In the matter of Auswide Limited (No 2) [2025] NSWSC 72

Affidavit evidence

1. Auswide reads the affidavit dated 28 November 2024 of Mr Douglas Snell, who is the Chief Executive Officer and Managing Director of Auswide, which was previously relied on to support a successful application to postpone the scheme meeting. That affidavit deals with the satisfaction of conditions precedent to the scheme, including those relating to the Treasurer's approval under the Financial Sector (Shareholdings) Act 1998 (Cth) and the Treasurer's consent under s 63 of the Banking Act 1959 (Cth). Mr Snell also addresses the then application to postpone the scheme meeting to allow sufficient time for the relevant conditions to be satisfied and correspondence with the Australian Securities and Investments Commission ("ASIC") in respect of the scheme, and the giving of notice of the second Court hearing
2. Auswide also reads the affidavit dated 6 February 2025 of Mr William Schafer, who is the Chief Financial Officer and Company Secretary of Auswide. Mr Schafer addresses the dispatch of scheme documents to Auswide shareholders, the satisfaction of conditions precedent to the scheme, including receipt of the Treasurer's approval and consent to the proposed transaction; the publication of an announcement postponing the scheme meeting, as ordered by the Court, pending the satisfaction of those conditions precedent; communications with Auswide shareholders; the publication of an announcement to ASX concerning the second Court hearing; and the conduct of the scheme meeting and the passage of the scheme resolution at the scheme meeting.
3. Auswide reads the affidavit dated 6 February 2025 of its solicitor, Mr Morris, who deals with registration of the scheme booklet with ASIC and with the giving of notice of the second Court hearing and indicates that he had not received any notice of appearance from Auswide shareholders wishing to oppose approval of the scheme.
4. Auswide also tenders a letter dated 6 February 2025 from ASIC confirming that it has no objection to the scheme for the purposes of s 411(17) of the Act and a certificate executed by Auswide and MyState in respect of the satisfaction or waiver of the conditions precedent to the scheme.

Applicable principles and submissions

1. The Court must be satisfied of several matters in order to approve a scheme of arrangement at the second Court hearing, namely that the plaintiff has complied with the orders of the Court convening the meeting of members; the meeting of members so convened has approved the scheme with the requisite majorities; all other statutory requirements have been satisfied; 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; 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; and there was full and fair disclosure to members of all information material to the decision whether to vote for or against the applicable scheme: Re Permanent Trustee Co Ltd (2002) 43 ACSR 601; [2002] NSWSC 1177 at [8]-[10]; Re Central Pacific Minerals NL [2002] FCA 239 ("Central Pacific Minerals") at [8]-[14]; Re Seven Network (No 3) (2010) 267 ALR 583; [2010] FCA 400 ("Seven Network") at [35]-[39]; Re Solution 6 Holdings Ltd (2004) 50 ACSR 113; [2004] FCA 1049 at [18]-[24]; Re Redcape Property Fund Ltd and the Trust Company (RE Services) Ltd (as the responsible entity for the Redcape Property Trust) [2012] NSWSC 486 at [7]; Re Amcor Ltd (No 2) [2019] FCA 842 at [7]-[11]; Re Ellerston Global Investments Ltd [2020] NSWSC 1108 ("Ellerston") at [10]-[12]; Re Coca-Cola Amatil Ltd [2021] NSWSC 489 at [9]; Re Pendal Group Ltd (No 3) [2023] NSWSC 14 at [9]. The Court will also have regard to shareholders' assessment of their interests as manifested in the voting results on the scheme resolution in recognising that shareholders are "the best judges of whether an arrangement is to their commercial advantage": Central Pacific Minerals at [13]; Ellerston at [10]. I have drawn on my judgment in Re Bionomics Ltd (No 2) [2024] NSWSC 1666 at [7] for this summary.

