In the matter of Westfield Corporation Limited (No 2) [2018] NSWSC 921

The affidavit and other evidence

1. At the second hearing, the Plaintiffs relied on the second affidavit dated 24 May 2018 of Sir Frank Lowy AC, a director and chairman of the boards of WCL and WAML, which addressed the conduct of the relevant meetings the results of voting at those meetings.
2. The Plaintiffs also relied on the affidavit dated 25 May 2018 of Mr Ibrahim Hussein, a senior relationship manager with Computershare Investor Services Pty Ltd, which addressed the despatch of scheme documents; the processing of proxy forms and the process adopted for registration and polling at the relevant meetings; the tagging of votes associated with the Lowy family, as contemplated by the First Judgment; and voter turnout at the relevant meetings. The proportion of votes cast at those meetings was substantial, although the proportion by number of Westfield securityholders present was, as might be expected, significantly lower. The Plaintiffs also relied on the second affidavit dated 25 May 2018 of Mr Simon Tuxen, the company secretary of WCL and WAML and the general counsel of Westfield (the stapled group comprising WCL, WAT and WFDT), who addressed the preparation and despatch of the scheme booklets, the provision of notices of the meetings to the directors and auditors of WCL and WAML, and also annexed copies of the signed minutes of the merger scheme meetings and the demerger meetings and a notice of this hearing published in a national newspaper.
3. The third affidavit dated 24 May 2018 of Mr Jason Watts, a partner of the firm of solicitors acting for the Plaintiffs in the transactions, dealt with registration of the scheme information booklets with the Australian Securities & Investments Commission ("ASIC"), with minor amendments to those booklets and with correspondence between the Plaintiffs and ASIC in respect of the company schemes and trust schemes. Mr Watts' fourth affidavit dated 28 May 2018 annexed letters dated 28 May 2018 from ASIC advising that it had no objection to the merger or demerger schemes, for the purposes of s 411(17)(b) of the Corporations Act and also annexed correspondence between the Plaintiffs' solicitors, Unibail-Rodamco's solicitors and ASIC in respect of an issue that had arisen in relation to the application of French financial transactions tax to sales of CHESS Depository Interests ("CDIs") over New Unibail-Rodamco Stapled Shares (as defined), which I will address below. The Plaintiffs also relied on the second affidavit dated 28 May 2018 of Mr Guy Alexander, a partner in the firm acting for Unibail-Rodamco, which also addressed the issue as to the application of the French financial transaction tax to dealings with CDIs over New Unibail-Rodamco Stapled Shares and referred to correspondence with Australian Securities Exchange Limited ("ASX") in respect of that matter. An affidavit dated 29 May 2018 of Mr Alexander Morris, the solicitor on the record for the Plaintiffs in the proceedings, also addressed publication of the notice of the hearing in a national newspaper and indicated that he had not received notice that any person proposed to appear before the Court at the second scheme hearing or make any application to the Court in respect of the scheme. There was no appearance by any Westfield securityholder at the hearing.
4. The Plaintiffs also tendered final versions of the securityholder booklet in respect of the merger (Ex IH-1) and the OneMarket demerger booklet (Ex IH-2) sent to Westfield securityholders and certificates as to satisfaction of conditions precedent executed by WCL (Ex A1) and Unibail-Rodamco (Ex A2).

