In the matter of PTB Group Limited [2022] NSWSC 1694

Affidavit evidence

1. By his affidavit dated 24 November 2022, Mr Oliver Talbot, who is a solicitor in the firm acting for PTB, gives evidence of lodgement of the orders convening the scheme meeting with the Australian Securities and Investments Commission ("ASIC") and registration of the scheme booklet; that the scheme booklet was provided to Link Market Services Limited ("Link") for dispatch; and that the notice of meeting and scheme booklet was uploaded to PTB's website and to ASX's announcement platform. He also refers to email notifications and documents sent to shareholders in the same form as was tendered at the first Court hearing.
2. By his affidavit dated 24 November 2022, Mr Craig Baker, a director and chair of PTB, addresses the conduct of the scheme meeting and identifies several questions then asked and the answers given. He addresses the results of voting at that meeting, which were announced on PTB's website and to ASX on 17 November 2022. Mr Baker also addresses the position in respect of the PTB Permitted Dividend (as defined), as contemplated by the scheme, and the view formed by PTB's directors that the giving of financial assistance by that dividend does not materially prejudice the interests of PTB or its shareholders or its ability to pay its creditors. He also refers to the PTB board's resolution at its meeting on 24 November 2022 to authorise the PTB Permitted Dividend with a record date of 1 December 2022 and a payment date of 9 December 2022.
3. By her affidavit dated 25 November 2022, Ms BeeYen Nah, who is a client relationship manager with Link, refers to Link's engagement to assist in distributing communications to PTB shareholders in connection with the scheme and in convening and conducting the scheme meeting; the steps taken to dispatch initial documents relating to the scheme; the PTB shareholder information line, which received no inquiries; the receipt of proxies; and the conduct of the scheme meeting. Ms Nah also addresses the process for registration of attendees at the scheme meeting; the number of shareholders attending the scheme meeting by comparison with attendances at earlier general meetings; and the result of the poll at the scheme meeting, where the resolutions were passed with the requisite majorities. She also notes that votes of PTB's senior management and employees who were entitled to a transaction bonus, if the scheme became effective, were tagged, and the requisite majorities were reached even if those shares were disregarded.
4. By her affidavit dated 28 November 2022, Ms Alisha Kennedy, who is a partner in the firm of solicitors acting for PTB, gives evidence of publication of notice of the second Court hearing. Ms Kennedy noted that no shareholder had indicated that they would appear at the Court hearing to oppose the scheme, and no shareholder did so.
5. By his second affidavit dated 29 November 2022, Mr Talbot annexed a letter dated 28 November 2022 from ASIC indicating that it had no objection to the proposed scheme under s 411(17)(b) of the Act and a conditions precedent certificate in respect of the scheme executed by PAG and by PTB. PTB also tendered a notification (Ex P1) that the Commonwealth of Australia had no objection to the acquisition by PAG and its subsidiary of up to a 100% interest in PTB, for the purposes of s 75 of the Foreign Acquisition and Takeovers Act 1975 (Cth).

Procedural matters

1. Mr Oakes submits and I accept that the evidence sufficiently addresses the procedural matters that arise at a second Court hearing for approval of a scheme of arrangement. The evidence proves the lodgement of the scheme booklet with ASIC; the service of the scheme booklet on PTB shareholders; that the scheme booklet as dispatched corresponds with that tendered at the first Court hearing; and that the letters and emails dispatched to shareholders also correspond with those tendered at the first Court hearing. There is also evidence of the receipt of proxy forms and collation of proxies; that the scheme meeting was held on 16 November 2022; and that the requisite statutory majorities were obtained at the scheme meeting. The evidence indicates that the resolution to approve the scheme was passed by 99.29% of votes cast and by 93.50% of Eligible Shareholders (as defined) present and voting and, as I noted above, the exclusion of tagged votes of PTB executives would not have affected the outcome of the meeting. There is also evidence that a deed poll has been executed; the Second Court hearing has been advertised and no shareholder has given notice to appear or appeared to oppose the approval of the scheme; ASIC has issued a letter under s 411(17)(b) of the Act; and there is proof of satisfaction or waiver of the conditions precedent to the scheme.

