In the matter of Westfield Corporation Limited [2018] NSWSC 584

The affidavit evidence

1. The background to the application and proposed transactions was set out in a detailed affidavit dated 10 April 2018 of Mr Simon Tuxen, who is company secretary of WCL and WAML and general counsel of the Westfield Group. Mr Tuxen set out the scope of Westfield's business, as an internally managed and vertically integrated international retail property group with a focus on the United States, the United Kingdom and Europe, and referred to the constitutional documents of Westfield and the identity of the directors of WCL and WAML. Mr Tuxen also referred to the entry into an Implementation Agreement dated 12 December 2017 with Unibail-Rodamco ("Implementation Agreement") (Ex SJT-1, Tab 5) relating to Unibail-Rodamco's proposed acquisition of Westfield, an Amending Deed dated 9 April 2018 (Ex SJT-1, Tab 7), the steps involved in implementing the Proposed Merger, the nature of the scheme consideration and the elections available to Westfield securityholders in respect of the WCL Merger Scheme. Mr Tuxen also referred to the manner in which meetings of Westfield securityholders would be conducted in respect of the scheme and to the negotiations and structure of a break fee payable in respect of the scheme, which I will address below. Mr Tuxen also referred to the proposed demerger of Westfield's retail technology business, OneMarket ("Demerger Transaction"), the documents relating to the Demerger Transaction including a Demerger Implementation Deed dated 6 April 2018 (Ex SJT-1 Tab 10), Demerger Deed dated 6 April 2018 (Ex SJT-1 Tab 11) and Demerger Deed Poll also dated 6 April 2018 given by OneMarket in favour of demerger participants (Ex SJT-1 Tab 12) and the steps for implementing the Demerger Transaction.
2. Mr Tuxen referred to the independent expert's reports from Grant Samuel & Associates Pty Ltd ("Grant Samuel") in respect of the proposed transactions and also to an "independent limited assurance report" from Ernst & Young Transaction Advisory Services Limited ("E&Y TAS") as to the historical financial information of the OneMarket business and pro forma historical statement of financial position of the OneMarket Group.
3. Mr Tuxen also addressed the preparation of the information booklet ("Securityholder Booklet") (Ex SJT-1, Tab 13) to be issued to Westfield securityholders in respect of the Proposed Merger, including an explanatory statement for the purposes of s 412(1) of the Corporations Act, the independent expert's report relating to the WCL Merger Scheme and other documentation. The WCL Merger Scheme and both trust schemes are described in the Securityholder Booklet. The Securityholder Booklet also outlines the key steps to implement the transaction and sets out the current structure of Westfield, in simplified form, and the structure of the new group, also in simplified form. The Securityholder Booklet also outlines the conditions precedent to the Proposed Merger and the shareholder approval process connected with the transaction, the details of the scheme consideration and the treatment of "ineligible foreign Holders" (as defined) and "Minimum Holders" (as defined) and also refers to other aspects of the transaction. The Securityholder Booklet also contains a description of the laws and rights that will apply to holders of securities issued in the Proposed Merger, which is relevant given the international character of the transaction, and outlines the Australian tax implications of the transaction.
4. The Securityholder Booklet summarises, inter alia, key terms of the Implementation Deed and other agreements and also refers to a voting agreement by which certain members of the Lowy family, who collectively hold approximately 9.5% of Westfield's voting rights, agreed, subject to the independent expert concluding that the schemes are in the best interests of Westfield Securityholders and in the absence of the Westfield board recommending a superior proposal, not to sell their interests in Westfield during the period of the transaction and to vote in favour of the transaction. I will address that agreement below. The Securityholder Booklet also refers to the treatment of securityholders in several jurisdictions and indicates that Unibail-Rodamco and an associated entity intend to rely on an exemption from registration under s 3(a)(10) of the Securities Act 1933 (US), to which I will refer below.
5. Mr Tuxen's affidavit also addressed the preparation of an information booklet ("Demerger Booklet") (MFI 4) relating to the Demerger Scheme, and the dividend and capital reduction that will result in the distribution of all of the OneMarket shares to, or for the benefit of, Westfield securityholders.
