Fairfax Media Limited, in the matter of Fairfax Media Limited (No 2) [2017] FCA 1313

The evidence 5 The following affidavits have been read in support of the present application: Nicholas Graham Falloon, affirmed 3 November 2017, which deposes to the passing of resolutions at the scheme meeting and the plaintiff's annual general meeting; Ivana Sjarifudin, affirmed 3 November 2017, which deposes to the dispatch of the scheme documentation, the receipt and recording of proxies and voting at the scheme meeting; Gail Hambly, affirmed 3 November 2017, which deposes to a matter mentioned later in these reasons; and Benjamin David Hely, affirmed 6 November 2017, which deposes to (amongst other things) registration of the scheme booklet, advertising of the second court hearing, the fact that no notices of appearance have been received by the plaintiff's solicitors, and satisfaction of the conditions precedent to the scheme. 6 Based on this evidence, I am satisfied of the following matters. 7 First, the scheme meeting was convened and held in accordance with the orders made on 22 September 2017 and that: 86.96% of the members present and voting in person or by proxy voted in favour of the scheme; and 99.89% of the votes were cast in favour of the scheme, thereby satisfying the requirements of s 411(4)(a) of the Act. 8 I note that, as events transpired, 19 members did not receive notification of the scheme meeting, or receive the relevant documents, by the means provided by Orders 2 (f)-(g) made on 22 September 2017. This is because these members had not nominated an electronic address for the purposes of receiving notices of meeting from the plaintiff, and the plaintiff's register of members did not record a physical address for them. These members held, in total, 41,158 shares as at 7.00pm on 31 October 2017, the time and date for determining eligibility to vote at the scheme meeting. I am satisfied that if voting rights in respect of these shares had been exercised, the outcome of the scheme meeting, in terms of the approval of the scheme, would not have been affected given that 1,624,405,870 votes were cast in favour of the scheme by 1,587 members, with 1,722, 921 votes cast against the scheme by 238 members. 9 It is important to understand that Order 2(f) of the Court's orders regarding dispatch of the notice of meeting, scheme booklet and proxy form to the members has been complied with, according to its terms. There is no irregularity to cure in respect of the 19 members, and, for that reason, no need to address the availability of remedial provisions such as s 1322 of the Act. It is also important to note that, at the time the orders were made on 22 September 2017, the plaintiff was not aware that these members had not provided either an electronic address for notification or did not have an address for service recorded in the register of members. 10 I do note, however, the following additional matters in this connection. The plaintiff's usual practice is to publish important company announcements and materials on its website. To this end, on 22 September 2017, the plaintiff caused a copy of the scheme booklet to be published on its website shortly after it was released to the ASX. The plaintiff also issued a news announcement setting out the details of the scheme meeting, which referred to the publication of the scheme booklet on its website. The news announcement included a URL link to PDF copies of the scheme booklet and proxy form. References to the news announcement and the scheme meeting, and a URL link to the scheme booklet, were promoted on the main page of the plaintiff's website. Further, an advertising banner drawing attention to the scheme was displayed prominently on the "Investors" page of the plaintiff's website. That banner linked directly to a dedicated webpage setting out information regarding the scheme. Finally, copies of the scheme booklet were made available at the plaintiff's registered office and upon request via published contact details. Thus, steps beyond those ordered by the Court have been taken by the plaintiff to bring the scheme proposal to the attention of members. In the circumstances, it is quite possible that the 19 members did, in any event, receive notice of the scheme meeting. 11 Secondly, subject to the granting of the approval that is now sought, and apart from the members' approval of the scheme (already given), the remaining conditions precedent to the scheme have been satisfied. Perhaps most significant amongst these is the condition that the members vote in favour of a capital reduction. As explained at [13]-[14] of my earlier reasons, the capital reduction amount - $536 million - is to be applied as consideration for shares to be issued by DHA to the members bound by the scheme. At the plaintiff's annual general meeting held immediately after the scheme meeting, 99.93% of the votes cast on the relevant resolution were in favour of the capital reduction. 