First Pacific Advisors LLC v Boart Longyear Ltd

INTRODUCTION 1 By originating process filed on 9 November 2023, AWA Mutual Limited (AWA) has applied for orders under s 411(1) of the Corporations Act 2001 (Cth) (Act) to convene and hold a meeting of its members (Scheme Meeting) to consider a proposed scheme of arrangement (Scheme). 2 AWA is an unlisted public company, which operates as a mutual financial services organisation, providing a range of banking products and services to its members (AWA Members). AWA is owned by its members. Each AWA Member holds one share in AWA (AWA Member Share). 3 The commercial purpose of the Scheme is to effect the acquisition of all AWA Member Shares by Beyond Bank Australia Limited (Beyond), which is also a mutual financial services organisation which provides banking services to its members. 4 If the Scheme is implemented, AWA Members will effectively swap their interest in AWA for an interest in Beyond. In particular, each AWA Member will transfer their AWA Member Share to Beyond, and as consideration for that transfer, will receive one share in Beyond (Beyond Member Share), or $10 in cash if that AWA Member is already a member of Beyond. AWA will thereby become a wholly-owned subsidiary of Beyond, who will be its sole member. 5 In addition, subject to the approval of the Australian Prudential Regulation Authority (APRA), AWA Members will transition to and become banking customers of Beyond. This is to occur via a statutory transfer of all loan and deposit products sold by AWA to Beyond (Statutory Transfer). The Statutory Transfer is not part of the Scheme, however it is a condition precedent to the Scheme that APRA approve the Statutory Transfer. 6 Certain amendments are required to be made to AWA's Constitution to facilitate the Scheme (AWA Constitutional Amendments). The AWA Constitution currently provides that AWA Member Shares are not transferable, and that an AWA Member may only hold one AWA Member Share. In order for the Scheme to be implemented, these provisions will need to be amended to enable the AWA Members Shares to be transferred to Beyond and to permit Beyond to hold more than one AWA Member Share. It is therefore proposed that AWA will hold a General Meeting immediately following the conclusion of the Scheme Meeting, at which AWA Members will be asked to approve the AWA Constitutional Amendments. The AWA Constitutional Amendments are not part of the Scheme, however their approval by AWA Members is a condition precedent to the Scheme. 7 If the Scheme is implemented, AWA Members will cease being members of AWA and will become members of Beyond. 8 The directors of AWA have agreed to unanimously recommend that AWA Members vote in favour of the Scheme, and the directors intend to vote any AWA Member Shares held or controlled by them in favour of the Scheme. 9 An independent expert report (IER) has been prepared by Lonergan Edwards & Associates Limited (Independent Expert). In the IER, the Independent Expert opines that the advantages of the Scheme outweigh the disadvantages, and that therefore the Scheme is reasonable and in the best interests of AWA Members in the absence of a superior proposal. 10 AWA has prepared a scheme booklet (Scheme Booklet) which sets out a detailed description of the Scheme and its advantages and disadvantages, and contains a number of annexures including a copy of the IER and the Scheme. It also explains the reasons for the directors' recommendation that members vote in favour of the Scheme, and it summarises the conclusions of the Independent Expert. 11 The Scheme Booklet was first lodged with the Australian Securities and Investments Commission (ASIC) on 8 November 2023, and a revised version of the Scheme Booklet was provided to ASIC on 28 November 2023. By letter dated 1 December 2023, ASIC provided comments on the revised version of the draft Scheme Booklet . 12 AWA has filed evidence and submissions in support of its application for orders convening the Scheme Meeting. Beyond has sought leave to be heard on AWA's application without becoming a party to that application, and has filed brief submissions and affidavit evidence in further support of AWA's application. I am satisfied that it is appropriate to grant leave, pursuant to r 2.13 of the Federal Court (Corporations) Rules 2000 (Cth) (Rules), for Beyond to be heard in this proceeding without becoming a party to it. 13 For the reasons set out below, I was satisfied that, if approved by AWA Members, the proposed Scheme was of such a nature that it would likely be approved by the Court at the second court hearing. Accordingly, on the hearing of AWA's application on 1 December 2023, I made orders convening the Scheme Meeting.