6. Mr Tuxen addressed the steps which would be taken to dispatch the Securityholder Booklet and Demerger Booklet to Westfield securityholders and outlined the verification process which had been undertaken in respect of the Securityholder Booklet and the Demerger Booklet. Mr Tuxen also addressed the steps which would be taken to give investor presentations in respect of the WCL Merger Scheme, the content of which was not intended to vary materially from the information contained in the Securityholder Booklet and Demerger Booklet, to maintain a securityholder information line to respond to queries from securityholders relating to the WCL Merger Scheme and the Demerger Scheme and to make copies of the Securityholder Booklet and the Demerger Booklet available to securityholders on Westfield's website.
7. By his affidavit dated 3 April 2018, Sir Frank Lowy, who is a director of WCL and chairman of its board and also a director of WAML and chairman of WAML's board, consents to act as chairman of the meeting in respect of the WCL Merger Scheme, the trust meetings and the meeting in respect of the Demerger Scheme and associated general meetings, and also refers to the voting agreement between certain members of his family and interests associated with Unibail-Rodamco. By affidavit also dated 3 April 2018, Mr Brian Schwartz, who is a director of WCL and deputy chairman of its board, and a director of WAML and deputy chairman of WAML's board, consented to act as chairman of the relevant meetings if Sir Frank Lowy did not so act.
8. By his affidavit dated 9 April 2018, Mr Stephen Wilson, who is a managing director of Grant Samuel, set out his qualifications and experience and indicated that he held the opinions set out in the independent expert's reports in respect of the WCL Merger Scheme and the Demerger Scheme, having made all inquiries that he believed were desirable and appropriate for the purpose of preparing those reports, and having omitted no matters that he considered to be of significance from those reports. That independent expert's report noted that the low end of Grant Samuel's assessed range incorporates the price at which Unibail-Rodamco's shares are now trading and also provided a table setting out the impact of movements in the Unibail-Rodamco share price and the exchange rate on the value of the consideration offered under the scheme, which will allow securityholders to assess the position under a range of share prices and exchange rates.
9. By his affidavit dated 10 April 2018, Mr Gavin Sultana, who is an accountant and a director and representative of E&Y TAS, confirmed that he held the opinions expressed in the independent limited assurance report prepared by that firm and had made all reasonable inquiries that he regarded as desirable and appropriate for the purpose of preparing that report and that no matters that he considered to be of significance had been omitted from it.
10. By affidavit dated 10 April 2018, Mr Jason Watts, who is a partner in the firm of solicitors acting for Westfield in connection with the transaction, referred to correspondence with the Australian Securities and Investment Commission ("ASIC") and with Australian Securities Exchange Limited ("ASX") in respect of the transaction and to applications for exemption made to ASIC in respect of certain requirements of the Corporations Act and Corporations Regulations 2001 (Cth) in connection with the WCL Merger Scheme and the Demerger Scheme and to ASX for certain waivers and confirmations in relation to the ASX Listing Rules. By a second affidavit dated 11 April 2018, Mr Watts referred to further correspondence with ASIC and to letters received from ASIC in customary form (Ex JJW-2, Tab 8), which indicated that ASIC did not propose to appear to make submissions or intervene to oppose the schemes that are the subject of this application at the first hearing.
11. By an affidavit dated 11 April 2018, Mr Guy Alexander, who is a partner in the firm of solicitors acting for Unibail-Rodamco in relation to the transactions, referred to Unibail-Rodamco's entry into the Implementation Agreement in respect of the WCL Merger Scheme, to the information provided by Unibail-Rodamco for inclusion in the Securityholder Booklet and to the due diligence and verification process which had been adopted in respect of that information. Mr Alexander also referred to the exclusivity provisions, break fee and reverse break fee in respect of the WCL Merger Scheme, to which I will refer below, and to the entry by Unibail-Rodamco and associated entities into a Deed Poll dated 5 April 2018 (Ex SJT-1, Tab 8) ("Merger Deed Poll"), by which each party had undertaken to perform its obligations under the proposed schemes. Mr Alexander's affidavit also exhibited opinion letters received from Dutch and French lawyers as to the valid execution of the Merger Deed Poll under Dutch and French law respectively and, by a separate affidavit dated 6 April 2018, Mr C. Stephen Bigler expressed his opinion as to the valid execution of the Merger Deed Poll under the laws of Delaware, United States of America.
12. I have also had regard to a Statement of Facts in relation to the judicial advice sought by WAML as responsible entity of the WAT (MFI 1) and a second Statement of Facts as to the judicial advice sought by WAML as responsible entity of the WFDT (MFI 2).

