In the matter of Kyckr Limited (No 2) [2022] NSWSC 1562

Affidavit evidence

1. Kyckr relies on the affidavit dated 20 October 2022 of Mr Paul Cooke, who is a listed client service manager at Boardroom Pty Ltd. Mr Cooke refers to the dispatch of the scheme booklet and related documents to Kyckr shareholders in hard copy and electronic form, as applicable; the dispatch of a reminder communication which was approved by an order made by the Court on 9 October 2022; the receipt and processing of proxy forms in respect of the scheme; and the conduct of a shareholder information line. Mr Cooke also refers to his attendance at the scheme meeting on 19 October 2022, which was conducted both in person and by an online meeting platform, and outlines the process for voting at that meeting. Mr Cooke also sets out the results of the poll of the scheme resolution at the scheme meeting, where in excess of 77.47% in number of shareholders present and voting, and in excess of 98% of votes cast, were in favour of the scheme. He notes that approximately 70% of Kyckr shares were voted the scheme meeting, after excluding shares held by Mr Richard White which were not eligible to vote at that meeting, and confirms that Mr White's shares were not voted at that meeting. His evidence is that he is satisfied that the dispatch, registration, meeting and voting processes for the scheme meeting were undertaken and completed properly and accurately.
2. By his affidavit dated 20 October 2022, Mr Rajarshi Manu Ray, who is the chair and an independent non-executive director of Kyckr, addresses the conduct of the scheme meeting and the results of voting at that scheme meeting.
3. By his affidavit dated 21 October 2022, Mr Danny Hunt, who is the chief operating officer, APAC at Morrow Sodali Pty Ltd, refers to the conduct of an outbound call campaign on behalf of Kyckr, in accordance with a script approved by the Court.
4. By her affidavit dated 20 October 2022, Ms Li-Jean Chew who is a partner in the firm of solicitors acting for Kyckr in the proceedings, refers to registration of the scheme booklet with the Australian Securities and Investments Commission ("ASIC"), dispatch of the scheme booklet, correspondence with ASIC in respect of the scheme, and the publication of an advertisement of the second Court hearing. By her second affidavit dated 25 October 2022, Ms Chew confirms that she was not aware of any shareholders who had stated an intention to appear at the second Court hearing; and refers to further correspondence from ASIC, and the receipt of a letter dated 24 October 2022 from ASIC which advised it had no objection to the proposed scheme of arrangement for the purposes of s 411(17)(b) of the Act.
5. Kyckr also tendered a certificate indicating the satisfaction of conditions precedent in respect of the proposed scheme, executed both by Kyckr and RealWise.

Statutory and procedural requirements

1. Mr Williams, who appears for Kyckr, rightly submits that, at the second Court hearing, the Court will need to be satisfied that the procedural requirements in respect of the scheme have been satisfied; and will then exercise its discretion as to whether or not to approve the scheme. Mr Williams recognises that the Court is not bound to approve a scheme merely because it has previously made orders for the convening of meetings and the statutory majorities have been achieved, but will pay due regard to the assessment by members of their interests, as manifested in the voting at the meeting: Re Central Pacific Minerals NL [2002] FCA 239 at [12]; Re Seven Network Ltd (2010) 77 ACSR 701; [2010] FCA 400 ("Seven Network") at [31]; 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 Atlas Iron Ltd (No 2) [2016] FCA 481 at [5]; Re Aveo Group Ltd [2019] NSWSC 1679 ("Aveo Group") at [15].
2. Turning first to the statutory and procedural requirements in respect of a scheme, the scheme booklet was registered with ASIC on 13 September 2022 and dispatched to Kyckr shareholders was in the same form as the document approved by the Court on 12 September 2022. The evidence establishes the dispatch of that scheme booklet to Kyckr shareholders and addresses the conduct of an outbound call campaign. The evidence also addresses the receipt of proxy forms, the collation of proxies, the preparation of a proxy report, the voting and poll procedures at the scheme meeting, and the conduct of that meeting, which was held as a hybrid meeting permitting both physical and virtual attendance. The evidence also establishes that the requisite majorities for the purposes of s 411(4)(a)(ii) of the Act were achieved at the scheme meeting and Mr White did not vote his Kyckr shares at that meeting.
3. Kyckr published a notice of the second Court hearing for approval of the scheme in a national newspaper on 10 October 2022 and no shareholders gave notice of their intention to appear, or appeared, to oppose approval of the scheme. ASIC has confirmed that it has no objection to the scheme for the purposes of s 411(17)(b) of the Act. Implementation of the scheme is conditional on a number of conditions precedent being satisfied or waived and, as I noted above, Kyckr has tendered certificates under cl 3.2 of the scheme stating that all of the relevant conditions precedent have been satisfied or waived, other than the conditions relating to Court approval of the scheme.

Exercise of the Court's discretion

1. Mr Williams also points out that there is no exhaustive statement of the matters as to which the Court must be satisfied before exercising its discretion to approve a scheme, but relevant matters include whether the scheme members have voted in good faith and not for an improper purpose; whether the proposal 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; 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; whether there has been full and fair disclosure of all information material to the decision; whether minority shareholders would be oppressed by the scheme; whether the scheme offends public policy; and whether the interests of other groups who are not parties to, but are affected by, the scheme are dealt with appropriately: Re Permanent Trustee Co Ltd (2002) 43 ACSR 601; [2002] NSWSC 1177 at [8]; Seven Network at [35]-[40]; Re Centro Properties Ltd (2011) 86 ACSR 584; [2011] NSWSC 1465 at [32]-[33]; Re David Jones Ltd (No 3) [2014] FCA 753 at [3]; Aveo Group at [15].
2. Mr Williams points out that the independent expert's report concluded that the scheme is fair and reasonable and in the best interests of Kyckr shareholders, in the absence of a superior proposal, and the Kyckr shareholders have agreed to the scheme. He submits and I accept that it would be an appropriate exercise of the Court's discretion to approve the scheme under s 411(4)(b) of the Act.

Exemption from s 411(11) of the Act

1. Mr Williams also submits and I accept that there is no need to insist on compliance with s 411(11) of the Act, where the scheme will not involve a modification of any rights of shareholders or of creditors or of persons dealing with Kyckr and there is no utility in having the Court order annexed to the company's constitution: Re Anaconda Nickel Holdings Pty Ltd (2003) 44 ACSR 229 at 240; Re Equinox Resources Ltd (2004) 49 ACSR 692 at [22]. I will therefore make an order providing the exemption sought by Kyckr under s 411(12) of the Act, so that there is no need for the Court order approving the scheme to be annexed to every copy of Kyckr's constitution.

Orders

1. For these reasons, I made the orders sought by Kyckr at the conclusion of the second Court hearing on 25 October 2022.

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: 20 November 2022