EVIDENCE 14 The evidence in support of this application is as follows: (a) the affidavit of Jonathan Alan Kramersh dated 9 November 2023 (Kramersh Affidavit). Mr Kramersh is a lawyer at HWL Ebsworth Lawyers (HWLE); (b) the affidavit of Gavin Heathcote dated 28 November 2023 (Heathcote Affidavit). Mr Heathcote is the chief executive officer and company secretary of AWA. In his affidavit, Mr Heathcote provides an overview of the main features of the Scheme, as well as the Statutory Transfer and the AWA Constitutional Amendments. Mr Heathcote also gives evidence in relation to the Scheme Booklet, and the steps taken by AWA to meet the statutory prerequisites for enlivening the Court's discretion to make orders convening the Scheme Meeting; (c) the affidavit of Chris Blight dated 28 November 2023 (Blight Affidavit). Mr Blight is the Senior Manager - Business Enablement of Beyond. The Blight Affidavit deposes to the verification of the information provided by Beyond Bank to AWA for inclusion in the Scheme Booklet, Beyond's application to APRA in relation to the Statutory Transfer, and the amendments made to Beyond's Constitution to facilitate the Scheme. The Blight Affidavit also annexes an executed copy of a Deed Poll given by Beyond in favour of participants in the Scheme, which provides for the scheme consideration to be paid in accordance with the terms of the Scheme; (d) the further affidavit of Gavin Heathcote dated 30 November 2023 (Heathcote Second Affidavit). The Heathcote Second Affidavit relevantly deposes to further correspondence with ASIC concerning the Scheme Booklet; (e) the affidavit of Neil Perl dated 1 December 2023 (Perl Affidavit). Mr Perl is a lawyer at HWLE. The Perl Affidavit annexes a version of the Scheme Booklet as at 1 December 2023, being the version of the Scheme Booklet the subject of this decision, and the 1 December 2023 letter from ASIC commenting on the Scheme Booklet. 15 The relevant parts of the evidence in support of AWA's application have been summarised in AWA's written submissions on this application dated 28 November 2023 at [14]-[50]. That summary is adopted, with minor modifications, below at [16]-[51] below.

AWA and the Alliance Bank Model 16 AWA was founded in Victoria in 1969 as Point Henry Credit Co-operative Limited, offering financial services to Alcoa of Australia Limited's employees and their families. In subsequent years, the company expanded its services and, in 2002, changed its name to AWA Credit Union Limited. It thereafter continued to expand its services to employees of other companies and their families. 17 In 2015, AWA restructured and implemented a new operating model (Alliance Bank Model) with three other member-owned social enterprise banks (AB Partners), which involved entry into an agency agreement with the Bendigo & Adelaide Bank Limited (Bendigo). Under this model, each AB Partner (including AWA) distributes Bendigo's banking products and services (eg, deposit and loan accounts) using its own Alliance Bank brand. 18 Pursuant to AWA's agency agreement with Bendigo (Alliance Agreement), AWA is an authorised agent of Bendigo and, in that capacity, AWA provides a range of savings accounts, fixed term accounts, personal and business lending products, and foreign exchange services as agent for Bendigo. 19 When AWA moved to the Alliance Bank Model, it subsequently surrendered its authorised deposit-taking institution (ADI) licence. It is therefore unable to independently carry out banking operations, such as receiving deposits and/or providing loans outside the Alliance Bank Model, and can no longer call itself a credit union. Accordingly, while customers transact through AWA, they remain at all times depositors with and borrowers from Bendigo. 20 The operation of the Alliance Bank Model (insofar as AWA is concerned) may be summarised as follows: (a) AWA remains responsible for all of its front office operations, including the operation of the physical branch network, employment of service staff, product branding and marketing, member verification and risk management, application processing, product pricing (within parameters approved by Bendigo), customer interaction and relationship management; (b) Bendigo acts as the ADI and provides all back office processes related to product manufacturing (including internet and mobile application banking), capital and liquidity management, ADI regulatory requirements, compliance training, credit risk, collections management, and billing; and (c) the fees and commissions generated from account management, along with the net interest margin generated on loans, are split between Bendigo and AWA at agreed rates specified in the Alliance Agreement. 21 The initial term of the Alliance Agreement ends in February 2025, and Bendigo has advised AWA that it will not renew the Alliance Agreement. Accordingly, if AWA wishes to continue to provide banking products and services to its members, it will need to implement a different operating framework. After consideration of a number of alternatives, the AWA Board unanimously agreed to recommend to AWA Members that AWA proceed with a merger of AWA with Beyond, to be implemented via the Scheme.

