Empired Limited, in the matter of Empired Limited (No 2) [2021] FCA 1409

MCKERRACHER J: 1 On 25 October 2021, holders of ordinary shares (Shareholders) in the plaintiff (Empired) voted in favour of a scheme of arrangement between Empired and its Shareholders, under which Capgemini Australia Pty Ltd ACN 092 284 314 will acquire all of the issued ordinary shares in Empired for cash consideration (Scheme). 2 Empired seeks orders: (a) under s 411(4)(b) of the Corporations Act 2001 (Cth), approving the Scheme; (b) pursuant to s 411(12) of the Act, exempting Empired from compliance with s 411(11) of the Act; and (c) pursuant to r 3.4(2) of the Federal Court (Corporations) Rules 2000 (Cth), abridging the notice period in r 3.4(3)(b) by one day to allow Empired to apply to the Court for approval of the scheme on 1 November 2021. 3 Capitalised terms which are used (but not defined) in these reasons have the same meanings as they do in the reasons for orders made on 20 September 2021 at the First Court Hearing.

EVIDENCE 4 Empired relies on the affidavits of: (a) Mr Mark Paganin, sworn and filed on 28 October 2021, as to the registration of the Scheme Booklet by the Australian Securities and Investments Commission (ASIC) and the provision of notices to ASIC; (b) Ms Nicole Lewis, sworn and filed on 27 October 2021, as to the postal and electronic despatch of the 'Scheme Materials' (as defined in that affidavit) by Computershare Investor Services Pty Limited, Computershare's maintenance of the Register of Shareholders, and online proxy voting access for Shareholders (Second Lewis Affidavit); (c) Mr David Hinton sworn and filed in this proceeding on 28 October 2021, as to: (i) the advertising of the Second Court Hearing; and (ii) his supervision of Computershare, including the despatch of the Scheme Materials; (d) Mr Thomas Stianos sworn and filed on 28 October 2021, as to his role as chairperson, the treatment of proxies, and voting results of the Scheme Meeting held on 25 October 2021 (Second Stianos Affidavit); (e) a further affidavit of Mr Paganin (Fifth Paganin Affidavit) sworn and filed on the morning of 1 November 2021, regarding: (i) satisfaction or waiver of all conditions precedent to the implementation of the Scheme by Empired (other than the condition precedent requiring Court approval of the Scheme); (ii) confirmation that no notices of appearances, or appearances, have been filed in the present proceeding; and (iii) the provision by ASIC of a letter in relation to s 411(17)(b) of the Act; and (f) an affidavit of a solicitor of Capgemini, Mr Christopher Hicks sworn and filed on the morning of 1 November 2021, regarding satisfaction or waiver of all conditions precedent to the implementation of the Scheme by Capgemini (other than the condition precedent requiring Court approval of the Scheme). 5 Empired also relies on the affidavits previously filed, which contain details of the Scheme and the disclosures made. These affidavits include the first affidavit sworn by Ms Lewis on 22 September 2021 (First Lewis Affidavit).

BACKGROUND 6 On 20 September 2021, orders were made pursuant to s 411(1) of the Act for the convening of a meeting of the Shareholders to consider and vote on the proposed Scheme (the Scheme Meeting), and those orders were amended by further orders made on 22 September 2021 (as amended, the First Orders). 7 The Scheme Meeting was held on 25 October 2021, and Shareholders voted in favour of the Scheme. Of the Shareholders who voted, 98.53% (and 99.91% of votes cast on the resolution put to the Scheme Meeting) were in favour of the Scheme. The requisite majorities of Shareholders under s 411(4)(a) of the Act have approved the Scheme. Approximately 24.84% of Shareholders entitled to vote on the Scheme, holding 74.41% of the total shares on issue in Empired, participated in the voting on the Scheme.

JURISDICTION TO APPROVE THE SCHEME 8 Section 411(4) of the Act relevantly provides that an arrangement is binding on the members of a company, and the company itself, if: (a) at a meeting convened in accordance with an order of the Court, a resolution in favour of the arrangement is: (i) passed by a majority in number of the members present and voting (either in person or by proxy) (s 411(4)(a)(ii)(A)); and (ii) if the body has a share capital, passed by 75% of the total votes cast on the resolution (s 411(4)(a)(ii)(B)); and (b) the arrangement is approved by order of the Court (s 411(4)(b)).

