[2000] NSWSC 408
- Re Permanent Trustee Co Ltd (2002) 43 ACSR 601[2010] FCA 400
- Re Solution 6 Holdings Ltd (2004) 50 ACSR 113
Judgment (6 paragraphs)
[1]
Solicitors:
Herbert Smith Freehills (Plaintiff)
Gilbert + Tobin (Acquirer)
File Number(s): 2021/148469
[2]
Background and affidavit evidence
By way of background, BINGO Industries Limited ("BINGO") is a listed public company which provides services across the resource recovery and waste management supply chain. As I noted in my judgment in Re BINGO Industries Limited [2021] NSWSC 798 ("Earlier Judgment"), BINGO entered into a Scheme Implementation Deed dated 27 April 2021 ("SID") with Recycle and Resource Operations Pty Ltd, an entity owned by Macquarie Infrastructure and Real Assets and its managed funds, for the acquisition of all of the issued shares in BINGO by way of a scheme of arrangement. That proposal provided for BINGO shareholders to receive $3.45 in cash per BINGO share held by them, which may partly comprise a special dividend in an amount of up to 11.7 cents per BINGO share ("All Cash Consideration"). Alternatively, BINGO shareholders (other than ineligible foreign shareholders, as defined in the SID) may elect to receive cash and unlisted scrip ("Mixed Consideration) with a "notional value" of $3.30 per BINGO share, as an alternative to the All Cash Consideration. The Mixed Consideration comprised cash consideration of $1.32 per BINGO share, inclusive of any special dividend, and unlisted scrip in another entity, Recycle and Resource Holdings Ltd which would indirectly hold all of the issued capital in BINGO after implementation of the proposed scheme.
On 9 June 2021, I made orders under s 411(1) of the Corporations Act 2001 (Cth) that the Plaintiff, BINGO, convene a meeting of BINGO shareholders to consider and, if thought fit, agree to a proposed scheme of arrangement between BINGO and BINGO shareholders, and approving a scheme booklet to be distributed by BINGO to the BINGO shareholders. I set out my reasons for making that order in the Earlier Judgment.
The scheme meeting was held on 13 July 2021 and a majority of BINGO shareholders in number present and voting and more than 75% of the votes cast voted in favour of the scheme, namely approximately 96.82% of shares by value and approximately 94.17% of BINGO shareholders by number present and voting by the online platform or by proxy, attorney or corporate representative.
At the second Court hearing on 15 July 2021, BINGO sought an order under s 411 of the Corporations Act approving a scheme of arrangement and orders under s 411(12) of the Act exempting it from compliance with s 411(11) of the Act in respect of the scheme. I made those orders at the conclusion of the hearing and these are my reasons for doing so. I have drawn below on the helpful submissions of Mr Jackman SC who appeared for BINGO in the application.
[3]
Affidavit and other evidence
At the second Court hearing, BINGO read an affidavit dated 13 July 2021 of Ms Elizabeth Crouch, an independent non-executive director of BINGO and a member of its Independent Board Committee in respect of the scheme, which dealt with the conduct of the scheme meeting and the results of voting at that meeting. By his affidavit dated 14 July 2021, Mr Nicholas O'Hagan, who is a client relationship manager with Link Market Services Ltd, addressed the dispatch of scheme materials, in hard copy and electronic form, the receipt of proxies for the scheme meeting and the result of voting at that meeting. By his affidavit dated 13 July 2021, Mr Antony Damian, a solicitor acting for BINGO in respect of the scheme, addressed, inter alia, the registration of the scheme booklet with the Australian Securities & Investments Commission ("ASIC"); the advertisement of the second Court hearing; the announcement of a special dividend payable by BINGO, as contemplated by the scheme booklet; and the fact that notice had not been received from any shareholder wishing to appear at the second Court hearing. BINGO also tendered certificates dated 15 July 2021 of satisfaction of conditions precedent in connection with the scheme and letter dated 14 July 2021 from ASIC for the purposes of s 411(17) of the Act.
[4]
Submissions and determination
Section 411(4) of the Act provides that an arrangement is binding on BINGO shareholders and BINGO only if, at a meeting of BINGO shareholders, it is passed by a majority of BINGO shareholders present and voting and by 75% of votes cast and it is approved by order of the Court. Section 411(6) of the Act provides that the Court may grant approval subject to such alterations or conditions as it thinks just.
