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In the matter of Domain Holdings Australia Limited [2025] NSWSC 701 | Case summary | Zoe

NSWNSWSC

In the matter of Domain Holdings Australia Limited

[2025] NSWSC 701

Supreme Court of NSW|2025-07-03|Before: Black J

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At a glance

Source facts

Court

Supreme Court of NSW

Decision date

2025-07-03

Before

Black J

Catchwords

CORPORATIONS — Arrangements and reconstructions — Schemes of
arrangement or compromise — Application under s 411 of the Corporations
Act 2001 (Cth) for orders convening meeting of members to consider and, if
thought fit, to agree to proposed scheme of arrangement —

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Catchwords

CORPORATIONS — Arrangements and reconstructions — Schemes ofarrangement or compromise — Application under s 411 of the CorporationsAct 2001 (Cth) for orders convening meeting of members to consider and, ifthought fit, to agree to proposed scheme of arrangement —Whetherrequirements to order scheme meeting are satisfied

Judgment

Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.

Medium Neutral Citation: In the matter of Domain Holdings Australia Limited [2025] NSWSC 701

Hearing dates: 30 June 2025

Date of orders: 30 June 2025

By Originating Process filed on 5 June 2025, the Plaintiff, Domain Holdings Australia Limited (“DHAL”) applies for orders under ss 411 and 1319 of the Corporations Act 2001 (Cth) (“Act”) relating to a proposed scheme of arrangement and associated orders.
By way of background, DHAL is an Australian public company listed on the Australian Securities Exchange (“ASX”). DHAL operates a “digital property marketplace” comprising several brands offering property related products and solutions to consumers (buyers, sellers and renters), agents and other parties and which operates across two main segments, being Core Digital (including Residential, “Media, Developers & Commercial”, Agent Solutions and Domain Insight) and Print (through the distribution of Domain, Domain Prestige and Allhomes magazines). On 9 May 2025, Domain announced to the ASX that it had entered into a Scheme Implementation Deed (“SID”) with CoStar Group Inc. (“CoStar”) and Andromeda Australia SubCo Pty Limited (“Bidder Sub”), a wholly owned subsidiary of CoStar. Bidder Sub currently holds 16.96% of DHAL’s ordinary shares and is an Excluded Shareholder for the purposes of the proposed scheme.
The scheme provides for Bidder Sub to acquire all of the DHAL Shares it does not already hold for $4.43 per scheme share less any Permitted Special Dividend (as defined in the SID) per Target Share (as defined in the SID) (but will not be reduced by the value attributed to any franking credits attached to such dividends). The Permitted Special Dividend is a dividend of up to 10 cents per Target Share (as defined in the SID) to DHAL shareholders, which DHAL may (in its discretion), at any time, prior to the Implementation Date (as defined in the SID), announce, determine and pay, conditional on the Scheme becoming effective, with the payment of any Permitted Special Dividend to be paid subject to the conditions and requirements in cl 4.4 of the SID. The scheme booklet discloses that the DHAL board currently intends to determine a fully franked Permitted Special Dividend of up to 8.8 cents per DHAL share. The total scheme consideration payable to scheme shareholders is $2,335,851,680.27 (“Maximum Scheme Consideration”). The effect of the scheme would be to make DHAL a wholly owned subsidiary of Bidder Sub, and an indirect subsidiary of CoStar, and DHAL would delist from the ASX following implementation of the scheme.
I made the orders sought by DHAL at the conclusion of the hearing on 15 May 2025. These are my reasons for doing so. I have drawn on the helpful submissions of Mr Izzo SC and Ms Ng who appeared for DHAL in this judgment.

