In the matter of Tabcorp Holdings Limited (No 2) [2022] NSWSC 725

Judgment

At the first Court hearing in this matter on 30 March 2022, I made orders, inter alia that the Plaintiff, Tabcorp Holdings Ltd ("Tabcorp") convene and hold a meeting of Tabcorp shareholders to consider and, if thought fit, agree to a proposed scheme of arrangement, which relates to then demerger of its lotteries and Keno business into a standalone listed entity, and I also approved a demerger booklet to be distributed by Tabcorp to Tabcorp shareholders. I set out my reasons for masking those orders in my judgment delivered on 13 April 2022 (Re Tabcorp Holdings Ltd [2022] NSWSC 448). That shareholders meeting has now approved the proposed demerger scheme by the requisite statutory majorities and Tabcorp now seeks orders under ss 411(4)(b) and 411(6) of the Corporations Act 2001 (Cth) ("Act") approving that scheme.

Submissions and determination

Mr Jackman draws attention to the Court's role at a second Court hearing in respect of a scheme of arrangement, where the Court will need to be satisfied that the relevant resolutions have been passed in accordance with the statutory requirements and that the procedural requirements have been satisfied and will then exercise its discretion whether to approve the scheme: Re Alabama, New Orleans, Texas and Pacific Junction Railway Co [1891] 1 Ch 213 at 247; 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 at [15]; Re Sydney Airport Ltd and Trust Co (Sydney Airport) Ltd as responsible entity for Sydney Airport Trust 1 (No 2) [2022] NSWSC 103 at [7]; and see also Re Quantum Health Group Limited (No 2) [2022] NSWSC 74 at [10]ff. Mr Jackman 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 points out that the Court 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 above.
Mr Jackman also recognises 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 may include whether the orders of the Court 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; shareholders 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: Re Permanent Trustee Co Ltd (2002) 43 ACSR 601; [2002] NSWSC 1177; Re Centro Properties Ltd (2011) 86 ACSR 584; [2011] NSWSC 1465 at [32]-[33]; Re Seven Network Ltd (No 3) (2010) 77 ACSR 701; [2010] FCA 400 at [35]-[40]; Re David Jones Limited (No 3) [2014] FCA 753 at [3]; Re Windlab Ltd [2020] NSWSC 936 at [8]-[13]; Re Coca-Cola Amatil Ltd [2021] NSWSC 489 at [18].
I am satisfied that there is here no reason to doubt that Tabcorp has complied with the Court's orders. The demerger booklet dispatched to Tabcorp shareholders was substantially in the form of the document approved by the Court for dispatch and was registered with ASIC on 30 March 2022. The process by which the demerger booklet was made available to Tabcorp shareholders is addressed in the evidence. A reminder to vote email sent by Tabcorp and an investor presentation were substantially in the form approved by the Court on 30 March 2022, and Tabcorp published a notice of the Court hearing for approval of the scheme in a national newspaper on 13 May 2022 in accordance with the Court's orders.
No issues have arisen which warrant any concern as to the proper conduct of the scheme meeting. The evidence also addresses the conduct of the meetings, which were held as hybrid meetings with both virtual and in-person attendance, and the conduct of the online and in-person voting process. The evidence establishes that the scheme was approved by the requisite majority of Tabcorp shareholders at the scheme meeting, for the purposes of s 411(4)(a)(ii) of the Act, with 1,453,917,125 votes (being 99.83% of all votes cast) by 7,735 shareholders (being 2.39% of all shareholders participating and voting) in favour of the resolution to approve the scheme and 2,450,748 votes by 637 shareholders against the resolution to approve the scheme.
The voting participation rate by number of shareholders was relatively low, although those voting participation rates were broadly comparable to the voting participation rates at Tabcorp's annual general meetings between 2019 and 2021. I accept that this relatively low level of level of shareholder participation does not raise any doubt as to the proper distribution of the demerger booklet or other scheme materials and is not a basis for not approving the scheme: Re TriAusMin Ltd (No 2) [2014] FCA 833 at [10]-[12]; Re Avoca Resources Ltd [2011] FCA 208; Re Auzex Resources Ltd (No 2) [2012] QSC 101 at [18]; Re Sundance Energy Australia Ltd [2019] FCA 1944 at [47]-[50]; Re Amcor Limited (No 2) [2019] FCA 842 at [19]-[20]; Re MYOB Group Ltd (No 2) [2019] FCA 668 at [19(5)]; Re Quantum Health Group Limited (No 2) above at [13]ff.
Mr Jackman points out that it was a condition precedent to the scheme that Tabcorp shareholders pass a resolution approving a capital reduction in connection with the scheme and that resolution was also passed by Tabcorp shareholders at a general meeting held on 12 May 2022, by 99.83% of all votes cast. Mr Jackman also points out that a company may only undertake a capital reduction if it "does not materially prejudice the company's ability to pay its creditors" under s 256B(1)(b) of the Act. The independent expert has here concluded that the scheme, including the capital reduction, will not so prejudice the company's ability to pay its creditors.
Mr Jackman submits and I accept that evidence that the statutory majority of members has agreed to a scheme of arrangement provides prima facie evidence of the fairness of the scheme and, where there is no opposition to the scheme at the final Court hearing, very considerable weight should be given to the commercial judgment of those who have voted to approve the scheme: Re Village Roadshow Ltd (No 2) [2020] FCA 1857 at [55]; Re Webster Ltd (No 2) [2020] NSWSC 40 at [9]; Re Isentia Group Ltd [2021] NSWSC 910 at [10]. Mr Jackman also refers to several matters that support a conclusion that the demerger scheme is fair and reasonable, namely that the scheme was approved by a very large majority of Tabcorp shareholders, far exceeding the majorities required by the Act; that no Tabcorp shareholder has appeared to seek to oppose the approval of the scheme; that the Tabcorp board unanimously recommended that the Tabcorp shareholders vote in favour of the scheme; and the independent expert concluded (and continues to conclude) that the scheme is in the best interests of Tabcorp shareholders.
There is here no reason to doubt that Tabcorp has brought to the Court's attention all matters that could be considered relevant to the exercise of the Court's discretion, or to doubt that there was full and fair disclosure to members of all information material to the decision whether to vote for or against the demerger scheme and associated capital reduction resolution. The factual information contained in the demerger booklet was verified in the usual way and the demerger booklet otherwise satisfies the relevant statutory requirements. In making orders to convene the meeting of Tabcorp shareholders, I was previously satisfied that the scheme was of such a nature and cast in such terms that, if it received the statutory majority at the meeting, the Court would be likely to approve it on the hearing of an application that was unopposed, and I have noted the independent expert's view above. I am satisfied that the scheme should be approved on that basis.
I am satisfied that the Court should also make an order exempting Tabcorp from compliance with s 411(11) of the Act, where the scheme will not modify any rights of shareholders, creditors or persons dealing with Tabcorp: Re Equinox Resources Ltd (2004) 49 ACSR 692; [2004] WASC 143 at [22]; Re Toll Holdings Ltd (No 2) [2015] VSC 236 at [18]-[19].

At a glance

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Judgment (6 paragraphs)

Legislation Cited (1)

Cases Cited (23)