The role of the Court at the second Court hearing

1. Mr Oakes also refers to the role of the Court at the second Court hearing as summarised by Beach J in Re Amcor (No 2) [2019] FCA 842 at [7]-[11] as follows: "Let me say something about my power under s 411(4)(b) to approve the Scheme. In essence, my role at the second court hearing is to assess the Scheme taking into account whether the Scheme is sufficiently fair and reasonable such that an intelligent and honest shareholder properly informed and acting alone might approve it. Of course, I can only approve a scheme of arrangement if the requisite majority of shareholders vote in favour of it, but I am not bound to approve the Scheme simply because I previously made orders for the convening of a Scheme meeting and subsequently the requisite majority agreed to it. But I accept that shareholders voting collectively at the Scheme meeting are better judges than I of what is to their commercial advantage and in their interests and accordingly, absent good reason, I should give effect to their intentions. Now whilst there is no exhaustive statement of the matters as to which I must be satisfied before granting approval, it is not in doubt that in exercising my power under s 411(4)(b), I should be satisfied: (a) the Scheme complies with the law, including the relevant procedural requirements; (b) the Scheme was approved by shareholders acting in good faith and for proper purposes; (c) there has been an accurate and comprehensive disclosure of the details of the Scheme and its effect to those voting on it; (d) there is no suggestion of oppression of any minority; (e) there is no evidence that any third parties will be disproportionately adversely affected by the operation of the Scheme; (f) the Scheme does not offend against any aspect of public policy; and (g) all matters that could be considered relevant to the exercise of my discretion have been drawn to my attention. I also need to be satisfied that the conditions precedent to the Scheme have been met, save for Court approval, and that ASIC has been given the opportunity to draw to my attention any relevant matter(s). I would say now that I am so satisfied concerning the conditions precedent, the last of which was satisfied on 31 May 2019. Moreover, ASIC has had an adequate opportunity to draw any necessary matters to my attention beyond what it drew to my attention for the purposes of the first court hearing. I will discuss any relevant Ch 6 question and s 411(17) later. In considering whether the Scheme complies with the law, including the relevant procedural requirements, I need to satisfy myself that the procedural and other requirements in the Act, Corporations Regulations 2001 (Cth) and Federal Court (Corporations) Rules 2000 (Cth) have been complied with and that the requirements for a valid resolution of the shareholders have been satisfied. I am so satisfied, including being satisfied that the Scheme materials have been properly despatched in accordance with my orders and that the resolution agreeing to the Scheme has been passed by the statutory majorities required by s 411(4)(a). Now as I have said, my task is to consider whether the Scheme is fair and reasonable with the test of fairness and reasonable including a consideration of whether "an intelligent and honest [shareholder], properly informed, acting alone, might approve [the scheme]" (Fowler v Lindholm (2009) 178 FCR 563 at [79] per Emmett, Gordon and Jagot JJ). But the Scheme shareholders' vote in favour of the Scheme is evidence of its inherent fairness. Put another way, if a majority of the Scheme shareholders have approved the Scheme, it is unlikely that the Scheme would be unreasonable. Further, I do not have to be satisfied that no better Scheme could have been devised."
2. Mr Oakes also refers to Re Wesfarmers Ltd (No 2) [2018] WASC 357 at [13], [15], where Vaughan J noted that the Court will usually approach its task on the basis that the members are better judges of what is in their own commercial interests than the Court, and that as such: "'[t]he function of the court does not extend to usurping the views of the shareholders. However, the court is not a mere rubber stamp and will look at the arrangement to ensure that it is a reasonable one. In doing so the court is primarily concerned with whether the proposal is "fair and reasonable" in the sense described in the second factor mentioned in the preceding paragraph. In that respect the court does not determine that the scheme is intrinsically in the members' interest or otherwise. The court ought only require satisfaction that the arrangement is one which is capable of being accepted."
3. Mr Oakes also notes that his Honour there described the Court's task as to ensure that all statutory and procedural requirements in relation to s 411 of the Act have been observed and that the Court must then determine in the exercise of its discretion whether to approve the scheme.
4. I also summarised the applicable principles in Re AusNet Services Ltd (No 2) [2022] NSWSC 79 at [9]ff as follows: "… at the second Court hearing in order to determine whether to approve a scheme of arrangement, the Court will consider whether the relevant resolutions were passed at the scheme meeting in accordance with the statutory requirements and whether the requisite procedural requirements have been satisfied and exercise a discretion as to whether to approve the scheme: Re Central Pacific Minerals NL [2002] FCA 239 at [12]; 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 Aveo Group Ltd [2019] NSWSC 1679 ("Aveo Group") at [15]. 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 have regard to shareholders' assessment of their own interests, as manifested in the voting at the meeting: Re NRMA Ltd (No 2) (2000) 156 FLR 412; (2000) 34 ACSR 261; [2000] NSWSC 408 at [85]-[86]; Re Central Pacific Minerals NL above at [13]; Re Seven Network Ltd (No 3) (2010) 77 ACSR 701; [2010] FCA 400 ("Seven Network") at [31]; Re Atlas Iron Ltd (No 2) [2016] FCA 481 at [5] . Mr Jackman also points out that, although there is no exhaustive statement of the matters as to which the Court must be satisfied before exercising its discretion to approve a scheme, relevant matters include whether the Court's orders convening the scheme meeting have been complied with; all other statutory requirements have been satisfied, including that the scheme was agreed to by the requisite statutory majorities; the scheme members have voted in good faith and not for an improper purpose; 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; 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; there has been full and fair disclosure of all information material to the decision; minority shareholders would not be oppressed by the scheme; the scheme does not offend public policy; and the interests of other groups who are not parties to, but are affected by, the scheme are dealt with appropriately: Seven Network above at [35]-[40]; Re David Jones Limited (No 3) [2014] FCA 753 at [3]; Aveo Group at [15]; Re Windlab Ltd [2020] NSWSC 936 at [8]-[13]."

