Solicitors:
Dentons Australia (Plaintiff)
File Number(s): 2020/101207
[2]
Background and affidavit evidence read at the second Court hearing
The Plaintiff, Windlab Limited ("Windlab"), seeks orders under s 411(4)(b) of the Corporations Act 2001 (Cth) approving a scheme of arrangement between Windlab and its shareholders, other than any Excluded Shareholder (as defined ("Scheme Shareholders"). That scheme provides for the acquisition of shares of Windlab by Wind Acquisition 2 Pty Ltd ("WA2") and the subsequent delisting of Windlab from the Australian Securities Exchange ("ASX"). Under the terms of the scheme, WA2 will acquire all of the Scheme Shares on the Implementation Date (as defined) and Scheme Shareholders will receive cash consideration payable by WA2 of $1.00 per Scheme Share. A resolution in favour of the scheme was passed at a meeting of Scheme Shareholders held on 5 June 2020 by 99.61% votes cast and 91.77% of the Scheme Shareholders voting at that meeting.
In support of its application to approve the scheme, Windlab reads the affidavit dated 29 May 2020 of Mr Cairns, a solicitor acting for Windlab, which deals with the steps taken to finalise the scheme booklet, with registration of the scheme booklet with the Australian Securities and Investments Commission ("ASIC"), with the despatch of the scheme booklet to shareholders and with identification of a minor typographical error in the scheme booklet, which was drawn to the Court's and ASIC's attention and was corrected by an announcement made by Windlab on the ASX Announcement Platform.
An affidavit of Mr Breznik dated 3 June 2020 proves publication of notice of the hearing in the Australian newspaper and the Canberra Times. An affidavit dated 4 June 2020 of Mr Cooke, the Company Secretary of Windlab, refers to the historical turnout of shareholders at general meetings of Windlab, which is relatively low in respect of the number of shareholders attending in person or by proxy, and provides context for the somewhat larger percentage of shareholders who attended the scheme meeting. Mr Cooke also addresses the release of information concerning the scheme on Windlab's website and the receipt of proxy forms for the scheme.
An affidavit dated 5 June 2020 of Mr Macek, a director of Windlab who acted as chair of the virtual scheme meeting, deals with the conduct of that meeting and gives evidence of the results of the scheme resolution, to which I have referred above. The number of Windlab shareholders present and voting and the percentage of votes cast in favour of the scheme resolution comfortably satisfied the statutory requirements. Mr Macek's evidence is also that no competing proposal had been received at the time of his affidavit.
An affidavit dated 9 June 2020 of Mr Powell, an Account Director employed by Computershare Investor Services Pty Ltd, deals with the process adopted to despatch documents to shareholders who did not receive them by email, and by email to shareholders who had elected to receive communications by email, with the receipt of proxy forms and the conduct of the scheme meeting, and with the preparation of a scheme meeting poll report. His evidence confirms that an excluded shareholder, Equity Trustees Limited, which held shares on behalf of WA2, did not vote at the scheme meeting. An affidavit dated 9 June 2020 of Mr Bampfield, who is the Managing Director for Lumi Technologies Pty Ltd, which provided services in respect of a virtual scheme meeting, dealt with the conduct of the scheme meeting and of the poll at that meeting. Mr Bampfield confirmed that no technical issues arose in respect of the conduct of that meeting.
A further affidavit dated 12 June 2020 of Mr Cairns noted that one shareholder had indicated an intention to attend the second Court hearing, and had been provided with dial-in information in order to do so, although he ultimately did not attend at that hearing. Mr Cairns also addressed the position in respect of the excluded shareholder and led evidence as to the satisfaction of conditions precedent to the scheme, other than conditions precedent relating to the Court's approval of the scheme. Mr Cairns also referred to a letter dated 11 June 2020 received from ASIC, in common form, which advised that ASIC had no objection to the proposed scheme of arrangement between Windlab and its members for the purposes of s 411(17)(b) of the Corporations Act. An affidavit dated 12 June 2020 of Ms Hodgman indicated that Windlab's solicitors had not received any other advice of persons attending the second Court hearing, and there was no such attendance when the matter was called.
[3]
Whether the Court should approve the proposed scheme under s 411(4)(b) of the Corporations Act
Section 411(4) of the Corporations Act provides that an arrangement is binding on Scheme Shareholders and Windlab if, at a meeting of Scheme Shareholders, it is passed by a majority of Scheme Shareholders present and voting (in person or by proxy) and by 75% of votes cast and it is approved by order of the Court. Section 411(6) of the Act provides that the Court may grant approval subject to such alterations or conditions as it thinks just. On the statutory conditions being met, the Court has a supervisory discretion: Re Alabama, New Orleans, Texas and Pacific Junction Railway Co [1891] 1 Ch 213 at 247; Re Seven Network Ltd (No 3) (2010) 77 ACSR 701 at [35]-[39]; Re Signature Capital Investments Limited (No 2) [2016] FCA 385; Re Medical Australia Ltd (No 2) [2017] FCA 1429.
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 a meeting of members were complied with; the meeting of members so convened 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 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 Solution 6 Holdings Ltd (2004) 50 ACSR 113 at [18]-[24]; Re Permanent Trustee Co Limited (2002) 43 ACSR 601 at [8]-[10]; Re Central Pacific Minerals NL [2002] FCA 239.
