Angel Seafood Holdings Ltd, in the matter of Angel Seafood Holdings Ltd [2022] FCA 717

[The order entered is available on the Commonwealth Courts Portal, which attaches the Scheme]

BEACH J: 1 On 6 May 2022, I made orders requiring Angel Seafood Holdings Ltd to convene and hold a meeting of its shareholders to consider a proposed scheme of arrangement (the Scheme). As the Scheme was straightforward I gave concise oral reasons on the spot. 2 In essence, most of the matters drawn to my attention were plain vanilla for schemes of this type save that it was also necessary to consider the status of certain parcels of excluded shares that were not to be voted at the scheme meeting and were not to participate in the Scheme. The other matters such as performance risk, the exclusivity arrangements, the reimbursement fee and the treatment of options and performance securities were all adequately addressed within standard parameters. 3 In accordance with my convening orders, the scheme meeting was held on 10 June 2022, and the resolution to agree to the Scheme was passed by 98.28% of the votes cast and by 87% of the shareholders present and voting in person or by proxy. 4 Now in accordance with statements made in the scheme booklet and in the evidence relied upon at the first court hearing, certain Angel shares were not voted at the scheme meeting, being the Angel shares held by the parent company of the bidder, which represented approximately 19.95% of Angel's total issued share capital, and another sizeable parcel of Angel shares held by the chief executive officer of Angel, Mr Isaac Halman and entities associated with him. 5 Angel has now sought orders approving the Scheme pursuant to s 411(4)(b) of the Corporations Act 2001 (Cth). It has also sought an order under s 411(6) that the Scheme be altered such as to amend the name of one of the entities associated with Mr Halman who acts as a trustee with respect to a parcel of excluded shares. 6 Yesterday afternoon I made the necessary orders. These are my reasons for doing so. 7 The commercial purpose of the Scheme is to effect the acquisition by Valley Seas BidCo Pty Ltd (BidCo), a subsidiary of Laguna Bay Agricultural No 1 Pty Ltd, of all of the shares in Angel save for the following excluded shares being: (a) the Angel shares in which Laguna Bay and its related bodies corporate have a relevant interest, which represent approximately 19.95% of the total number of Angel shares on issue; and (b) various Angel shares held by Mr Halman and his associated entities. 8 If the Scheme is implemented, all of the Angel shares other than the excluded shares that are held on the scheme record date will be transferred to BidCo and, in consideration, each holder of scheme shares will receive a cash payment of $0.20 per scheme share. 9 The entities who held excluded Laguna Bay shares and excluded Halman shares were not able to vote at the scheme meeting and their shares are not scheme shares as they fall within the definition of "Excluded Shares" in the Scheme. 10 Now on an application to approve a scheme, it is necessary to ensure that all statutory and procedural requirements in relation to the convening and conduct of the scheme meeting have been observed. This requires me to conclude that the scheme meeting was properly convened and held in accordance with my convening orders, that the resolution to agree to the Scheme was duly passed, and that all relevant statutory requirements whether in principal or subordinate legislation have been complied with. Once satisfied of these matters, I have a discretion to approve the Scheme pursuant to s 411(4)(b). 11 In that context, the considerations relevant to the exercise of my discretion are well established. In Re Amcor Limited (No 2) [2019] FCA 842 I stated (at [7] and [11]): In essence, my role at the second court hearing is to assess the Scheme taking into account whether the Scheme is sufficiently fair and reasonable such that an intelligent and honest shareholder properly informed and acting alone might approve it. Of course, I can only approve a scheme of arrangement if the requisite majority of shareholders vote in favour of it, but I am not bound to approve the Scheme simply because I previously made orders for the convening of a Scheme meeting and subsequently the requisite majority agreed to it. But I accept that shareholders voting collectively at the Scheme meeting are better judges than I of what is to their commercial advantage and in their interests and accordingly, absent good reason, I should give effect to their intentions. … Now as I have said, my task is to consider whether the Scheme is fair and reasonable with the test of fairness and reasonableness including a consideration of whether "an intelligent and honest [shareholder], properly informed, acting alone, might approve [the scheme]" (Fowler v Lindholm (2009) 178 FCR 563 at [79] per Emmett, Gordon and Jagot JJ). But the Scheme shareholders' vote in favour of the Scheme is evidence of its inherent fairness. Put another way, if a majority of the Scheme shareholders have approved the Scheme, it is unlikely that the Scheme would be unreasonable. Further, I do not have to be satisfied that no better Scheme could have been devised. 