Fowler v Lindholm, in the matter of Opes Prime Stockbroking Limited

Federal Court of Australia|2022-03-03|Before: Mr J, Halley J

Pursuant to s 411(4)(b) of the Corporations Act 2001 (Cth) (Act), the scheme of arrangement between the plaintiff and its shareholders, in the form of Exhibit 4 in the proceeding, be approved.
The plaintiff lodge with the Australian Securities and Investments Commission a copy of the approved scheme of arrangement at the time of lodging a copy of these Orders.
Pursuant to s 411(12) of the Act, the plaintiff be exempted from compliance with s 411(11) of the Act in relation to Order 1 above. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Introduction 1 On 21 January 2022, at the conclusion of the first court hearing in this matter, I made orders under ss 411(1) and 1319 of the Corporations Act 2001 (Cth) (Act) that the plaintiff, Over the Wire Holdings Limited (OTW) convene a meeting of the holders of its fully paid ordinary shares (Scheme Meeting) for the purpose of considering, and if thought fit, agreeing to a proposed scheme of arrangement to be made between OTW and its shareholders (Scheme) and approving a scheme booklet to be distributed by OTW to its shareholders (Scheme Booklet): see Over the Wire Holdings Limited, in the matter of Over the Wire Holdings Limited [2022] FCA 26. 2 On 3 March 2022, I made orders under s 411(4)(b) of the Act approving the Scheme. These are my reasons for making those orders.

Background 3 The Scheme Meeting was held on 24 February 2022. The statutory majorities required by s 411(4)(a)(ii) were attained at the meeting, as follows: (a) shares present and voting in favour, 41,489,616 (99.99%); and (b) members present and voting in favour, 307 (99.03%). 4 The application by OTW for the approval of the proposed Scheme was uncontested. 5 The plaintiff relied on the following affidavits at the second court hearing, in addition to the affidavits it read at the first court hearing: (a) an affidavit of Naomi Gabriella Omundson, a solicitor employed by McCullough Robertson Lawyers, affirmed on 24 February 2022, giving evidence of the lodgement of the first court hearing orders made on 21 January 2022 with the Australian Securities and Investments Commission (ASIC), the notice of hearing published in The Australian newspaper, and an ASIC historical search; (b) an affidavit of Jemimah Storme Rowlandson, a graduate employed by McCullough Robertson Lawyers, affirmed on 1 March 2022, confirming that the Scheme Booklet tendered in the first court hearing is identical to that which was lodged with ASIC and distributed to OTW shareholder (save for formatting differences and changes to page numbers); (c) an affidavit of Stephe Peter Wilks, non-executive director and chair of the board of OTW, affirmed on 1 March 2022, giving evidence of dispatch of the Scheme Booklet on 24 January 2022, the circumstances in which the Scheme Meeting was held and the outcome of the Scheme Meeting; (d) an affidavit of BeeYen Nah, a client relationship manager employed by Link Market Services, affirmed on 1 March 2022, giving evidence of the dispatch of the Scheme materials and the Scheme Booklet electronically and by post, confirming that no request had been received from OTW shareholders in the period February 2020 to January 2022 to be provided with hard copies of documents from OTW other than 14 OTW shareholders who had elected to receive hard copies of Annual Reports and each of these shareholders had been sent hard copies of the Scheme Booklet, the receipt of consideration elections (cash or scrip, or both), receipt of proxies, voting at the Scheme Meeting and voting participation rates at the 2020 and 2021 annual general meetings of OTW; (e) an affidavit of Brian Maher, the chief financial officer and company secretary of Aussie Broadband Limited (ABB), affirmed on 3 March 2022, confirming that the conditions precedent to the Scheme for which ABB is responsible had been satisfied or waived in accordance with the Amended Implementation Deed; (f) an affidavit of Peter William Stokes, a partner of McCullough Robertson Lawyers, providing an updated shareholder election summary report, confirming that he had not received any notification from any party intending to appear at the second court hearing and annexing a copy of the s 411(17)(a) letter from ASIC dated 2 March 2022 confirming it had no objection to the Scheme.