AWA Shares and AWA Constitution 22 Notwithstanding the Alliance Bank Model, AWA remains an independent mutual financial services organisation, owned by its members, who are also its customers. AWA's primary objectives as a mutual are documented within its Constitution. Under the AWA Constitution, a person can only become a member by subscribing for an AWA Member Share. Further, an AWA Member may only hold one AWA Member Share, and AWA Member Shares are not transferrable or saleable. 23 The subscription price for each AWA Member Share is $10. 24 An AWA Member Share confers the right to: (a) one vote, and only one vote, at member meetings; (b) participate in the mutual's profits through payment of dividends (however, AWA has never paid a dividend); (c) participate in the surplus assets (if any) in the event of a wind-up. 25 An AWA Member may request termination of their membership, and AWA may also terminate a membership if that member has been inactive (i.e. has not initiated any transactions in relation to AWA's products and services for a period of 12 months), or the AWA Board determines that the member has failed to fulfil their obligations, engaged in misconduct, or obtained membership through misrepresentation or mistake. Upon termination of membership, AWA Member Shares are redeemed at the subscription price, less any unpaid amounts. 26 As at 31 October 2023, AWA had a total of 3,921 members (Primary Members) and 3,921 AWA Member Shares on issue, fully paid up to the amount of $10.00 per share. 27 In addition, AWA has 1,841 secondary members (Secondary Joint Members), being the secondary member of an AWA membership that is held jointly by two or more members. Only one AWA Member Share is issued per joint membership, and this AWA Member Share is registered in the name of the Primary Member, who paid the $10 subscription price. Secondary Joint Members have not contributed any capital and have no voting rights under the AWA Constitution (because the AWA Member Share is not registered in their name). The Secondary Joint Members will not vote on the Scheme at the Scheme Meeting. They will however be entitled to receive the scheme consideration in the form one Beyond Member Share, as discussed below. 28 Finally, AWA has members who are also members of Beyond (Duplicate Members). Duplicate Members cannot receive another Beyond Member Share as scheme consideration, because the Beyond Constitution provides that a Beyond member may only hold one share in Beyond. Duplicate Members will instead receive $10 in cash as scheme consideration.

Beyond 29 Beyond is an unlisted public company and an ADI. Beyond is a customer-owned mutual bank that offers a traditional range of retail and business banking products and services including savings and business transaction accounts, online banking, home loans, personal and business loans and credit cards. 30 Beyond, which was originally known as Community CPS Australia Limited, was formed in 2006 as result of the merger of two credit unions, and in 2013 it converted to a mutual bank and commenced trading as a customer owned bank under the business name "Beyond Bank Australia". 31 Today, Beyond is made up from over 40 mergers with credit unions across Australia and has grown to become one of Australia's largest customer owned banks.

Beyond Shares and Beyond Constitution 32 Pursuant to the Beyond Constitution, all customers of Beyond must be members of Beyond and hold a Beyond Member Share. 33 Until 27 November 2023 and since 2016, the Beyond Constitution required that Beyond Member Shares be issued at a $nil subscription price. In order to facilitate the issue of Beyond Member Shares to AWA Members at a subscription price of $10 pursuant to the Scheme, the Beyond Constitution has been amended. The amendments allow for the issue of Beyond Member Shares as consideration in relation to the acquisition of a business (including by scheme of arrangement) at a subscription price specified by the transaction document for the acquisition. 34 As at 30 June 2023: (a) there were 290,503 Beyond Member Shares on issue with an aggregate paid up capital of $705,102; (b) Beyond also had 315,200 D Class redeemable preference shares (Beyond D Class Shares) on issue. These shares can only be issued to member shareholders and have a subscription price of $1.

Scheme of Arrangement 35 On 12 September 2023, AWA and Beyond entered into the Merger Implementation Agreement (MIA) pursuant to which Beyond would purchase 100% of the AWA Member Shares by implementing the Scheme on the terms and conditions of the MIA. 36 If the Scheme is implemented: (a) each person who is an AWA Member at the Scheme Record Date (Scheme Participant) will transfer their AWA Member Share (Scheme Share) to Beyond; and (b) each Scheme Participant will receive consideration for that transfer in the form of either one Beyond Member Share or $10 in cash, as follows (Scheme Consideration): (i) Primary Members (that is, all AWA Members other than Secondary Joint Members and Duplicate Members) will receive one Beyond Member Share in exchange for their Scheme Share, and the Beyond Member Share will be taken to have been issued at a $10 subscription price; (ii) Secondary Joint Members will receive one Beyond Member Share, which will be taken to have been issued at a $nil subscription price; and (iii) Duplicate Members will not receive a Beyond Member Share, rather they will be repaid the subscription price they originally paid for their AWA Member Share in the form of a cash payment of $10 (Cash Consideration). 37 The Scheme Consideration ensures that each category of AWA Member will be put in an equivalent position to each other AWA Member as a result of the Scheme. Namely, each AWA Member will no longer hold any AWA Member Shares, and will each hold only one Beyond Member Share, as a result of the Scheme. They will in effect give up their membership in AWA, in exchange for membership in Beyond. 38 As a result of the Scheme, AWA will cease to be owned by AWA Members and it will instead become a wholly owned subsidiary of Beyond, and AWA Members will become members of Beyond. 39 The Scheme is subject to a number of conditions precedent, including that AWA Members vote in favour of the Scheme and the AWA Constitutional Amendments, APRA approves the Statutory Transfer, and the Court approves the Scheme at the second court hearing. 40 If all conditions precedent are satisfied (or waived), then the Scheme becomes effective upon the lodgement of a copy of the Court's approval orders with ASIC. 41 The key steps in the Scheme are as follows: (a) no later than three Business Days before the Implementation Date, Beyond must deposit the aggregate amount of the Cash Consideration payable to all Duplicate Members into a Trust Account to be held on trust by AWA for those Duplicate Members (clause 6.2(a) of the Scheme); (b) on the implementation date, AWA must pay the Cash Consideration of $10 to each Duplicate Member (clause 6.2(c) of the Scheme); (c) before 12.00pm on the Implementation Date, Beyond must issue (clause 6.1(a) of the Scheme): (i) to each Primary Member, one Beyond Member Share taken to have been issued and fully paid up at the subscription price of $10.00; (ii) to each Secondary Joint Member, one Beyond Member Share taken to have been issued and fully paid up with a nil subscription price; (d) on or before the Implementation Date (which is currently expected to be 22 December 2023) SL Global will issue the Scheme Consideration to Scheme Shareholders (and to the Sale Agent in respect of ineligible foreign shareholders) (Scheme, clauses 5.1(a) and 5.3(a)(i)); (e) on the Implementation Date, but subject to the provision of the Scheme Consideration (in the form of both the issue of the new Beyond Member Shares and the payment of the Cash Consideration to Duplicate Members), all of the Scheme Shares will be transferred to Beyond (Scheme, clause 5.2). 42 In addition, Beyond must ensure that, for membership tenure purposes, the Beyond register of members recognises the following adjustments in the membership tenure of Beyond (Beyond Tenure Adjustment): (a) Primary Members and Secondary Joint Members are deemed to have become members of Beyond on the date that they first became an AWA Member (clause 6.1(d) of the Scheme and the definition of "Beyond Tenure Adjustment"); (b) Duplicate Members are deemed to have become members of Beyond on the earlier of the date the person first became an AWA Member or the date the person first became a Beyond member. 43 Beyond has executed a Deed Poll pursuant to which Beyond has agreed, subject to the Scheme becoming effective, to provide the Scheme Consideration to Scheme Participants in accordance with the terms of the Scheme.

