[2002] NSWSC 1177
- Re Seven Network (No 3) (2010) 267 ALR 583
Source
Original judgment source is linked above.
Catchwords
[2002] NSWSC 1177
- Re Seven Network (No 3) (2010) 267 ALR 583
Judgment (6 paragraphs)
[1]
Solicitors:
Herbert Smith Freehills (Plaintiff)
Gilbert & Tobin (Bidder)
File Number(s): 2024/134916
[2]
Judgment
By Originating Process filed on 11 April 2024, the Plaintiff, McGrath Limited ("McGrath"), sought orders under ss 411 and 1319 of the Corporations Act 2001 (Cth) ("Act") to convene a scheme meeting in respect of a proposed scheme of arrangement and in respect of ancillary matters. By way of background, McGrath is an Australian public company limited by shares and listed on the Australian Securities Exchange ("ASX"). It is an integrated real estate services business, offering agency sales, property management, mortgage broking and career training services in Australia, and operates a hybrid business model consisting of company owned offices and franchise offices.
The proposed scheme of arrangement provides for RPAA Holdings Pty Ltd ("Bidder"), an entity controlled jointly by Knight Frank Australia Holdings Pty Ltd ("KFA") and BCL Aus Holdings Limited ("BCL"), which is a subsidiary of Bayley Corporation Limited (together, "Consortium"), to acquire all of McGrath's ordinary shares by way of a scheme of arrangement. On implementation of the scheme, McGrath would apply to be delisted from the ASX and would be a wholly owned subsidiary of the Bidder. McGrath shareholders would receive, for each McGrath share held by them as at the Scheme Record Date (as defined) either $0.60 cash per scheme share ("All-Cash Alternative"); or, for shareholders (other than Ineligible Foreign Shareholders, as defined) who make a valid Election (as defined), unlisted scrip in RPAA Investments Limited ("Rollco"), which is an unlisted newly incorporated Australian entity which will indirectly own all of the issued capital in McGrath through Rollco's ownership of all of the shares in the Bidder ("Rollco Scrip Alternative"); or a combination of the All-Cash Alternative and Rollco Scrip Alternative. If the scheme is implemented, shareholders will receive the All-Cash Alternative unless they make a valid Election to receive the Rollco Scrip Alternative.
I made the orders sought by McGrath at the conclusion of the first Court hearing on 7 May 2024 for the reasons set out in my judgment in Re McGrath Ltd [2024] NSWSC 555. I then made further orders on 24 May 2024 for the publication of supplementary disclosure.
The proposed scheme was subsequently approved by McGrath shareholders by the requisite majorities at the scheme meeting.
At this second Court hearing, McGrath now seeks orders approving the scheme. I made those orders at the conclusion of the second Court hearing on 14 June 2024. These are my reasons for making those orders, and I have drawn on the helpful submissions of Mr Wood, who appears for McGrath, in this judgment.
[3]
Affidavit and other evidence
McGrath reads the affidavit dated 11 June 2024 of Mr Howard Herman, which addresses the registration of the scheme booklet with the Australian Securities & Investments Commission ("ASIC"); the dispatch of scheme documents to McGrath shareholders; the conduct of the scheme meeting, the passage of the scheme resolution and the voting participation rate, and annexes a copy of the poll report; and the publication of an ASX announcement giving notice of the second Court hearing. McGrath also reads the affidavit dated 24 May 2024 of a solicitor acting for it, Mr Luke Hastings, in relation to the supplementary disclosure to which I referred above. McGrath tenders a letter from ASIC confirming that it has no objection to the scheme, for the purposes of s 411(17) of the Act and also tenders a conditions precedent certificate, evidencing satisfaction of the conditions precedent to the scheme, other than the condition relating to Court approval of the scheme.
[4]
Applicable principles, submissions and determination
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 at [8]-[14]; Re Seven Network (No 3) (2010) 267 ALR 583; [2010] FCA 400 at [35]-[39]; Re Solution 6 Holdings Ltd (2004) 50 ACSR 113; [2004] FCA 1049 at [18]-[24]; Re Signature Capital Investments Ltd (No 2) [2016] FCA 385 at [4].
Mr Wood also refers to my summary of the applicable principles in Re InvoCare Ltd (No 2) [2023] NSWSC 1350 at [8]-[9] as follows:
"The matters of which the Court must be satisfied in approving the scheme at the second Court hearing are whether there was compliance with the orders of the Court convening the scheme meeting or meetings; whether the resolution to approve the scheme was passed by the requisite majority and whether other statutory requirements have been satisfied; and whether all conditions to which the scheme is subject (other than Court approval and lodgement of the Court's orders with ASIC) have been met or waived: Re ELMO Software Ltd (No 2) [2023] NSWSC 81 ("ELMO") at [7].