The Court’s role at the first Court hearing in respect of a scheme is to determine, in the exercise of its discretion, whether to approve the convening of a scheme meeting and the explanatory statement if it is satisfied of several matters, namely that the plaintiff is a Pt 5.1 body; the proposed scheme is an “arrangement” within the meaning of s 411 of the Act; the scheme is bona fide and properly proposed; ASIC has had a reasonable opportunity to examine the proposed scheme and explanatory statement, to make submissions and has had 14 days’ notice of the proposed hearing date of the first Court hearing; the procedural requirements under the Supreme Court (Corporations) Rules 1999 (NSW) (“Rules”) have been met; and there is no apparent reason why the scheme should not, in due course, receive the Court’s approval if the necessary majority of votes is achieved: Re Orion Telecommunications Limited [2007] FCA 1389 at [5]; Re Staging Connections Group Ltd [2015] FCA 1012 at [19]; Re Wridgways Australia Ltd [2010] FCA 1187 at [30]; Re Ellerston Global Investments Ltd [2020] NSWSC 879 at [25]–[26]; Re Vocus Group Ltd [2021] NSWSC 630 at [12].
The Court will not ordinarily summon a scheme meeting unless the scheme is of such a nature and cast in such terms that, if it achieves the statutory majority at the meeting, the Court would be likely to approve it. The Court will consider whether the proposed scheme is fit for consideration at the proposed scheme meeting, in the sense that it is of such a nature and cast in such terms that, if it achieves the statutory majority at the meeting, the Court would be likely to approve it on the hearing of a petition which is unopposed, and that members are to be properly informed as to the nature of the scheme before the scheme meeting: F T Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd (1977) 3 ACLR 69 at 72, approved in Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485 at 504; [1993] HCA 15; Re Foundation Healthcare Ltd (2002) 42 ACSR 252; [2002] FCA 742 at [36] and [44], cited with apparent approval in Re CSR Ltd (2010) 183 FCR 358; [2010] FCAFC 34 at [58]; Re InvoCare Ltd [2023] NSWSC 1180 at [16]–[17] (“Invocare”); Re Absolute Equity Performance Fund Ltd [2022] FCA 933 at [18]–[22].
Each of the preconditions to the exercise of the Court’s discretion in s 411 of the Act is satisfied in this case. DHAL is a company registered under the Act and a Pt 5.1 body. The proposed scheme is an “arrangement” within the scope of s 411 of the Act where it involves the acquisition of the shares in DHAL in return for cash consideration paid to its shareholders. There is no reason to doubt that the scheme is bona fide and properly proposed, where it provides for the acquisition of shares in DHAL in that manner. The DHAL directors have unanimously recommended that DHAL shareholders vote in favour of the scheme, in the absence of a superior proposal, and subject to the independent expert continuing to conclude that the scheme is in the best interests of DHAL shareholders. The independent expert, Grant Samuel, has also expressed the opinion that the scheme is fair and reasonable and in the best interests of DHAL’s shareholders in the absence of a superior proposal. The independent expert has valued DHAL in the range of $2,580 million to $2,830 million which corresponds to a value of $4.06 to $4.46 per share. That valuation of Domain has been derived by aggregating the underlying value of DHAL’s business operations (on a control basis) together with the realisable value of non-trading assets and deducting borrowings and non-trading liabilities using a discounted cash flow analysis and earnings multiple analysis.
ASIC has here had a reasonable opportunity to examine the proposed scheme and scheme booklet and to make submissions; it has had the necessary notice of this hearing; and, as I noted above, it has indicated that it does not currently propose to appear to make submissions or intervene to oppose the scheme at this hearing. The relevant procedural requirements under the Rules have generally been met, and I will relieve DHAL from compliance with Rule 3.4 of the Rules on the basis that an announcement will be published on its website.