AWA Constitutional Amendments 44 The AWA Constitution currently provides that AWA Member Shares are not transferrable, and it limits the number of shares that may be held by an AWA member to one. These provisions require amendment in order to facilitate the Scheme. Additionally, the AWA Constitution provides a procedure for nominating Directors to the AWA Board and a requirement that a person must first be an AWA member to qualify as a Director of AWA. These requirements will no longer be appropriate once Beyond is the sole shareholder of AWA. 45 AWA will convene a general meeting to amend the AWA Constitution to remove the share transfer restriction, shareholding limit, the Director share qualification requirement and the Director nomination process (ie, the AWA Constitutional Amendments). The general meeting will occur on the same day as the Scheme Meeting. The AWA Constitutional Amendments must be approved by at least 75% of the total number of votes cast on the resolution at the general meeting by those AWA Members that are entitled to vote. 46 The AWA Constitutional Amendments are a condition precedent to the Scheme, such that the Scheme cannot proceed if they are not approved. Further, the AWA Constitutional Amendments will only be made if the Scheme becomes effective.

Statutory Transfer 47 Under the Alliance Agreement with Bendigo, AWA distributes Bendigo's banking products and services (eg. deposit and loan accounts) using the "AWA Alliance Bank" brand. While customers transact through AWA, the deposits and loans held by AWA customers are legally loans and deposits of Bendigo, and accordingly, AWA is not able to pass these directly to Beyond as part of the Scheme. This must be facilitated through a regulatory process (the Statutory Transfer) which is set out in the Financial Sector (Transfer and Restructure) Act 1999 (Cth) (Transfer Act), which provides for the transfer of banking products and services from one ADI (in this case Bendigo) to another (in this case Beyond). 48 The Statutory Transfer is to be a "partial transfer" of Bendigo's banking business: that is, it is a transfer of the assets and liabilities that were originally transferred from AWA to Bendigo at the commencement of the Alliance Agreement with Bendigo, and banking products that AWA has subsequently issued as agent for Bendigo since that time under the alliance arrangements. These products are therefore held on the balance sheet of Bendigo and not AWA. 49 The Statutory Transfer will result in the transfer of these products directly from Bendigo to Beyond, as part of the overall transaction. However, AWA is not directly a party to the Statutory Transfer. Beyond will pay the consideration (if any) for the Statutory Transfer directly to Bendigo. 50 Bendigo's obligation to complete the Statutory Transfer is subject to Beyond paying the required amount into an escrow account, which is expected to occur shortly after the Scheme Meeting (subject to AWA's Members approving the Scheme). 51 Pursuant to the Transfer Act, APRA must approve the Statutory Transfer. It is a condition precedent to the Scheme that the Statutory Transfer be approved by APRA pursuant to the Transfer Act before 5.00pm on the Business Day before the date of the second court hearing. This requires both Bendigo and Beyond to make a joint application to APRA. AWA, Beyond and Bendigo have entered into a Tripartite Agreement to facilitate the necessary application with APRA and other steps required to complete the Statutory Transfer. The initial joint application to APRA has been lodged.

