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Court of Appeal of New Zealand |
Last Updated: 28 December 2011
IN THE COURT OF APPEAL OF NEW ZEALAND
CA277/06[2007] NZCA 596
BETWEEN ELDERS NEW ZEALAND
LIMITED
Appellant
AND PGG WRIGHTSON
LIMITED
Respondent
Hearing: 27 November 2007
Court: William Young P, O'Regan and Wilson JJ
Counsel: D F Dugdale and K J Crossland for
Appellant
P R Jagose
and H M Northover for Respondent
Judgment: 21 December 2007 at 3 pm
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JUDGMENT OF THE COURT
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____________________________________________________________________
REASONS OF THE COURT
(Given by William Young P)
Overview
[1] Wrightson Ltd (“Wrightson”) and Elders New Zealand Ltd (“Elders”), or associated companies, were co-owners (in some cases with others) of 13 stock saleyards. In 11 cases Wrightson and Elders were co-owners of the saleyards directly, the balance being owned indirectly through intermediate co-owned companies. In each case their rights inter se were regulated by either agreements or the constitutions of the co-owned companies. Each of these agreements and company constitutions provided for rights of pre-emption in the event of one of the co-owners seeking to dispose of the whole or part of its interest in the relevant saleyard.
[2] Wrightson and Pyne Gould Guinness (“PGG”) agreed to a scheme of arrangement under Part 15 of the Companies Act 1993 (“the Act” and “the 1993 Act”) under which:
- (a) PGG and Wrightson would amalgamate, with the former continuing as the surviving company under the name PGG Wrightson Ltd (“PGG Wrightson”);
- (b) PGG Wrightson would “succeed to all the property, rights, powers and privileges of Wrightson”; and
- (c) Wrightson would be removed from the New Zealand register of companies.
The arrangement was conditional upon final orders being granted by the High Court under ss 236(1) and 237(1) of the Act. On 7 October 2005 the Court made a final order approving the merger plan and directed that it be binding on PGG, Wrightson and their shareholders from 30 September 2005 or such later date as PGG and Wrightson might decide. The arrangement has now been implemented.
[3] Elders took the view that Wrightson had disposed of its direct and indirect interests in the saleyards to PGG Wrightson in such a way as to trigger the pre-emptive rights contained in the various agreements and company constitutions. Elders issued proceedings in the High Court seeking a declaration to that effect. The parties agreed on the formulation (under to r 418 of the High Court Rules) of a question in these terms:
Whether the Court’s order of 7 October 2005 approving the scheme of arrangement sought by PGG and Wrightson had the effect of transferring, selling or otherwise disposing of Wrightson’s saleyard interest to PGG Wrightson in terms of the prohibition on such transfer, sale or disposal set out in the saleyard agreements and constitutions.
[4] In the High Court, Allan J answered this question in favour of PGG Wrightson, primarily on the basis that the scheme of arrangement as approved resulted in an amalgamation within the meaning of s 219 of the Act (which appears in Part 13 of the Act) with the result that PGG and Wrightson continued as a single company (namely PGG Wrightson), and that there was thus no transfer or disposal which triggered the rights of pre-emption. Elders now appeals.
[5] We propose to address the case by reference to the following issues:
- (a) Does an amalgamation approved under Part 15 of the Act have the same effect as an amalgamation under Part 13?
- (b) Do the requirements of Part 13 of the Act apply where approval of an amalgamation is sought under Part 15?
- (c) Is the final order made by the High Court binding on Elders?
- (d) Did the final order made by the High Court have the legal consequence that PGG and Wrightson continue as one company, namely PGG Wrightson?
- (e) On the true interpretation of the relevant agreements and constitutions, does the succession of PGG Wrightson to the property of Wrightson trigger the relevant rights of pre-emption?
Before we address these questions, it is necessary for us to discuss the legislative scheme, Carter Holt Harvey Ltd v McKernan [1998] 3 NZLR 403 (CA) and the approach taken by the Judge
The legislative scheme
Part 13 of the Act
[6] Part 13 is headed “Amalgamations”.
[7] Section 219 is in these terms:
219 Amalgamations
Two or more companies may amalgamate, and continue as one company, which may be one of the amalgamating companies, or may be a new company.