Legal Principles 6 In Dragontail Systems Limited, in the matter of Dragontail Systems Limited (No 2) [2021] FCA 834 (Dragontail), I summarised at [7]-[11] the relevant principles to the exercise of the discretion to grant approval to a scheme after it has received the consideration and approval of a meeting of the members or creditors under s 411(4)(b) of the Act. For ease of reference, I set out below those paragraphs of that judgment. 7 Insofar as discretionary considerations are concerned, the general principles which guide the Court's discretion are well established and are helpfully summarised by Gleeson J in EcoBiotics Limited, in the matter of EcoBiotics Limited (No 2) [2017] FCA 1031 at [26]-[28], which I respectfully adopt. 8 The Court has a discretion whether to approve a scheme and is not bound to approve it merely because it has previously made orders for the convening of meetings or because the statutory majorities have been achieved: Seven Network Limited, in the matter of Seven Network Limited (No 3) (2010) 77 ASCR 701; [2010] FCA 400 (Re Seven Network) at [31] (Jacobson J), citing NRMA Limited (Application of); NRMA Insurance Limited (Application of) (2000) 34 ACSR 261; [2000] NSWSC 408 (Re NRMA) at [22] (Santow J). 9 The Court will usually approach the task on the basis that the members are better judges of what is in their commercial interests than the Court: Re Seven Network at [32]-[33]. 10 At [35] to [40] of Re Seven Network, Jacobson J set out the following six matters which courts have taken into account as informing their discretion regarding whether or not to approve a scheme: (1) whether the shareholders have voted in good faith and not for an improper purpose: In the matter of Foundation Healthcare Limited (No 2) (2002) 43 ACSR 680; [2002] FCA 973 at [27] (French J, as his Honour then was); (2) whether the proposal is fair and reasonable so that an intelligent and honest person who was a member of the relevant class, properly informed and acting alone, might approve it: Fowler v Lindholm, in the matter of Opes Prime Stockbroking Limited (2009) 178 FCR 563; [2009] FCAFC 125 at [79] (Emmett, Gordon and Jagot JJ); (3) whether the plaintiff has brought to the attention of the Court all matters that could be considered relevant to the exercise of the Court's discretion: Permanent Trustee Company (2002) 43 ACSR 601; [2002] NSWSC 1177 at [7] (Barrett J); (4) whether there has been full and fair disclosure of all information material to the decision: Re NRMA at [30]; (5) whether minority shareholders would be oppressed by the scheme: Re Ranger Minerals Ltd; Ex parte Ranger Minerals Ltd (2002) 42 ACSR 582; [2002] WASC 207 at [39] (Parker J); and (6) whether the scheme offends public policy: see for example CSR Limited, in the matter of CSR Limited (2010) 183 FCR 358; [2010] FCAFC 34 at [51]-[56] (Keane CJ and Jacobson J).

Satisfaction of standard requirements 11 I am satisfied that the evidence relied upon by the plaintiff establishes all of the procedural matters that are necessary to permit me to approve the Scheme.

Discretionary considerations 12 As to fairness, the independent expert report of Grant Thornton Corporate Finance Pty Ltd (Grant Thornton Report) concluded that the Scheme is fair and reasonable and in the best interests of OTW shareholders. I am satisfied that there is no evidence to the contrary and nothing in the Grant Thornton Report, on its face, that suggests that the opinion should not be accepted. 13 Further, I observe that the reasonableness of the Scheme was established, at least on a prima facie basis, at the first court hearing pursuant to the principle in FT Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd (1977) 3 ACLR 69 at 72 (Street CJ, with whom Hutley and Samuels JJA agreed), subject to any new matters being brought to the Court's attention at the second court hearing. 14 There is nothing before me to suggest that the relevant OTW shareholders voted other than in good faith, that they cast their votes for an improper purpose or that any member had been treated in a way that may be characterised as oppressive. Nor is there anything that materially casts doubt on the procedural integrity of the processes followed for the Scheme Meeting. 15 ASIC has provided a statement pursuant to s 411(17)(b) of the Act stating that it has no objections to the Scheme. 16 ASIC has not raised any public policy concern and there is nothing before me to suggest that there should be any such concern. 17 I am satisfied that fairness can be inferred in all the circumstances including the obtaining of the statutory majorities in the Scheme Meeting in a context where there was adequate and verified disclosure and those who voted did so as the best judges of their own interests.