Relevant Considerations for the Second Court Hearing 9 In considering an application for approval of a scheme under s 411(4)(b) of the Act, the Court's task is twofold: (a) first, the Court must ensure that the statutory and procedural requirements in relation to s 411 of the Act have been observed; and (b) secondly, the Court must determine, in the exercise of its discretion, whether to approve the scheme in question. see Re Wesfarmers Ltd (No 2) [2018] WASC 357 per Vaughan J (at [12]). 10 The statutory and procedural requirements for the proposed Scheme are as follows: (a) compliance with the First Orders which convened the Scheme Meeting; (b) compliance with the disclosure obligations under s 412(1) of the Act in relation to the Scheme (including as addressed at the First Court Hearing on 20 September 2021); (c) the passing of the resolution to approve the Scheme by the requisite statutory majority; and (d) satisfaction of the condition under s 411(17) of the Act (and any other relevant statutory requirements) in relation to the Scheme.

Court's Discretion to Approve 11 In approving a scheme of arrangement, the role of the Court is supervisory in nature, requiring the Court to be satisfied that there has been no oppression, and that the arrangement is capable of being accepted. Although the Court is not bound to approve just because it made an order to convene a scheme meeting, or because the statutory majorities have been achieved, the Court will usually approach its task on the basis that the members are better judges of what is in their own commercial interests than the Court: Re Gindalbie Metals Ltd (No 2) [2019] FCA 1066 per Colvin J (at [19]) and Re Seven Network Ltd (No 3) [2010] FCA 400; (2010) 267 ALR 583 per Jacobson J (at [31]-[34]). 12 Courts are generally reluctant to intervene against schemes in which the requisite majorities have been reached by fully-informed members, who have been made aware of all matters relevant to the making of their voting decisions, as I noted in Re Altona Mining Ltd [2018] FCA 614 (at [8]). 13 In exercising the discretion to approve the Scheme, the Court must consider whether: (a) the Scheme is fair and reasonable, such that an intelligent and honest person, properly informed and acting alone in respect of his or her interest as a shareholder, might approve it; (b) the Shareholders have voted in good faith and not for an improper purpose; (c) Empired has brought to the Court's attention all matters that could be considered relevant to the exercise of the Court's discretion; (d) there has been full and fair disclosure of all information material to the decision as to whether to vote for or against the Scheme; (e) minority shareholders would be oppressed by the Scheme; (f) the Scheme offends public policy; (g) all conditions to which the Scheme is subject (other than Court approvals and lodgement of the Court's orders with ASIC) have been met or waived; and (h) statutory and procedural requirements in relation to s 411 of the Act have been duly observed. (see, for instance, Re Opus Group Ltd (No 2) [2018] FCA 1413 per Banks-Smith J (at [7])). 14 As detailed below, the evidence shows that all statutory, procedural and legal requirements are satisfied. 15 I am satisfied it is appropriate for the Court to exercise its discretion to order that: (a) the Scheme be approved, for the reasons set out below; and (b) Empired be exempted from compliance with s 411(11) of the Act, as approval of the Scheme will not result in any amendment to, or change in the construction of, Empired's Constitution and after the implementation of the Scheme, Capgemini will be the holder of all of shares in Empired: as to which, see Re Kumarina Resources Ltd [2013] FCA 549 per Gilmour J (at [60]-[61]).

COMPLIANCE WITH STATUTORY AND PROCEDURAL REQUIREMENTS

Notice of Second Court Hearing 16 On 23 September 2021, and on 24 September and 1, 8 and 15 October 2021, in the case of Bounce Back Shareholders and New Shareholders (as defined in the Second Lewis Affidavit), the Scheme Booklet was despatched to Shareholders. 17 The Scheme Booklet despatched to Shareholders included statements that: (a) in order to become effective, the Scheme would need to be approved by an order of the Court; (b) Empired intended to apply to the Court on 1 November 2021 for approval of the Scheme; and (c) Shareholders who wished to oppose the approval of the Scheme could do so by filing with the Court, and serving on Empired, a notice of appearance. 18 At the Scheme Meeting on 25 October 2021, the chairperson, Mr Stianos, stated that Empired intended to apply to the Court for approval of the Scheme on 1 November 2021, and that Shareholders were entitled to appear at that hearing. 19 Order 10 of the First Orders stated that Empired would satisfy its notice obligation under r 3.4(3)(b) of the Corporations Rules so long as it caused a notice of the Second Court Hearing (substantially in the form of Annexure A to the First Orders) to be published in The Australian newspaper on or before 26 October 2021, and that Empired would otherwise be exempted from compliance with r 3.4 of the Corporations Rules. 20 On 26 October 2021, notice of the Second Court Hearing (substantially in the form of Annexure A to the First Orders) was published in The Australian newspaper. A copy of that notice, as published, is in evidence. The notice directed persons who wished to oppose the approval of the Scheme to file, and serve on Empired by no later than 31 October 2021, a notice of appearance and any supporting affidavit at Empired's address for service provided in the advertisement. Mr Cameron Belyea of Clayton Utz was named as the relevant contact. 21 ASIC has been made aware of the Second Court Hearing. 22 No person has provided any notice of an intention to oppose the grant of the orders approving the Scheme (whether during the Scheme Meeting or otherwise).