[8] A Part 13 amalgamation can be effected without Court approval, provided the elaborate procedure specified in s 221 is followed. Subsections (4) and (5) of that section are in these terms:
221 Approval of amalgamation proposal
...
(4) The board of each amalgamating company must, not less than 20 working days before the amalgamation is proposed to take effect,—
...
(b) Give public notice of the proposed amalgamation, including a statement that—
(i) Copies of the amalgamation proposal are available for inspection by any shareholder or creditor of an amalgamating company or any person to whom an amalgamating company is under an obligation at the registered offices of the amalgamating companies and at such other places as may be specified during normal business hours; and
(ii) A shareholder or creditor of an amalgamating company or any person to whom an amalgamating company is under an obligation is entitled to be supplied free of charge with a copy of the amalgamation proposal upon request to an amalgamating company.
(5) The amalgamation proposal must be approved—
(a) By the shareholders of each amalgamating company, in accordance with section 106 of this Act; and
(b) If a provision in the amalgamation proposal would, if contained in an amendment to an amalgamating company's constitution or otherwise proposed in relation to that company, require the approval of an interest group, by a special resolution of that interest group.
...
Section 221(4)(b) is relevant to the operation of s 226 which we set out below (see [11]). Section 221(5)(a) ties in with s 106 of the Act and gives dissenting shareholders the right to be bought out under ss 110 and 111 of the Act.
[9] The final step in the process is the issue of a certificate of amalgamation under s 224. Section 225 provides:
225 Effect of certificate of amalgamation
On the date shown in a certificate of amalgamation,—
(a) The amalgamation is effective; and
(b) If it is the same as a name of one of the amalgamating companies, the amalgamated company has the name specified in the amalgamation proposal; and
(c) The Registrar must remove the amalgamating companies, other than the amalgamated company, from the New Zealand register; and
(d) The amalgamated company succeeds to all the property, rights, powers, and privileges of each of the amalgamating companies; and
(e) The amalgamated company succeeds to all the liabilities and obligations of each of the amalgamating companies; and
(f) Proceedings pending by, or against, an amalgamating company may be continued by, or against, the amalgamated company; and
(g) A conviction, ruling, order, or judgment in favour of, or against, an amalgamating company may be enforced by, or against, the amalgamated company; and
(h) Any provisions of the amalgamation proposal that provide for the conversion of shares or rights of shareholders in the amalgamating companies have effect according to their tenor.
[10] It is also necessary to refer to s 225A:
225A Registers
(1) Where an amalgamation becomes effective, no Registrar of Deeds or District Land Registrar or other person charged with the keeping of any books or registers shall be obliged, solely by reason of the amalgamation becoming effective, to change the name of an amalgamating company to that of an amalgamated company in those books or registers or in any documents.
(2) The presentation to any Registrar or other person of any instrument (whether or not comprising an instrument of transfer) by the amalgamated company—
(a) Executed or purporting to be executed by the amalgamated company; and
(b) Relating to any property held immediately before the amalgamation by an amalgamating company; and
(c) Stating that that property has become the property of the amalgamated company by virtue of this Part of this Act—
shall, in the absence of evidence to the contrary, be sufficient evidence that the property has become the property of the amalgamated company.
(3) Without limiting subsection (1) or subsection (2) of this section, where any security issued by any person or any rights or interests in property of any person become, by virtue of this Part of this Act, the property of an amalgamated company, that person, on presentation of a certificate signed on behalf of the board of the amalgamated company, stating that that security or any such rights or interests have, by virtue of this Part of this Act, become the property of the amalgamated company, shall, notwithstanding any other enactment or rule of law or the provisions of any instrument, register the amalgamated company as the holder of that security or as the person entitled to such rights or interests, as the case may be.
...
[11] Section 226 provides:
226 Powers of Court in other cases
(1) If the Court is satisfied that giving effect to an amalgamation proposal would unfairly prejudice a shareholder or creditor of an amalgamating company or a person to whom an amalgamating company is under an obligation, it may, on the application, made at any time before the date on which the amalgamation becomes effective, of that person, make any order it thinks fit in relation to the proposal, and may, without limiting the generality of this subsection, make an order—
(a) Directing that effect must not be given to the proposal:
(b) Modifying the proposal in such manner as may be specified in the order:
(c) Directing the company or its board to reconsider the proposal or any part of it.
