In the matter of A2B Australia Limited [2024] NSWSC 377

Supreme Court of NSW|2024-03-28|Before: Black J

Solicitors: King & Wood Mallesons (Plaintiff) Corrs Chambers Westgarth (Acquirer) File Number(s): 2024/45098

Judgment

By Originating Process filed on 5 February 2024 the Plaintiff, A2B Australia Limited ("A2B"), sought orders that it convene a meeting of its members to consider a proposed scheme of arrangement under s 411 of the Corporations Act 2001 (Cth) ("Act") and directions under s 1319 of the Act as to the manner in which that meeting is to be held. A2B is an Australian public company limited by shares, and is listed on ASX, and operates an Australian taxi network technology and payment solutions business. The proposed scheme provides for ComfortDelGro Corporation Australia Ltd ("CDC") or its wholly owned nominee to acquire all of the issued shares in A2B, other than those already held on behalf of Excluded Shareholders (defined broadly, as members of the CDC Group).
At the first Court hearing on 21 February 2024, for the reasons set out in my judgment in Re A2B Australia Ltd [2024] NSWSC 185, I made orders that A2B convene a meeting of its members to consider the proposed scheme and associated orders. At the second hearing, A2B now seeks orders approving the scheme. I made those orders at the conclusion of the second Court hearing on 28 March 2024. These are my reasons for making those orders, and I have drawn on the helpful submissions of Mr Ahmed, who appears for A2B, in this judgment.

Affidavit evidence

A2B reads the affidavit dated 26 March 2024 of Mr Edelman, its General Counsel and Company Secretary. Mr Edelman refers to the announcements made by A2B to the Australian Securities Exchange ("ASX") market announcements platform relating to the scheme meeting and addresses the conduct of the scheme meeting. He refers to a poll report indicating the outcome of the scheme meeting and an announcement made by A2B to ASX on 25 March 2024 which attached that poll report. I address that poll report further below. Mr Edelman also notes that, in accordance with the orders made by the Court at the first Court hearing, A2B published a notice of this second Court hearing on the ASX markets announcement platform on 25 March 2024.
By a second affidavit dated 28 March 2024, Mr Edelman exhibited conditions precedent certificates in relation to the scheme and addressed the position in respect of several conditions precedent in relation to the scheme; noted the position of the Australian Competition and Consumer Commission in respect of the transaction; referred to the grant of relief by the Australian Securities & Investments Commission ("ASIC") in respect of two applications for relief made by A2B; and exhibited a letter from ASIC indicating that it had no objection to the proposed scheme for the purposes of s 411(17)(b) of the Act.
By his affidavit dated 26 March 2024, Mr Vanderneut, a solicitor acting for A2B, refers to the form of the scheme booklet issue by A2B to its shareholders and to registration of the final scheme booklet by ASIC. He notes that he had not received any notices of appearance from shareholders wishing to oppose A2B's application for approval of the scheme, and no shareholders appeared at the second Court hearing to oppose that application.
By his affidavit also dated 26 March 2024, Mr Danny Younis, who is an executive director of Automic Group, referred to an invitation sent on A2B's behalf to several major proxy advisory firms which invited them to meet with A2B's chair and company secretary in respect of both schemes. None of those proxy advisory firms took up that invitation and it is not necessary to address any communications with them, as it would have been had those meetings proceeded.
By an affidavit dated 26 March 2024, Mr Peter Guirguis, who is a client relationship manager with Link Market Services Ltd, outlines the process adopted for the dispatch of scheme materials to A2B shareholders and also refers to the steps which were taken to dispatch the scheme booklet to twenty new A2B shareholders who had come onto A2B's share register since the dispatch of scheme materials on 23 February 2024. Mr Guirguis was the returning officer for the scheme meeting and he indicates the result of that meeting, namely that 97.73% of the votes cast were in favour of the proposed scheme (excluding shareholders who abstained and 85.95% of shareholders who cast votes were in favour of the proposed scheme (excluding shareholders who abstained), so that it was approved by the requisite statutory thresholds of a majority of number in A2B shareholders (other than Excluded Shareholders) and more than 75% of votes cast on the scheme resolution. Mr Guirguis also led evidence that the voting participation rate at the scheme meeting was broadly consistent with that achieved at A2B's recent AGMs. Mr Guirguis' evidence was that A2B's executive chair, Mr Bayliss (who, as I noted in my earlier judgment, will receive a financial benefit from the scheme) voted in favour of the scheme resolution, but that resolution would still have been passed by a majority in number of A2B shareholders (other than Excluded Shareholders) present and voting on the scheme resolution and more than 75% of the votes cast on the scheme resolution if his votes were disregarded.