Compliance with First Orders 23 Empired has complied with the First Orders made by the Court in this proceeding. 24 Specific points in relation to Empired's compliance with the First Orders were brought to the Court's attention as below.

Despatch of Scheme Materials 25 As required under order 5 of the First Orders, the Scheme Booklet, substantially in the form approved by the Court under order 1(c) of the First Orders, was registered with ASIC on 22 September 2021. 26 Order 5 of the First Orders required the Scheme Booklet and other materials identified in that order to be despatched to each Shareholder recorded on the Register as at 5:00 pm (AWST) on 21 September 2021. Due to an oversight, those materials were instead initially despatched to each Shareholder recorded on the Register as at 5:00 pm (AWST) on 20 September 2021. 27 Only one Shareholder came onto the Register between 5:00 pm (AWST) on 20 September 2021 and 5:00 pm (AWST) on 21 September 2021, and that Shareholder voted in favour of the resolution which was put at the Scheme Meeting. 28 The Scheme Booklet and other materials identified in order 5 of the First Orders (Scheme Materials) (or electronic equivalents, as identified in orders 5(a) and 5(c)) were despatched on 23 September 2021 to each Shareholder recorded on the Register as at 5:00 pm (AWST) on 20 September 2021, by: (a) in the case of 659 Shareholders who had nominated an electronic address for the purpose of receiving Empired communications (including notices of any meeting) from Computershare (Email Shareholders), sending an email broadcast in the form of annexure NBL-4 to the First Lewis Affidavit (the Email Broadcast), containing links to websites at which recipients could access the Scheme Booklet, and lodge electronic proxy forms for the Scheme Meeting; (b) in the case of 18 Shareholders had who had expressly elected to receive physical copies of Empired communications (including notices of any meetings) (Postal Shareholders), mailing the Scheme Materials (by prepaid post, or prepaid international airmail or air courier, as applicable) to those Shareholders' registered postal addresses; and (c) in the case of 692 Shareholders who had neither nominated an electronic address nor expressly elected to receive physical copies of Empired communications (including notices of any meetings) (Default Shareholders) mailing a notice (by prepaid post, or prepaid international airmail or air courier, as applicable) to those Shareholders' registered postal addresses, such notice being in the form of annexure NBL-3 to the First Lewis Affidavit and containing links to websites at which recipients could access the Scheme Booklet and lodge electronic proxy forms for the Scheme Meeting. 29 In accordance with order 7 of the First Orders, on 24 October 2021 Computershare caused physical copies of the Scheme Materials to be despatched, by priority post, to the registered postal addresses (within Australia) of three Email Shareholders, whose email addresses had returned undeliverable notifications when Computershare despatched the Email Broadcast on 23 September 2021 (the Bounce Back Shareholders as defined in the Second Lewis Affidavit). 30 On 1, 8 and 15 October, Computershare caused physical copies of the Scheme Materials to be despatched, by priority post, to a total of 17 new Shareholders who had come onto the Register after 5:00 pm on 20 September 2021.

Conduct of the Scheme Meeting 31 In accordance with order 9 of the First Orders, valid proxies in respect of the Scheme were returned to Computershare (or lodged electronically) by 10:00 am (AWST) on 23 October 2021. 32 More than two Shareholders were present (in person, or by proxy, corporate representative or attorney) at the Scheme Meeting, satisfying the quorum required to conduct the Scheme Meeting under order 3(c) of the First Orders. 33 In accordance with order 3(a) of the First Orders, Mr Stianos acted as the chairperson of the Scheme Meeting, and has reported to the Court that, in satisfaction of s 411(4)(a)(ii) of the Act, a resolution in favour of the Scheme was passed at the Scheme Meeting by 98.53% of the Shareholders present and voting by person or by proxy, holding 99.91% of the votes cast on the resolution.

