In the matter of Silk Logistics Holdings Limited

Hearing dates: 17 July 2025

Date of orders: 17 July 2025

Decision date: 28 July 2025

Jurisdiction: Equity - Corporations List

Before: Black J

Decision: Orders made convening scheme meeting.

Catchwords: CORPORATIONS — arrangements and reconstructions — schemes of arrangement or compromise — application under s 411 of the Corporations Act 2001 (Cth) for orders convening meeting of members to consider and, if thought fit, to agree to proposed scheme of arrangement, after previous meeting adjourned — whether requirements to order scheme meeting are satisfied.

Legislation Cited: - Corporations Act 2001 (Cth), ss 411, 1319

Cases Cited: - Re Huon Aquaculture Group Ltd [2021] FCA 1170
- Re Intega Group Limited [2021] NSWSC 1434
- Re McGrath Ltd [2024] NSWSC 555
- Re Nzuri Copper Ltd; Ex parte Nzuri Copper Ltd [2019] WASC 189
- Re Silk Logistics Holdings Ltd [2025] NSWSC 1
- Re TASK Group Holdings Ltd [2024] NSWSC 821

Category: Principal judgment

Parties: Silk Logistics Holdings Limited (Plaintiff)
DP World Australia Limited (Bidder)

Representation: Counsel:
D Barnett SC / Mr D Monteith (Plaintiff)
T O’Brien (Bidder)
Solicitors:
Hamilton Locke (Plaintiff)
Herbert Smith Freehills Kramer (Bidder)

File Number(s): 2024/473892

Judgment

1. On 23 December 2024, I made orders under s 411(1) of the Corporations Act 2001 (Cth) convening of a meeting of ordinary shareholders of the Plaintiff, Silk Logistics Holdings Ltd (“Silk Logistics”) in relation to a proposed scheme of arrangement, for the reasons set out in my judgment in Re Silk Logistics Holdings Ltd [2025] NSWSC 1. I there summarised (at [2]) the background to the scheme as follows:

“By way of background, Silk [Logistics] is a logistics business listed on Australian Securities Exchange (“ASX”) which provides integrated “port to door” services in Australia. On 11 November 2024, Silk [Logistics] announced to the ASX that it had signed a Scheme Implementation Deed (“SID”) with DP World Australia Ltd (“DP World Australia”) in respect of the proposed acquisition by DP World Australia of all of the issued share capital of Silk [Logistics]. DP World Australia is an Australian public company that carries on a marine terminal and port services business in Australia and is controlled by DP World, which is ultimately controlled by the Government of Dubai. The proposed scheme of arrangement provides for DP World Australia to acquire all of the issued share capital of Silk [Logistics] for a cash price of $2.14 per share.”

2. By way of background, the scheme meeting was initially fixed for 7 March 2025. The date of the scheme meeting was subsequently postponed while a review of the proposed acquisition of shares under the scheme was undertaken by the Australian Competition and Consumer Commission (“ACCC”) and pending approval of the Foreign Investment Review Board (“FIRB”). On 13 March 2025, the ACCC released a statement of issues with preliminary views on competition issues arising from the proposed acquisition of shares under the scheme and set a provisional date for the announcement of its findings of 10 July 2025. The End Date under the SID was 30 June 2025 or such other date as agreed in writing by the parties and, on 27 June 2025, Silk Logistics and DP World Australia agreed to extend that End Date to the later of (i) 10 July 2025 or (ii) 7 August 2025 if the ACCC notified DB World Australia prior to 10 July 2025 that the ACCC did not propose to intervene in the scheme. On 4 July 2025, the ACCC notified DP World Australia that it would not oppose the proposed acquisition of shares under the scheme and, on 15 July 2025, DP World Australia received a no objection notice from FIRB, which satisfies the condition precedent in clause 3.1(a)(1) of the SID. The proposed scheme meeting and second Court hearing will occur prior to the extended End Date of 7 August 2025.

3. Silk Logistics now seeks an order that the scheme meeting be convened on 1 August 2025, programming orders to facilitate the provision of supplementary disclosure to shareholders, and an order fixing the second Court hearing in respect of the scheme. I made the orders sought at the hearing on 17 July 2025 and these are my reasons for doing so. I have drawn on the helpful submissions of Mr Barnett, with whom Mr Monteith appeared for Silk Logistics, in this judgment.

Affidavit and other evidence

4. Silk Logistics reads the affidavit dated 16 July 2025 of its solicitor, Mr Fox, who notes that a proposed supplementary scheme booklet includes additional disclosure concerning the tax treatment for the beneficial owners of Tax Exempt Shares as defined in that supplementary scheme booklet. Mr Fox explains why that information was not included in the original scheme booklet, where the relevant tax issue was not identified by Silk Logistics until 5 March 2025. Mr Fox also addresses communications with the Australian Securities and Investments Commission (“ASIC”) in respect of the scheme. ASIC has indicated that it did not propose to appear to make submissions or intervene to oppose the orders sought in this application and ASIC did not appear at the hearing. Mr Fox also referred to announcements made by Silk Logistics to Australian Securities Exchange (“ASX”), and noted that several of those announcements referred to the directors’ recommendation in the scheme without drawing attention to the fuller information concerning the scheme’s advantages and disadvantages contained in the scheme booklet and had not been approved by the Court.

5. Silk Logistics also reads the affidavit dated 16 July 2025 of Mr Moulton, a director of Silk Logistics, who addresses the verification process in respect of the supplementary scheme booklet and refers to the process to be adopted in further communications with shareholders. Mr Moulton also confirms the continued willingness of Mr Sinclair to act as Chair of the scheme meeting and Mr Moulton’s willingness to act as alternate chair of the scheme meeting if necessary. Silk Logistics also tendered the proposed supplementary scheme booklet and a proposed ASX announcement that would be issued if the Court convened the meeting of its shareholders to consider and vote on the scheme as sought by Silk Logistics.