Applicable principles

1. Mr Jackman and Mr Thomas draw attention to the well-established principles applicable at a second hearing in respect of company and trust schemes. They point out that, in deciding whether to give final approval to a scheme of arrangement, the Court will typically wish to be satisfied that the orders of the Court convening the meeting of members were complied with; that the meeting of members has approved the scheme with the requisite majority; all other statutory requirements have been satisfied; the scheme is fair and reasonable so that an intelligent and honest man or woman who was a member of the relevant class, properly informed and acting alone, might approve it; the plaintiff has brought all matters that could be considered relevant to the exercise of the Court's discretion to its attention; 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 Limited (2002) 43 ACSR 601 at [8]-[10]; Re Central Pacific Minerals NL [2002] FCA 239 at [8]-[14]; Re Seven Network Limited (No 3) (2010) 77 ACSR 701 at [35]-[39]. Mr Jackman and Mr Thomas point out that the Court has regard to analogous considerations in considering whether to grant judicial advice at a second court hearing in respect of trust schemes: Re Australand Holdings Limited (2005) 219 ALR 728 at [28]-[29]; Re The Hills Motorway Ltd (2002) 43 ACSR 101 at [24].
2. I am satisfied that the Court's orders made on 12 April 2018 were complied with. There is evidence that the securityholder booklet in respect of the proposed merger and the OneMarket demerger booklet were distributed to members in the period 22-23 April 2018 (Hussein 25.5.18 [18]-[26]); a notice of hearing substantially in the form annexed to the Court's orders was published in a national newspaper on 16 May 2018 (Tuxen 25.5.18 [14], Annexure C); and the relevant meetings were held on 24 May 2018 as contemplated by the Court's orders (Lowy 24.5.18 [5]-[26]).
3. I am also satisfied that resolutions giving effect to the WCL Merger Scheme and WCL Demerger Scheme were passed by the requisite majorities at meetings held on 24 May 2018. The WCL Merger Scheme was approved by 97.55% of total votes cast and by 93.85% of members present and voting (in person or by proxy) (Lowy 24.5.18 [28]); each of the six resolutions put to extraordinary general meetings in connection with the proposed merger were approved by over 97.5% of total votes cast (Lowy 24.5.18, Annexure G, 56-57); the WCL Demerger Scheme was approved by 97.76% of total votes cast and by 93.71% of members present and voting (in person or by proxy) (Lowy 24.5.18 [30]); and the resolution put to a meeting in connection with a capital reduction in connection with the demerger transaction was approved by 97.58% of total votes cast (Lowy 24.5.18, Annexure G, 59). The statutory majorities in s 411(4)(a)(ii)(A)-(B) of the Act were therefore satisfied in respect of both company schemes, and the resolutions put to Westfield securityholders in respect of the WAT Trust Scheme and WFDT Trust Scheme, and to the members of WCL in respect of a capital reduction in connection with the demerger transaction, were also carried by the required majorities. The Plaintiffs have also led evidence that ASIC has no objection to the WCL Merger Scheme and WCL Demerger Scheme, for the purposes of s 411(17)(b) of the Corporations Act.
4. I am also satisfied that the schemes are fair and reasonable and that an intelligent and honest man or woman who was a member of the relevant classes, properly informed and acting alone, might approve them. I had noted in the First Judgment (at [28], [43]) that I was satisfied that that the WCL Merger Scheme and the WCL Demerger Scheme was each a transaction that was fit for consideration by meetings of Westfield securityholders and reflected a commercial proposition that, if passed by the requisite majorities, was likely to be approved by the Court on an uncontested application. Mr Jackman and Mr Thomas submit, and I accept, that nothing that has occurred since the first court hearing raises any reason to question those conclusions. The Plaintiffs have also tendered certificates confirming that each of the conditions precedent to the schemes has been satisfied or waived, except for those conditions related to Court approval of the schemes and amendments to be made to WAT's constitution and WFDT's constitution taking effect by way of lodgement of the corresponding supplemental deeds with ASIC.
5. Mr Jackman and Mr Thomas note that, at the first court hearing, the Plaintiffs notified the Court of several matters warranting the Court's attention. I addressed those matters in the First Judgment and held (at [30]-[39]) that they did not prevent convening the Scheme meetings. For the same reasons, none of those matters would warrant a refusal to approve the schemes at the second court hearing.

US Securities Act

1. The Plaintiffs point out that, if the WCL Merger Scheme is ultimately approved by the Court and the Court provides the judicial advice sought at the second hearing in connection with the trust schemes, Unibail-Rodamco, WFD Unibail-Rodamco N.V. ("Newco") and Unibail-Rodamco TH B.V. ("TH Newco") (and their subsidiaries) intend to rely on the Court's approval and advice for the purpose of qualifying for exemption from the registration requirements of 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, and WCL intends to adopt a corresponding approach in respect of the WCL Demerger Scheme if the Court approves that scheme. I noted that matter (at [38], [44]) in the First Judgment. The Plaintiffs point out that the Court's recognition of that matter is a requirement of the relevant exemption, and a practice has developed concerning the terms in which the Court may express that recognition: Re Permanent Trustee Co Ltd above at [11]-[20]; Re Simavita Holdings Limited [2013] FCA 1274 at [50]-[52].
2. Consistent with that practice, I recognise that the merger schemes (namely the WCL Merger Scheme, WAT Trust Scheme and WFDT Trust Scheme) contemplate the receipt of New Unibail-Rodamco Stapled Shares as consideration for the transfer of Westfield securities, and the issue of TH Newco shares; the WCL Demerger Scheme contemplates the receipt of shares in OneMarket by members of WCL; and the Court has been advised, before the commencement of the second court hearing, that the Plaintiffs, Unibail-Rodamco, Newco and TH Newco (and their subsidiaries) will rely upon the s 3(a)(10) of the Securities Act 1933 (US) exemption on the basis of the Court's approval in respect of the merger schemes and the Court's approval of the WCL Demerger Scheme. I also recognise that the Court does not act as valuer, and has been informed of the value of Westfield securities and the value of the shares to be received as consideration for the transfer of those securities. That question is addressed by the evidence of an expert which the Court has been advised is independent of the Plaintiffs and Unibail-Rodamco and that expert gives sworn evidence. The Court has taken this evidence into account in determining whether the WCL Merger Scheme and WCL Demerger Scheme are fair and should be approved and whether judicial advice should be given in respect of the WAT Trust Scheme and the WFDT Trust Scheme.
3. I also note that the Court has held a hearing to consider the fairness and reasonableness of the proposed merger schemes and WCL Demerger Scheme; that hearing was open to the public and each Westfield securityholder to whom New Unibail-Rodamco Stapled Shares and shares in OneMarket are to be issued had standing to appear; and notice of the date of the second court hearing has been included in the securityholder booklet and the OneMarket demerger booklet sent to Westfield securityholders prior to the transactions being considered at the scheme meetings and was advertised in a daily newspaper circulating throughout Australia and there was no appearance by any Westfield securityholder at that hearing.