RELEVANT PRINCIPLES 52 As noted by O'Bryan J in Re DuluxGroup Ltd (2019) 136 ACSR 546 (Re DuluxGroup) at [14]: Part 5.1 of the Corporations Act provides a procedure whereby an arrangement between a company and its members (a scheme) can be made binding on all members. Section 411 is the principal provision. The procedure involves three main steps: (a) an application to the Court for an order that the company convene a meeting of its members; (b) if such an order is made, the holding of such a meeting at which a resolution agreeing to the scheme is considered, and perhaps passed; and (c) if the resolution is passed by the required majority (see s 411(4)), an application to the Court for approval of the scheme. 53 The principles that apply upon an application to convene a scheme meeting are well-known. The Court's function is supervisory. In Re Amcor [2019] FCA 346 (Re Amcor) at [47], Beach J described the Court's role as follows: My function on an application to order the convening of a meeting is supervisory. At this stage I should generally confine myself to ensuring that certain procedural and substantive requirements have been met including dealing with adequate disclosure, with limited consideration of issues of fairness. But having said that, it is appropriate to consider the merits or fairness of a proposed scheme at the convening hearing if the issue is such as would unquestionably lead to a refusal to approve a proposed scheme at the approval hearing, that is, the proposed scheme appears now to be on its face "so blatantly unfair or otherwise inappropriate that it should be stopped in its tracks before going any further". But in the present case, in my view there is no issue arising from the Scheme which would unquestionably lead to a refusal to approve the Scheme at the approval hearing. It cannot be said that the Scheme on its face is "so blatantly unfair or otherwise inappropriate that it should be stopped in its tracks before going any further". Put another way, the Scheme is not of such a nature and cast in such terms that if it receives the support of the statutory majorities at the meeting, nevertheless I would not be likely to approve it at the second court hearing. 54 It is well-established that the question whether or not to accept particular consideration for shares is quintessentially a commercial matter for the members to assess, and they ought not be prevented from having the opportunity to do so, provided that the Court can be satisfied that they are acting on sufficient information and with time to consider what they are voting on. 55 The Court's task at the first court hearing is to assess, firstly, whether the statutory prerequisites to the making of orders convening a meeting have been met and, secondly, whether it is appropriate for the Court to exercise its discretion in favour of making those orders. Each of these matters will be considered in turn.

STATUTORY PREREQUISITES 56 Section 411(1) of the Act requires that AWA, as the plaintiff, make an application in relation to a compromise or arrangement that is proposed between a Part 5.1 body and its members. AWA has satisfied these requirements in the present case: (a) this application was made by originating process filed on 10 November 2023; (b) a "Part 5.1 body" is defined in s 9 of the Act to include a company registered under the Act, which AWA is; (c) the proposed Scheme is an "arrangement" within the meaning of s 411(1) (as to the width of that expression; see French J in Re Foundation Healthcare Ltd (2002) 42 ACSR 252 (Re Foundation Healthcare) at 264 [39]). 57 Section 411(2) of the Act requires that ASIC be given at least 14 days' notice of the hearing of an application for orders to convene a scheme meeting, and that ASIC be given a reasonable opportunity to examine the terms of the proposed Scheme and the draft explanatory statement, and to make submissions to the Court. 58 I am satisfied that AWA has complied with the requirements in s 411(2) of the Act. By a letter to ASIC from HWLE dated 13 November 2023, AWA provided ASIC notice of the time and date of this application on 13 November 2023. ASIC was first provided with the draft Scheme Booklet on 8 November 2023, being the date that the draft Scheme Booklet was lodged on the ASIC portal. HWLE provided ASIC with a revised version of the Scheme Booklet on 28 November 2023. By letter dated 1 December 2023, ASIC confirmed that it considered that it had had a reasonable opportunity to comment on the Scheme, and that it did not propose to appear to make submissions, or intervene, to oppose the Scheme at the first court hearing. 59 In addition, the information to be provided to members for the purposes of their consideration of the Scheme is regulated by s 412 of the Act and reg 5.1.01 and Schedule 8 of the Corporations Regulations 2001 (Cth) (Regulations). In particular, s 412(1) of the Act and Schedule 8 (Part 3) of the Regulations set out the disclosure requirements of the explanatory statement (which is included within the Scheme Booklet). 60 There are three aspects to the requirements of s 412(1): (a) firstly, the explanatory statement must explain the effect of the compromise or arrangement, and in particular state any material interest of the directors, and the effect on those interests of the compromise or arrangement so far as it is different from the effect on the like interests of other persons; (b) secondly, the explanatory statement must set out the prescribed information, being the information set out in reg 5.1.01 and Schedule 8 of the Regulations; (c) thirdly, the explanatory statement must set out any other information that is material to the making of a decision whether or not to agree to the compromise or arrangement. 61 I am satisfied that the explanatory statement meets each of the above requirements. I am satisfied that the Scheme Booklet is clear and comprehensive, and (along with the IER annexed to the Scheme Booklet) contains a detailed evaluation of the Scheme, presented in a way that enables an AWA member to form his or her own view of the merits of the Scheme. 62 In light of the procedural requirements having been satisfied, the Court's discretion to make the convening orders is enlivened: Re Security Matters Limited [2023] FCA 19 (Re SMX) at [51]; Re Australian Pharmaceutical Industries Limited [2022] FCA 103 at [26]; Re PM Capital Asian Opportunities Fund Limited [2021] FCA 1380 (Re PM Capital) at [42]; Re Healthscope Limited (2019) 139 ACSR 608 (Re Healthscope) at [43]; Re Amcor at [45]; Re DuluxGroup Ltd at [15]; Re Legend Corporation Limited [2019] FCA 1249 at [17]; Re Wellcom Group Limited [2019] FCA 1655 at [24].