The nature of the transactions

1. The transactions to be implemented in the Proposed Merger have a substantial degree of commercial complexity, although they largely do not raise novel legal issues. Mr Jackman and Mr Thomas set out the steps involved in the implementation of the Proposed Merger in their helpful submissions. The WAT Trust Scheme, the WFDT Trust Scheme and the WCL Merger Scheme are inter-conditional. The Proposed Merger is also subject to a number of conditions precedent, as set out in the Securityholder Booklet (Securityholder Booklet, section 3.4).
2. A Westfield security comprises one share in WCL, one unit in WAT and one unit in WFDT, each of which is stapled to the others (Tuxen 10.4.18 [1]). Under the WAT Trust Scheme, all Westfield securityholders will transfer their units in WAT to URW America Inc. (a Delaware corporation) ("URW America") in return for cash and class A shares in the capital of WFD Unibail-Rodamco N.V., a Dutch public company ("Newco") ("Newco Class A Shares") (WAT Supplemental Deed (Annexure F to Securityholder Booklet), cll 29.10, 29.13-29.14). Certain securityholders, classified as "Ineligible Foreign Holders" and "Minimum Holders" (as defined), will not receive securities but will receive a cash payment determined in accordance with the terms of a sale facility. The Newco Class A Shares provided under this scheme will be issued as either New Unibail-Rodamco Stapled Shares (which are Newco Class A Shares provided under the WAT Scheme stapled to New Unibail-Rodamco Shares provided under the WCL Merger Scheme on a 1:1 basis) or New Unibail-Rodamco CHESS Depositary Interests ("CDIs") over New Unibail-Rodamco Stapled Shares (WAT Supplemental Deed, cl 29.14).
3. Under the WFDT Trust Scheme, all Westfield securityholders will transfer their units in WFDT to Unibail-Rodamco TH B.V., a Dutch private company ("TH Newco"), in return for the issue on a 1:1 basis of ordinary shares in TH Newco ("TH Newco Shares") to TH Transfer Nominee B.V. a wholly-owned subsidiary of Unibail-Rodamco ("Transfer Nominee") (WFDT Supplemental Deed (Annexure F to Securityholder Booklet), cll 33.3, 33.10). That step is included in the transaction to accommodate issues of Dutch law. The interests of Westfield securityholders are protected at that point since, although the Transfer Nominee will hold legal title to the TH Newco Shares, Westfield securityholders will (with the qualification noted below) hold beneficial title to those shares (WFDT Supplemental Deed, cl 33.10(b)). The Transfer Nominee will hold TH Newco Shares that would otherwise be issued in respect of Ineligible Foreign Holders (as defined) as agent for sale of those shares under the WCL Merger Scheme, to which I now turn.
4. Under the WCL Merger Scheme, which is a scheme of arrangement to be implemented under s 411 of the Corporations Act, all Westfield securityholders will transfer their WCL shares and the Transfer Nominee will transfer all of the TH Newco Shares to Unibail-Rodamco and Westfield securityholders will receive cash and New Unibail-Rodamco Shares (WCL Merger Scheme (Annexure D to the Securityholder Booklet), cll 5.2, 6.1). However, Ineligible Foreign Holders and Minimum Holders (as defined) will receive a cash payment determined in accordance with the terms of a sale facility rather than such securities (WCL Merger Scheme, cll 6.7, 6.8). The New Unibail-Rodamco Shares provided under this scheme will be provided as New Unibail-Rodamco Stapled Shares, being the New Unibail-Rodamco Shares provided under the WCL Merger Scheme stapled to the Newco Class A Shares provided under the WAT Trust Scheme on a 1:1 basis, or alternatively as New Unibail-Rodamco CDIs over such stapled shares (WCL Merger Scheme, cl 6.5).
5. If the Proposed Merger is approved and becomes effective, scheme participants will receive cash and scrip comprising US$2.67 in cash per Westfield security held and, if they are a Westfield securityholder, 0.01844 New Unibail-Rodamco Stapled Shares per Westfield security to be issued (subject to the Westfield securityholder's election) in the form of New Unibail-Rodamco CDIs. Westfield securityholders are able to make a number of elections in relation to the scheme consideration, which it is not necessary to set out in this judgment.
6. Westfield also has employee incentive arrangements in place, under which employees may be given rights ("Employee Rights") to Westfield securities (Tuxen 10.4.18 [28]). The Implementation Agreement requires Westfield to ensure that there are no outstanding Employee Rights by the day following the Effective Date (as defined) (Implementation Agreement, cl 4.5) and Westfield's board has resolved to accelerate the vesting of all outstanding Employee Rights so that the outstanding Employee Rights will vest on the Effective Date (Tuxen 10.4.18 [29]). Westfield will purchase that number of Westfield securities required to satisfy the vesting of all outstanding Employee Rights on market and transfer those Westfield securities to the holders of Employee Rights so that they become registered holders of Westfield securities on or before the record date and can participate in the Proposed Merger on the same basis as other Westfield securityholders.
7. As I noted above, each of Unibail-Rodamco, TH Newco, the Transfer Nominee, URW America and Newco have executed the Merger Deed Poll covenanting to undertake all actions attributed to them under the schemes (including in respect of the provision of the scheme consideration) and there is evidence confirming the efficacy of the Merger Deed Poll under the respective jurisdictions in which each covenantor is registered (Alexander 11.4.18; Bigler 6.4.18).
8. Four meetings of Westfield securityholders are proposed to be held to consider the Proposed Merger and, if thought fit, pass the relevant resolutions. A Court-convened meeting of WCL shareholders would be held for the purpose of considering and, if thought fit, approving the WCL Merger Scheme. Meetings of WCL shareholders, WAT unitholders and WFDT unitholders would be held for the purpose of considering and, if thought fit, approving several resolutions, subject to and conditional upon the schemes becoming effective. The manner in which those meetings would be conducted would be consistent with prior practice in respect of stapled structures: Re Hills Motorway (2002) 43 ACSR 101 at [20]-[23]; Re Westfield Holdings Limited (2004) 49 ACSR 734 at [9].
9. I will address the Demerger Transaction, which is also the subject of this application, below.