Voter turnout 18 The concept of voter turnout at a scheme meeting has no statutory basis, but as a matter of practice, the Court has (since the decision of Emmett J in Lion Nathan Limited, in the matter of Lion Nathan Limited (No. 2) [2009] FCA 1261 (Lion Nathan)) requested and had regard to such evidence for the purpose of assessing the integrity of the process. As Farrell J observed TriAusMin Limited, in the matter of TriAusMin Limited (No 2) [2014] FCA 833 (TriAusMin) at [10]: Although the statutory requirement under s 411(4)(a)(ii) has been satisfied, it is the usual practice of the Court at the second court hearing to consider the number of shareholders who attended the Scheme Meeting in person or by proxy. Low shareholder turnout may be an indication that some procedural irregularity occurred. It is inappropriate to assume (in the absence of complaint) that shareholders did not vote either did not have notice of the meeting or were silent in protest of the scheme: Re Professional Investment Holdings Ltd (No 2) [2010] FCA 1336 at [7] and Re Seven Network Ltd (No 3) (2010) 267 ALR 583 … at [61] per Jacobson J; apathy should not be presumed to be antagonism: Re Matine Ltd (1998) 28 ACSR 268 at 295 per Santow J. 19 Voter turnout percentages at the Scheme Meeting were approximately 69.6% by shares participating and approximately 18.1% by members participating. 20 These voter turnout percentages compare favourably with voter turnout percentages noted by Courts in approving schemes of arrangement in: Lion Nathan at [6] (Emmett J), of 64% of shares participating; Avoca Resources Limited, in the matter of Avoca Resources Limited [2011] FCA 208 at [25] (Gilmour J), of 72.38% by shares participating and 11.49% by persons participating; Re Auzex Resources Ltd (No 2) [2012] QSC 101 at [18] (Applegarth J) of 42.3% by shares participating and 9.75% by persons participating; TriAusMin at [9] (Farrell J) of 52.9% by shares participating and 10.94% by persons participating and Dragontail at [20] (Halley J) of 78.7% by shares participating and 24.1% by members participating . 21 The percentages achieved at the Scheme Meeting also compare favourably with the percentages of approximately 67.12% by shares participating and 3.45% by members participating at the plaintiff's 2020 annual general meeting and 75.79% by shares participating and 3.80% by members participating at the plaintiff's 2021 annual general meeting. 22 I am satisfied that given the evidence as to the dispatch of the Scheme Booklet and the voter turnout percentages at the Scheme Meeting, there is nothing to suggest that there was any flaw in the procedure for convening the Scheme Meeting.

Section 411(11) exemption 23 Section 411(11) of the Act provides that copies of all orders made by the Court for approving a scheme pursuant to s 411(4)(b) of the Act must be annexed to every copy of the company's constitution issued after the approval of the scheme. Section 411(12) of the Act provides that the Court may exempt a company from complying with s 411(11). 24 I am satisfied that it is appropriate to make an order pursuant to s 411(12) of the Act exempting OTW from compliance with s 411(11), in circumstances where the Scheme will not amend the constitution of OTW and OTW will become a wholly owned subsidiary of the acquirer upon implementation of the Scheme: In the matter of Toll Holdings Limited (No 2) [2015] VSC 236 at [18]-[19] (Robson J); In the matter of BINGO Industries Limited [2021] NSWSC 911 at [13] (Black J).

Disposition 25 In all the circumstances I was satisfied, for the reasons outlined above, that orders be made approving the Scheme and exempting OTW from compliance with s 411(11) of the Act. I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Halley.

At a glance

Court

Decision date

Before

Source

Judgment (9 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (20)

Cited By (3)