Dropsuite Limited, in the matter of Dropsuite Limited (No 2) [2025] FCA 487 | Case summary

Federal Court of Australia|2025-05-14|Before: Button J

For the reasons outlined above, I consider that it is appropriate that the Court exercise its discretion to grant approval of the Scheme.
Accordingly, orders will be made for the Scheme to be approved, together with ancillary orders exempting Dropsuite from compliance with s 411(11) of the Corporations Act.

I certify that the preceding forty-seven (47) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Button.

Court (Corporations) Rules 2000

On 2 April 2025, the Court made orders pursuant to ss 411(1) and 1319 of the Corporations Act 2001 (Cth) (Corporations Act) convening a meeting of members holding fully paid ordinary shares in Dropsuite Limited (Dropsuite) (Scheme Shareholders) to consider and, if thought fit, approve the scheme of arrangement set out at Annexure A to those orders (Scheme) (April Orders).
The meeting was held on 9 May 2025 (Scheme Meeting), and the second Court hearing was held on 14 May 2025.
These reasons are to be read with my reasons convening the Scheme Meeting, which set out the nature of, and background to, the Scheme: Dropsuite Limited, in the matter of Dropsuite Limited [2025] FCA 306 (Dropsuite No 1).
At the second Court hearing, Dropsuite relied on an affidavit of Bill Kyriacou dated 13 May 2025, and an affidavit of Merryn Jill Quayle dated 14 May 2025.

In Re Australia and New Zealand Banking Group Limited (No 2) [2022] FCA 1547 (Re ANZ (No 2)), O'Bryan J set out the matters to which the Court will ordinarily have regard in deciding whether to approve a scheme of arrangement (at [10], citing Re Vault Intelligence Limited (No 2) [2020] FCA 1504 at [11] (O'Bryan J)):

The Scheme Meeting was held on 9 May 2025. At the Scheme Meeting, 96.8% of shareholders present and voting (in person or by proxy) cast their votes in favour of the Scheme. This represented 99.95% of the votes cast.
The Scheme therefore attracted overwhelming support from voting Scheme Shareholders, and achieved the voting majorities required by s 411(4)(a)(ii) of the Corporations Act.
In terms of voter turnout, 19.49% of Scheme Shareholders were present and voted at the Scheme Meeting. This equated to 65.02% of the total shares entitled to be voted at the Scheme Meeting. The level of participation in the Scheme Meeting was significantly higher than the typical participation rate at Dropsuite's Annual General Meetings in 2022, 2023 and 2024 at which between 3.0% and 4.0% of shareholders voted.
The voter turnout (assessed by the proportion of eligible shareholders voting) at the Scheme Meeting is well above the level of 10% that is often used to determine whether the voter turnout is "low": see, eg Re Midway Ltd [2025] FCA 47 at [28] (Anderson J) citing Re Crown Resorts Ltd (No 2) [2022] FCA 710 at [37] (Anderson J).
The authorities are also clear that low voter turnout is not, without more, a reason to refuse to exercise the discretion to approve a scheme: Re Surf Lakes Holdings Limited (No 2) [2023] FCA 1601 at [17] (O'Callaghan J), referring to Santow J's statement in Re Matine Ltd (1998) 28 ACSR 268 () at 295 that:

It is also inappropriate to assume (in the absence of complaint) that shareholders who did not vote either did not have notice of the meeting or were silent in protest of the scheme: Re TriAusMin Ltd (No 2) [2014] FCA 833 (TriAusMin) at [10] (Farrell J). It is, however, relevant to consider whether low turnout may be an indication of some procedural irregularity, or whether shareholders were deterred from attending or voting: TriAusMin at [10]-[11] (Farrell J, also referring to Santow J's judgment in Re Matine).
Relevantly in the present case, there is no evidence of any irregularity in the dispatch of material to Scheme Shareholders, or of any issue that would have deterred them from attending or voting at the Scheme Meeting, whether in person or by proxy.
For the reasons set out above, I accept Dropsuite's submission that the level of voter turnout in this case does not give rise to any concern that Scheme Shareholders did not have proper notice of the Scheme Meeting or that there was any irregularity that compromised the participation of Scheme Shareholders.

In exercising its discretion to grant approval of a scheme of arrangement, the Court will consider whether the scheme is fair and reasonable, in the sense that an intelligent and honest shareholder, properly informed and acting alone, might approve it: Re ANZ (No 2) at [10] (O'Bryan J).
In the present case, the voting Scheme Shareholders overwhelmingly supported the Scheme, and there was no opposition to the order for approval. This stands as evidence of the Scheme's "inherent fairness": Re Amcor Limited (No 2) [2019] FCA 842 at [11] (Beach J). As identified by Markovic J in Re APN Outdoor Group Limited (No 2) [2018] FCA 1633 at [4], "members are better judges of what is in their own commercial interests than the Court".
For these reasons, I accept that the Scheme is fair and reasonable.

Dropsuite Limited, in the matter of Dropsuite Limited (No 2) [2025] FCA 487 (14 May 2025)