PTB's submissions and determination

1. Mr Oakes in turns submits and I accept that, so far as the statutory and procedural requirements in relation to s 411 of the Act are concerned, PTB is a Pt 5.1 body and has complied with the orders convening the scheme meeting and with the Court Rules and has complied with the disclosure obligations under s 412(1) of the Act; as I noted above, the approval resolution was passed by the requisite majorities required by section 411(4)(a)(ii) of the Act, where 93.50% of Eligible Shareholders present and voting and 99.29% of all votes cast voted in favour of the scheme resolutions; a certificate under cl 3.2 of the scheme implementation deed stating that all of the relevant conditions precedent have been satisfied or waived, other than the condition relating to Court approval of the scheme, has been tendered; and the independent expert's report has confirmed that the scheme is fair and reasonable and in the best interests of PTB shareholders. Mr Oakes submits and I accept that ASIC's statement under s 411(17)(b) of the Act is sufficient to address the question raised by that section and the Court should be satisfied that the scheme has not been proposed for the purpose of enabling any person to avoid the operation of any of the provisions of Ch 6 of the Act.
2. Mr Oakes also points out that, while the concept of voter turnout has no statutory basis, it has become the practice to proffer such evidence in support of the integrity of the process, since a low turnout percentage might suggest a flaw in the procedure for convening the scheme meeting which warrants further consideration. Mr Oakes points out that the total turnout at the scheme meeting was better than the turnout at the past three PTB annual general meetings. I accept that, given the evidence as to the dispatch of the scheme booklet and the voter turnout percentages in comparison to previous annual general meetings, there is nothing to suggest a flaw in the procedure for convening the scheme meeting which should be of concern to the Court.
3. Mr Oakes also refers to the principles which guide the exercise of the Court's discretion at the second Court hearing, to which I referred above. He submits and I accept that the Court should exercise its discretion in favour of approving the scheme, given the strong support of the shareholders as reflected in the voting results at the scheme meeting; the independent expert's opinion that the scheme is fair and reasonable and in the best interests of PTB shareholders; the PTB directors' recommendation that PTB shareholders vote in favour of the scheme resolutions; the disclosure in the scheme booklet of the potential benefits and disadvantages of the scheme; that there is nothing to suggest that the scheme has been proposed other than in good faith or that the shareholders voted other than in good faith or that any shareholder was oppressed; and the scheme contains measures to protect shareholders against performance risk. Mr Oakes also points out that the form of orders sought is orthodox and PTB seeks an order, commonly made in acquisition schemes, exempting it from the requirement that a copy of the Court's order approving a scheme of arrangement be annexed to every copy of the company's constitution issued after the order is made. I am satisfied that order should be made.
4. For these reasons, I made the orders ought by PTB at the conclusion of the second Court hearing on 29 November 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: 19 December 2022