Participation 34 Although the turnout percentage of eligible shares and shareholders at a scheme meeting has no statutory significance, a low turnout may suggest a flaw in the convening procedure. It is submitted, and I accept, that no such flaw is suggested by the evidence in this matter, and that Empired has made all reasonable attempts to maximise the participation of Shareholders in the Scheme Meeting: see Re Decimal Software Ltd (No 2) [2018] FCA 2040 per Banks-Smith J (at [19]-[22]); Re Excelsior Gold Ltd [2018] FCA 2064 per McKerracher J (at [92]). 35 Votes were cast at the Scheme Meeting by 340 of 1369 (or approximately 24.84%) of Shareholders eligible to vote, holding 74.26% of Empired shares on issue as at the cut-off time for eligibility to vote at the Scheme Meeting. It is submitted, and I accept, that this represents a high turnout of Shareholders participating in the voting at the Scheme Meeting.

Voting Results at Scheme Meeting 36 As at 5:00 pm (AWST) on 23 October 2021, being the cut-off time and date for eligibility to vote at the Scheme Meeting, there were 162,371,595 Empired shares on issue, held by a total of 1369 Shareholders. 37 The Share Poll Letter in respect of the Scheme Meeting discloses the number of Shareholders, and Empired shares, represented at the Scheme Meeting. 38 As set out in the Second Stianos Affidavit, out of the total number of eligible Empired shares and Shareholders identified in [36] above: (a) 121,084,442 votes were cast at the Scheme Meeting, being approximately 74.41% of the 162,371,595 shares on issue in Empired as at 23 October 2021; (b) 335 Shareholders present and voting (including by proxy) voted in favour of the Scheme (being approximately 24.47% of the Register), while five voted against it (being approximately 0.37% of the Register); and (c) 120,976,744 votes were cast in favour of the resolution at the Scheme Meeting, being 99.91% of all votes cast.

Conditions Precedent 39 Clause 3.1 of the Scheme Implementation Agreement dated 19 June 2021 between Empired and Capgemini (SIA) sets out a number of conditions precedent to the implementation of the Scheme. Clause 2.1 of the Scheme Document (being Annexure C to the Scheme Booklet) also sets out a number of conditions precedent to the Scheme. 40 The 'OIO' condition precedent under cl 3.1(c) of the SIA was satisfied on 23 August 2021. 41 All other conditions precedent in the SIA, other than the condition precedent requiring Court approval of the Scheme, were satisfied or waived before 8:00 am (AWST) on 1 November 2021, being the date of the Second Court Hearing. Certificates of satisfaction or waiver of conditions precedent, executed by each of Empired and Capgemini, were subsequently annexed to the Fifth Paganin Affidavit filed with the Court prior to the Second Court Hearing.

Compliance with s 411(17) of the Act 42 The Court's ultimate approval of the Scheme is dependent upon the fulfilment of one of two alternative conditions set out in s 411(17) of the Act: Re Macquarie Private Capital A Ltd [2008] NSWSC 323 per Barrett J (at [31]) and Re Integra Mining Ltd (No 2) [2013] FCA 220 per McKerracher J (at [10]). 43 As noted in Empired's written submissions filed in this proceeding ahead of the First Court Hearing, s 411(17) is to be considered at the Second Court Hearing. 44 ASIC has considered these submissions and determined, in the usual way, whether to issue a no objection letter. Production of a 'no objection letter' has been made. A 'no objection letter' issued by ASIC was produced on the day of the Second Court Hearing (1 November 2021). Following provision of this letter, the requirements under s 411(17)(b) of the Act were satisfied. 45 This usually brings an end to the issue, but the letter does not bring an end to the Court's discretion: Re Macquarie Private Capital A Ltd (at [29]). 46 If the directors of a target company consider a takeover proposal is in the best interests of the members of the target company, the implementation of the takeover by a method that provides for the certainty of outcome (100% by the bidder company) through a single process is a commercially rational reason for choosing a scheme of arrangement over a Ch 6 takeover. This reason for preferring a scheme of arrangement to a Ch 6 takeover is not a proscribed purpose: Re Altona Mining (at [27]). 47 The requirements under s 411(17)(a) of the Act have been satisfied.

