Fowler v Lindholm; re Opes Prime Stockbroking Ltd

1. Pursuant to subs 411(4)(b) of the Corporations Act 2001 (Cth), the scheme of arrangement between PrimeQ Limited and the holders of its ordinary shares in the form annexed hereto and marked "A" be approved.
2. Pursuant to subs 411(4)(b) of the Corporations Act 2001 (Cth), the scheme of arrangement between PrimeQ Limited and the holders of its Class A performance shares in the form annexed hereto and marked "B" be approved.
3. Pursuant to subs 411(12) of the Corporations Act 2001 (Cth), PrimeQ Limited be exempted from compliance with subs 411(11) of the Corporations Act 2001 (Cth) in relation to the schemes referred to in Orders 1 and 2.
4. These Orders be entered forthwith. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

WHITE J: 1 This judgment concerns an application by PrimeQ Limited (PrimeQ) for approval, pursuant to s 411(4)(b) of the Corporations Act 2001 (Cth) of two schemes of arrangement. The first is a scheme for the acquisition by Accenture Australia Holdings Pty Ltd (Accenture) of the ordinary shares in PrimeQ. The second scheme is for the acquisition by Accenture of the performance shares in PrimeQ. 2 On 1 November 2018 the Court made orders for the convening of meetings of the ordinary shareholders and of the performance shareholders in PrimeQ for the purpose of considering the respective schemes of arrangement: PrimeQ Limited, in the matter of PrimeQ Limited [2018] FCA 1705. 3 The scheme with respect to the 84,882,179 ordinary shares issued in PrimeQ involves Accenture acquiring all of those shares for a cash price of $0.33492 per share. The scheme with respect to the 60 million Class A performance shares involves all of those shares being acquired for no consideration. 4 On the carrying of the schemes into effect, PrimeQ will become a wholly owned subsidiary of Accenture. Accenture is a subsidiary of Accenture PLC, a company listed on the New York Stock Exchange with a market capitalisation said to exceed USD100 billion. The meetings which were the subject of the Court's orders on 1 November 2018 were held on 5 December 2018. 5 Section 411(4) of the Corporations Act provides (relevantly): (4) A compromise or arrangement is binding on the creditors, or on a class of creditors, or on the members, or on a class of members, as the case may be, of the body and on the body or, if the body is in the course of being wound up, on the liquidator and contributories of the body, if, and only if: (a) at a meeting convened in accordance with an order of the Court under subsection (1) or (1A): … (ii) in the case of a compromise or arrangement between a body and its members or a class of members - a resolution in favour of the compromise or arrangement is: (A) unless the Court orders otherwise - passed by a majority in number of the members, or members in that class, present and voting (either in person or by proxy); and (B) if the body has a share capital - passed by 75% of the votes cast on the resolution; and (b) it is approved by order of the Court. 6 In support of the application for approval, PrimeQ relies on the following evidence: the affidavit of Ian Silvanus White made on 5 December 2018; the affidavit of Keryn Dawn Hogben made 5 December 2018; the affidavit of Damien Gregory Pozza made 5 December 2018; and the affidavit of Andrew Charles Meurant Tually made 7 December 2018. 7 The principles which guide the Court's approach to applications under s 411(4) have been discussed in a number of the authorities. The Court has a discretion as to whether to approve a scheme. It is not bound to approve a scheme merely because it has previously made orders for the convening of a meeting at which the scheme is voted upon, or because the statutory majorities are achieved: Seven Network Ltd; re Seven Network Ltd (No 3) [2010] FCA 400; (2010) 267 ALR 583 at [31]. The Court's jurisdiction is supervisory. It is concerned to be satisfied that there has been an absence of oppression and that the compromise or arrangement is one which is capable of being accepted. The Court will usually consider applications for approval under s 411(4) on the basis that it is the members of the company who are better judges of what is in their commercial interests than is the Court: ibid at [32]. 8 Section 411(17) enjoins the Court from approving an arrangement unless it is satisfied that the arrangement has not been proposed for an improper purpose and unless it has been provided with a statement in writing from ASIC indicating that ASIC has no objection to the arrangement. However, the absence of objection by ASIC is not by itself a sufficient condition for the arrangement to be approved. 9 In considering the grant of approval, the Court has regard in particular to the following matters: (a) whether the shareholders have voted in good faith and not for an improper purpose: Re Foundation Healthcare Ltd (No 2) [2002] FCA 973; (2002) 43 ACSR 680 at [27], [29]; (b) whether the proposal is fair and reasonable so that an intelligent and honest person who is a member of the relevant class properly informed and acting alone may approve it: Fowler v Lindholm; re Opes Prime Stockbroking Ltd [2009] FCAFC 125; (2009) 178 FCR 563 at [79]; (c) 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: Re Permanent Trustee Co Ltd [2002] NSWSC 1177; (2002) 43 ACSR 601 at [7]; (d) whether there has been full and fair disclosure of all information material to the decision: Re NRMA Ltd (No 2) [2000] NSWSC 408; (2000) 156 FLR 412 at [30]; (e) whether minority shareholders would be oppressed by the scheme: Re Ranger Minerals Ltd; ex parte Range of Minerals Ltd [2002] WASC 207; (2002) 42 ACSR 582; and (f) whether the scheme offends public policy: CSR Ltd, re CSR Ltd [2010] FCAFC 34; (2010) 183 FCR 358 at [51]-[56]. 10 ASIC provided to PrimeQ's solicitors on 6 December 2018 a letter confirming that, under s 411(17)(b) of the Corporation Act, it has no objection to the schemes. Before ASIC provided that letter, it had been provided with a copy of the Scheme Booklet and other information which it had requested. 