DISCRETION 63 The relevant discretionary considerations involve two main questions: firstly, whether the Scheme is fit for consideration by the members; and secondly, whether the members are to be properly informed as to the nature of the Scheme: Re Cellnet Group Limited [2023] FCA 767 (Re Cellnet) at [23], referring to Re DuluxGroup Ltd at [13]; Re SMX at [55]; Re Japara Healthcare Limited (2021) 156 ACSR 695 at [34] (Re Japara); API at [27]; Re Crown Resorts Limited [2022] FCA 367 (Re Crown) at [25] - [26]; Re PM Capital at [46]; Re Skilled Group Limited (No 1) [2015] VSC 781 (Robson J) at [27]. See also FT Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd (1977) 3 ACLR 69 at 72; Re NRMA Ltd (2000) 33 ACSR 595 at [30]; Re Foundation Healthcare Ltd (2002) 42 ACSR 252 at 263 [38].

Whether Scheme is fit for consideration 64 I am satisfied that the Scheme is fit for consideration by its members, in that: (a) the Scheme is of such a nature and cast in such terms that, if agreed to at the Scheme Meetings, the Court would be likely to approve the Scheme at the second court hearing; (b) there is no issue arising from the Scheme which would unquestionably lead to a refusal by the Court to approve the Scheme at the approval hearing; and (c) it cannot be said that the Scheme is on its face "so blatantly unfair or otherwise inappropriate that it should be stopped in its tracks before going any further": Re Foundation Healthcare Ltd (2002) 42 ACSR 252 at [44] (French J), quoted with approval in Re Healthscope at [45]; Re RXP at [18]-[19] and Re Wellcom Group Limited [2019] FCA 1655 at [31]. 65 AWA drew the Court's attention to the following features of the Scheme, which it said warranted consideration: (a) performance risk; (b) different forms of scheme consideration; (c) voting rights of minors. 66 A further issue has also been raised in ASIC's letter of 1 December 2023, which concerns the rights of members who jointly hold a share in AWA on a winding up of Beyond. 67 I now turn to address each of these matters.

Performance Risk 68 Although the Scheme provides for Beyond to provide the Scheme Consideration to Scheme Participants, Beyond is not a party to the Scheme and is not directly bound by it. The obligations of Beyond do not depend upon s 411 of the Act, which is confined to the obligations of AWA and its members. As such, the Court will need to ensure that Beyond is bound to perform the actions attributed to it under the Scheme and that its obligations are able to be enforced. This is often referred to as "performance risk". 69 The Scheme effectively addresses any performance risk by adopting the following safeguards: (a) firstly, the terms of the Scheme require that Beyond must first issue the Scheme Consideration to Scheme Participants, and only after the Scheme Consideration is issued will the Scheme Shares be transferred to Beyond; and (b) secondly, Beyond has executed a Deed Poll in favour of Scheme Participants binding Beyond to perform the actions attributed to it under the Scheme, including issuing the Scheme Consideration.