12 The other conditions precedent which have been satisfied are: the plaintiff's directors' recommendation, between the date of the scheme booklet and the scheme meeting, to members to vote in favour of the scheme and the capital reduction; the obtaining of necessary regulatory approvals; and ASX approval of the admission of DHA to the official list and the granting of permission for official quotation of DHA's shares. 13 The only regulatory approval that has been sought is ASIC's statement under s 411(7)(b) of the Act that it has no objection to the scheme. This statement has been given by ASIC in the form of a letter, which is in evidence. 14 As to the ASX listing approval and quotation, the ASX has provided a letter, which is also in evidence, to the effect that it has decided to admit DHA to the official list and to quote its securities. In this connection, I note that DHA converted to public company status on 3 November 2017. 15 In relation to all conditions precedent (other than Court approval), the plaintiff has provided a certificate, executed as a deed, confirming that all such conditions have been satisfied or waived (the evidence is that they have been satisfied). 16 There is one matter arising from the evidence to which I am must refer. 17 At [26] of my earlier reasons, I recorded the fact that, on 19 September 2017, the plaintiff's Board approved the scheme booklet. This finding was based on a statement to that effect in an affidavit made by the plaintiff's Group General Counsel and Company Secretary, Ms Hambly, on 20 September 2017. For the avoidance of doubt, her evidence, in that regard, was: On 19 September 2017, the Board and each of its directors approved the Scheme Booklet for lodgement with the Court. 18 At the first court hearing, I enquired about the means by which that approval had been given: HIS HONOUR: Ms Hambly referred to the board having approved the scheme booklet. MR WOOD: Yes. HIS HONOUR: Is there any - she makes that as a statement. Is there any material before me or that will be before me which contains the board resolution or - - - MR WOOD: On that topic? HIS HONOUR: Yes, on that topic. MR WOOD: No, I don't think so, but I will just check, but I don't think there is, your Honour. No, there isn't. I will make some inquiries as to whether such a document does exist, and I will let - - - HIS HONOUR: Yes. It's just that I'm not quite sure of the form in which the approval took - I assumed it was a resolution. MR WOOD: Yes. I will find out and come back to you, if it may please. HIS HONOUR: Yes. Thank you. 19 Later, acting on instructions given, counsel informed me: MR WOOD: And the answer to your Honour's question earlier is that there is a board resolution in relation to the booklet. We will tender that on the second hearing.....it's not in court at the moment. HIS HONOUR: Thank you. 20 That exchange confirmed in my mind the impression which Ms Hambly's affidavit unquestionably conveyed - namely, that the Board had, by a formal act, consciously considered and approved the scheme booklet and that each director had agreed to that course. In other words, that the Board itself had positively accepted responsibility for the accuracy of statements made in the scheme booklet, at least in respect of statements attributed to the plaintiff. 21 In an affidavit read in support of the present application - no doubt in response to the query I had raised at the first court hearing - Ms Hambly said that, on 20 September 2017, she sent an email to each of the plaintiff's directors informing them that a copy of the scheme booklet (to be lodged with the Court that day) would be uploaded to an online document portal to which the directors have access for board-related matters, along with other material relating to the scheme. In that email, Ms Hambly reported on the verification work undertaken by the Due Diligence Committee (see [26] of my earlier reasons). Her email concluded with the following: There is a lot of material uploaded for the records including the DDC Planning Memorandum which sets out how the DDC has undertaken its work. If you would like to discuss the process or any of the material please let me know. 22 In her affidavit, Ms Hambly offered a "clarification" of the process by which, she said, the Board's approval of the scheme booklet had been given: I received no indication from any Director in response to my email that they wished to discuss the Scheme Booklet, which I understood to indicate approval by the Board of the Scheme Booklet for lodgement with the Court. 