Alstom Signalling Solutions Pty Ltd, in the matter of Alstom Signalling Solutions Pty Ltd v Alstom Transport Australia Pty Limited

INTRODUCTION 1 By an originating process filed on 3 August 2022, the plaintiff, Dealt Holdings Limited (ACN 605 935 153) (Dealt), applies, among other things, for orders pursuant to ss 411 and 1319 of the Corporations Act 2001 (Cth) (Act) to convene a share scheme meeting (Scheme Meeting) of its members to consider a proposed scheme of arrangement (Scheme) between Dealt and its shareholders, other than 360 Capital Property Limited and its related entity TGP TOT JV Pty Limited (Scheme Shareholders). 2 The Scheme, if approved and implanted, will result in the acquisition of all the shares in Dealt by 360 Capital Property Limited (TGP) that it and its related entity TGP TOT JV Pty Ltd (TGP Tot) do not own, in return for a cash payment. 3 Dealt is an unlisted Australian public company limited by shares. It was incorporated on 20 May 2015. Dealt provides online solutions for loan brokerage, underwriting, negotiation and execution of commercial real estate (CRE) loans. Dealt currently does not have any employees and has derived limited revenue from its remaining business activities. 4 TGP and TGP Tot are wholly owned subsidiaries of 360 Capital Group Limited (360 Capital). 360 Capital is an Australian Securities Exchange (ASX) listed alternative asset investment and funds management business. 5 The commercial purpose of the Scheme is described in the proposed explanatory statement (Scheme Booklet) as providing compelling strategic benefits and values to Scheme Shareholders.

EVIDENCE RELIED UPON BY DEALT 6 The application is supported by the following affidavits. 7 First, the affidavit of Mr Philip John Raff affirmed on 14 September 2022. Mr Raff is a non-executive director of Dealt. Mr Raff gives evidence that he considers the Scheme to be in the best interests of the Scheme Shareholders and that, if the Scheme is approved and implemented, TGP will acquire approximately 73.51% of the issued share capital in Dealt that is not already owned by TGP or TGP Tot and Dealt will become a wholly owned subsidiary of 360 Capital. Each Scheme Shareholder will receive consideration for their shares in cash in the amount of $0.50 per Dealt share from TGP. Mr Raff gives evidence of the 'no shop', 'no talk', a 'notification' obligation that applies to Dealt, and a 'matching right' that applies to TGP's benefit. Mr Raff also gives evidence of the steps that have been taken to verify the information in the Scheme Booklet, to the proposed manner of dispatch of the Scheme Booklet and notice of the Scheme Meeting. 8 Second, two affidavits of Mr Andrew Mutton, affirmed on 15 September 2022 and 19 September 2022. Mr Mutton is a director of Andrews & Holm Lawyers Pty Ltd and the solicitor for Dealt. Mr Mutton gives evidence that the Australian Securities and Investments Commission (ASIC) was notified of this hearing and was provided with a version of the Scheme Booklet (together with annexures) on 12 July 2022 (being more than 14 days' prior to the hearing). Further, following the lodgement of the Scheme Booklet, a revised draft of the Scheme Booklet was provided to ASIC on 2 August 2022, 9 August 2022, 16 August 2022, 6 September 2022, and 8 September 2022. Mr Mutton states that ASIC has confirmed that it has no comments on the version of the Scheme Booklet provided on 8 September 2022. A further draft of the Scheme Booklet showing changes in mark-up from the previous version was provided to ASIC on 15 September 2022. 9 Mr Mutton gives further evidence that ASIC has granted relief in relation to the requirements set out in subregulation 5.1.01(1) and paragraph 8302(h) of Schedule 8 of the Corporations Regulations 2001 (Cth), on the condition that the Scheme Booklet sets out all material changes to the financial position since its last balance sheet sent to Dealt shareholders (being the financial statements for the financial half-year ended 31 December 2021). The Scheme Booklet addresses the extent of material changes to Dealt's financial position since that date at ss 5.8 and 8.6. 10 Mr Mutton gives evidence that any Scheme Shareholders who have not elected to receive communications via email will receive hard copies of the Scheme Booklet (including the Notice of Meeting) and a Scheme Meeting Online Guide. The balance of the Scheme Shareholders will receive an email containing links to the Scheme Booklet and the Scheme Meeting Online Guide. 11 Third, the affidavit of Mr Tony Robert Pitt affirmed on 14 September 2022. Mr Pitt is the Director and Non-executive Chair of 360 Capital. Mr Pitt will not vote in the Scheme Meeting and has abstained from making any recommendation with respect to the Scheme as he holds an executive position with 360 Capital and has significant interests in 360 Capital. 12 Fourth, the affidavit of Mr Glenn Kevin Butterworth, affirmed on 15 September 2022. Mr Butterworth is the CFO and Company Secretary of 360 Capital and has been performing the functions of Dealt's Chief Financial Officer since February 2022. He addresses the preparation of unaudited financial accounts as at 30 April 2022 relied upon in the expert report produced by Grant Thornton Corporate Finance Pty Limited (Grant Thornton) discussed below. Mr Butterworth confirms that there have been no material changes to the financial position nor prospects of Dealt since 30 April 2022. 13 Fifth, the affidavit of Ms Nakul Joglekar affirmed on 14 September 2022. Ms Joglekar is the Client Services Manager of Boardroom Ltd and gives evidence as to the approach to be adopted at the Scheme Meeting. 14 Sixth, the affidavit of Mr Andrea De Cian affirmed on 16 September 2022. Mr De Cian is a Director of Grant Thornton and had overall responsibility for the preparation of the independent expert report referred to below. He gives evidence that Grant Thornton concluded that the Scheme was fair and reasonable and in the best interests of the Scheme Shareholders.