(2) An order may be made under subsection (1) of this section on such conditions as the Court thinks fit.
Section 221(4)(b) provides the mechanism by which parties who might be affected by an amalgamation have an opportunity to resort to the procedure provided for by s 226.
Part 14 of the Act
[12] Part 14 deals with compromises which is defined by s 227 as meaning a: “compromise between a company and its creditors ... .”
[13] The procedure provided for in Part 14 does not require Court approval (see s 230) but there is considerable scope for Court supervision and intervention (see ss 232 – 234).
Part 15 of the Act
[14] Part 15 provides a regime whereby the Court may approve an arrangement, amalgamation or compromise. “Arrangement” is given an inclusive definition in s 235, but “amalgamation” and “compromise” are not defined.
[15] Section 236 provides:
236 Approval of arrangements, amalgamations, and compromises
(1) Notwithstanding the provisions of this Act or the constitution of a company, the Court may, on the application of a company or any shareholder or creditor of a company, order that an arrangement or amalgamation or compromise shall be binding on the company and on such other persons or classes of persons as the Court may specify and any such order may be made on such terms and conditions as the Court thinks fit.
(2) Before making an order under subsection (1) of this section, the Court may, on the application of the company or any shareholder or creditor or other person who appears to the Court to be interested, or of its own motion, make any one or more of the following orders:
(a) An order that notice of the application, together with such information relating to it as the Court thinks fit, be given in such form and in such manner and to such persons or classes of persons as the Court may specify:
(b) An order directing the holding of a meeting or meetings of shareholders or any class of shareholders or creditors or any class of creditors of a company to consider and, if thought fit, to approve, in such manner as the Court may specify, the proposed arrangement or amalgamation or compromise and, for that purpose, may determine the shareholders or creditors that constitute a class of shareholders or creditors of a company:
(c) An order requiring that a report on the proposed arrangement or amalgamation or compromise be prepared for the Court by a person specified by the Court and, if the Court thinks fit, be supplied to the shareholders or any class of shareholders or creditors or any class of creditors of a company or to any other person who appears to the Court to be interested:
(d) An order as to the payment of the costs incurred in the preparation of any such report:
(e) An order specifying the persons who shall be entitled to appear and be heard on the application to approve the arrangement or amalgamation or compromise.
(3) An order made under this section has effect on and from the date specified in the order.
(4) Within 10 working days of an order being made by the Court, the board of the company must ensure that a copy of the order is delivered to the Registrar for registration.
(5) If the board of a company fails to comply with subsection (4) of this section, every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2) of this Act.
[16] Section 237 provides:
237 Court may make additional orders
(1) Without limiting section 236 of this Act, the Court may, for the purpose of giving effect to any arrangement or amalgamation or compromise approved under that section, either by the order approving the arrangement or amalgamation or compromise, or by any subsequent order, provide for, and prescribe terms and conditions relating to,—
(a) The transfer or vesting of real or personal property, assets, rights, powers, interests, liabilities, contracts, and engagements:
(b) The issue of shares, securities, or policies of any kind:
(c) The continuation of legal proceedings:
(d) The liquidation of any company:
(e) The provisions to be made for persons who voted against the arrangement or amalgamation or compromise at any meeting called in accordance with any order made under subsection (2)(b) of that section or who appeared before the Court in opposition to the application to approve the arrangement or amalgamation or compromise:
(f) Such other matters that are necessary or desirable to give effect to the arrangement or amalgamation or compromise.
(2) Within 10 working days of an order being made by the Court, the board of the company must ensure that a copy of the order is delivered to the Registrar for registration.
(3) If the board of a company fails to comply with subsection (2) of this section, every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2) of this Act.
[17] Sections 238 and 239 provide:
238 Parts 13 and 14 not affected
The Court may—
(a) Approve an amalgamation under section 236 of this Act even though the amalgamation could be effected under Part 13 of this Act:
(b) Approve a compromise under section 236 of this Act even though the compromise could be approved under Part 14 of this Act.
239 Application of section 233
The provisions of section 233 of this Act shall apply with such modifications as may be necessary in relation to any compromise approved under section 236 of this Act.
The provenance of these provisions
[18] The Part 15 procedure is broadly comparable to that provided under s 205 – 207 of the Companies Act 1955 which in turn can be traced back via the Companies Act 1933 to s 129 of the Companies Act 1929 (UK). That section was construed reasonably narrowly by the House of Lords in Nokes v Doncaster Amalgamated Collieries Ltd [1940] AC 1014; in particular as not permitting a transfer of contractual rights (in that case associated with a contract of employment) which were not otherwise assignable by the parties.
[19] Perhaps as a result of Nokes, Canadian legislatures adopted a rather different approach to amalgamations under which the relevant statutes provided that the amalgamating companies continued in the form of the amalgamated company. This is discussed in Stanward Corporation v Denison Mines Ltd (1966) 57 DLR (2d) 674 at 681 per Kelly JA for the Court (Ont CA) and R v Black & Decker Manufacturing Company Ltd [1975] 1 SCR 411.
[20] When the Law Commission reported on the reform of New Zealand company law, it proposed what was in effect a Canadian rather than a United Kingdom approach. Its recommendations were for essentially what are now Parts 13 and 14, and contained nothing equivalent to Part 15. That Part was inserted as a result of the recommendations of the Justice and Law Reform Committee’s report of 15 December 1992. As a consequence, Parts 13, 14 and 15 provide something of an awkward mix and match rather than a coherent regime.
[21] As part of the processes associated with the enactment of the 1993 Act, the Companies Act 1955 was amended so as to give immediate effect to some of the reforms included in the 1993 Act. These amendments included the insertion into the 1955 Act of Parts VA, VB and VC which corresponded to Parts 13, 14 and 15 of the 1993 Act. It was Part VA which was in issue in Carter Holt which we are about to discuss.
Carter Holt Harvey Limited v McKernan
[22] Messrs McKernan and O’Neill had guaranteed the liabilities of Pioneer Builders Ltd to John Edmond Ltd. John Edmond Ltd was a subsidiary of Carter Holt Harvey Ltd and, as part of a restructuring exercise, came to be amalgamated with Carter Holt Harvey under Part VA of the 1955 Act (the equivalent of Part 13 of the 1993 Act). The amalgamation which provided for Carter Holt Harvey to be the continuing company. Pioneer Builders continued to trade with Carter Holt Harvey and the issue then arose whether Carter Holt Harvey could enforce the guarantee against Messrs McKernan and O’Neill in relation to post-amalgamation transactions.
[23] This question was eventually answered by this Court in favour of Carter Holt Harvey. The Court primarily relied on the consideration that s 209A (which was in the same terms as s 219 of the 1993 Act) provided that two or more companies which amalgamate continue as one company. The word “succeeds” in s 209G(e) (corresponding to s 225(e) of the 1993 Act) did not contemplate a “predecessor and a successor”. Likewise the provisions of s 209G which provided for the dissolution of the amalgamating companies other than “the amalgamated company” was not critical. Rather (at 411):
The deeming process enables the Registrar to take the sensible administrative action of removing their discarded carapaces from the Register.
...
We discern in the legislation of parliamentary intent that the benefits and burdens of the contracts of all merging companies are to continue in force for all purposes. The amalgamated company is to enjoy all advantages previously conferred on any of the amalgamating companies and have their liabilities. It is not to be treated as a different entity or as a new party to the contractual arrangements. It is not the equivalent of an assignee. ... The amalgamated company simply stands in the shoes of the amalgamating company.
The approach taken by the Judge
[24] Broadly, the Judge took the view that an “amalgamation” for the purposes of Part 15 had the consequences specified in s 219. On this basis, he concluded that the amalgamation did not involve a transfer from Wrightson to PGG Wrightson. At this point, it is best to use the words of the Judge:
[45] ... Mr Crossland’s argument [for Elder’s] assumes that there has been a transfer from Wrightson to PGG. The concept of amalgamation as discussed in Carter Holt involves no such transfer. Mr Crossland’s argument involves an assumption that Wrightson parted with its assets upon the completion of its Part 15 amalgamation. In my view it did not. The assets and liabilities of Wrightson, and Wrightson itself, are to be found within, and as part of, PGG Wrightson. Elders’ pre-emptive rights remain and may be invoked against PGG Wrightson in the future, but the pre-emptive rights are not triggered by an amalgamation which involves no transfer or disposition.
[46] Mr Crossland’s next point relied upon the absence in s 237(1)(a) of a power for the Court to direct that one party was entitled to “succeed” to property, consequent on the making of an order. He contrasted that with s 225(d) and (e), which provide that, as an automatic consequence of the issue of a certificate of amalgamation, the amalgamated company succeeds to all the property, rights, powers and privileges of each of the amalgamating companies, and to all the liabilities and obligations of those companies.
[47] In a sense the reference in s 225 to succession is misleading, because the amalgamated company does not in truth succeed to the rights and obligations of the amalgamating participants. Rather, it becomes those participants. There is no predecessor and no successor: Carter Holt at 411. Be that as it may, the omission of s 237(1)(a) to provide for orders relating to “succession” is not in my opinion, of relevance because:
[48] Elders further argues that the explicit provision made in s 237 for the Court to make ancillary orders directing the transfer of property, suggests that the “amalgamation” contemplated by Part 15 is not conceptually the same as that for which provision is made in Part 13. The short answer to that, in my view, is that Part 15 deals not only with amalgamations but with arrangements and compromises. The range of ancillary orders mandated by s 237 must be considered in the light of the wide jurisdiction which Part 15 confers.
[49] Finally, Mr Crossland argued that s 238 was of no assistance to PGG Wrightson. I disagree. That section contemplates amalgamations which might be accomplished either under Part 13 or Part 15. In other words, a Part 15 application to the Court may involve a merger plan which could have been carried into effect under Part 13. It is not difficult to imagine circumstances that would lead to a Board decision to invoke the Part 15 procedure, rather than that set out in Part 13. Indeed, in this case, counsel for the amalgamating parties explained to the Court, in the course of their s 236 application, that the Part 15 jurisdiction had been chosen because:
Summary
[50] I am satisfied that Wrightson and PGG sought and obtained approval to an amalgamation to which s 219 applies. In particular, and at the heart of the merger plan, the provisions of paragraph 2.1(i)(i-iv) inclusive are materially identical to the provisions of s 225(d)-(g) inclusive of the Act.
[51] As is explained in Carter Holt Wrightson continues as part of PGG Wrightson, although the former Wrightson entity has been struck off the register of companies. Consequently, the assets and liabilities of Wrightson continue in PGG Wrightson. Wrightson has not transferred or disposed of anything. It remains the owner of its saleyard interests because it is, for present purposes, PGG Wrightson. Elders’ pre-emptive rights have therefore not been triggered.
Does an amalgamation approved under Part 15 of the Act have the same effect as an amalgamation under Part 13?
[25] As the just-cited passage from the judgment of Allan J indicates, he took the view that an amalgamation under Part 15 necessarily has the legal consequences provided for in s 219, even though that section appears in Part 13.
[26] Part 15 is not easy to follow and its inter-relationships with Parts 13 and 14 are not entirely clear.
[27] These problems are largely caused by the way in which Part 15 links together three rather different concepts:
- (a) An “amalgamation” within the meaning of s 219 can only be achieved pursuant to a statutory process with the primary procedure being that specified in Part 13.
- (b) A “compromise” as defined in s 227 can be achieved without resort to statutory procedures, providing all affected parties agree. If unanimity cannot be achieved, Part 14 provides a mechanism by which a compromise can become effective following approval by specified majorities of the affected classes of creditors.
- (c) An “arrangement” as defined by s 235 can be achieved without resort to statutory process as long as the procedures provided for in the constitution of the affected company can be complied with. As well, Part 15 makes allowance (as we will see in rather unclear terms) for the “approval” of an arrangement, providing that procedural requirements imposed by the Court have been satisfied.
[28] Associated with this, s 236(1) – which is the primarily operative section in Part 15 – does not define the role of the Court with any clarity. Significantly, it is not cast in the language of approval. Rather it provides for the Court to:
... order that an arrangement or amalgamation or compromise shall be binding on the company and on such other persons or classes of persons as the Court may specify and any such order may be made on such terms and conditions as the Court thinks fit.
This language raises the question whether the jurisdiction in the case of amalgamations or compromise is confined to such amalgamations as have already been effected under Parts 13 or 14. But this interpretation is untenable because:
(a) The scheme of Part 15 is that an “arrangement” only becomes effective by Court order and s 236(1) is the only section which provides for such approval.
(b) Section 237(1) refers to orders made under s 236 as “approving the arrangement or amalgamation or compromise”.
(c) Language of approval is also used in s 238.
(d) Part 15 is headed: “Approval of arrangements, amalgamations, and compromises by the Court”.
(e) Section 238 proceeds on the basis that Part 15 provides an alternative mechanism for the implementation of amalgamations and compromises which could have been effected under Parts 13 and 14.
[29] These considerations in turn make it clear that an amalgamation approved under Part 15 has the consequences identified in s 219.
Do the requirements of Part 13 of the Act apply where approval of an amalgamation is sought under Part 15?
[30] A striking feature of the case for PGG Wrightson is that it involves a pick and choose approach to the provisions of Part 13 which apply to Part 15. PGG Wrightson while maintaining (successfully as it turns out) that s 219 applies to amalgamations approved under Part 15, is adamant the procedural safeguards stipulated for by s 221 have no application. Mr Jagose asserted that in the case of a Part 15 amalgamation, the procedures of the Court provided for in s 236 supplant and render unnecessary those safeguards.
[31] On the recommendations of the Law Commission, no amalgamation could proceed in the absence of compliance with the specified statutory process provided for in Part 13. Part 15 is a somewhat awkward tack-on to Parts 13 and 14. It does not seem particularly likely that those responsible for Part 15 expressly considered whether the Part 15 process could or should be employed so as to side-step the public advertising and minority buy out provisions. It would be possible to construe the generality of the processes provided for in s 236(2) as a function of the section addressing arrangements and compromises, and not as intended to water down, in the case of a proposed amalgamation, the strict procedures mandated in Part 13. As well, and associated with this, there is the awkwardness which we have already discussed that s 236 is not cast in the language of approval.
[32] We are nonetheless persuaded that on this point too Mr Jagose is right. The language of Part 13 and the persistent references to “amalgamation proposal” seems to proceed on the basis that s 221 applies only where the Part 13 process is invoked. As well 236(2) is not easily reconcilable with a requirement that s 221 be complied with in relation to Part 15 amalgamations. Finally, s 238 contemplates the approval of an amalgamation which has not been effected (ie has not met the prerequisites for approval) under Part 13.
Is the final order made by the High Court binding on Elders?
[33] Elders maintains that because the final order of the High Court is expressed to be binding only on Wrightson and PGG, it is not binding on Elders which is, accordingly, entitled to invoke its pre-emptive rights.
[34] Allen J dismissed this argument in the following way:
[40] The answer to that proposition, as Mr Jagose submits, is that the direct participants in the amalgamation, and their shareholders, are the only persons directly affected by the amalgamation, and accordingly, are the only parties who need to be expressly bound. Other parties, those dealing with the amalgamating companies, are unaffected because the amalgamating parties continue as part of the amalgamated entity.
[41] Moreover, there is an inherent dissonance in this argument. If Mr Crossland is right, no-one other than the applicants and their shareholders would be bound by the Court approved amalgamation. It would follow that the amalgamation participants would be obliged to order their affairs, and to carry on their future business, in terms of the Court order and of the merger plan, but all other persons dealing with them would be entitled to act without regard to the amalgamation. For example, proceedings could be commenced against Wrightson, even though in terms of the merger plan the old Wrightson entity had been struck off the register of companies. A successful plaintiff might seek to enforce its judgment by levying execution against assets formerly owned by Wrightson, even though in terms of the merger plan, PGG Wrightson had become the owner of those assets.
[42] Outcomes such as those are untenable and could never have been contemplated by the Legislature.
[35] We regard this reasoning as unassailable and adopt it accordingly.
Did the final order made by the High Court have the legal consequence that PGG and Wrightson “continue as one company”, namely PGG Wrightson?
