GrainCorp Limited, in the matter of GrainCorp Limited (No 2) [2020] FCA 460

The scheme 3 The details of the Scheme are described in GrainCorp (No 1) at [5]-[12]. 4 In summary the Scheme involves the demerger of United Malt Group Limited (UMG), a wholly owned subsidiary of GrainCorp, from GrainCorp resulting in two independent Australian Securities Exchange (ASX) listed businesses as follows: (1) GrainCorp, which will continue to operate its agribusiness with operations including grain, oils and other materials accumulation, storage, handling and trading and ownership of storage facilities, rail and road operations and bulk export ports in eastern Australia, edible oils crushing and processing operations in Australia and New Zealand, and origination of marketing teams positioned across four continents; and (2) UMG, an international commercial maltster that also operates a distribution business, which provides malt, hops, yeast, adjuncts and related products to craft brewers and distillers. 5 If the Scheme is implemented, GrainCorp shareholders will be entitled to receive one UMG share for each GrainCorp share they hold on the relevant record date in respect of the Scheme, with the exception of Ineligible Foreign Holders and Selling Small Shareholders (see definitions at [8]-[9] of GrainCorp (No 1)), who will instead have their UMG shares sold on the ASX by a Sale Agent (see definition at [11] of GrainCorp (No 1)) and receive proceeds from those sales. GrainCorp shareholders will also retain their shareholding in GrainCorp and GrainCorp will retain a 10% minority shareholding in UMG. It is proposed that UMG shares would begin trading on the ASX on a deferred settlement basis on or around 24 March 2020 following the demerger becoming effective. 6 GrainCorp and UMG agreed to facilitate the implementation of the demerger by way of capital reduction and scheme of arrangement.

Legal principles 7 In Amcor Limited, in the matter of Amcor Limited (No 2) [2019] FCA 842 at [7]-[11] Beach J summarised the role of the Court at a second hearing for approval of a scheme of arrangement as follows: 7 Let me say something about my power under s 411(4)(b) to approve the Scheme. In essence, my role at the second court hearing is to assess the Scheme taking into account whether the Scheme is sufficiently fair and reasonable such that an intelligent and honest shareholder properly informed and acting alone might approve it. Of course, I can only approve a scheme of arrangement if the requisite majority of shareholders vote in favour of it, but I am not bound to approve the Scheme simply because I previously made orders for the convening of a Scheme meeting and subsequently the requisite majority agreed to it. But I accept that shareholders voting collectively at the Scheme meeting are better judges than I of what is to their commercial advantage and in their interests and accordingly, absent good reason, I should give effect to their intentions. 8 Now whilst there is no exhaustive statement of the matters as to which I must be satisfied before granting approval, it is not in doubt that in exercising my power under s 411(4)(b), I should be satisfied that: (a) the Scheme complies with the law, including the relevant procedural requirements; (b) the Scheme was approved by shareholders acting in good faith and for proper purposes; (c) there has been an accurate and comprehensive disclosure of the details of the Scheme and its effect to those voting on it; (d) there is no suggestion of oppression of any minority; (e) there is no evidence that any third parties will be disproportionately adversely affected by the operation of the Scheme; (f) the Scheme does not offend against any aspect of public policy; and (g) all matters that could be considered relevant to the exercise of my discretion have been drawn to my attention. 9 I also need to be satisfied that the conditions precedent to the Scheme have been met, save for Court approval, and that ASIC has been given the opportunity to draw to my attention any relevant matter(s). … 10 In considering whether the Scheme complies with the law, including the relevant procedural requirements, I need to satisfy myself that the procedural and other requirements in the Act, Corporations Regulations 2001 (Cth) and Federal Court (Corporations) Rules 2000 (Cth) have been complied with and that the requirements for a valid resolution of the shareholders have been satisfied. … 11 Now as I have said, my task is to consider whether the Scheme is fair and reasonable with the test of fairness and reasonableness including a consideration of whether "an intelligent and honest [shareholder], properly informed, acting alone, might approve [the scheme]" (Fowler v Lindholm (2009) 178 FCR 563 at [79] per Emmett, Gordon and Jagot JJ). But the Scheme shareholders' vote in favour of the Scheme is evidence of its inherent fairness. Put another way, if a majority of the Scheme shareholders have approved the Scheme, it is unlikely that the Scheme would be unreasonable. Further, I do not have to be satisfied that no better Scheme could have been devised.