Supplementary disclosure

6. Mr Barnett points out that, as I noted above, Silk Logistics seeks Court approval to issue a supplementary scheme booklet to shareholders concerning the scheme. The supplementary scheme booklet provides an update on the key dates for the scheme and as to the satisfaction of the FIRB condition precedent; as I noted above, addresses tax consequences of the scheme in relation to shares that were issued by Silk Logistics to eligible employees under a Tax Exempt Share Plan supplementing the disclosure in section 8 of the scheme booklet; discloses an extension of the expiry date for options held by Silk Logistics’ directors; provides an update on Silk Logistics’ financial position; and attaches a supplementary report from the independent expert, which continues to express the opinion that the scheme is in the best interests of Silk Logistics’ shareholders.

7. Mr Barnett notes that the issue concerning the tax exempt share plan was not addressed in the original scheme booklet. He notes that, in summary, 234,458 fully paid ordinary shares (approximately 0.3% of shares on issue) were issued to qualifying employees under a Tax Exempt Share Plan and, in order to be eligible for a tax concession, those shares are subject to a three year holding lock. The transfer of those shares under the scheme, if approved, will have the result that the holders of those shares are not eligible to apply the tax concession, unless the Commissioner of Taxation permits a shorter holding period. Silk Logistics has applied for a class ruling to address this issue but the outcome of that application may not be known prior to the scheme meeting. Mr Barnett submits, and I accept, that the supplementary disclosure identifies the risks and consequences of this matter for the employee participants in the share plan, so that they can make a properly informed decision whether to vote for or against the scheme. He also submits, and I accept, that the fact that Employee Participants may or may not receive favourable tax treatment in relation to the disposal of their shares is not class creating: Re Huon Aquaculture Group Ltd [2021] FCA 1170 at [33]. As I noted above, the evidence indicates that this matter was not addressed in the disclosures in the original scheme booklet since the issue was not identified until March 2025. This matter provides no reason not to convene the proposed scheme meeting.

Change to options held by directors

8. Mr Barnett also notes that options issued to directors of Silk Logistics were due to expire on 9 July 2025. On 3 July 2025, ASX granted a waiver from Listing Rule 6.23.3 to allow Silk Logistics to extend the expiry date of the options to 31 December 2025 subject to three extension conditions relating to the scheme. Section 4 of the supplementary scheme booklet explains that, if the scheme is approved, the relevant directors will receive $0.54 per option (representing the difference between the scheme consideration and the option exercise price), continuing the position disclosed in the original scheme booklet; and, if the scheme is not approved, then the extension conditions set by ASX will not be satisfied and the options will be forfeited for no consideration. In that case, two relevant directors, Mr Sinclair and Mr Moulton, will receive nothing for their options if the scheme is rejected and $226,364 and $136,537 respectively if the scheme is approved. In contrast, under the position disclosed at the first Court hearing, Mr Sinclair and Mr Moulton would have received the same amount for those options if the scheme was approved, but would still have had their options, with whatever value attached to them based on the trading price of the Silk shares, if the scheme were rejected.

9. Silk Logistics submits, and I accept, that this change is not class creating, where the fact that the scheme may result in some shareholders receiving additional amounts because they have additional rights or roles does not have the effect that they cannot consult in a common interest together with the other shareholders: Re McGrath Ltd [2024] NSWSC 555 at [25]. I also accept that this matter does not prevent Mr Sinclair and Mr Moulton from making recommendations as directors where it is sufficiently disclosed by the scheme booklet. I did not require “tagging” of their votes where any impact of those votes on the outcome is highly unlikely.

10. I recognise that Mr Sinclair and Mr Moulton are the nominated chair and alternate chair for the scheme meeting. Mr Barnett fairly points out that there are cases where the Court has declined to appoint as chair a director who is receiving a payment conditional upon approval of the scheme: for example, Re Nzuri Copper Ltd; Ex parte Nzuri Copper Ltd [2019] WASC 189 at [73]–[80]. Nonetheless, I accept that the extension of Mr Sinclair’s and Mr Moulton’s options does not here raise a realistic concern that they could or would not impartially preside at the scheme meeting and the conduct of the scheme meeting will in any case be considered by the Court at the second Court hearing: Re Intega Group Limited [2021] NSWSC 1434 at [23]. These matters also provide no reason not to convene the proposed scheme meeting.

Previous ASX announcements

11. Mr Barnett points out that, since the Court made orders at the first Court hearing in December 2024, Silk Logistics has made three ASX announcements relating to the scheme that were not approved by the Court, which included references to the recommendation of Silk Logistics’ directors in relation to the scheme but did not draw attention to the fuller outline of the scheme and its advantages and disadvantages as contained in the scheme booklet.

12. Silk Logistics fairly recognises that difficulties can arise from communications to shareholders made without court approval: Re TASK Group Holdings Ltd [2024] NSWSC 821 at [3] and [7]–[12] (“TASK Group”). However, Mr Barnett submits that this issue will be sufficiently addressed by the proposed supplementary disclosure that will be made before the scheme meeting. In any case, he submits, and I accept, that the impact of these matters on the approval of the scheme is a matter for the second Court hearing: TASK Group at [12].

Orders

13. I was satisfied that these matters give rise to no reason not to convene the proposed scheme meeting, and that I should convene that meeting to allow Silk Logistics’ shareholders the opportunity to consider the scheme. For these reasons, I made the orders sought by Silk Logistics at the conclusion of the Court hearing on 17 July 2025.

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