12 See also Re Healthscope Ltd (2019) 136 ACSR 259 at [6] to [14] and Re Vocus Group Limited [2021] NSWSC 843 at [9] per Black J. 13 In summary, in deciding whether to give approval to a scheme of arrangement, assuming that the procedural requirements have been met and the requisite statutory majorities on voting have been achieved, it is usually necessary to be satisfied that: (a) when the scheme was approved by shareholders in the requisite majorities, they were acting in good faith and for proper purposes, with there being no suggestion of any oppression of any minority; (b) there was full and fair disclosure to shareholders of all information material to the decision whether to vote for or against the scheme; (c) the scheme is fair and reasonable such that an intelligent and honest shareholder, properly informed and acting alone, might approve it; (d) all matters that could be considered relevant to the exercise of the court's discretion have been drawn to the court's attention, and ASIC has been given the opportunity to draw the court's attention to any relevant matter; (e) the conditions precedent to the operation of the scheme have been satisfied or waived, save for court approval; and (f) the scheme has not been proposed for a proscribed purpose concerning Chapter 6 of the Act or there is a statement from ASIC that it has no objection to the scheme (see s 411(17)). 14 In my view there has been compliance with the convening orders, ss 411 and 412 and other relevant subordinate legislation concerning the dispatch of the scheme booklet to Angel shareholders, approval of the Scheme by the requisite statutory majorities of shareholders at the scheme meeting, and the satisfaction or waiver of all conditions precedent. 15 Further, the explanatory statement which was included within the scheme booklet was registered by ASIC as contemplated by s 412(6) prior to being sent to shareholders. Registration of the explanatory statement by ASIC is some evidence of compliance with the disclosure obligations imposed by s 412(1), given that before registering the explanatory statement ASIC must conclude that it appears to comply with the requirements of the Act, and ASIC must form the opinion that the statement does not contain any matter that is false in a material particular or materially misleading in the form and context in which it appears. Moreover, the information in the scheme booklet was subject to thorough verification processes. 16 So, through the scheme booklet and further consideration given to the Scheme at the scheme meeting, there appears to have been full and fair disclosure to members of all information material to the decision whether to vote for or against the Scheme. 17 Further, in accordance with s 411(4)(a)(ii), the scheme resolution was passed by a majority in number of members present and voting (either in person or by proxy) at the scheme meeting, and by 75% of the votes cast on the scheme resolution. In particular, the scheme resolution was passed by 98.28% of the votes cast and by 87% of shareholders present and voting in each case, in person or by proxy. But as I have said, certain Angel shares were not voted at the scheme meeting, being the Angel shares held by Laguna Bay, and certain Angel shares held by Mr Halman and entities associated with him. 18 As to voter turnout, 61.77% of the Angel shares eligible to be voted at the scheme meeting were voted, and 12.92% of Angel shareholders eligible to vote at the scheme meeting voted. The level of voter turnout does not give rise to any concern that shareholders were deterred from attending the scheme meeting or did not have notice of it. Moreover, these voting participation rates are healthier than the voting participation rates at recent Angel annual general meetings. Indeed, this conclusion is fortified when one considers the exclusions that I have condoned. 19 Let me now address one matter that is out of the ordinary for an application such as the present. 20 A copy of the Scheme was included as annexure B to the registered scheme booklet provided to Angel shareholders. But paragraph (d) of the definition of "Excluded Shares" in clause 1.1 of the Scheme so annexed to the registered scheme booklet incorrectly referred to "Angel Oysters Australia Pty Ltd ACN 615 037 815" as the trustee of the Halman Family Trust, whereas "Angel Oysters Pty Ltd ACN 147 593 799" is the correct trustee. 21 In order to correct this mistake, on 9 June 2022 Angel, BidCo and Laguna Bay agreed to amend the Scheme by deleting the words "Angel Oysters Australia Pty Ltd ACN 615 037 815" from paragraph (d) of the definition of "Excluded Shares" in clause 1.1 and replacing them with the words "Angel Oysters Pty Ltd ACN 147 593 799". 22 Further, on that day, which was the day prior to the scheme meeting, Angel announced this correction to the ASX, with the announcement including a copy of the corrected Scheme. In addition, ASIC has been informed of the correction. 