In the matter of Intecq Limited [2016] NSWSC 1944

In the matter of Intecq Limited [2016] NSWSC 1944 | Case summary | Zoe

On 22 September 2016 I delivered judgment in respect of an application by Intecq Limited ("Intecq") for orders under s 411 of the Corporations Act 2001 (Cth) convening a meeting of shareholders for the purpose of considering and, if thought fit, agreeing to a proposed scheme of arrangement between Intecq and its members and approving the explanatory statement required to accompany the notice of meeting in the form of the relevant scheme booklet.
The relevant scheme of arrangement arose in circumstances of a proposed transfer of shares in Intecq to Tabcorp Gaming Holdings Pty Ltd which is a subsidiary of Tabcorp Holding Limited, for which payment of consideration would be in cash. I made the order sought in respect of convening the scheme meeting and approving the relevant explanatory statement. The proceedings have been made returnable on the date on which it was originally listed for the second hearing. The large majority of matters which would ordinarily be addressed at a second hearing have been addressed, but one remaining issue as to conditions precedent remains to be addressed. In these circumstances, it seems to me that the convenient course is to deliver a brief judgment at this point, indicating the Court's preliminary view as to the matters that have been addressed, so that those will not later need to be addressed again, absent any developments in the interim, while reserving the making of final substantive orders until the remaining conditions precedent have been satisfied.
There are two areas in which conditions precedent have not been addressed at the hearing today. The first is a condition precedent relating to regulatory approval by the Australian Competition and Consumer Commission, although it has been drawn to my attention, for completeness, that it appears such approval was provided yesterday. The second relates to other regulatory approvals, primarily in respect of State gaming authorities. The result of those applications for approval is presently expected to be known in early December 2016. The Court would not, of course, make its final substantive orders until those conditions precedent to the scheme have been satisfied.
I have, however, been taken as I noted above, to the majority of matters that would be relevant at a second scheme hearing, and I should record the position in respect of those matters. At a second scheme hearing, the court must ordinarily be satisfied that the relevant procedural requirements have been satisfied and must then exercise a discretion whether to approve the scheme in accordance with well-established principles: Re Seven Network Ltd (No 3) [2010] FCA 400; [2010] 77 ACSR 701. The court will recognise that properly informed security holders are generally the best judges of their own commercial interests and will give substantial weight to security holders' views expressed at the scheme meeting, although the court must nonetheless be satisfied that the proposed arrangement is fair and reasonable and that security holders have voted in good faith and for proper purposes: Re Central Pacific Minerals NL [2002] FCA 239; Re Seven Network Ltd (No 3) above at [35]-[36]; Re Centro Properties Ltd (in its capacity as responsible entity of Centro Property Trust) [2011] NSWSC 1465; (2011) 86 ACSR 584 at [35]-[37]. The court will also have regard to the adequacy of disclosure made to security holders and whether the proposed arrangement is contrary to public policy: Re Seven Network Ltd (No 3) above at [38]-[40]; Re Centro Properties Ltd (in its capacity as responsible entity of Centro Property Trust) at [38]-[44].
I have been taken to affidavit evidence which establishes the formal matters which would need to be established at the second court hearing, including proof of lodgment of the scheme booklet with the Australian Securities and Investments Commission ("ASIC"); proof of service of the scheme booklet on members; identification of changes, which are not of a material character, to the scheme booklet since the first court hearing; evidence as to the manner in which proxy forms were dealt with in respect of the scheme meeting and as to the way in which that meeting was held and the voting at the scheme meeting; proof of advertisement of this application; the fact that no notice of intention to appear in opposition to the application was received, and no-one appeared to oppose the application when the matter was called; and proof that ASIC has indicated its position in respect of the application, by providing a common form of letter under s 411(17) of the Corporations Act.