Different forms of Scheme Consideration 70 The different forms of Scheme Consideration to be provided under the Scheme are set out at [36(b)] above. This necessitates consideration of whether AWA Members should vote in separate classes at the Scheme Meeting. I am satisfied that the different forms of Scheme Consideration do not lead to the creation of more than a single class of members for the reasons that follow. 71 In Re Healthscope, Beach J stated (at [106]-[107]) that: The well-established test for identifying a class for the purposes of a scheme of arrangement is that expressed by Bowen LJ in Sovereign Life Assurance Co v Dodd [1892] 2 QB 573 at 583. Sovereign Life Assurance concerned a creditors' scheme of arrangement, but the test enunciated by Bowen LJ has been adopted ever since in members' schemes (Re Foster's Group Limited [2011] VSC 93 at [15] per Ferguson J). Bowen LJ expressed the class test in the following terms: …The word "class" is vague, and to find out what is meant by it we must look at the scope of the section, which is a section enabling the Court to order a meeting of a class of creditors to be called. It seems plain that we must give such a meaning to the term "class" as will prevent the section being so worked as to result in confiscation and injustice, and that it must be confined to those persons whose rights are not so dissimilar as to make it impossible for them to consult together with a view to their common interest… Accordingly, the question for present purposes is whether the rights of NWH AssetCo (or its affiliates) are so dissimilar from the rights of the other Healthscope shareholders as to make it impossible for them to consult together with a view to their common interest. Or put another way, do the differences in rights between NWH AssetCo (or its affiliates) and the other Healthscope shareholders mean that any community of interest between them has been displaced for the purposes of them considering and voting upon the proposed Scheme. 72 Similarly, in First Pacific Advisors LLC v Boart Longyear Ltd (2017) 121 ACSR 136 at [78]-[80] (Bathurst CJ, Beazley P and Leeming JA agreeing), the New South Wales Court of Appeal considered the relevant authorities on class, and Bathurst CJ concluded as follows: The test seems to me to involve three questions. First, what are the rights which existing creditors (or members) have against the company and to what extent are they different. Second, to what extent are those rights differently affected by the scheme. Third, does the difference in rights or different treatment of rights make it impossible for the creditors (or members) in question to consider the scheme as one class. 73 It is apparent from the reasons of Beach J and the New South Wales Court of Appeal that the test is one of "impossibility" -that is, the different treatment of member's rights must make it impossible for them to consult together with a view to their common interest. I am satisfied that the difference in the treatment of AWA Members under the Scheme in terms of the form of Scheme Consideration to which they are entitled does not rise to this level of impossibility. Critically, if the Scheme is implemented, all AWA Members will cease to be members of AWA and they will all be members of Beyond, and they will all retain an equivalent position in terms of the value of their shareholdings prior to the Scheme. 74 The specific question of whether different forms of scheme consideration give rise to the need for separate classes has been considered by the New South Wales Supreme Court in Re Prime Infrastructure Holdings Ltd (2010) 80 ACSR 193 (Barrett J) and by this Court in Re Recall Holdings Ltd [2015] FCA 1142 (Jagot J). In each case, the Court considered whether the existence of different proportional entitlements to different forms of consideration under a scheme of arrangement would necessitate the creation of separate classes of shareholders for the purpose of voting on the scheme. In each case, the Court decided that it did not. 75 In Re Citadel Group Limited (2020) 148 ACSR 598, Beach J considered an application for orders convening a scheme meeting where shareholders of Citadel were to receive cash consideration under the scheme, unless they made an election to receive scrip in the form of shares in a related party of the bidder. In considering whether this gave rise to the need for separate classes of shareholders for the purposes of voting, Beach J noted that "the potential availability of different forms of scheme consideration does not necessarily lead to the creation of more than a single class of shareholders": at [42]. His Honour held that, in that case, the potential availability of different forms of scheme consideration did not lead to the creation of more than a single class of shareholders, as the rights of scheme shareholders who elected to receive the scrip consideration were not so dissimilar from the rights of the scheme shareholders who did not make an election as to make it impossible for them to consult together with a view to their common interest: at [46]. 76 I am satisfied that in this case the different forms of Scheme Consideration do not lead to the creation of more than a single class of shareholders.

Voting rights of minors 77 Under the AWA Constitution, an AWA Member who is a minor may not vote at a general meeting of AWA. AWA does not propose to alter this position for the purposes of the Scheme Meeting. 78 In the particular context of minors who are precluded from voting at general meetings under a company's constitution, there is authority for the proposition that such minors need not be given a right to vote on a scheme. In Re Queensland Professional Credit Union Ltd (No 1) [2016] QSC 73 (Re QPCU), 138 of the 4,094 members of the applicant credit union were minors and precluded by the constitution of the applicant from voting at meetings. Bond J did not consider that it was appropriate to alter this position for the purposes of the scheme meeting. In reaching this conclusion, Bond J emphasised that it was not apparent that the interests of members would be prejudiced by this approach: at page 9. 79 In addition, Bond J in Re QPCU also held that the existence of the non-voting minors did not create any difficulty in the proposed formulation of a single class, on the basis that this did not prevent them from consulting together with other members with a view to their common interest: at pages 9-10. 80 I am satisfied that the same position ought to apply in the present case in respect of minors, both in terms of their voting rights and the class issue.