23 I do not consider that, by the process described, it could reasonably be thought that the Board or any director did, in fact, approve the scheme booklet, as Ms Hambly had stated in her first affidavit - a position which, unfortunately, she sought to maintain in her second affidavit. I think that, fairly read, Ms Hambly's email did no more than report on the work that the Due Diligence Committee had done, and inform the directors of progress on that matter. They were not asked to approve the scheme booklet. Indeed, they were not asked to do anything in relation to the scheme booklet. It is understandable that there was no relevant response from any director about it. Quite apart from these matters, I do not understand how, in any event, Ms Hambly's email could possibly relate to Board and individual director approval said to have been given the day before, on 19 September 2017. 24 I mention this matter because Ms Hambly's statement in her first affidavit - that the Board and each director had approved the scheme booklet - was, to my mind, significant. Indeed, it is the reason why I raised it at the first court hearing and recorded her evidence in my earlier reasons. I now find, contrary to what Ms Hambly had deposed, that there was no such approval. 25 The accuracy of statements made in evidence is always important, but particularly so in proceedings such as the present where the application to the Court is ex parte. The Court must have confidence that the evidence before it is accurate and can be relied upon without question or qualification. 26 Also significant is the fact that, at the first court hearing, I was told that there was a Board resolution approving the scheme booklet, when plainly that was not the case. I do not understand how, in light of the facts it then knew, the plaintiff could have given those instructions or how it could then have given its assurance to the Court that the supposed resolution would be tendered. I wish to make it perfectly clear that I make no criticism whatsoever of counsel who, as is apparent from the transcript quoted above, was simply conveying the instructions he had been given. No doubt he relied on the accuracy of those instructions, as did I. 27 It gives me no satisfaction to raise these matters. And although it should not be necessary for me to do so, I must stress the paramount importance of the need for absolute accuracy in statements made to the Court - in the evidence, in submissions and in assurances given. Regrettably, on this occasion, and on this topic, the plaintiff has fallen well short of the standard which the Court expects, and is entitled to assume has been met. The unvarnished fact is that there had been no Board approval (let alone approval by each director), and there was no Board resolution. The evidence and statements to this effect that were received and acted upon by the Court on 22 September 2017 were simply untrue. I do not wish to see conduct of this kind repeated. 28 That said, there was, as I recorded in my earlier reasons, other evidence concerning the steps taken by the plaintiff to verify the accuracy of the statements made in the scheme booklet. Despite the fact that neither the plaintiff's Board nor any of its directors had approved the scheme booklet as represented, it was not necessary for them to do so and no matter has been brought to my attention that would change my earlier conclusion that the scheme booklet contains an adequate and accurate disclosure of the restructure and the scheme.

Other matters 29 In oral submissions, I was taken to various provisions of a Business Transfer Agreement dated 30 October 2017 and a Separation Deed dated 3 November 2017, both of which have been entered into by the plaintiff and DHA to implement the restructure. These agreements are specifically referred to in the scheme booklet, along with other agreements. 30 Finally, I was taken to a Sale Agency Deed dated 3 November 2017 between the plaintiff and Macquarie Securities (Australia) Ltd (Macquarie) whereby Macquarie was appointed as the Sale Agent to conduct the share sale facility described in the scheme booklet in relation to shares in DHA referable to Ineligible Foreign Shareholders: see [17]-[19] of my earlier reasons.

Conclusion and disposition 31 I am satisfied that the necessary procedural requirements for the approval that is now sought from the Court have been satisfied. I am also satisfied that the scheme is fair and reasonable. In coming to this conclusion, I have taken into account the fact that the plaintiff's directors have unanimously recommended the scheme to members; the independent expert, Grant Samuel, has expressed the opinion that the scheme is fair and in the best interests of members; the scheme has been agreed to by the members, with the significant majorities I have recorded; and no person has come forward to oppose the scheme. 32 I am satisfied, therefore, that the scheme should now be approved by the Court. The plaintiff has sought exemption from compliance with s 411(11) of the Act. It is appropriate that the exemption be granted. I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates.