In the matter of TASK Group Holdings Limited (No 3) [2024] NSWSC 854

Affidavit and other evidence

1. By his affidavit dated 8 July 2024, Mr Glenn Day, who is the Group Chief Financial Officer of TASK, refers to the adjournment of the first Court hearing on 28 June 2024, immediately after it was opened, and to the orders subsequently made by the Court on 1 July 2024 approving the distribution by TASK of a supplementary announcement to TASK shareholders and the publication of that announcement. Mr Day in turn refers to the conduct of the adjourned scheme meeting on 4 July 2024, and to the results of the poll at that meeting, by which the scheme resolution was passed by a majority in number of TASK shareholders present and voting, and by more than 75% of the votes cast on the scheme resolution.
2. By his affidavit dated 8 July 2024, Mr Richard Powell, who is a Senior Manager, Issuer Services at Computershare Investor Services Pty Ltd, gives evidence as to the dispatch of scheme documents and the circumstances in which a supplementary dispatch of documents to some 34 shareholders was delayed by 2 days, as a result of a public holiday in Victoria. Mr Powell also referred to the receipt of proxy forms and the receipt of election forms, by which TASK shareholders could elect to obtain scrip consideration rather than cash consideration for a percentage of their scheme consideration, and to the conduct of the scheme meeting and the results of the poll at that meeting. Mr Powell also addressed the voting turnout at the scheme meeting, where about 6% of TASK shareholders by numbers voted and about 57.25% by number of TASK shares voted. That is plainly not a substantial voter turnout, but it is higher than the voter turnout achieved at TASK's previous annual general meeting in November 2023, both in respect of the number of shareholders and the percentage of shares voted. Mr Powell also referred to the operation, by Georgeson Shareholder Communications Pty Ltd, of an inbound shareholder information line which responded to queries from TASK shareholders in relation to the scheme.
3. By his affidavit dated 8 July 2024, Mr Anthony Boogert, who is a partner in the firm of solicitors acting for TASK in the scheme, addressed the registration of the scheme booklet with the Australian Securities and Investments Commission ("ASIC"), an announcement made by TASK to the Australian Securities Exchange ("ASX") in respect of the second Court hearing, and a waiver given by ASX in respect of TASK equity incentives in the manner set out in the scheme booklet.
4. TASK also tendered condition precedent certificates executed by each of TASK and the bidder. Those conditions precedent included a condition that valid elections to receive scrip consideration must be received, and not be withdrawn, before the Election Date (as defined), such that the scrip consideration comprises at least 18% of the aggregate scheme consideration, which has been satisfied. TASK also tenders a letter dated 8 July 2024 by which ASIC advised that it had no objection to the proposed scheme for the purposes of s 411(17)(b) of the Act.