[36] The ex parte application for orders approving the scheme and making it binding on the relevant parties invoked ss 236 and 237 of the Act. The merger plan which was attached to the application set out a set of sequential steps which involved, inter alia, PGG acquiring shares in Wrightson. The critical step for these purposes was expressed in clause 2.1 in this way:
PGG and Wrightson will amalgamate, with PGG continuing as the surviving company under the Act with the name “PGG Wrightson Limited” and with the effect that:
(i) PGG Wrightson will succeed to all the property, rights, powers and privileges of Wrightson;
(ii) PGG Wrightson will succeed to all liabilities and obligations of Wrightson;
(iii) proceedings by, or against, Wrightson may be continued by, or against, PGG Wrightson;
(iv) a conviction, ruling, order or judgment in favour of, or against, Wrightson may be enforced by, or against, PGG Wrightson;
(v) Wrightson shares held by PGG Wrightson will be deemed to be cancelled without payment or other consideration and Wrightson will be removed from the New Zealand register;
(vi) the constitution of PGG Wrightson will be the same as the constitution of PGG immediately before the Effective Date; and
(vii) the directors of PGG Wrightson from the effective time will be ... .
[37] In a memorandum from counsel for the applicants to the Court, the proposed merger was described as being by way of “friendly amalgamation”. Counsel also noted that there had been much publicity about the intention of the two applicants to form an “amalgamated entity”. But the memorandum was not explicit as to whether what was sought was an “amalgamation” within the meaning of s 219.
[38] The final order made by the Court was in these terms:
Upon reading the originating application for final orders approving a scheme of arrangement under Part XV of the Companies Act 1993, the affidavit of Joshua Benjamin Pringle, the second affidavits of Keith Raymond Smith and Arthur William Baylis, and the memorandum of counsel for the applicants in support of their application for final orders, the Court orders:
[39] There is thus some ambiguity in the merger plan, the final order of the Court and associated documents. On the one hand the merger plan records that the companies were to “amalgamate” and it also borrowed from the language of s 219 (in referring to PGG Wrightson as “continuing”) and follows generally the scheme of s 225 in describing the effects of the merger. On the other hand, the order sought from, and made by, the Court makes no specific reference to an amalgamation.
[40] If an arrangement approved by the Court under Part 15 incorporates an amalgamation, that amalgamation is, itself, necessarily approved: cf Canadian Forest Products Ltd v British Columbia [2004] BCSC 1188. Whether this is so in this case comes down to an issue of interpretation. Because the final order approved the scheme as recorded in the merger plan, that interpretation issue turns on the meaning to be ascribed to the merger plan as a whole. Given that the merger plan provides in 2.1(i) that PGG and Wrightson will amalgamate and describes the effects of this in a way which correlates to the effects of an amalgamation under Part 13, we conclude that it effected an amalgamation in the s 219 sense.
On the true interpretation of the relevant agreements and constitutions, does the succession of PGG Wrightson to the property of Wrightson trigger the relevant rights of pre-emption?
[41] Whether rights of pre-emption are triggered by an amalgamation necessarily depends on the terms in which they are cast. To put this another way, the “continuing as a single company” legal fiction does not prevent an amalgamation under the 1993 Act being defined as an event which gives rise to rights of pre-emption. Indeed, the particular sequencing of the steps leading to the merger would have invoked the rights of pre-emption had they been triggered by a change of control. As it turns out, however, the rights of pre-emption in issue arise only in relation to transfers or disposals of the relevant interests in the stockyards. We are accordingly of the view that those rights of pre-emption were not triggered by the amalgamation. That this is so follows naturally from the Carter Holt Harvey case and is consistent with s 225A.
[42] We agree that in broadly analogous circumstances, American courts have taken a different approach, see particularly Koppers Coal and Transportation Co v United States, 107 F 2d 706 (3rd Cir, 1939) and PPG Industries Inc v Guardian Industries Corporation, [1979] USCA6 321; 597 F 2d 1090 (6th Cir, 1979). But, to the extent to which these cases can be regarded as involving circumstances which are truly comparable to the present, they represent a view of the law which was not accepted in Carter Holt Harvey.
Disposition
[43] We dismiss the appeal.
[44] Elders must pay PGG Wrightson costs of $6,000 and usual disbursements. We certify for second counsel.
Solicitors:
Stace Hammond, Hamilton for Appellant
Chapman
Tripp, Wellington for Respondent
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