Orders to convene the scheme meeting for the WCL Merger Scheme

1. Section 411(1) of the Corporations Act authorises the Court to order a meeting of members to be convened, and to approve the applicable explanatory statement, where a compromise or arrangement is proposed between a Pt 5.1 body and its members or any class of them; application for the order is made in a summary way by the body or by a creditor or member of the body; 14 days' notice of the hearing of the application, or such lesser period of notice as the Court or ASIC permits, has been given to ASIC; and the Court is satisfied that ASIC has had a reasonable opportunity to examine the terms of the proposed compromise or arrangement to which the application relates and a draft of the explanatory statement relating to the proposed compromise or arrangement; and make submissions to the Court in relation to the proposed compromise or arrangement, and the draft explanatory statement. Each of these matters has been satisfied with respect to the WCL Merger Scheme and the Plaintiffs have tendered a letter from ASIC at this hearing indicating that it does not currently propose to appear to make submissions or intervene to oppose the schemes. The Court therefore has power to convene meetings, and approve the Securityholder Booklet, if it is satisfied that it is otherwise appropriate to do so.
2. Once the preconditions to the exercise of the power under s 411 of the Act are satisfied, it remains for the Court to determine whether that power should be exercised. Mr Jackman refers to my summary of the applicable principles in Re DUET Finance Limited [2017] NSWSC 415 at [14] as follows: "It is, of course, well-established that the Court will generally approve the convening of a meeting of shareholders to consider a proposed scheme if it seems fit for consideration by a meeting of members and a commercial proposition that, if passed by the requisite majorities, is likely to be approved by the Court on an uncontested application: Re ACM Gold Ltd; Re Mt Leyshon Gold Mines Ltd [1992] FCA 89; (1992) 34 FCR 530 at 535; Re The Trust Company Ltd [2013] NSWSC 1680 at [5]. … [T]he Court's approach at the first hearing is that it "will not ordinarily summon a meeting unless the scheme is of such a nature and cast in such terms that, if it receives the statutory majority at the … meeting the court would be likely to approve it on the hearing of a petition which is unopposed": FT Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd (1997) 3 ACLR 69 at 72; Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485 at 504. … [A]t the first hearing, the Court exercises a "supervisory jurisdiction" to review the scheme and raise any queries with the plaintiff, and the Court will intervene at the first hearing if it has any concerns, since the market will have regard to the orders made by the Court at the first hearing: Re Archean Gold NL (1997) 23 ACSR 143 at 146; Cleary v Australian Cooperative Foods Ltd [1999] NSWSC 991; (1999) 32 ACSR 701 at [46]. The Court does not substitute its commercial judgment for that of the members to whom the scheme is directed, but considers whether the scheme is one that sensible businesspeople might conclude is of benefit to members: Re Prime Infrastructure Holdings Ltd [2010] NSWSC 1104; (2010) 80 ACSR 193 at [13]; Re AXA Asia Pacific Holdings Ltd [2011] VSC 4 at [13]; Re Aspen Group Ltd [2015] NSWSC 1718 at [11].
3. Mr Jackman submits, and I accept, that the Proposed Merger is a transaction that is fit for consideration by meetings of Westfield securityholders and reflects a commercial proposition that, if passed by the requisite majorities, is likely to be approved by the Court on an uncontested application. Mr Jackman also points out that the Proposed Merger is unanimously supported by Westfield's board, in the absence of a superior proposal; Grant Samuel has concluded that the Proposed Merger is fair and reasonable to, and therefore in the best interests of, Westfield securityholders in the absence of a superior proposal; and that an independent expert's report has been verified by affidavit (Wilson 9.4.18 [10]-[13]). Mr Jackman also submits, and I accept, that the WCL Merger Scheme, although undoubtedly complex, has been accurately and fairly described in the Securityholder Booklet, which has been the subject of a verification process in common form (Tuxen 10.4.18 [68]-[83]) and was made available to ASIC for review (Watts 10.4.18 [5]-[7]). There are no discretionary reasons why the Court would refuse to order the convening of meetings pursuant to s 411 of the Corporations Act and approve the Securityholder Booklets in respect of the WCL Merger Scheme.

Orders in respect of the WAT Trust Scheme and the WFDT Trust Scheme

1. As Mr Jackman also points out, it is commonplace for a responsible entity of a registered scheme to seek judicial advice pursuant to s 63 of the Trustee Act in connection with a trust scheme and, in giving advice on this issue, the Court will proceed by analogy with the approach governing the exercise of its discretion under s 411(1) of the Act: Re Mirvac Ltd [1999] NSWSC 457; (1999) 32 ACSR 107 at [47]; Re Macquarie Capital Alliance Ltd [2008] NSWSC 745; (2008) 67 ACSR 484 at [19]; Re Macquarie Communications Infrastructure Group [2009] NSWSC 487; Re Sydney Airport Holdings Ltd [2013] NSWSC 1665 at [2], [6], [19]; Re DUET Finance Ltd above at [16]. I am satisfied that WAML, as responsible entity of WAT and WFDT, would be justified in proceeding on the basis that the making of the proposed amendments to the WAT and WFDT constitutions in connection with the Proposed Merger, following approval by special resolution by WAT and WFDT members, would be within WAML's powers as trustee and responsible entity of each trust, including the powers of alteration conferred by the trust's constitutions and s 601GC of the Corporations Act; in acting upon the resolutions relevant to the Proposed Merger in doing all things and taking all necessary steps to implement the Proposed Merger; and in reimbursing all costs and expenses incurred by WAML in its capacity as responsible entity of the trusts in relation to this proceeding, out of the assets of WAT and WFDT.

Particular issues as to the WCL Merger Scheme and trust schemes addressed in submissions