Expert Report 15 Dealt also relies on an expert report of Grant Thornton dated 8 September 2022. Grant Thornton conclude that the Scheme is fair and reasonable, and in the best interests of Scheme Shareholders. Grant Thornton values Dealt as the sum of Dealt's net tangible assets as at 30 April 2022 of $4.77 million and the current fair value of the CRE Platform, which is assessed as between $2.4 million and $3.2 million (representing a discount of 40% and 20% respectively from the price for which the platform was purchased by Dealt from 360 Capital in September 2021). The result is a range for the value per Dealt share of between $0.47 and $0.52. 16 In assessing the value of the CRE Platform, Grant Thornton explains its reasons for applying a discount of between 20% and 40% to arrive at current fair value for that asset.

Formal requirements to exercise s 411(1) power 17 Section 411(1) of the Act confers a power on the Court to order a meeting of members to be convened and to approve the relevant explanatory statement. 18 As stated by McKerracher J in Amcom Telecommunications Limited, in the matter of Amcom Telecommunications Limited [2015] FCA 341 (Amcom) at [12], the Court should order the convening of the scheme meeting and approve the scheme booklet if it is satisfied of the following matters: (a) the proposed scheme is an arrangement in respect of which the Court may order a meeting of the members: s 411(1) of the Act. That is, the scheme is an arrangement, the company is a Pt 5.1 Body, the scheme participants are members of the company and the scheme meeting will be convened between members of the same class; (b) ASIC has had a reasonable opportunity to examine the terms of the scheme and the scheme booklet and make submissions to the Court in relation to those matters: s 411(2)(b) of the Act; (c) the scheme booklet provides adequate disclosure (s 412(1)(a)(i) of the Act) and contains the prescribed information: s 412(1)(a)(ii) of the Act, r 5.1.01; sch 8 cll 8301-8310 of the Corporations Regulations 2001 (Cth); (d) the procedural requirements of the Federal Court Rules 2011 (Cth) (Rules) have been met; and (e) there is no apparent reason why the scheme should not, in due course, receive the Court's approval if the necessary majority of votes are achieved: Integra Mining Limited, in the matter of Integra Mining Limited [2012] FCA 1414 (Integra Mining) at [12] (McKerracher J), and the cases cited therein. See also Xplore Wealth Limited, in the matter of Xplore Wealth Limited [2020] FCA 1868 at [23] (Markovic J) 19 I am satisfied that the evidence upon which Dealt relies is sufficient to establish that: (a) Dealt is a Part 5.1 body; (b) the Scheme Participants are members of Dealt; (c) the Scheme Meeting will be convened between members of the same class; (d) the Scheme is bona fide and properly proposed; (e) ASIC has had a reasonable opportunity to examine the terms of the Scheme and the Scheme Booklet and make any submissions to the Court; (f) the Scheme Booklet provides adequate disclosure and contains the prescribed information; (g) the procedural requirements of the Rules have been met; and (h) there is no apparent reason why the Scheme should not receive the Court's approval if the necessary majority of votes are achieved. 20 Once the preconditions to the exercise of power under s 411(1) to order the convening of a meeting have been satisfied, it is then necessary to consider whether that power ought to be exercised pursuant to the Court's discretion.