In particular, Intecq has relied on the affidavit of its director, Mr Oneile, dated 2 November 2016 which dealt with the conduct of the relevant scheme meeting, the satisfaction of a quorum requirement in respect of that meeting; the resolution which was put to that meeting, and the poll there conducted; and the details of the result, which involved an impressive 99.47% of votes being cast in favour of the proposal, and 0.53% of the votes being cast against. Mr Oakes, who appears for Intecq, fairly draws attention to the fact that, on one view, the number of members attending, being 427 members, was a relatively small percentage of members by number, constituting approximately 11% of members. However, Mr Oakes points out, by reference to evidence, that that is a higher level of attendance than occurred at either the 2014 or 2015 annual general meetings of Intecq. In any event, it seems to me that any inference that can be drawn from members' non-attendance at a meeting is somewhat equivocal, at best, since members may well have no particular reason to attend at a scheme meeting to vote in favour of a proposal which they are satisfied with and which they may anticipate will succeed without their participation. Mr Oneile's affidavit also, fairly, refers to a particular matter raised by ASX in respect of an issue of some 808 fully paid ordinary shares to a company controlled by him, which ASX has indicated, in its view, contravened a relevant listing rule. That matter, as Mr Oakes points out, is not material to this application.
I have been taken to the minutes of the scheme meeting, which record a number of questions raised by members, none of which raise any concern as to the nature of the scheme, and to the record of the votes cast at the meeting.
Affidavit evidence has also been led by Mr Peter Renda, who is employed by Computershare Investor Services Pty Ltd, of the process by which hard copy and electronic material was dispatched to members, the proxy results, and the process for the conduct of the relevant meeting. I have also been taken to a further affidavit of Mr Chatila dated 28 October 2016 which deals with the dispatch of material to members, including overseas members of Intecq. An affidavit of Mr Taylor dated 2 November 2016 proves registration of the scheme booklet, and also proves the advertisement of this hearing.
An affidavit of Mr Edwards dated 4 November 2016 leads further evidence as to the publication of the advertisement of this hearing, and also establishes the receipt of a letter under s 411(17)(b) of the Corporations Act from ASIC indicating that it has no objection to the proposed scheme of arrangement between Intecq and its members, having regard to the criteria set out in ASIC's Regulatory Guide 60, Schemes of Arrangement.
Finally, an affidavit of Ms Wen dated 2 November 2016 deals with several immaterial changes made, as between the scheme booklet originally approved by the Court, and the final version dispatched to shareholders, which cause no concern.
Mr Oakes draws attention in submissions to the matters which would ordinarily be considered at a scheme meeting, to which I have referred above; the question of voter turnout, which I have addressed above; the matter relating to the shares held by an entity associated with Mr Oneile, which I have observed above appears to me to be immaterial; and the receipt of the statement in writing from ASIC under s 411(17) of the Corporations Act. There is no suggestion in this matter that security holders in Intecq have voted other than with regard to their commercial interests, in good faith and for a proper purpose. Their vote, by a substantial majority, to approve the relevant arrangement is consistent with the views expressed in an independent expert's report which was placed before the Court at the first hearing and which was available to security holders in the explanatory memorandum prior to the scheme meeting. The substantial majorities which voted in favour of the scheme supports the view that the relevant arrangements are fair and reasonable, and there is no suggestion that relevant information was not disclosed, in circumstances that there was evidence at the first hearing of the due diligence process that had been adopted to minimise the risk of non-disclosure or misleading information. There is no reason of public policy why the scheme should not be approved in this case. The evidence to which I have referred above also deals with the procedural matters which need to be established at a second hearing, other than in respect of the satisfaction of the two conditions precedent to which I have referred above, which remain to be addressed.
I am satisfied that, as matters stand, and subject to the satisfaction of the conditions precedent which remain to be satisfied and to any matter which may emerge between now and the further hearing in the matter, there is no reason that has been disclosed in the evidence before the Court that the Court would not approve the scheme in the form that it was placed before members at the meeting which has approved it. At this stage, I need only make procedural directions, which will adjourn the matter to a date after it is anticipated that the position as to the conditions precedent will be clarified, and will otherwise provide for liberty to apply, if those conditions precedent are satisfied at an earlier date.
I make the following orders:
The proceeding be adjourned to 9.15am on 9 December 2016 for hearing.
Liberty to apply.

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