In the matter of Millennium Services Group Limited (No 2) [2024] NSWSC 528

Supreme Court of NSW|2024-04-22|Before: Black J

Solicitors: Kardos Scanlan (Plaintiff) MinterEllison (Bidder) File Number(s): 2024/49972

Judgment

By Originating Process filed 8 February 2024, the Plaintiff, Millennium Services Group Ltd ("MSG") sought orders in respect of a scheme of arrangement by which MS Journey Pty Ltd ("BidCo") would acquire all of the shares in MSG. I made the orders sought by MSG at the first Court hearing on 12 March 2024 at the conclusion of that hearing, for the reasons set out in an earlier judgment (Re Millennium Services Group Ltd [2024] NSWSC 307). The scheme meeting was subsequently held on 17 April 2024 and MSG shareholders approved the scheme by the requisite statutory majorities, with approximately 99.97% of MSG shares by value and approximately 97.27% of MSG shareholders by number present and voting, voting in favour of the scheme.
MSG now seeks an order under s 411(4) of the Corporations Act 2001 (Cth) ("Act") approving the proposed scheme of arrangement. I made that order at the conclusion of the second Court hearing on 22 April 2024 and these are my reasons for doing so. I have drawn on the helpful submissions of Ms Scott who appeared for MSG in this judgment.

Affidavit evidence

By his affidavit dated 17 April 2024, Mr Galea, who is the Chief Executive Officer and Managing Director of MSG refers to the registration of the scheme booklet with the Australian Securities and Investments Commission ("ASIC") and the despatch of scheme documents to MSG shareholders. He notes that there was a minor difference between the form of the scheme resolution put to shareholders at the scheme meeting, and the form of the resolution contained in the proxy form, where the latter included an additional reference (which was plainly superfluous) for the approval of the scheme not only with but also "without" any alterations, and included an additional authorisation for the board of directors of MSG to implement the scheme with any such alterations or conditions, which they did not require once the scheme had been approved by shareholders under s 411 of the Act. Mr Galea's evidence, by reference to information provided by MSG's solicitors, is that this resulted from an oversight, being a failure to communicate the final form of the resolution to MSG's share registry.
Mr Galea also refers to communications with MSG's shareholders, including a reminder email which had been sent to shareholders in substantially the form put before the Court, and an inbound shareholder information line which had been operated by a third party on MSG's behalf. Mr Galea also noted the publication of an announcement of the second Court hearing on Australian Securities Exchange ("ASX"). Mr Galea also gave evidence of the conduct of the scheme meeting, where the resolutions were passed by a substantial majority of shareholders present and voting at the scheme meeting by number, and a more substantial majority of the number of votes cast on the scheme resolution. Shares voted at the scheme meeting constituted a substantial percentage, in excess of 75%, of MSG's shares in issue, although only a relatively small number of shareholders voted. The turnout at the scheme meeting exceeded the percentage of shares voted at MSG's recent Annual General Meetings ("AGMs") by a significant extent, and the number of shareholders who attended also exceeded the relatively small number of shareholders who have attended MSG's most recent AGMs. These matters give no reason to doubt that the documents relating to the scheme came to the attention of scheme shareholders.
By her affidavit dated 22 April 2024, Ms Stein, who is a solicitor acting for MSG in respect of the application, referred to MSG's announcement of the indicative outcome of elections for scrip consideration, published on ASX on 12 April 2024; to a letter dated 19 April 2024 from ASIC indicating that it had no objection to the proposed scheme of arrangement under s 411(17)(b) of the Act; and also annexed conditions precedent certificates executed by MSG and by BidCo in respect of the scheme.