I am satisfied that that evidence sufficiently addresses the concerns which would otherwise arise where the Bidder Sub is a special purpose company that could not pay the scheme consideration from its own resources.
The scheme otherwise adopts the conventional mechanism of making the transfer of DHAL shares to Bidder Sub conditional on the payment of the total consideration into a trust account with an Australian bank. On 26 June 2025, CoStar and Bidder Sub executed a Deed Poll in favour of the scheme shareholders under which Bidder Sub undertook, in favour of each scheme shareholder, to provide the scheme consideration to which each scheme shareholder is entitled under the scheme and to perform Bidder Sub’s obligations under the scheme; and CoStar undertook in favour of each Scheme Shareholder to perform CoStar’s obligations under the scheme and that, if Bidder Sub will not or does not fulfil its obligations to provide the Scheme Consideration to each Scheme Shareholder under the Scheme, then Co-Star will perform such obligations in place of Bidder Sub, subject to the Scheme becoming effective. Mr Izzo submits, and I accept, that the Deed Poll and mechanism for payment of the scheme consideration are well-established means of managing performance risk: Re ELMO Software Pty Ltd [2023] NSWSC 12 at [27]–[28] (“ELMO”).
Third, Mr Izzo addresses the question of benefits to DHAL directors. Several directors of DHAL may indirectly benefit from implementation of the scheme, as disclosed in the Chairman’s letter at footnote 6 and sections 9.1 to 9.7 of the scheme booklet. In particular, section 9.6 of the scheme booklet discloses that Mr Stanton, Ms Rosen and Mr Tonagh, who are directors of DHAL, are also currently directors of DHAL’s controlling shareholder, Nine; Mr Stanton is also employed by Nine as its Chief Executive Officer; and Mr Falloon was previously a director of Nine, serving as Deputy Chair from December 2018 to November 2022. Mr Falloon, Mr Stanton, Ms Rosen and Mr Tonagh each have a Relevant Interest (as defined in the Scheme Booklet, with reference to ss 608 – 609 of the Act) in Nine shares. Section 9.6 of the scheme booklet discloses that, if the scheme is implemented, Nine may distribute a portion of the surplus net cash it receives under the scheme by way of a special dividend paid to Nine shareholders, and Mr Falloon, Mr Stanton, Ms Rosen and Mr Tonagh may be entitled to receive any such dividend from Nine, along with the benefit of any associated franking credits, through their Relevant Interests in Nine shares. Mr Stanton also holds Nine Performance Rights as part of Nine’s long term incentive plan and implementation of the scheme could have an impact on satisfaction of the performance criteria for the Nine Performance Rights which have been issued to him under that plan.
Section 6.4(d) of the scheme booklet also discloses that, if the scheme is implemented, CoStar intends to offer Mr Jason Pellegrino the position of President of DHAL in place of its current interim chief executive officer, Mr Ellis. Section 9.7 of the Scheme Booklet discloses that, if this occurs, if this occurs, Mr Ellis will receive a termination payment (which will include pay in lieu of notice) that ensures Mr Ellis receives a minimum of nine months’ remuneration (including superannuation) for his executive role as interim Chief Executive Officer, which he commenced on 17 February 2025. The amount of the termination payment to Mr Ellis will depend on when (if at all) Mr Ellis is terminated as interim Chief Executive Officer but will be no more than $440,000.
I accept that it is open to these directors to make a recommendation concerning the scheme where their interests arising from these matters are sufficiently disclosed in the scheme booklet: Re Kidman Resource Ltd (2019) 139 ACSR 122; [2019] FCA 1226 at [115]; Re DWS Ltd (2020) 148 ACSR 616; [2020] FCA 1590 at [41]–[49]; Re Pendal Group Ltd [2022] NSWSC 1648 at [25]; Re McGrath Ltd [2024] NSWSC 555 at [25]. These matters do not give rise to any class issues in respect of the scheme.
Fourth, Mr Izzo addresses transitional arrangements with Nine, where DHSL and Nine currently share the benefit of certain third-party contracts for services required for the conduct of their respective businesses (McGregor [34]; scheme booklet, section 9.9). The scheme booklet discloses that DHAL and Nine are negotiating a transitional services agreement (“TSA”) under which these arrangements will continue on a transitional basis on the terms set out in the TSA (McGregor [35]; scheme booklet, section 9.9). Section 9.9 of the scheme booklet also discloses that, separate to the TSA, DHAL and Nine are party to commercial arrangements to provide one another services and they have entered into an agreement (“Commercial Arrangements Agreement”) which will continue certain commercial arrangements currently in place between them and/or their group members for a transitional period, while they negotiate any longer term arrangements. This matter is sufficiently addressed by disclosure and provides no reason not to convene the scheme meeting.
Fifth, Mr Izzo addresses equity incentives issued by DHAL. Section 9.14(a) of the scheme booklet discloses that DHAL operates several equity incentive plans under which short-term and long-term incentives are offered to executives and senior employees as an incentive or reward, which are governed by the Equity Incentive Plan Rules adopted on 15 November 2017, including an Executive Incentive Plan, Domain Incentive Plan, Senior Leadership Incentive Plan, Short Term Incentive Plan and Long-Term Incentive Plan. The scheme booklet discloses the manner in which these incentives will be addressed. Mr Izzo submits, and I accept, that the fact that holders of performance rights and other equity incentives may receive benefits as a result of the scheme by reason of early or accelerated vesting does not place them in a different class: ELMO at [25]; Re Mayne Pharma Group Ltd [2025] NSWSC 513 at [16]. I accept that benefits under these arrangements which are received by shareholders who also hold performance rights do not create the need for a separate voting class at the scheme meeting: ELMO at [25]; Re Ansarada Group Ltd [2024] NSWSC 411 at [20] (“Ansarada”).