Relevant principles for the exercise of discretion 21 In Absolute Equity Performance Fund Ltd, in the matter of Absolute Equity Performance Fund Ltd [2022] FCA 834, I summarised at [18]-[22] the relevant principles for the exercise of the discretion to order the convening of a meeting to consider approving a proposed scheme of arrangement. For ease of reference, I set out below those paragraphs of that judgment. See also Dragontail Systems Limited, in the matter of Dragontail Systems Limited [2021] FCA 834 at [10]-[14] (Halley J). 22 The Court will not ordinarily make orders for the convening of a scheme meeting unless the scheme is of such a nature and cast on such terms that if it receives the statutory majority at the meeting, the Court would be likely to approve it on the hearing of an application that was not opposed: FT Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd (1977) 3 ACLR 69 at 72 (Street CJ, with whom Hutley and Samuels JJA agreed); approved in Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485; [1993] HCA 15 at 504; Re Central Pacific Minerals NL [2002] FCA 239 at [8]; CSR Limited, in the matter of CSR Limited (2010) 183 FCR 358; [2010] FCAFC 34 at [12]. 23 At the first court hearing, the Court exercises its supervisory jurisdiction in order to review the scheme and the explanatory statement and to raise any queries that it might have with the plaintiff: Alstom Signalling Solutions Pty Ltd, in the matter of Alstom Signalling Solutions Pty Ltd v Alstom Transport Australia Pty Limited [2016] FCA 838 at [21] (Gleeson J). The Court needs to be satisfied that there are no obvious flaws in the scheme and that there is an adequate explanation provided to persons who have a financial interest in the proposed scheme: In the matter of Coca-Cola Amatil Limited [2021] NSWSC 270 at [13] (Black J) (Coca-Cola Amatil). 24 The Court should consider at the first court hearing whether the proposed scheme is not inappropriate and whether it is one that sensible business people might consider is of benefit to its members: Australian Leaders Fund Ltd v Equity Trustees Ltd, in the matter of Australian Leaders Fund Ltd [2021] FCA 88 (Leaders Fund) at [15] citing Re Sonodyne International Ltd (1994) 15 ACSR 494 at 499 (Hayne J); Integra Mining at [11] (McKerracher J); and Amcom at [10] (McKerracher J). 25 The Court does not need to be satisfied that no better scheme could have been proposed and ultimately that is a question for the members themselves to determine at the scheme meeting: Associated Advisory Practices Limited, in the matter of Associated Advisory Practices Limited [2013] FCA 761 at [22] (Farrell J); Coca-Cola Amatil at [13]; and Leaders Fund at [15]. 26 Although the second court hearing is when the Court makes its final determination, in practice, the first court hearing is where the Court will typically intervene if it has concerns. A reason that has been advanced for this is that the market views the approval by the Court of the convening of scheme meetings as providing assurance that the scheme, at least in form and substance, has received a preliminary clearance by the Court and that trading in the company's securities thereafter will proceed on that basis: Re Archaean Gold NL (1997) 23 ACSR 143 at 147; and Leaders Fund at [15].

DISPOSITION 27 On the basis of the material provided to the Court and the considerations outlined above, I am satisfied that the formal requirements contained in s 411 of the Act for the convening of a meeting of members to consider the Scheme and to approve the Scheme Booklet for circulation to members of Dealt have been met. I am satisfied that the discretion of the Court should otherwise be exercised to order the convening of a meeting of the shareholders of Dealt and to approve the Scheme Booklet for distribution to Scheme participants. I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Halley.