1. Mr Jackman and Mr Thomas also addressed, in submissions, several matters that have been given particular attention in the case law.
2. First, as Mr Jackman recognises, the Courts generally consider the extent of any performance risk as to whether a bidder will comply with its obligation to pay the scheme consideration to scheme members. Several cases have identified the need to address performance risk by ensuring that there is a mechanism for scheme participants to enforce the right to entitlements that are to be received under a scheme: Re WebCentral Group Ltd [2006] FCA 937; Re Brambles Industries Ltd [2006] FCA 1273; (2006) 59 ACSR 501; Re APN News & Media Ltd [2007] FCA 770; (2007) 62 ACSR 400 at [23]; Re Simavita Holdings Limited [2013] FCA 1274 at [43] - [44]; Re Duet Finance Ltd above at [18].
3. Mr Jackman submits that this issue does not arise by reason of the combined operation of cll 5.2, 5.4, 6.4 and 6.5 of the WCL Merger Scheme, which provide for Unibail-Rodamco to deposit the cash consideration into trust accounts operated by Westfield as trustee for scheme participants in cleared funds no later than the business day prior to the Implementation Date. Mr Jackman acknowledges that a legal interest in the WCL shares will be transferred to Unibail-Rodamco prior to the provision of the scrip consideration to scheme participants, but points out that Unibail-Rodamco only obtains a beneficial entitlement to the WCL shares after Unibail-Rodamco has complied with its obligations with respect to the provision of the required scrip consideration (WCL Merger Scheme, cll 5.4, 6.5). Mr Jackman also points out that analogous regimes apply to the consideration payable under the WAT and WFDT Trust Schemes under the proposed amendments to the constitutions of both trusts (WAT Supplemental Deed, cll 29.2, 29.3, 29.4, 29.13 and 29.14; WFDT Supplemental Deed, cll 33.2, 33.3, 33.4, 33.10). Mr Jackman also draws attention to the obligations imposed under the Merger Deed Poll (Annexure E to the Securityholder Booklet). Mr Jackman submits, and I accept, that substantially identical arrangements have been held to be sufficient in previous cases: Re APN News & Media Ltd above at [23]; Re Hostworks Group Ltd [2008] FCA 64; (2008) 26 ACLC 137 at [32]; Re Coles Group Limited (2007) 25 ACLC 1380 at [38]. I am satisfied that these matters do not give rise to any reason not to order the convening of the scheme meetings or give the judicial advice sought.
4. Mr Jackman also recognises that cl 10 of the Implementation Agreement contains exclusivity provisions, which include a 'no-shop' restriction, a 'no-talk' restriction subject to a 'fiduciary exception' (Implementation Agreement, cl 10.5) and an obligation to give 'notice of approaches', which are disclosed in the Securityholder Booklet. Mr Jackman submits, and I accept, that the period for which the exclusivity provisions operate is clearly defined and is a reasonable period in the circumstances: compare Re DUET Finance Ltd above at [23]. As Mr Jackman points out, exclusivity restrictions of this kind have now been accepted in many schemes of arrangement: Re Orion Telecommunications Ltd [2007] FCA 1389 at [7]; Re AXA Asia Pacific Holdings Ltd above at [26]-[30]; Re The Trust Company Ltd above at [19]; Re Duet Finance Ltd above. These provisions are also not inconsistent with the guidance provided in Takeovers Panel Guidance Note 7. I am satisfied that this matter should not prevent the Court ordering the convening of the scheme meetings or giving the advice sought in respect of the trust schemes.
5. Clause 10.8 of the Implementation Agreement allows 'matching rights' which require Westfield to give Unibail-Rodamco notice of actual, proposed or potential Competing Proposals (as defined) and allows Unibail-Rodamco to provide a matching or superior proposal in response. Mr Jackman recognises that the Takeovers Panel has noted the possibility that matching rights can be anti-competitive (Guidance Note 7, [13]-[18]). That possibility was considered in Re Wridgways Australia Ltd [2010] FCA 1187 at [13]-[25], where Jacobson J observed that the overall effect of the matching provision in that scheme was pro-competitive. Notification and matching rights of this kind have since become reasonably common in schemes of arrangement: Re The Trust Company Ltd above at [19]; Re Veda Group Ltd [2015] FCA 1506 at [10]; Re Toll Holdings Ltd [2015] VSC 123 at [35]-[36]; Re SAI Global Ltd [2016] FCA 1312 at [61]. In Re Duet Finance Ltd above at [24], I observed, in respect of a similar provision, that: "… the terms of a Competing Proposal would likely need to be disclosed in any event, by reason of DUET's continuous disclosure obligations. It seems to me unlikely that this provision would deter competing bids that might otherwise be made, since the process under this clause corresponds to the course that a prospective bidder would expect DUET to take, even without such a provision, in order to obtain the best possible offer if competing bidders emerged." I am satisfied that these matters should also not prevent the Court ordering the convening of the scheme meetings or giving the advice sought in respect of the trust schemes.