23 But unfortunately, the resolution passed by Angel shareholders at the scheme meeting on 10 June 2022 referred to the form of the Scheme annexed to the registered scheme booklet provided to shareholders and the error was not otherwise drawn to the shareholders' attention on the day. In particular, the resolution was in the following terms, albeit that there was in-built potential variability: That pursuant to and in accordance with section 411 of the Corporations Act 2001 (Cth) the Scheme, the terms of which are contained in and more particularly described in the Scheme Booklet (of which this Notice of Scheme Meeting forms part) is agreed to (with or without any alterations or conditions agreed to in writing between Angel and BidCo or any alterations or conditions required by the Court to which Angel and BidCo agree), and subject to approval of the Scheme by the Court, the directors of Angel are authorised to implement the Scheme with any such alterations or conditions. 24 Accordingly, if I am otherwise prepared to make an order approving the Scheme, which I am, it is also necessary to make an order that the form of the Scheme agreed to by shareholders at the scheme meeting be altered in the manner described earlier. 25 Now I have the power under s 411(6) to give my approval to a scheme subject to any alterations that I consider just. But the following should be noted in terms of the exercise of my discretion. 26 First, the discretion has to be exercised at the time the scheme is approved at the final court hearing and cannot be exercised after the approval order has been made. 27 Second, the discretion may be exercised if the alteration is of a minor or technical kind which does not really affect the details of or recast the scheme. And in elaboration, the discretion may be exercised if the alteration is of such a kind which improves the smooth working of the scheme or which does not affect the substantive operation of the scheme. 28 Third, I should not make an alteration to a scheme unless I am satisfied that the scheme as proposed to be altered would still have been agreed to by the requisite majorities if the shareholders had considered and voted on the scheme as proposed to be altered. And relatedly and pithily expressed, any alteration should not "impinge upon or affect the spirit and intendment of the scheme as a whole" (Re Permanent Trustee Co Ltd (2002) 43 ACSR 601 at [21] per Barrett J). 29 In my view, this is an appropriate case for the exercise of my discretion to order that the Scheme be altered in the manner sought by Angel. Indeed, it is not uncommon for the discretion under s 411(6) to have been exercised in analogous cases to alter a scheme to more precisely and clearly identify shares and shareholders that are excluded from the operation of the scheme. 30 In the present case, the amendment sought does not offend any of these boundary conditions. In those circumstances it is appropriate to approve the Scheme as so amended. 31 First, the Scheme is fair and reasonable, in the sense that an intelligent and honest shareholder, properly informed and acting alone, might approve the Scheme. There is considerable support of the Angel shareholders as reflected in the voting results of the scheme meeting. Moreover, proof of the relevant statutory majorities establishes that prima facie the Scheme is fair. Shareholders are in the best position to judge whether an arrangement is in their commercial interests, and I should be reluctant to make a decision contrary to the views expressed by the shareholders. Moreover, no shareholder has appeared before me to oppose the Scheme. Further, one has the recommendation from the independent Angel directors that Angel shareholders vote in favour of the Scheme for the reasons given in the scheme booklet, and one also has the fact that each independent Angel director stated their intention to vote the Angel shares held or controlled by them in favour of the Scheme. Moreover, the opinion of the independent expert is that the Scheme is in the best interests of Angel shareholders. And this is all in the context of the disclosures in the scheme booklet which set out a detailed description of the Scheme, including its potential benefits and disadvantages. 32 Second, there is nothing to suggest that the Scheme has been proposed otherwise than in good faith, or that the Angel shareholders voted otherwise than in good faith and for proper purposes. Moreover, there is no suggestion of any oppression of any minority, and no evidence that any third party will be disproportionately adversely affected by the operation of the Scheme. 33 Third, at the first Court hearing, Angel drew to my attention as I have said various matters warranting consideration, but none of those matters now presents any impediment to the orders sought approving the Scheme. 34 Fourth, my power to approve the Scheme is of course restricted by s 411(17). At the approval stage, either I must be satisfied that there is no proscribed purpose as described in s 411(17)(a) or there must be produced a statement in writing by ASIC that it has no objection to the arrangement (see s 411(17)(b)). A "no objection" statement has now been provided by ASIC which satisfies the requirements of s 411(17)(b), and consequently I do not need to address s 411(17)(a) further, save to make the obvious point that I should not refuse approval of the Scheme merely because the relevant acquisition could also have been effected under Chapter 6. 35 For these reasons I made the necessary orders to approve the Scheme with the alteration as discussed. I certify that the preceding thirty-five (35) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Beach.