In the matter of WPP AUNZ Limited [2021] NSWSC 520

In the matter of WPP AUNZ Limited [2021] NSWSC 520 | Case summary | Zoe

Background and affidavit evidence

On 16 March 2021, I made orders convening a scheme meeting and ancillary orders in respect of a scheme of arrangement proposed by WPP AUNZ Limited ("WPPA"). I set out my reasons for making those orders in my Judgment published on 16 April 2021 ([2021] NSWSC 388). At a second Court hearing on 23 April 2021, WPPA sought orders under s 411(4)(b) of the Corporations Act 2001 (Cth) approving a proposed scheme of arrangement between WPPA and scheme participants, being all holders of ordinary shares in WPPA other than Excluded Shareholders (as defined in the Scheme Implementation Deed dated 25 December 2020) ("SID") as, broadly, WPP plc and each of its Related Bodies Corporate and any person who holds WPPA shares on its or their behalf). I made the orders sought at the hearing on 23 April 2021. These are my reasons for making those orders.
At the second Court hearing, WPPA relied on the affidavit dated 21 April 2021 of Mr Mactier, an independent non-executive director and the chairman of WPPA, who acted as chair of the scheme meeting held on 21 April 2021. He refers to several questions from the floor of the meeting, and to a question which had been submitted to the share registry prior to the scheme meeting. He also refers to the poll which was then taken on the relevant resolutions, which was passed by a substantial majority of over 96% of votes cast and 87.5% of the number of holders. Mr Mactier's evidence was that no-one present at the scheme meeting indicated that he or she intended to appear at the second Court hearing to oppose the scheme, and that WPPA had not received any Superior Proposal (as defined in the scheme booklet) for the acquisition of its shares since the scheme was first announced.
WPPA also relies on the affidavit dated 21 April 2021 of Mr Richard Powell, an account director employed by Computershare Investor Services Pty Ltd, which provided services to WPPA in relation to the scheme. Those services extended to the dispatch of materials relating to the scheme and the provision of a live webcast of the scheme meeting and facility for shareholders to submit questions in relation to the scheme, for voting by scheme participants and the payment of the scheme consideration. Mr Powell addressed the dispatch of scheme materials, including materials in electronic and hard copy form, the receipt of proxies, the registration of attendees for the scheme meeting, and voting at the scheme meeting, and indicated the results of the scheme meeting, consistent with Mr Mactier's evidence to which he referred above. Mr Powell noted that the percentage of shareholders, by number, who voted at the scheme meeting was significantly larger than the percentage of voters who typically voted at annual general meetings of WPPA, although still low in absolute terms at 21.70%, and the percentage of shares voted at that meeting was slightly lower than at annual general meetings, although that was explicable where the major shareholder in WPPA shares was excluded from voting at the scheme meeting.
WPPA also relied on the affidavit dated 21 April 2021 of its solicitor, Ms Stone, who referred to the registration of the scheme booklet with the Australian Securities and Investments Commission ("ASIC"), the advertisement of the second Court hearing, the announcement of the results of the scheme meeting to Australian Securities Exchange, and to the identity of the only Excluded Shareholder for the purposes of the scheme, namely Cavendish Square Holding BV, an indirect wholly owned subsidiary of WPP plc, which currently holds 61.5% of the issued share capital of WPPA. WPPA also tendered a letter dated 22 April 2021 from the ASIC which advised that, under s 411(17)(b) of the Act, ASIC had no objection to the proposed scheme (Ex A1). WPPA also tendered a condition precedent certificate executed in counterparts by WPPA and WPP plc (Ex A2).