Applicable principles

Ms Scott rightly points out that the principles which guide the Court's discretion whether to approve a scheme at the second Court hearing are well established. The Court will assess whether the procedural requirements in respect of the scheme have been satisfied and then has a discretion whether to approve a scheme; the Court will have regard to shareholders' assessment of their interests, as manifested in voting at the meeting; but the Court is not bound to approve a scheme merely because the Court has made orders for the convening of meetings or because the statutory majorities have been achieved: Re Central Pacific Minerals NL [2002] FCA 239 at [13]; Re Seven Network Ltd (No 3) (2010) 267 ALR 583; [2010] FCA 400 at [31]; Re Staging Connections Group Ltd (No 2) [2015] FCA 1102 at [12]; Re Ellerston Global Investments Ltd [2020] NSWSC 1108 at [10]; Re InvoCare Ltd (No 2) [2023] NSWSC 1350 at [8].
Ms Scott also refers to Re Amcor Ltd (No 2) [2019] FCA 842 (at [7]-[11]), where Beach J summarised the matters that the Court must consider in deciding whether to approve a scheme, including whether the scheme complies with the law, including relevant procedural requirements; whether the scheme was approved by shareholders acting in good faith and for proper purposes; whether there has been an accurate and comprehensive disclosure of the details of the scheme and its effect to those voting on it; whether the scheme involves oppression of a minority or third parties will be disproportionately adversely affected by its operation; whether the scheme offends any aspect of public policy; whether all matters that could be considered relevant to the exercise of the Court's discretion have been drawn to the Court's attention; 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; and whether the scheme is fair and reasonable so that an intelligent and honest shareholder, properly informed and acting alone, might approve it.
Ms Scott fairly draws attention to the irregularity which I noted above in respect of the notice of scheme meeting and associated proxy form, where the latter contained minor differences to the text of the resolution in the notice of meeting, which were only recognised after despatch of the scheme booklet. Ms Scott submits and I accept that the differences between the scheme resolution as it appears in the notice of meeting and in the proxy form were minor and of no material effect, where the additional words contained in the proxy form were superfluous. I am satisfied that any non-compliance with the orders made at the first Court hearing was a procedural irregularity (being a defect, irregularity or deficiency of notice or time) which did not occasion any substantial injustice or invalidate the scheme meeting or the resolution passed at the scheme meeting, by reason of s 1322(2) of the Act: Re Wesfarmers Ltd; Ex parte Wesfarmers Ltd [No 2] [2018] WASC 357 at [28]; Re Ardent Leisure Ltd; Ardent Leisure Management Ltd in its capacity as the responsible entity of the Ardent Leisure Trust (No 2) [2018] NSWSC 1990 at [10]. In those circumstances, MSG does not need and did not seek any further curative order under s 1322 of the Act.
Ms Scott submits, and I accept, that MSG has otherwise complied with the applicable procedural and other statutory requirements in respect of the scheme. The evidence establishes that the scheme booklet, proxy form and election form were despatched to MSG shareholders, with minor changes to the version of the scheme booklet that was approved by the Court at the first Court hearing. The scheme meeting was held in the manner provided by the orders made at the first Court hearing and, after that meeting, MSG published a notice of this hearing on ASX. No notice of appearance has been served on MSG's solicitors by any person intending to appear at the second Court hearing to oppose the approval of the scheme and no shareholder appeared at this hearing to oppose the scheme.
As I noted above, the resolution to approve the scheme was passed at the scheme meeting by the requisite majorities with 99.97% of all votes cast representing 107 MSG shareholders (being 97.27% of all MSG shareholders present and voting) voting in favour of the resolution to approve the scheme; 10,100 votes (being 0.03% of all votes cast) representing 3 MSG shareholders (2.73% of all MSG shareholders present and voting) voting against the resolution to approve the scheme; and 1,000 votes representing 1 MSG shareholder abstaining from voting. As I also noted above, ASIC has confirmed that it has no objection to the scheme for the purposes of s 411(17)(b) of the Act, satisfying the requirements of that section; and the relevant conditions precedent to the scheme have been satisfied or waived, other than the conditions relating to Court approval of the scheme.
Ms Scott also recognises that, in respect of voter turnout at the scheme meeting, 75.67% of eligible MSG shares were voted and 8.7% of eligible MSG shareholders voted and, although the latter figure is not a high turnout by number of shareholders, more shareholders voted than at MSG's recent AGMs. Ms Scott submits, and I accept, that this voter turnout creates no reason to doubt the adequacy of the communications to shareholders concerning the scheme meeting: Re Quantum Health Group Ltd (No 2) [2022] NSWSC 74 at [13]-[14]; Re Vimy Resources Ltd [No 2] [2022] WASC 257 at [32].
MSG also seeks an exemption from s 411(11) of the Act and I accept Ms Scott's submission that, in the context of this scheme, there is no utility in having the Court orders annexed to MSG's constitution where those orders do not bring about any change to that constitution, and it is appropriate to exempt MSG from compliance with that section by an order made under s 411(12) of the Act: Re Anaconda Nickel Holdings Pty Ltd (2003) 44 ACSR 229 at 240.

Orders

For these reasons, I was satisfied that the Court's discretion is appropriately exercised to approve the scheme pursuant to s 411(4)(b) of the Act, and I made the orders sought by MSG at the second Court hearing on 22 April 2024.

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 May 2024

Corporations Act 2001(Cth)ss 411, 1322

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