6. Clause 11 of the Implementation Agreement provides for the payment of a substantial break fee by Westfield, of USD150 million, in prescribed circumstances. As Mr Jackman points out, that break fee is not payable if the meeting of scheme participants do not approve the WCL Merger Scheme (Implementation Agreement, cl 11.2) and would have no influence on voting at the meeting: Re Adelaide Bank Limited [2007] FCA 1582 at [31]. Mr Jackman submits that break fees are also common features in schemes of arrangement and have not been an obstacle to the making of orders under s 411(1) of the Corporations Act, and that a break fee will be permitted unless its amount is such that it could influence voting at the meeting to be convened or if there are some other unusual circumstances: Re SFE Corporation Ltd [2006] FCA 670; (2006) 59 ACSR 82 at [6]-[7]; Re APN News & Media Limited above at [43].
7. Although this break fee is very large in absolute terms, it was consistent with the Takeovers Panel's guideline of a maximum 1% of equity value when the Proposed Merger was announced (although the percentage that it bears to the transaction value has since marginally increased with changes in the price of the shares to be issued in the transaction). Mr Jackman also points out that, even if the break fee were to exceed the figure of 1%, that would not in itself be a reason to decline to order the convening of scheme meetings or withhold approval at a second hearing: Re Tatts Group Limited [2017] VSC 552 at [32]-[34]. There is evidence that substantial costs were and will be incurred in connection with the implementation of the Proposed Merger; that fee is disclosed in the Securityholder Booklet; the Implementation Agreement provides for Westfield to be paid a reverse break fee in the same amount by Unibail-Rodamco in specified circumstances (Implementation Agreement, cl 12); and the affidavit evidence (Tuxen 10.4.18 [34]-[43]) addresses the matters that should generally be addressed before a break fee is approved: Re APN News & Media Ltd above at [55]. It seems to me that in this case, as in Re DUET Finance Ltd above at [29], the board of Westfield could readily form a view that an agreement to pay a break fee of this size was in the interests of shareholders and unitholders, since it would allow them the opportunity to consider a substantial proposal that some or many of them may find commercially attractive, where that proposal might well not have been available, absent agreement to pay that break fee. Although the break fee is large in absolute terms, reflecting the scale of the transaction, I accept that it does not provide reason not to order the convening of the scheme meetings or give the advice sought in respect of the trust schemes.
8. Clause 5.6 of the WCL Merger Scheme also contains a 'deemed warranty', by which each scheme participant warrants that, inter alia, all their Scheme Shares (as defined) transferred to Unibail-Rodamco will be fully paid and free from all Encumbrances (as defined) and that scheme participants have full power to sell and transfer their Scheme Shares to Unibail-Rodamco under the scheme, and corresponding warranties are provided in the two trust schemes (WAT Supplemental Deed, cl 29.6; WFDT Supplemental Deed, cl 33.6). Those deemed warranties are disclosed in the Securityholder Booklet (section 2 item 5.8, section 3.19). The case law has recognised the legitimacy of deemed warranty provisions, provided that appropriate disclosure is made, since their purpose and effect is to ensure that a scheme participant whose shares are subject to an encumbrance is not unfairly advantaged: Re APN News & Media Ltd above at [57]-[63]; Re Hostworks Group Ltd above at [41]; Re Coles Group Ltd above at [45]; Re Macquarie Private Capital A Limited (2008) 26 ACLC 366 at [14]; Re DUET Management Company 1 Ltd [2013] NSWSC 817 at [23]. This matter also does not provide reason not to order the convening of the scheme meetings or give the advice sought in respect of the trust schemes.
9. Mr Jackman points out that, if the WCL Merger Scheme is ultimately approved by the Court and the Court also gives the judicial advice sought at the second hearing in connection with the trust schemes, Unibail-Rodamco and Newco (and their subsidiaries) intend to rely on the Court's approval and advice for the purpose of qualifying for the exemption from registration under s 3(a)(10) of the Securities Act 1933 (US) in connection with the issue of securities to US resident Westfield securityholders under the WCL Merger Scheme. Mr Jackman points out, and I accept, that recognition of this matter by the Court is a requirement of their qualifying for the exemption and that further consideration of the application of the exemption, if required, is a matter for the second court hearing: Re Permanent Trustee Co Ltd (2002) 43 ACSR 601 at [11]-[20]; Re Simavita Holdings Limited above at [50]-[52].
10. As I noted above, certain members of the Lowy family have entered a voting agreement with interests associated with Unibail-Rodamco by which they agreed, inter alia, to vote in favour of the Proposed Merger in the absence of Westfield's board recommending a superior proposal and subject to the independent expert concluding that the merger scheme and the trust schemes are in the best interests of Westfield securityholders. There is no suggestion that that matter requires separate class meetings and Mr Jackman confirmed, in oral submissions, that votes of persons within the scope of that voting agreement will be tagged. I am satisfied that this matter is not a reason to decline to order the convening of the scheme meetings or the trust meetings.

