FT Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd

B. Scheme Meeting and Special Dividend 6 The Scheme Meeting was held on Friday, 10 November 2023 and the resolution in favour of the Scheme was passed by the requisite statutory majorities. 7 The Scheme Booklet explained that, if implemented, the Scheme will result in the acquisition of all the shares in SILK by API, a wholly owned subsidiary of Wesfarmers Limited, for a cash consideration of $3.35 per SILK share (less the amount of any special dividend declared and paid by SILK) (Scheme Consideration) and the subsequent delisting of SILK. 8 On 6 November 2023, SILK announced to the Australian Securities Exchange (ASX) that it had determined, subject to the Scheme becoming effective, to pay a fully franked special dividend of $0.10 per SILK Share (Special Dividend), confirming that the Special Dividend record date would be 7.00 pm (Sydney time), 6.30pm (Adelaide time) on 21 November 2023, with the Special Dividend payment date being 28 November 2023. The announcement and dates were foreshadowed in the Scheme Booklet.

C. Relevant legal principles 9 In addition to being satisfied that the formal requirements stipulated in the Act for the approval of a scheme of arrangement and any relevant conditions precedent have been satisfied or waived, the Court must also consider, as a matter of discretion, whether the scheme should be approved. 10 In MOQ Limited, in the matter of MOQ Limited (No 2) [2022] FCA 1364 at [7]-[11], I summarised the principles relevant to the exercise of the discretion to grant approval to a scheme under s 411(4)(b) of the Act after it had been approved at a meeting of members or creditors, by reference to well established authorities, including the statements by Jacobson J in Seven Network Limited (ACN 052 816 789), in the matter of Seven Network Limited (No 3) (2010) 77 ASCR 701; [2010] FCA 400 at [35]-[40]. It is sufficient for present purposes to provide the following summary of those principles. 11 First, 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. 12 Second, 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. 13 Third, the following specific matters have been taken into account for the purpose of informing the exercise of the discretion to approve a scheme of arrangement: (a) whether the shareholders have voted in good faith and not for an improper purpose; (b) 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; (c) whether the plaintiff has brought to the Court's attention all matters that could be considered relevant to the exercise of the Court's discretion: (d) whether there has been full and fair disclosure of all information material to the decision; (e) whether minority shareholders would be oppressed by the scheme; and (f) whether the scheme offends public policy.