Issue raised by ASIC 81 The sole issue raised in ASIC's 1 December 2023 letter concerned the rights of members who jointly hold a share in AWA on a winding up of Beyond. ASIC's letter relevantly stated: ASIC understands that [AWA's] members will be entitled to the following consideration under the Scheme: 1. individual members or the primary contact on a joint membership - 1 share in Beyond Bank Australia Limited (Beyond) with a subscription price of $10; 2. secondary members on a joint membership - 1 share in Beyond with a subscription price of $0; and 3. members that are already members of Beyond - the $10 subscription price paid back to them. ASIC also understands that Beyond does not intend to issue joint memberships of shares following the Scheme, notwithstanding that Beyond's constitution allows for joint memberships and that existing joint memberships would continue. ASIC understands that the effect of that position is that members of [AWA] who jointly hold one share would, following the Scheme, be issued with one share each in Beyond. Accordingly, as a result of the Scheme, joint-members of [AWA] may obtain an additional voting right and the opportunity to realise any underlying value of Beyond in a hypothetical wind-up scenario. ASIC understands that the Scheme has been structured in this manner to reflect Beyond's Principles of Mutuality. ASIC intends to continue engaging with [AWA] in respect of this matter prior to the second court hearing. ASIC has also requested that [AWA] tag the votes of non-joint members. 82 In my opinion, the differential treatment of members who jointly hold a share in AWA on a winding up of Beyond is not a matter which ought to preclude the Court from making orders convening the Scheme Meeting. ASIC has proposed that AWA tag votes of non-joint members at the Scheme Meeting. Doing so will reveal whether there is a significant discrepancy in the votes of non-joint members and joint members, and such a discrepancy may warrant further scrutiny by the Court. At present, I am not satisfied that the mere possibility of joint members of AWA obtaining additional voting rights is a matter that renders the Scheme unfit for consideration by AWA's members.

Whether members will be properly informed 83 The second principal aspect relevant to the exercise of the Court's discretion is the adequacy of the information to be provided to shareholders. 84 As noted above, s 412(1) of the Act and Schedule 8 (Part 3) of the Regulations set out the disclosure requirements of the explanatory statement (which is included within the Scheme Booklet). The prescription of the contents of the explanatory statement in these provisions ordinarily provides guidance to the court in assessing this matter, bearing in mind that these applications are made in a summary way. Accordingly, if the Court is satisfied that the statutory disclosure requirements are met, it will ordinarily be satisfied that information to be provided to shareholders is adequate for the purposes of the exercise of the court's discretion to convene a meeting. I am satisfied in this case that the information to be provided to shareholders is adequate. 85 In addition, AWA Members are to be presented with an appropriately detailed and clear explanation of the Scheme in the Scheme Booklet, and they will have the benefit of the opinion of the Independent Expert as set out in the IER. They also have the benefit of the recommendation of the directors in relation to the Scheme.

Conclusion on the exercise of discretion 86 I am satisfied that the Scheme is of such a nature and cast in such terms that, if it achieves the statutory majorities at the Scheme Meeting, the Court would be likely to approve the Scheme.

DISPATCH OF SCHEME BOOKLET AND SCHEME MEETING 87 AWA has filed evidence as to the manner in which the Scheme Booklet is proposed to be sent to members: Heathcote Affidavit at [35]-[38]. In summary, the proposal is to adopt a mixture of electronic and hard-copy dispatch that has been commonplace in schemes of arrangement for some time, and which complies with the relevant provisions of the Act. 88 It is proposed that the Scheme Meeting to vote on the Scheme will commence at 6.00pm (AEDT) on Monday, 29 January 2024, and it will be a hybrid meeting (that is, it will be held both in-person and via an online platform). The Heathcote Affidavit includes evidence that the proposed commencement time of 6.00pm is consistent with AWA recent past practice in holding Annual General Meetings outside of business hours on a working week day commencing at around 6.00pm to 6.30pm, in order to afford more members the opportunity to attend outside of usual work hours: Heathcote Affidavit at [34].

NOTICE OF SECOND COURT HEARING 89 Rule 3.4 of the Rules provides that, unless the Court otherwise orders, the plaintiff must publish a notice of the second court hearing (that is, the application for approval of the Scheme) in a newspaper at least five days before the date of the hearing, and the notice must be in accordance with Form 6. However, consistently with the Schemes of Arrangement Practice Note (GPN-SOA) at [3(f)], in circumstances where AWA will publish an announcement on its website concerning the details of the second court hearing, I consider it appropriate to dispense with compliance with r 3.4 of the Rules.

DISPOSITION 90 For the reasons outlined above: (a) the procedural requirements for the convening of the Scheme Meeting are satisfied, such that the Court's discretion to make orders convening such a meeting is enlivened; and (b) I am satisfied that the Court should exercise its discretion to make orders convening the Scheme Meeting on the basis that: (i) the Scheme, which is conventional in form, is cast in such terms as would likely lead to its approval at a subsequent hearing should it receive the statutory majorities at the Scheme Meeting; (ii) AWA Members are to be properly informed as to the nature of the Scheme. 91 Accordingly, the Court has made the orders sought convening the Scheme Meeting. I certify that the preceding ninety-one (91) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Anderson.