11 The evidence indicates that PrimeQ has complied with the orders made by the Court on 1 November 2018, as varied on 9 November 2018. On 5 November 2018, PrimeQ caused copies of the Explanatory Memorandum, in the form of the Scheme Booklet, together with a covering letter and proxy forms, to be delivered by hand, post, courier or email to each of its shareholders. Notices of the meetings on 5 December 2018 were included in the Scheme Booklet; notice of today's hearing substantially in the form of Annexure A to the Court's orders of 1 November 2018 was published in The Australian and The Advertiser newspapers on 28 November 2018; and PrimeQ did conduct the scheme meetings on 5 December 2018. In fact, it conducted four meetings: two of the ordinary shareholders and two of the performance shareholders. 12 The first resolution on which the ordinary shareholders voted was: That, pursuant to and in accordance with the provisions of section 411 of the Corporations Act 2001 (Cth): (a) the scheme of arrangement proposed between PrimeQ Limited and the holders of its Ordinary Shares, as contained in and more particularly described in the Scheme Booklet accompanying the notice convening this meeting as the "Ordinary Share Scheme", is approved; and (b) the directors of PrimeQ Limited are authorised to agree to such alterations or conditions as are thought fit by the Court and, subject to approval of the scheme by the Court, the directors of PrimeQ Limited are authorised to implement the scheme arrangement with any such modifications or conditions. 13 All of the 104 ordinary shareholders present and voting in person or by proxy (who represented 80,497,066 ordinary shares) voted in favour of that resolution. Those shares comprised 94.8% of the total issued ordinary shares (84,882,179). No ordinary shareholder voted against the resolution and none abstained from voting. 14 Sixty four of the performance shareholders were present, either in person or by proxy at the meeting of the performance shareholders. All of these shareholders, who comprised 86.5% of the total number of performance shareholders and representing 58,700,000 performance shares, voted in favour of the corresponding resolution concerning the performance share scheme. No performance shareholders voted against the resolution and none abstained from voting. 15 The second meetings of each of the ordinary shareholders and the performance shareholders considered resolutions for the modification of PrimeQ's constitution so as to permit the transfer of the Class A performance shares to Accenture under the proposed schemes of arrangement. These resolutions were also passed by all shareholders present in person or by proxy and voting. 16 The votes at each of the meetings well exceeded the statutory majorities required by s 411(4)(a)(ii). There were no counter proposals at any of the meetings. 17 There is nothing to suggest that the members voted other than in good faith, or that they cast their votes for an improper purpose, or that any member was treated in a way which may be suggestive of oppression. In particular, there is nothing in the materials to indicate that the schemes were proposed for the purpose of avoiding the takeover provisions in Ch 6 of the Corporations Act. 18 PrimeQ and Accenture have exchanged completion certificates indicating that each is satisfied that, with the exception of the condition precedents concerning Court approval and the registration of the Court's orders with ASIC, the other conditions precedent have been satisfied. 19 A number of matters indicate that the two schemes are fair and reasonable: (a) the opinion of the independent expert, Leadenhall, to which I referred in my reasons for the orders made on 1 November 2018; (b) as already indicated, ASIC has not raised any objection to the scheme. That is a material consideration presently, because ASIC accepts that its role includes assisting the Court by representing the interests of investors and creditors and helping to ensure that all matters relevant to the Court's decision are brought to its attention, see the ASIC Regulatory Guideline RG60.4; (c) the overwhelming majority of both the ordinary shareholders and the performance shareholders voted in favour of the schemes; (d) no person has attended today to raise concerns about the fairness and reasonableness of the schemes or to voice opposition to the Court approving them; and (e) there is nothing to suggest that an intelligent and honest person would not regard the schemes as fair and reasonable. In saying that, I refer to the discussion in the judgment on 1 November 2018 of the fact that the performance shareholders will not receive any consideration for those shares. 20 There is no reason to suppose that PrimeQ and its solicitors have not brought to the Court's attention all matters which could be considered relevant to the exercise of the Court's discretion. Nor is there any reason to think that the information provided to PrimeQ's shareholders for the purposes of their decisions was inadequate and, in particular, as I have already said, there is no apparent matter suggesting that minority shareholders are being oppressed by the adoption of the schemes. 21 I note that Accenture had previously executed, on 30 October 2018, a deed poll binding itself to the performance of its obligations under the schemes. 22 Finally, there is nothing in the evidence to suggest that the implementation of the schemes may offend public policy. 23 For these reasons, I am satisfied that the schemes should be approved and I will make the orders sought by PrimeQ under s 411(4). 24 PrimeQ also seeks an order pursuant to s 411(12) of the Corporations Act exempting it from compliance with the requirement imposed by s 411(11). That subsection provides: Subject to subsection (12), a copy of every order of the Court made for the purposes of paragraph (4)(b) must be annexed to every copy of the constitution of the body issued after the order has been made. 25 I am satisfied, given the terms of the schemes and, in particular, that PrimeQ will become a wholly owned subsidiary of Accenture, that compliance with s 411(11) is not necessary and so will make the exemption order sought by PrimeQ. I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice White.