D. Consideration 14 As to the formal procedural requirements and the orders made on 4 October 2023 at the first court hearing (4 October 2023 Orders), I was satisfied from the affidavit evidence relied upon by SILK that: (a) A copy of the 4 October 2023 Orders was lodged with the Australian Securities and Investments Commission (ASIC) as required by r 3.5(b) of the Federal Court (Corporations) Rules 2000 (Cth); (b) the Scheme Booklet was registered by ASIC on 4 October 2023; (c) the Scheme Booklet was despatched to Scheme Shareholders in accordance with the 4 October 2023 Orders; (d) the Scheme Meeting was held in accordance with the 4 October 2023 Orders; and (e) an announcement about the second court hearing was published by SILK on 9 November 2023 through the ASX Market Announcements Platform in substantially the form of Annexure A to the 4 October 2023 Orders. 15 As to the requisite statutory majorities for approval of a scheme of arrangement for the purposes of s 411(4)(a) of the Act, I was satisfied that they had been achieved because the affidavit evidence establishes that: (a) 92.02% of Scheme Shareholders that were present and voting (either in person or by proxy) at the Scheme Meeting voted in favour of the Scheme resolution; and (b) 99.85% of the votes cast (in person or by proxy) at the Scheme Meeting were cast in favour of the Scheme resolution. 16 As to the conditions precedent to the implementation of the Scheme, in the Scheme Implementation Deed, I am satisfied that the condition precedent certificates and ASIC correspondence annexed to the affidavit evidence establish that all conditions precedent, other than Court approval, had been satisfied or waived. 17 Finally, I was satisfied that it was appropriate for the discretion to be exercised to approve the Scheme for the following reasons: (a) the overwhelming vote of the Scheme Shareholders at the Scheme Meeting in favour of the Scheme; (b) the unanimous recommendation by the SILK board that Scheme Shareholders vote in favour of the Scheme; (c) the independent expert report prepared by Lonergan Edwards & Associates (Report), which concluded that the Scheme is fair and reasonable and in the best interests of Scheme Shareholders. I was satisfied that there is no evidence to the contrary and nothing in the Report, on its face, that suggests that the opinion should not be accepted; (d) 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); (e) there was nothing before me to suggest that the Scheme 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; (f) nor was there anything before me that materially cast doubt on the procedural integrity of the processes followed for the Scheme Meeting; (g) no notice had been received of any opposition to the Scheme, no shareholders appeared to oppose the Scheme being approved at the second court hearing and ASIC has provided a statement pursuant to s 411(17)(b) of the Act stating that it has no objections to the Scheme; (h) fairness can be inferred, in all the circumstances, including the obtaining of the statutory majorities in the Scheme Meeting in a context where I was satisfied that there was adequate and verified disclosure and those who voted did so as the best judges of their own interests; (i) given the voter turnout percentages at the Scheme Meeting were more favourable than the voter turnout at SILK's 2021 and 2022 annual general meetings and the evidence as to the despatch of the Scheme Booklet, there was nothing to suggest that there was any flaw in the procedure for convening the Scheme Meeting; and (j) there was nothing to suggest that minority shareholders in SILK would be oppressed or that the Scheme offended public policy. 18 Finally, for completeness I note that Mr Ahern specifically drew to the Court's attention two further matters. 19 First, revisions made to shareholder communications scripts and ASX announcements made by SILK, following the first court hearing. I was satisfied that none of these revisions or ASX announcements were in any way inconsistent with the disclosures and explanations provided to Scheme Shareholders in the Scheme Booklet. 20 Second, the results of the vote at the Scheme Meeting were announced to the ASX shortly after the closure of the Scheme Meeting. This was consistent with a practice that was accepted by Barrett J in The MAC Services Group Limited [2010] NSWSC 1474 at [22]-[25] and followed in subsequent cases, including by Gleeson J in In the matter of CSG Limited (No 2) [2020] NSWSC 39 at [6]-[8]. Mr Ahern raised this issue with the Court because of the recent observation made by Black J in In the matter of MyDeal.com.au Limited [2022] NSWSC 1317 at [11]: MyDeal complied with the orders made in respect of the conduct of the scheme meeting and, following voting, the scheme meeting was adjourned to allow for the tallying of the votes, and resumed to display the result of the poll. Dr Austin notes that this process was adopted to ensure that the meeting complied with the statutory requirement that the approval resolution be "passed" by the relevant majorities "at" the meeting convened in accordance with s 411(1) of the Corporations Act: Re MAC Services Group Ltd [2010] NSWSC 1474 per Barrett J at [13]. 21 I do not understand that his Honour was intending, by this reference to the submission made by Dr Austin, to make any finding that it was necessary to formally adjourn a scheme meeting before subsequently announcing the results of the poll, on the ASX or otherwise, in order to comply with the statutory requirement that the approval resolution be "passed" by the relevant majorities "at" the scheme meeting convened for the purposes of s 411(1) of the Act. Such a finding would be inconsistent with the approach adopted by Barrett J in MAC Services and subsequently followed in other authorities in both this Court and State Supreme Courts.

E. Section 411(11) exemption 22 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) of the Act. 23 I was satisfied that it was appropriate to make an order pursuant to s 411(12) of the Act exempting SILK from compliance with s 411(11) of the Act, in circumstances where SILK will become a wholly owned subsidiary of the acquirer upon implementation of the Scheme: Re 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).

F. Section 411(6) Alteration 24 SILK also sought an order from the Court pursuant to s 411(6) of the Act that the date in the definition of the "Deed Poll" in the Scheme be altered to correct an inadvertent typographical error, namely, to delete "[●]" and replace it with "29 September 2023". I am satisfied that the error was an inadvertent oversight, there could be no relevant prejudice to any Scheme Shareholder and in all the circumstances, it would be just to make the order sought by SILK.

G. Disposition 25 I was satisfied, for the short form reasons outlined above, that orders be made approving the Scheme and exempting SILK 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.