Submissions and determination

1. There is evidence that Auswide complied with the Court's orders in respect of the distribution of scheme documents to its shareholders.
2. Mr Ahmed notes that the Court had been advised at the first Court hearing that Auswide proposed to undertake additional communications with shareholders in relation to the scheme. A third party, Orient Capital was engaged to assist in scheduling meetings between proxy advisors and executives and/or directors of Auswide and executives of MyState, but those meetings did not take place. Communications also took place between representatives of Orient Capital Limited, MyState and Auswide and Auswide shareholders. A log of those communications was kept, which recorded matters such as the nature of the communication and notes of the communication, and the relevant organisations have confirmed that the communications did not extend beyond the information contained in the scheme booklet. These communications do not give rise to any reason not to approve the scheme meeting.
3. As I noted above, the scheme meeting was held on 3 February 2025 and Auswide shareholders voted in favour of the scheme by the requisite statutory majorities. Some 93.51% of the votes cast were in favour of the proposed scheme (excluding shareholders who abstained) and 90.59% of shareholders who cast votes were in favour of the proposed scheme (again excluding shareholders who abstained).
4. Some 31.61% of available votes were cast at the scheme meeting, although only 9.12% of Auswide shareholders by number cast their votes (excluding abstentions), and the voting participation rate at the scheme meeting was higher than that at Auswide's most recent annual general meetings. Mr Ahmed submits and I accept that: "While shareholder turnout in terms of the number of shareholders voting would not be characterised as overwhelming, it is nonetheless represents a majority of the shares that were available to be voted. As noted above, it is also higher than historical voting by Auswide shareholders. Particularly in light of that historical experience, there is no suggestion that the shareholder turnout was the result of shareholders being deterred from voting or a lack of notice. In any event, the observations of Farrell J in Re TriAusMin Ltd (No 2) [2014] FCA 833 at [10]-[12] are apposite: 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 who 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; 77 ACSR 701; [2010] FCA 400 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. … [see also Re Amcor Ltd (No 2) [2019] FCA 842 at [18]-[20] (Beach J)] Moreover, when regard is had to the overwhelmingly positive response from those shareholders who did vote, the low turnout may represent contentment with the terms of the proposed [s]cheme." This matter does not suggest any defect in the notice of the scheme given to Auswide shareholders and does not give rise to any reason not to approve the scheme.
5. The scheme was recommended by Auswide's directors and the independent expert whose report was included in the scheme booklet and expressed the view that the scheme was fair and reasonable and in the best interests of Auswide shareholders in the absence of a superior proposal. Mr Ahmed fairly recognises that that expert formed that view on the basis of a merger of equals approach, which it considered, on balance, was the appropriate approach, and then considered whether Auswide shareholders were better off, or at least not worse off, under the proposal. Mr Ahmed recognises that the expert's report also expressed the view that, if the scheme was evaluated on the basis that it was a takeover or change of control transaction (which the expert did not necessarily consider to be the appropriate basis for evaluation), the scheme was not fair, but it was reasonable and still in the bests interests of Auswide shareholders. Mr Ahmed also notes that, as I had recognised in my earlier judgment, the expert's report had been amended following questions raised by ASIC so as prominently disclose the basis on which the expert's primary opinion had been formed and indicate the expert's view that, on the alternate basis, the transaction would not be fair but would be reasonable and in the interests of Auswide shareholders. Where these matters were sufficiently disclosed to Auswide shareholders, the fact that the expert had expressed an opinion (here, not as its preferred view) that the transaction was not fair but reasonable does not prevent approval of the scheme at the second Court hearing: Re Beadell Resources Ltd (2013) 133 ACSR 600; [2018] WASC 410 at [62]-[63].
6. As I noted above, no Auswide shareholder indicated an intention to appear at the second Court hearing to oppose the scheme and there was no such appearance. There is no reason to doubt that the scheme is fair and reasonable so that an intelligent and honest Auswide shareholder, properly informed and acting alone, might approve it. There is otherwise no reason to doubt that Auswide has brought to the Court's attention all matters that could be considered relevant to the exercise of the Court's discretion or that there was full and fair disclosure to shareholders of all information material to the decision whether to vote for or against the scheme. I am therefore satisfied that the scheme is appropriate for the Court's approval.

Securities Act 1933 (US)

1. At the first Court hearing, the Court's attention was drawn to the fact that MyState intended to rely on the approval of the scheme to qualify for an exemption from the requirements of the Securities Act 1933 (US) ("Securities Act"). That exemption is provided for by s 3(a)(10) of the Securities Act and, in Re Simeon Wines Ltd (2002) 42 ACSR 454; [2002] SASC 204 at [22], Lander J summarised the elements of that exemption as that the relevant securities are issued in exchange for other securities; the issuer advises the Court whose order will be relied upon that the issuer itself will rely on s 3(a)(10) on the basis of the Court's approval; the Court has sufficient information before it to determine the value of the securities to be surrendered and those to be issued in the proposed transaction; the Court holds a hearing to determine whether the terms and conditions of the transaction are fair to all those who will receive securities and approval of the terms of the exchange; and the hearing is open to everyone to whom the securities would be issued in the proposed exchange and a notice of the hearing in appropriate terms has been provided in a timely manner: Ellerston at [18]-[19]; Re Telstra Corporation Ltd (2022) 163 ACSR 543; [2022] NSWSC 1460; Re Newcrest Mining Ltd (No 2) [2023] FCA 1251; Re TASK Group Holdings Limited (No 3) [2024] NSWSC 854.
2. I accept that I should adopt that approach and I record that the requisite conditions of the exemption are satisfied, as follows. First, the Court was advised before the approval hearing that reliance would be placed on the s 3(a)(10) exemption on the basis of the Court's approval of the scheme and Auswide shareholders were also informed of this in the scheme booklet; second, the Court has been informed of the securities to be offered as scheme consideration, and an independent expert report concluded that the proposal is in the best interests of Auswide shareholders; third, the Court has held a hearing to consider the fairness and reasonableness of the proposed scheme; fourth, that hearing was open to the public, and any person to whom securities are to be issued had standing to appear; and, fifth, notice of the time and date of the approval hearing was provided through the scheme booklet.

Exemption under s 411(12) of the Act

1. Auswide 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 Auswide's constitution that may be issued in the future. I accept that an order of this kind is properly made where, as here, the rights of shareholders in Auswide are not modified in any way: Re Equinox Resources Ltd (2004) 49 ACSR 692; [2004] WASC 143 at [22]-[23]; Re Murchison Metals Ltd [2014] NSWSC 951 at [10]-[11]; Re The Trust Company Ltd [2013] NSWSC 1947 at [19].

Determination and orders

1. For these reasons, I made the orders sought by Auswide at the conclusion of the second Court hearing on 7 February 2025.

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: 19 February 2025