Applicable principles, submissions and determination

The principles that apply to the role of the Court in approving a scheme of arrangement under s 411(4)(b) of the Act are well established and I summarised them in Re InvoCare Ltd (No 2) [2023] NSWSC 1350 at [8]-[9] as follows: "The matters of which the Court must be satisfied in approving the scheme at the second Court hearing are whether there was compliance with the orders of the Court convening the scheme meeting or meetings; whether the resolution to approve the scheme was passed by the requisite majority and whether other statutory requirements have been satisfied; and whether all conditions to which the scheme is subject (other than Court approval and lodgement of the Court's orders with ASIC) have been met or waived: Re ELMO Software Ltd (No 2) [2023] NSWSC 81 ("ELMO") at [7]. The Court also has, in exercising its power of approval, a residual discretion whether to approve a scheme and is not bound to approve it merely because it has made orders for the convening of meetings or because the statutory majorities have been achieved: Re Seven Network Ltd (No 3) (2010) 267 ALR 583 ("Seven Network") at [31]; Re Staging Connections Group Ltd (No 2) [2015] FCA 1102 at [12]. In exercising that residual discretion, the (non-exhaustive) matters the Court will take into account include whether the scheme is fair and reasonable so that an intelligent and honest member of the relevant class, properly informed and acting alone, might approve it; whether there was full and fair disclosure to members of all information material to the decision whether to vote for or against the scheme; and 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) 43 ACSR 601 at [8]; Seven Network at [35]-[40]; Re Pendal Group Ltd (No 3) [2023] NSWSC 14 at [10]; ELMO at [8]."
Mr Ahmed, who appears for A2B, submits and the evidence establishes that A2B has complied with the Court's orders of 21 February 2024 in respect of the distribution of material in relation to the scheme to A2B shareholders. The scheme meeting was held in accordance with those orders on 25 March 2024 and, as I noted above, A2B shareholders there voted in favour of the scheme by the requisite majorities. As I also noted above, the votes cast by Mr Bayliss, were tagged and, if those votes were excluded, they would not have altered the results of the meeting. Mr Ahmed also points out that 62.77% of available votes were cast at the scheme meeting, although only 15.54% of shareholders by number cast their votes. He points out that the number of votes cast in respect of the scheme is roughly equivalent to the number of votes cast at recent A2B AGMs. This matter raises no reason to think that any difficulty has occurred with the distribution of scheme materials to shareholders. Mr Ahmed also points to the evidence that, as I noted above, each of the conditions precedent to the scheme have been satisfied or waived and ASIC has confirmed that it has no objection to the scheme for the purposes of s 411(17)(b) of the Act.
Returning now to the matters relevant to the Court's decision at a second Court hearing, Mr Ahmed notes that the Court will wish to be satisfied that A2B has complied with the orders of the Court convening the meeting of members, that the meeting of members so convened has approved the scheme with the requisite majorities and that all other statutory requirements have been satisfied and I have referred to the evidence establishing those matters above.
The Court will also wish to be satisfied that the scheme 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. Mr Ahmed points out that, as I noted in my earlier judgment, the independent expert whose report was included in the scheme booklet has expressed the view that the scheme was fair and reasonable and in the best interests of A2B shareholders (other than Excluded Shareholders) in the absence of a superior proposal, and noted that the scheme consideration of $1.45 per share was within the expert's assessed valuation range for each share of $1.30 to $1.54, with a midpoint of $1.42. The scheme was recommended by A2B's directors, with the usual qualifications, and A2B's shareholders have voted in favour of the scheme by the requisite majorities. There is otherwise no reason to doubt that matter in respect of a cash acquisition scheme. There is also no reason to doubt that A2B has brought to the Court's attention all matters that could be considered relevant to the exercise of the Court's discretion and that there was full and fair disclosure to members of all information material to the decision whether to vote for or against the applicable scheme, and I referred to the evidence as to the verification processes adopted in respect of the scheme booklet in my earlier judgment. The position as to the conditions precedent to the scheme was addressed by the evidence at this hearing.
A2B also seeks an exemption pursuant to s 411(12) of the Act from compliance with s 411(11) so that a copy of the Court order approving the scheme does not need to be annexed to any copy of A2B's constitution that may be issued in the future. Mr Ahmed submits, and I accept, that an order of this kind is orthodox where, as here, the rights of shareholders in A2B shareholders are not modified by the scheme.
I was otherwise satisfied that the scheme is appropriate for the Court's approval. For these reasons, I made the orders sought by A2B at the second Court hearing on 16 February 2024.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 17 April 2024

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