Mr Oakes, who appears for Windlab, refers to the observations of Vaughan J in Re Wesfarmers Ltd (No 2) [2018] WASC 357 at [13] that the Court will usually approach its task on the basis that the members are better judges of what is in their own commercial interests than the Court, and (at [15]) that:
"[t]he function of the court does not extend to usurping the views of the shareholders. However, the court is not a mere rubber stamp and will look at the arrangement to ensure that it is a reasonable one. In doing so the court is primarily concerned with whether the proposal is 'fair and reasonable' … In that respect the court does not determine that the scheme is intrinsically in the members' interest or otherwise. The court ought only require satisfaction that the arrangement is one which is capable of being accepted."
His Honour also there noted that the Court's task is to ensure that all statutory and procedural requirements in relation to s 411 of the Act have been observed and to determine, in the exercise of its discretion, whether to approve the scheme.
Mr Oakes also refers to Beach J's summary of the applicable principles in Re Amcor Limited (No 2) [2019] FCA 842 at [7]-[11] as follows:
"In essence, my role at the second court hearing is to assess the Scheme taking into account whether the Scheme is sufficiently fair and reasonable such that an intelligent and honest shareholder properly informed and acting alone might approve it. Of course, I can only approve a scheme of arrangement if the requisite majority of shareholders vote in favour of it, but I am not bound to approve the Scheme simply because I previously made orders for the convening of a Scheme meeting and subsequently the requisite majority agreed to it. But I accept that shareholders voting collectively at the Scheme meeting are better judges than I of what is to their commercial advantage and in their interests and accordingly, absent good reason, I should give effect to their intentions.
Now whilst there is no exhaustive statement of the matters as to which I must be satisfied before granting approval, it is not in doubt that in exercising my power under s 411(4)(b), I should be satisfied that:
(a) the Scheme complies with the law, including the relevant procedural requirements;
(b) The Scheme was approved by shareholders acting in good faith and for proper purposes;
(c) There has been an accurate and comprehensive disclosure of the details of the Scheme and its effect to those voting on it;
(d) there is no suggestion of oppression of any minority;
(e) there is no evidence that any third parties will be disproportionately adversely affected by the operation of the Scheme;
(f) the Scheme does not offend against any aspect of public policy; and
(g) all matters that could be considered relevant to the exercise of my discretion have been drawn to my attention.
I also need to be satisfied that the conditions precedent to the Scheme have been met, save for Court approval, and that ASIC has been given the opportunity to draw to my attention any relevant matter(s).
In considering whether the Scheme complies with the law, including the relevant procedural requirements, I need to satisfy myself that the procedural and other requirements in the Act, Corporations Regulations 2001 (Cth) and [the Corporations Rules] have been complied with and that the requirements for a valid resolution of the shareholders have been satisfied.
Now as I have said, my task is to consider whether the Scheme is fair and reasonable with the test of fairness and reasonableness including a consideration of whether "an intelligent and honest [shareholder], properly informed, acting alone, might approve [the scheme]" … But the Scheme shareholders' vote in favour of the Scheme is evidence of its inherent fairness. Put another way, if a majority of the Scheme shareholders have approved the Scheme, it is unlikely that the Scheme would be unreasonable. Further, I do not have to be satisfied that no better Scheme could have been devised."
Mr Oakes also points to the main statutory and procedural requirements in relation to s 411 of the Act, namely compliance with the orders convening the scheme meeting and with the Supreme Court (Corporations) Rules; compliance with the disclosure obligations under s 412(1) of the Act; the passage of the approval resolution by the requisite majorities required by s 411(4)(a)(ii) of the Act; the satisfaction of relevant conditions precedent; and satisfaction of s 411(17) of the Act.
Applying these principles in this case, the affidavit evidence to which I have referred establishes compliance with the Court's orders convening the scheme and with applicable requirements of the Corporations Rules. I am satisfied that there was proper disclosure; the resolutions giving effect to the scheme were passed by the requisite majorities at the scheme meeting; and the excluded shares were not voted at the scheme meeting. The evidence establishes satisfaction of conditions precent, other than as to Court approval which would be satisfied by the orders sought at this hearing and, as I have noted above, ASIC has no objection to the scheme for the purposes of s 411(17)(b) of the Corporations Act.
Mr Oakes also draws attention to the substantial support of the shareholders for the scheme as reflected in the voting results at the scheme meeting; the independent expert's opinion that the scheme is fair and reasonable and in the best interests of Windlab Shareholders; the directors' recommendation that Scheme Shareholders vote in favour of the scheme resolution; the disclosure of the potential benefits and disadvantages of the scheme in the scheme booklet. He submits that Windlab has brought to the Court's attention all matters that could be considered relevant to the exercise of the Court's discretion and that there is nothing to suggest that the scheme has been proposed other than in good faith or that the shareholders voted other than in good faith or that any shareholder was oppressed; and points out that the scheme contains measures to protect shareholders against performance risk.
I am satisfied that an intelligent and honest man or woman who was a shareholder in Windlab, properly informed and acting alone, might approve the scheme, as the requisite majority of shareholders by number and votes have done. None of the matters which I addressed in my judgment in respect of the application to convene the scheme meeting would warrant a refusal to approve the scheme at this hearing. I am also satisfied that, as the scheme will not involve a modification of any rights of shareholders or of creditors or of persons dealing with Windlab, there is no need to require compliance with s 411(11) of the Act.
[4]
Orders
For these reasons, I made the orders sought by Windlab at the second Court hearing on 12 June 2020.
[5]
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Decision last updated: 31 July 2020