Limitation of Liability Clause 48 Clause 7.11 of the Scheme Document (forming Annexure C to the Scheme Booklet) states: 'Neither [Empired] nor [Capgemini], nor any of their respective officers, directors, secretaries or employees, will be liable for anything done or omitted to be done in the performance of this Scheme or the Deed Poll in good faith'. 49 In Re Wesfarmers Limited (No 2) (at [49(4)]), Vaughan J considered a materially identical clause to that identified in the preceding paragraph. His Honour observed as follows: Clause 7.4 provides Wesfarmers, Coles and their officers with an exclusion from liability to scheme participants for acts or omissions done in performance of the scheme or the deed poll in good faith. I questioned whether the clause was necessary or appropriate. Wesfarmers identified that a similar clause had been approved in at least 12 schemes approved since 2006. However, there has been no express curial consideration of the clause. On its proper construction the clause will not exclude liability for acts or omissions in breach of the scheme terms or in breach of the deed poll. Such acts or omissions could not be in performance of the scheme or the deed poll. Accordingly, the clause will not deprive members of their intended benefits under the scheme. To the extent that the clause offers some comfort to those who must implement the mechanics of the scheme it may be seen as facilitating the scheme. I was thus persuaded that cl 7.4 ought to remain as part of the scheme to be approved. 50 Vaughan J's decision has been followed by this Court, for example by Colvin J in Re Patersons Securities Ltd (No 2) [2019] FCA 1645 (at [9]). 51 Like the clause considered in Re Wesfarmers Limited (No 2), cl 7.11 of the Scheme Document will not exclude liability for any act or omission done in breach of the terms of the Scheme (as such acts or omissions could not be 'in performance of' the Scheme). Therefore, the clause will not operate to deprive Shareholders of their intended benefits under the Scheme.

Recommendations by Directors 52 Each of Empired's directors recommended to Shareholders that they vote in favour of the Scheme. 53 The disclosure of benefits of certain directors have been set out in the Scheme Booklet. Empired's directors were nevertheless required to make a recommendation in relation to the Scheme.

The Scheme is Fair and Reasonable 54 The Court generally takes the view that the shareholders will be the best judge of whether an arrangement is to their commercial advantage. The Court is reluctant to make a decision contrary to the views expressed at a meeting of shareholders. However, the Court may withhold its approval in the following instances: (a) where the majority is shown to be acting in bad faith; (b) where a majority's acceptance is in the nature of a fraud on the minority; or (c) where there is an objection to the scheme such that a reasonable person might not approve it. see Re Altona Mining (at [16] and the cases therein cited). 55 At the First Court Hearing (on 20 September 2021), the Court (in granting the Orders to convene the Scheme Meeting) formed the view that the proposed Scheme was a commercial proposition, capable of being accepted by the Shareholders. 56 Nothing has occurred since 20 September 2021 to suggest that the Court ought to depart from its preliminary view that the Scheme is fair and reasonable such that an intelligent and honest Shareholder, properly informed and acting alone informed by his or her interests as a Shareholder, might approve the Scheme. Indeed, the Scheme was passed by the required majority at the Scheme Meeting on 25 October 2021.

The Scheme will be approved 57 I am satisfied as to the following matters: (a) full disclosure has been made to Shareholders, both as to the benefits and potential benefits of the Scheme, and as to its potential disadvantages. Relevantly, the Scheme Booklet contains: (i) a detailed summary of the advantages and disadvantages of the Scheme; (ii) details of the break fee payable by Empired in certain circumstances; (iii) an independent expert's report from Lonergan Edwards & Associates Limited as to whether the Scheme is in the best interests of Shareholders at Annexure B of the Scheme Booklet; (iv) the terms of the Scheme at Annexure C of the Scheme Booklet; and (v) a deed poll in favour of each of the 'Scheme Shareholders', executed by Capgemini, at Annexure E of the Scheme Booklet; (b) Empired has included detailed verified information in the Scheme Booklet to fully inform the Shareholders of the Scheme and decide on whether to approve it; (c) the Scheme Booklet sent to the Shareholders complies with the requirements of s 411 and s 412 of the Act; (d) any performance risk in respect of Empired and Capgemini's obligations under the SIA and the Scheme Document has been sufficiently protected against; (e) the Scheme is commercially viable and does not prejudice the interests of Shareholders, and in the opinion of the independent expert the Scheme is fair and reasonable and in the best interests of Shareholders in the absence of a superior offer; (f) Empired has not received any superior offer; (g) Empired has complied with the First Orders; (h) the Scheme has been proposed in good faith and is not commercially immoral in any respect; (i) votes in favour of the Scheme are in favour of the Scheme. There is nothing to suggest that Shareholders voted other than in good faith or that they cast their votes for an improper purpose. It is therefore apparent that Shareholders consider the Scheme to be to their commercial advantage; and (j) ASIC has been given notice of the Scheme, and has provided a statement of 'no objection' pursuant to s 411(17)(b) of the Act. 58 There is nothing proposed in the Scheme which is offensive to any substantive or procedural requirement under the Act or otherwise. Further, the evidence before the Court indicates that there is a sound commercial basis, in the interests of the Shareholders, for the Scheme to proceed. 59 The Court accordingly approved the Scheme pursuant to s 411(4)(b) of the Act. I certify that the preceding fifty-nine (59) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice McKerracher.