French financial transactions tax

1. My attention was drawn to an issue that had arisen after the securityholders' meetings which approved the schemes and the meetings that approved the relevant transactions in respect of the trusts, in respect of a French transaction tax that will be applicable to trading in CDIs over New Unibail-Rodamco Stapled Shares (as defined) issued under the schemes. Since that issue emerged after the date of the securityholders' meetings, securityholders did not have the opportunity to take it into account in respect of their votes at those meetings.
2. It has now been recognised that a French financial transactions tax of 0.3% will apply to trades in New Unibail-Rodamco CDIs, although those trades take place on the Australian market and will likely take place between non-French residents. The tax is imposed on purchases of CDIs and is levied on the portion of the value of the CDIs that is allocated to the Unibail-Rodamco SE ordinary share and is to be collected by the purchasing broker for remittance to French authorities. A bulletin providing details of this matter to market participants has been released by ASX to the market.
3. Mr Jackman and Mr Thomas submit that this matter does not adversely impact Westfield securityholders, since this tax will not apply on issue of the New Unibail-Rodamco CDIs to them as part of the scheme consideration; this tax is also not payable by Westfield securityholders on sale of the New Unibail-Rodamco CDIs, and is in effect borne by the purchaser, since the broker executing the purchase order is liable to pay the tax; the rate of the tax (0.3%) is insufficiently material to be of concern; and information such as tax rates is likely to be incorporated into security prices, so the impact of the 0.3% tax would already be priced into the value of Unibail-Rodamco SE shares and, correspondingly, the value of New Unibail-Rodamco CDIs. This issue has also been addressed in subsequent communications with ASIC.
4. I am satisfied that this issue would have been immaterial to securityholders voting at the relevant meetings. As I noted above, the tax does not apply on the issue of New Unibail-Rodamco CDIs as part of the scheme consideration and is not payable by Westfield securityholders on sale of the New Unibail-Rodamco CDIs, but is borne by the purchaser, since the broker executing the purchase order is required to pay the tax and is likely to pass the cost of it to the purchaser of those CDIs. It is, of course, possible that there will be a price adjustment in respect of the price of New Unibail-Rodamco CDIs to reflect the fact that that tax is payable, since a purchaser may have regard to the existence of that tax in determining the price that would be payable, or at least the collective of purchasers that constitute the market would have regard to that matter. However, there is substantial force in the Plaintiffs' submission that that matter would already be priced into the value of Unibail-Rodamco SE shares so far as that tax is applicable to trading those shares. The rate of the tax, being 0.3%, is not likely to be material to securityholders in a transaction of this substantial scale, particularly where the price impact of that tax would be discounted on a time basis to the extent that it would emerge at some point in the future, on a sale of the CDIs.
5. The question of any impact of the existence of the tax on Australian brokers' systems and their capacity to implement trades in New Unibail-Rodamco CDIs, and on liquidity in trading, has been addressed in correspondence between ASIC and the solicitors acting for Unibail-Rodamco and those solicitors have explained the reasons that it is anticipated that market participants will promptly be in a position to collect the relevant tax, which will operate in a similar fashion to other costs, including brokerage, incurred on the sale of New Unibail-Rodamco CDIs. It appears that ASIC has been satisfied with that explanation, and it has not sought to appear or oppose this application, and has provided letters under s 411(17) of the Corporations Act in the ordinary way.
6. I do not consider that this matter was, to adopt the language of Re City Of Melbourne Bank (in liq) [1897] 19 ALT 80, an important supervening event that materially altered the scheme and requires some further process, such as further scheme meetings, to be undertaken, or that, within the language of Re Telford Inns Pty Ltd (1985) 10 ACLR 312, it was a matter occurring after the scheme meeting that if "known to the creditors at the time of the meeting might have induced them to vote differently". I am reinforced in that view by the fact that this matter was disclosed to the market, albeit only shortly before this hearing, and has not led any securityholders (including institutional investors who would be well capable of promptly assessing its significance) to oppose approval of the scheme at this hearing, a matter to which Young J similarly had regard in Re Telford Inns Pty Ltd above. I do not consider that further scheme meetings should be required or that this matter is reason not to approve the company schemes or give the directions sought in respect of the trust schemes.

Other aspects of disclosure

1. I am satisfied that, subject to that issue as to the French transaction tax that I have addressed above, the evidence of verification of the information contained in the securityholder booklet and the OneMarket demerger booklet indicates that full and fair disclosure was made in respect of the company schemes and trust schemes.

Conclusion and orders

1. For these reasons, I was satisfied that the Court should approval the WCL Merger Scheme and WCL Demerger Scheme under to s 411 of the Corporations Act 2001 (Cth) and give the judicial advice that was sought with respect to the implementation of the WAT Trust Scheme and WFDT Trust Scheme. I therefore made orders in the form initialled by me and placed in the file at the conclusion of the second hearing on 29 May 2018.

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: 21 June 2018