The Court also has, in exercising its power of approval, a residual discretion whether to approve a scheme and is not bound to approve it merely because it has made orders for the convening of meetings or because the statutory majorities have been achieved: Re Seven Network Ltd (No 3) (2010) 267 ALR 583 ("Seven Network") at [31]; Re Staging Connections Group Ltd (No 2) [2015] FCA 1102 at [12]. In exercising that residual discretion, the (non-exhaustive) matters the Court will take into account include whether the scheme is fair and reasonable so that an intelligent and honest member of the relevant class, properly informed and acting alone, might approve it; whether there was full and fair disclosure to members of all information material to the decision whether to vote for or against the scheme; and 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: Re Permanent Trustee Co Ltd (2002) 43 ACSR 601 at [8]; Seven Network at [35]-[40]; Re Pendal Group Ltd (No 3) [2023] NSWSC 14 at [10]; ELMO at [8]."
I have drawn this summary from my judgment in Re Silver Lake Resources Ltd (No 2) [2024] NSWSC 737 at [4]-[5].
The evidence establishes that McGrath has complied with the Court's orders in respect of the distribution of scheme documents to its shareholders. As I noted above, the scheme was approved at the scheme meeting by the requisite statutory majorities. Both a majority in number present and voting and more than 75% of the votes cast voted in favour of the scheme, namely approximately 85.71% of McGrath shareholders by number present and voting (either in person or by proxy, attorney or corporate representative), and approximately 99.05% of McGrath shares by value. A total of 89,731,865 votes were cast at the scheme meeting (either in person or by proxy) by 133 McGrath shareholders, comprising a voting participation rate of approximately 56.37% by number of McGrath shares and a somewhat underwhelming participation rate of approximately 1.67% by number of McGrath shareholders. Those participation rates, although by no means high in absolute terms, are comparable or better than those at McGrath's recent AGMs, and I am satisfied, given the evidence as to the despatch of the scheme documents, that they do not raise any doubt as to the adequacy of the notice of the scheme given to scheme shareholders.
Mr Wood points out that, on 4 June 2024, McGrath disclosed to the market by an ASX announcement that as at the Election Deadline (as defined) for the scheme some, 23 McGrath shareholders representing 26.66% of McGrath shares, had made Elections (as defined) to receive the Rollco Scrip Alternative (as defined). The scheme booklet disclosed that the scheme was conditional on McGrath shareholders holding, in aggregate, at least 22% of the total issued capital of McGrath making valid Elections to receive the Rollco Scrip Alternative, and the indicative outcome of Elections suggests that this condition will be satisfied. As foreshadowed by the scheme booklet, on 5 June 2024, the McGrath board determined to pay a fully franked divided of $1.6 cents per McGrath share held at 7:00 pm (Sydney time) on 12 June 2024 and that determination was disclosed to the market by an ASX announcement on 5 June 2024. That dividend is not conditional on any aspect of the scheme. Each of the conditions precedent to the scheme have been satisfied or waived and ASIC has confirmed that it has no objection to the scheme for the purposes of s 411(17)(b) of the Act. I am satisfied that the procedural requirements for approval of the scheme are satisfied.
Turning now to the exercise of the Court's discretion in respect of the scheme, the independent expert whose report was included in the scheme booklet expressed the view that the scheme was fair and reasonable and in the best interests of McGrath shareholders in the absence of a superior proposal. No McGrath shareholder or other person indicated an intention to appear at the second Court hearing on 14 June 2024 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 McGrath shareholder, properly informed and acting alone, might approve it. I am satisfied that there is also no reason to doubt that McGrath has brought to the Court's attention all matters that could be considered relevant to the exercise of the Court's discretion and that there was full and fair disclosure to McGrath shareholders of all information material to the decision whether to vote for or against the applicable scheme. I am therefore satisfied that the scheme is appropriate for the Court's approval.
McGrath also seeks an exemption under 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 McGrath's constitution that may be issued in the future. I am satisfied that such an order should be made where, as here, the rights of McGrath shareholders are not modified by the scheme: Re Anaconda Nickel Holdings Pty Ltd (2003) 44 ACSR 229 at 240; [2003] WASC 19; Re GBST Holdings Ltd [2019] NSWSC 1503 at [15].
[5]
Orders
For these reasons, I made the orders sought by McGrath at the conclusion of the second Court hearing on 14 June 2024.
[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: 21 June 2024