Formal and procedural matters 8 The evidence relied on by GrainCorp established that all formal and procedural matters had been satisfied. In particular that evidence established that: (1) the Scheme Booklet was registered by the Australian Securities and Investments Commission (ASIC) on 6 February 2020 pursuant to s 412(6) of the Act; (2) the Scheme Booklet, substantially in the form approved at the first court hearing, was despatched to each GrainCorp shareholder in accordance with the February Orders; (3) the Scheme Meeting was held in accordance with the February Orders. It was chaired by Graham John Bradley and held at the time and place specified in the Scheme Booklet; (4) the statutory majorities were obtained at the Scheme Meeting in that 99.69% of all votes cast, representing 90.75% of all GrainCorp shareholders present and voting, were in favour of the resolution to approve the Scheme while 0.31% of all votes cast, representing 9.25% of all GrainCorp shareholders present and voting, were against the resolution to approve the Scheme; (5) although the form of advertisement published was amended, as explained at [11]-[12] below, GrainCorp published a notice of the second court hearing in The Australian newspaper on 13 March 2020 (Published Advertisement) in accordance with the February Orders; and (6) as at 18 March 2020 the solicitors for GrainCorp had not received any notice of appearance from any person in response to the Published Advertisement, as explained at [14] below no party contacted my associate indicating an intention to appear at the second court hearing and, upon the matter being called three times outside the courtroom, there was no appearance by any other party at that hearing. 9 By letter dated 19 March 2020 ASIC informed GrainCorp, pursuant to s 411(17)(b) of the Act, that it had no objection to the proposed Scheme. 10 The implementation of the Scheme is conditional on a number of conditions precedent being satisfied. By a certificate dated 20 March 2020 and signed on behalf of GrainCorp and UMG which was before me in evidence those parties certified that, other than Court approval, the conditions precedent in the Scheme and in the demerger scheme implementation deed between GrainCorp and UMG dated 13 January 2020 had been satisfied. 11 Order 3 of the February Orders required that, subject to the requisite majorities of GrainCorp shareholders voting in favour of the Scheme at the Scheme Meeting, GrainCorp publish a notice of the second court hearing in The Australian newspaper in substantially the form of annexure A to the February Orders not later than five days prior to the date fixed for the second court hearing i.e. not later than 13 March 2020, which was the date on which the Published Advertisement appeared in The Australian newspaper. However, because the Scheme Meeting was held on 16 March 2020, which was after the last date required for publication of the advertisement, the Published Advertisement included minor amendments and was not identical to the form of advertisement that appeared as annexure A to the February Orders. Notwithstanding those amendments I was satisfied that the Published Advertisement complied with the requirements of the February Orders because it was "in substantially the form" of the annexure to those orders. 12 Similarly, by reason of r 1.7 of the Federal Court (Corporations) Rules 2000 (Cth) (Rules) I was satisfied that the Published Advertisement complied with r 3.4(3) of the Rules which requires that the advertisement be in accordance with Form 6 in Sch 1 to the Rules. Rule 1.7 is headed "substantial compliance with forms" and relevantly provides that: (1) It is sufficient compliance with these Rules in relation to a document that is required to be in accordance with a form in Schedule 1 if the document is substantially in accordance with the form required or has only such variations as the nature of the case requires. 13 As set out at [8(6)] above, no party appeared to oppose the approval of the Scheme. The second court hearing took place at a time when the Court was operating so as to reduce the need for parties to attend personally at Court and hearings were being held by way of telephone or other electronic means. This practice was part of the response to reduce the risk of spread of the novel coronavirus (COVID-19). Accordingly the second court hearing took place with senior counsel for GrainCorp appearing by telephone. The Court's list included the following information: This hearing will be conducted by telephone. Any person who wishes to appear and to participate in the hearing should contact the Associate to Markovic J on +61 2 9230 8380 or by email at associate.markovicj@fedcourt.gov.au by 8.30 am AEDT on 20 March 2020. 14 As noted above, no party contacted my associate about the hearing or to notify an intention to appear. In addition, the matter was called three times outside the courtroom but there was no appearance by or on behalf of any person.

Exercise of the discretion 15 Having considered the matters relevant to the exercise of the Court's discretion to approve the Scheme, for the following reasons I was satisfied that orders approving the Scheme should be made. 16 First, there was nothing to suggest that shareholders voted other than in good faith, that they cast their votes for an improper purpose or that any member was treated in a way that could be characterised as oppressive. 17 Secondly, I was satisfied that the Scheme is fair and reasonable. At the first court hearing I made the orders sought by GrainCorp. In making those orders I was satisfied, based on the matters brought to my attention at the time, that the Scheme was of such a nature and cast in such terms that if it achieved the statutory majorities at the Scheme Meeting I would be likely to approve it: see GrainCorp (No 1) at [40]. The independent expert appointed by the directors of GrainCorp was of the opinion that the Scheme is in the best interests of GrainCorp shareholders and that the capital reduction does not materially prejudice its ability to pay its existing creditors: see GrainCorp (No 1) at [14]-[15]. As set out at [8(4)] above, there was significant support of the Scheme by shareholders who voted in its favour at the Scheme Meeting, no one came forward to GrainCorp or the Court to oppose the Scheme and no issues were raised by any shareholders, other than one question asked at the Scheme Meeting as recorded in the minutes of that meeting and to which the chairperson, Mr Bradley, provided a response. 18 Thirdly, the Scheme Booklet disclosed the potential benefits and disadvantages of the Scheme and there was no criticism of the disclosure included therein. 19 Fourthly, GrainCorp brought to the Court's attention all matters that could be considered relevant to the exercise of its discretion. 20 Lastly, there was nothing to suggest that the Scheme had been proposed other than in good faith.

Conclusion 21 For those reasons I made the orders sought by GrainCorp. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Markovic.