Mr Izzo also notes that, as disclosed in section 9.14(d) of the scheme booklet, DHAL operates a Tax-Exempt Share Plan (“TESP”) under which eligible employees may purchase up to $1,000 of DHAL shares per year from deductions from their pre-tax salary at a 20% discount, which are subject to a three-year holding lock once granted. DHAL shares held by certain participants under the TESP relating to financial years prior to FY25 are subject to disposal restrictions (“Restricted Shares”). Mr Izzo points out that these Restricted Shares will be acquired in the ordinary course under the scheme and any holding locks applied by DHAL’s share registry will, on instruction from DHAL, be lifted upon the scheme becoming effective (McGregor [46]; scheme booklet, section 9.14(d)). Section 9.14(d) of the scheme booklet also discloses that, where the Restricted Shares would be acquired under the scheme prior to the expiry of their restriction period, DHAL has applied for a ruling from the Australian Taxation Office to seek to preserve their tax-exempt status; and, if that ruling is not granted, and the participating employees would be subject to tax on those shares, DHAL may elect to pay an amount to the participating employees equal to the amount of tax that they will incur. It is anticipated that the amount would be less than $200,000 and I accept that matter is sufficiently addressed by disclosure and provides no reason not to convene the scheme meeting.
Mr Izzo also notes that, as also disclosed in section 9.14(d) of the scheme booklet, the salary sacrifice period for employees participating in the FY25 TESP (“FY25 TESP Participants”) ran up to 12 June 2025 and, instead of granting DHAL shares to FY25 TESP Participants, the FY25 offer will be cancelled and deductions repaid to FY25 TESP Participants, with additional compensation to reflect the lost benefit relating to the 20% discount that they would have otherwise received under the FY25 offer. Repayment and any compensation to FY25 TESP Participants will be made prior to the Implementation Date. This matter is also sufficiently addressed by disclosure and provides no reason not to convene the scheme meeting.
Sixth, Mr Izzo addresses exclusivity provisions in respect of the scheme. He notes that cl 9 of the SID imposes several restrictions and obligations on DHAL and its directors in relation to negotiations with third parties such as “no shop” (cl 9.2), “no talk” (cl 9.3), and “no due diligence” (cl 9.4) restrictions and a “notification of approaches” obligation (cl 9.5) and a “matching right” (cl 9.6). The “no talk” and “no due diligence” restrictions are subject to the DHAL directors’ fiduciary and statutory obligations (cl 9.7). I accept that these exclusivity provisions prominently disclosed in the scheme booklet and that exclusivity provisions in this form are now commonplace in schemes of arrangement and are not inconsistent with the Takeovers Panel’s guidance as to “deal protection”: Re Villa World Ltd (2019) 139 ACSR 550; [2019] NSWSC 1207 at [23] (“Villa World”); Ansarada at [23].
The “End Date” for the “Exclusivity Period” under the SID is nine months after the date of the SID, being 9 February 2026 or such other date and time agreed in writing between CoStar and Domain. The Court is concerned to ensure that any exclusivity period should be for no more than a reasonable period, capable of precise ascertainment; an exclusivity clause directed at dealing with an unsolicited alternative proposal should be subject to a fiduciary carve out; and the provisions should be clearly disclosed in the explanatory statement sent to shareholders: Re Arthur Yates & Co Ltd (2001) 36 ACSR 758; [2001] NSWSC 40 at [9]; Re TPG Telecom Ltd [2020] NSWSC 772 at [22]; Re Isentia Group Ltd [2021] NSWSC 910 at [23] (“Isentia”); Re Asaleo Care Ltd [2021] FCA 406 at [55]. I accept that exclusivity periods of this length have previously been accepted in comparable transactions: Re Coca-Cola Amatil Ltd [2021] NSWSC 270 at [22].
Seventh, Mr Izzo addresses the question of break fees. Pursuant to cl 10 of the SID, DHAL must pay to CoStar a Target Break Fee of $28,100,000 in the circumstances set out in cl 10.3 of the SID; and, pursuant to cl 11 of the SID, CoStar must pay to DHAL a Bidder Break Fee of $28,100,000 in the circumstances set out in cl 11.2 of the SID. The SID acknowledges each party’s loss to which the respective break fees are directed. The Target Break Fee and the Reverse Break Fees are disclosed in the scheme booklet and their amount is less than 1% of the total equity value of DHAL as implied by the scheme consideration, complying with the Takeovers Panel’s guidance. Mr Izzo submits and I accept that break fees of this kind are now common features in schemes of arrangements and will generally be permitted unless the amount of the break fee is such that it could influence voting at the meeting or if the break fee has unusual features: Villa World at [24]; Isentia at [20]–[22]; Ansarada at [24]. This matter gives rise to no reason not to convene the scheme meeting.
For completeness, DHAL shareholders will be deemed to give a warranty to the effect their shares are fully paid, free from all security interests of third parties and that the shareholder has full power to sell and transfer their shares. The deemed warranty is properly disclosed in the scheme booklet and the case law recognises the legitimacy of this provision where it is appropriately disclosed: Re APN News and Media Ltd (2007) 62 ACSR 400 at [57]–[63]; [2007] FCA 770; Re Ardent Leisure Ltd [2018] NSWSC 1665 at [26]; Re Intega Group Ltd [2021] NSWSC 1434 at [24]. The arrangements for the despatch of scheme documents to DHAL shareholders are conventional and Mr Izzo draws proposed shareholder communications to the Court’s attention without seeking approval for them. No matters arose from those communications that gave rise to concern. These matters, separately and together, give rise to no reason not to convene the scheme meeting.