Applicable principles, submissions and determination

1. 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 ("Permanent Trustee") 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].
2. I also summarised 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: [Permanent Trustee] at [8]; Seven Network at [35]-[40]; Re Pendal Group Ltd (No 3) [2023] NSWSC 14 at [10]; ELMO at [8]."
3. I have drawn this summary from my judgment in Re Silver Lake Resources Ltd (No 2) [2024] NSWSC 737 at [4]-[5].
4. The evidence here establishes that TASK has substantially complied with the Orders in relation to the provision of the scheme booklet and associated material to its shareholders. In submissions, Mr Ahmed addressed the short delay in the supplementary despatch of scheme documents to 34 TASK shareholders, which was not material where the documents were despatched well in advance of the scheme meeting. I accept Mr Ahmed's submission that this matter did not adversely affect the integrity of the voting process in relation to the scheme. I am satisfied that TASK has also complied with the order that provided for supplementary disclosure to shareholders by ASX announcement and giving notice of this hearing.
5. As I have noted above, the scheme resolutions were passed by the requisite statutory majorities. Mr Ahmed notes that an issue arose as to late proxies that were submitted after the close of the initial proxy date, but before proxies had been reopened following the supplementary disclosure, and were counted in the results. That matter provides no reason not to approve the scheme, where the number of proxy votes involved would have made no difference to the result in respect of the scheme resolution.
6. Mr Ahmed fairly accepts that the number of shareholders voting could not be characterised as "overwhelming", but notes that it represents a majority of the shares that were available to be voted and is higher than voter turnout achieved at TASK's previous annual general meeting in November 2023. As Mr Ahmed also points out, there is no reason to think that the level of shareholder turnout was the result of shareholders being deterred from voting or any lack of notice and, as Farrell J pointed out in Re TriAusMin Ltd (No 2) [2014] FCA 833 at [10]-[12], shareholder apathy should not be presumed to be antagonism to the proposed scheme. That is particularly the case where the independent expert has expressed the view that the cash scheme consideration is fair and reasonable and the substantial majorities by which those shareholder who voted approved the scheme. The other statutory preconditions to the Court's approval have been met, including in respect of lodgements with ASIC, the publication of notice of second Court hearing on the ASX Market Announcements Platform, and ASIC's advice that it has no objection to the scheme for the purposes of s 411(17)(b) of the Act.
7. Mr Ahmed also notes that the independent expert has expressed the opinion that the scheme is fair and reasonable and in the best interests of TASK shareholders in the absence of a superior proposal, and points to the shareholders' vote in favour of the scheme. I accept that there is no reason to doubt that 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. There is also no reason to doubt that the scheme booklet contains full and fair disclosure of the nature of the scheme, where evidence as to the verification process adopted was led at the first Court hearing, and the supplementary disclosure made to TASK's shareholders was considered at the hearing on 1 July 2024.

Securities Act 1933 US

1. The orders that TASK seeks, and I will make, include a notation that: "PAR Technology Corporation will rely on the Court's approval of the Scheme for the purposes of qualifying for exemption from the registration requirements of the Securities Act of 1933 (US) (US Securities Act), provided for by s 3(a)(10) of the US Securities Act, in connection with the implementation of, and the provision of scrip consideration under, the Scheme."
2. This matter was properly raised at the first Court hearing and noted in Gleeson JA's judgment. I recognised that, where the scheme will be approved by the Court, PAR intends to rely on that approval for the purpose of qualifying for exemption from the requirements of Securities Act 1933 (US). The relevant exemption is provided for by s 3(a)(10) of the Securities Act and operates in connection with the new PAR shares that will be issued pursuant to the scheme. The operation of that exception has been recognised in the case law, including Permanent Trustee at [11]-[20] and, more recently, Re Newcrest Mining Ltd (No 2) [2023] FCA 1251, Re Ellerston Global Investments Ltd [2020] NSWSC 1108 ("Ellerston") at [18]-[19] and Re Telstra Corporation Ltd (2022) 163 ACSR 543; [2022] NSWSC 1460 ("Telstra") at [56]-[57].
3. I will, at Mr Ahmed's request, adopt the approach that I took in Ellerston and Telstra, and record in this judgment that (1) the Court was advised before the approval hearing that reliance would be placed on the s 3(a)(10) exemption on the basis of the Court's approval of the scheme and TASK shareholders were also informed of this in the scheme booklet; (2) the Court has been informed of the securities to be offered as scheme consideration, and an independent expert report concluded that the proposal is in the best interests of shareholders; (3) the Court has held a hearing to consider the fairness and reasonableness of the proposed scheme; (4) that hearing was open to the public, any person to whom PAR shares are to be issued had standing to appear, and notice of the time and date of the approval hearing was made clear through an ASX announcement.

Exemption under s 411(12) of the Corporations Act

1. TASK 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 TASK's constitution that may be issued in the future. I accept that an order of this kind is properly made where, as here, the rights of shareholders are not modified in any way: Re Equinox Resources Ltd (2004) 49 ACSR 692; [2004] WASC 143 at [22]-[23]; Re The Trust Company Ltd [2013] NSWSC 1947 at [19]; Re Murchison Metals Ltd [2014] NSWSC 951 at [10]-[11].

Orders

1. For these reasons, I made the orders sought by TASK at the conclusion of the second Court hearing on 9 July 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: 16 July 2024