At the second Court hearing, the plaintiff must satisfy the Court that the resolutions have been passed in accordance with the statutory requirements and the procedural requirements have been satisfied. Where those matters are established, the Court has a supervisory discretion and will consider whether the scheme involves oppression and whether the arrangement is capable of being accepted: Re Alabama, New Orleans, Texas and Pacific Junction Railway Co [1891] 1 Ch 213 at 247. As Mr Jackman points out, in deciding whether to give approval to the scheme, the Court will typically wish to be satisfied that the orders of the Court convening a meeting of members were complied with; the meeting of members so convened has approved the scheme with the requisite majority; all other statutory requirements have been satisfied; the scheme is fair and reasonable so that an intelligent and honest man or woman 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 Solution 6 Holdings Ltd (2004) 50 ACSR 113; [2004] FCA 1049 at [18]-[24]; Re Permanent Trustee Co Limited (2002) 43 ACSR 601; [2002] NSWSC 1177 at [8]-[10]; Re Central Pacific Minerals NL [2002] FCA 239 at [8]-[14]; Re Seven Network (No 3) (2010) 77 ACSR 701; [2010] FCA 400 at [35]-[39]; Re Redcape Property Fund Ltd and Trust Company (RE Services) Ltd (as the responsible entity for the Redcape Property Trust) [2012] NSWSC 486 at [7]; Re Aveo Group Ltd [2019] NSWSC 1679 at [15].
Mr Jackman also points out that the Court will give due regard to the assessment by members of their interests as manifested in the voting at the meeting. He refers to Re Central Pacific Minerals NL above at [13], where Emmett J observed that:
"[t]he Court will, of course, generally take the view that the shareholders are the best judges of whether an arrangement is to their commercial advantage and will be reluctant to make decisions contrary to the views of security holders expressed at meetings".
The Court is not bound to approve a scheme merely because it has previously made orders for the convening of meeting of the members and the statutory majorities have been achieved: Re NRMA Ltd (No 2) (2000) 156 FLR 412; (2000) 34 ACSR 261; [2000] NSWSC 408 at [22]; Re Seven Network above at [31]; Re Atlas Iron Ltd (No 2) [2016] FCA 481 at [5].
The affidavit evidence here establishes that the Court's orders in respect of the dispatch of the scheme booklet and the scheme meeting were complied with. The Independent Board Committee and the other Recommending Directors (as defined in the scheme booklet) unanimously recommended that the BINGO shareholders vote in favour of the scheme, in the absence of a Superior Proposal (as defined) and subject to the independent expert concluding (and continuing to conclude) that the scheme was fair and reasonable and in the best interests of BINGO shareholders. The independent expert's report concluded that the scheme is fair and reasonable and in the best interests of BINGO shareholders, by reference to the All Cash Consideration rather than the Mixed Consideration, and no competing proposal has been made to acquire BINGO shares at a price equal to or higher than that provided under the scheme.
As I noted above, the scheme was approved by the requisite majorities of votes cast and by number of BINGO shareholders present virtually or by proxy at the meeting held on 13 July 2021, and the statutory majorities in sections 411(4)(a)(ii)(A) and (B) of the Act have been satisfied. Of the 7,706 BINGO shareholders eligible to vote at the scheme meeting, 873 voted, which is a voting participation rate by shareholder of 11.32%. Of the 656,707,668 BINGO shares eligible to be voted at the scheme meeting, 492,732,369 were voted, which is a voting participation rate by shares of 75.03%. These voting participation rates are broadly comparable to the voting participation rates at BINGO annual general meetings between 2018 and 2020 (O'Hagan [60]-[61]) and are not particularly high. However, I bear in mind that, in Re TriAusMin Ltd (No 2) [2014] FCA 833 at [10]-[12], a scheme was approved where 10.94% of shareholders had voted 52.9% of the shares. Farrell J there observed that:
"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 (Re Seven Network Ltd) 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.
In making orders to convene the meeting of BINGO shareholders, I was satisfied that the scheme was of such a nature and cast in such terms that, if it received the statutory majority at the meeting, the Court would be likely to approve it on the hearing of an application that was unopposed, and nothing has occurred since the first Court hearing to warrant a departure from that conclusion. No BINGO shareholder or other person indicated a wish to appear or appeared at the second Court hearing to object to the scheme and BINGO has tendered a letter from ASIC issued pursuant to s 411(17)(b) of the Act stating that ASIC has no objection to the scheme. There is no reason to doubt that BINGO has brought to the Court's attention all matters that could be considered relevant to the exercise of the Court's discretion, or to doubt 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. The factual information contained in the scheme booklet was verified in the usual way and the scheme booklet otherwise satisfies the relevant statutory requirements.
I am satisfied that the Court should also make an order exempting BINGO from compliance with s 411(11) of the Act, where the scheme will not amend BINGO's constitution and BINGO will become a wholly owned subsidiary of the acquirer upon implementation of the scheme: Re Toll Holdings Ltd (No 2) [2015] VSC 236 at [18]-[19].
[5]
Orders
For these reasons, I made the orders sought by BINGO at the conclusion of the second Court hearing in respect of the scheme.
[6]
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: 03 August 2021