The Demerger Transaction

1. I now turn to the Demerger Transaction in respect of OneMarket, which is an Australian public company limited by shares and a wholly owned subsidiary of WCL. The Demerger Transaction comprises the Demerger Scheme under s 411 of the Corporations Act, the payment of a dividend and a capital reduction, which would together result in all of the OneMarket shares being distributed to or for the benefit of shareholders in WCL, and OneMarket is then proposed to be listed on the ASX. The Demerger Transaction is conditional on, inter alia, the Proposed Merger being approved, although the Proposed Merger is not conditional on the Demerger Transaction proceeding (Demerger Scheme, cl 3.1).
2. WCL shareholders who participate in the Demerger Scheme will be entitled to a Distribution (as defined) consisting of a dividend and, if necessary, an amount by way of a return of capital, implemented as an equal capital reduction pursuant to section 256B(1) of the Corporations Act (Demerger Scheme, cl 5.4). Entitlements under that dividend and capital reduction would not be paid to participants in the Demerger Scheme in cash but would instead be applied on their behalf as consideration for the transfer of OneMarket shares to them under that scheme (Demerger Scheme, cll 5.4(c), 5.6, 5.7). Each WCL shareholder would receive one OneMarket share for every 20 WCL shares that they hold, subject to specified arrangements that apply in respect of participants in the Demerger Scheme who are Ineligible Foreign Holders or Small Shareholders (as defined). Two meetings of WCL shareholders would be held to consider the Demerger Transaction and, if thought fit, pass certain resolutions in connection with it, comprising a Court-convened meeting of WCL shareholders for the purpose of considering and, if thought fit, approving the Demerger Scheme and an extraordinary meeting of WCL shareholders for the purpose of considering and, if thought fit, approving the proposed capital reduction.
3. Mr Jackman also points out that the Demerger Scheme is also unanimously supported by Westfield's board; and, if the Proposed Merger were implemented and the Demerger Scheme was not implemented, then OneMarket would remain part of Westfield and would be acquired by Unibail-Rodamco for no additional consideration. Grant Samuel has observed that this provides reason for scheme participants to vote in favour of the Demerger Scheme and that the Demerger Transaction is in the best interests of Westfield securityholders (Demerger IER Report, sections 5.3-5.4) and that that report has also been verified by affidavit (Wilson 9.4.18 [14]-[17]). The information contained in the Demerger Booklet has also been the subject of verification and has been made available to ASIC for review (Watts 20.4.18 [5]-[6], [8]). There is no exclusivity or break fee in respect of the Demerger Scheme and, as I noted above, OneMarket has entered into the Demerger Deed Poll in favour of Westfield securityholders under which it has undertaken to take the steps to be performed by it under the Demerger Scheme, including applying for admission to the official list of ASX and for official quotation of its shares on ASX.
4. The requirements in s 411(1) of the Corporations Act have also been satisfied in respect of the Demerger Scheme and the Court therefore has power to order the convening of meetings, and approve the Demerger Booklet if it is satisfied that it is otherwise appropriate to do so. The Demerger Transaction is also a transaction that is fit for consideration by meetings of Westfield securityholders and reflects a commercial proposition that, if passed by the requisite majorities, is likely to be approved by the Court on an uncontested application. There are no discretionary reasons why the Court would refuse to order the convening of meetings pursuant to s 411 of the Corporations Act and approve the Demerger Booklet.
5. Mr Jackman points out that, if the Demerger Scheme is ultimately approved by the Court, WCL also intends to rely on the Court's approval and advice for the purpose of qualifying for that exemption in connection with the issue of the OneMarket shares to US resident Westfield securityholders (if required). As I noted above, recognition of this matter by the Court is a requirement of Unibail-Rodamco qualifying for the exemption from registration under s 3(a)(10) of the Securities Act 1933 (US).

Conclusion

1. I am satisfied that the WCL Merger Scheme and the Demerger Scheme each concern the rights and obligations of shareholders in WCL and are each an arrangement for the purposes of s 411 if the Corporations Act. The independent expert's reports have concluded that the proposed transactions are fair and reasonable and detailed evidence is led as to the process which has been adopted in respect of the preparation and verification of the explanatory material. Having regard to the evidence and matters to which I referred above, I am satisfied that an order should be made convening the scheme meetings and approving the scheme booklet for distribution to shareholders. I am also satisfied that judicial advice should be given that WAML is justified in propounding resolutions to implement the proposed trust schemes and proceeding on the basis that the amendments to be made to the WAT and WFDT constitutions to implement those trust schemes would be within the powers of alteration conferred by those documents and s 601GC of the Corporations Act.
2. For these reasons I made the orders sought by the Plaintiffs at the conclusion of the first hearing.

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