[3]

The applicable principles

I first set out the applicable principles, and I have drawn on my judgments in Re TPG Telecom Ltd [2020] NSWSC 978 at [7]ff and Re Coca-Cola Amatil Limited [2021] NSWSC 489 and Mr Jackman's submissions in doing so. Section 411(4) of the Corporations Act has the effect that an arrangement is binding on WPPA and scheme shareholders if 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.
At the second Court hearing, the Court will first determine whether the procedural requirements in respect of the scheme have been satisfied and then exercise its discretion as to whether or not to approve the scheme: 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]. 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, and will have due regard to members' assessment of their interests as manifested in the voting at the scheme meeting, and will recognise that shareholders are generally "the best judges of whether an arrangement is to their commercial advantage", and will therefore "be reluctant to make decisions contrary to the views of security holders expressed at meetings": Re NRMA Ltd (No 2) (2000) 156 FLR 412; [2000] NSWSC 408 at [22]; Re Central Pacific Minerals NL above at [13]; Re Seven Network Ltd (2010) 77 ACSR 701; [2010] FCA 400; at [31]; Re Atlas Iron Ltd (No 2) [2016] FCA 481 at [5].
The Court will generally take several matters into account in the exercise of its discretion, including whether scheme members have voted in good faith and not for an improper purpose; whether 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; 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; whether there has been full and fair disclosure of all information material to the decision; whether minority shareholders would be oppressed by the scheme; whether the scheme offends public policy; and whether the interests of other groups who are not parties to, but are affected by, the scheme are dealt with appropriately: Corporations and Markets Advisory Committee report, Members' schemes of arrangement, 2009, pp 49-52; Re Permanent Trustee Co Limited (2002) 43 ACSR 601; [2002] NSWSC 1177 at [8]-[10]; Re Solution 6 Holdings Ltd (2004) 50 ACSR 113; [2004] FCA 1049 at [18]-[24]; Re Seven Network Limited above at [35]-[40]; Re Texon Petroleum Ltd (No 2) [2013] FCA 147 at [6]-[17]; Re David Jones Limited (No 3) [2014] FCA 753 at [3]; Re GBST Holdings Ltd [2019] NSWSC 1503 at [11]; Aveo Group above at [15].
In Re Amcor Limited (No 2) [2019] FCA 842 at [7]-[11], Beach J summarised the applicable principles 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."

[4]

WPPA's submissions and determination

Mr Jackman submits, and I accept, that the evidence to which I referred above established that WPPA has complied with the orders made at the first Court hearing in respect of the dispatch of the scheme booklet to scheme participants, the scheme meeting and the return and lodgement of proxy forms was conducted in accordance with those orders. That evidence also establishes that the requisite majority for the purposes of section 411(4)(a) of the Act were satisfied at the scheme meeting, and voting participation rates were broadly comparable to the voting participation rates at WPPA's annual general meetings between 2018 and 2020. Mr Jackman also submits, and I accept, that relatively low shareholder turnout does not prevent the Court from making orders approving a scheme of arrangement: Re Saracen Mineral Holdings Ltd [No 2] [2021] WASC 32 at [46]. WPPA published a notice of the Court hearing for approval of the scheme in a national newspaper on 14 April 2021.
Mr Jackman submits that the Court should conclude that the scheme is fair and reasonable. The evidence establishes that an Independent Board Committee established by WPPA unanimously recommended that scheme participants vote in favour of the scheme, in the absence of a Superior Proposal (as defined in the scheme booklet) and subject to the independent expert maintaining his conclusion that the scheme is in the best interests of scheme participants. The independent expert appointed by WPPA expressed the view that the scheme is fair and reasonable, and is therefore in the best interests of scheme participants, in the absence of a Superior Proposal. WPPA has not received any Superior Proposal for the acquisition of WPPA shares held by scheme participants since the scheme was first announced. As I have noted above, the scheme was approved by the requisite majorities of scheme participants; no notice of appearance was served on WPP from any person in relation to the second Court hearing; and no shareholder appeared at that hearing to oppose the scheme. I have addressed the evidence as to satisfaction of conditions precedent in respect of the scheme above.
There is here no reason to doubt that the substantial number and majority of scheme members who voted in favour of the scheme here did so in good faith and for a proper purpose, and no reason to doubt that 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. There is also no reason to doubt that WPPA has brought to the Court's attention the matters that could be considered relevant to the exercise of the Court's discretion, or to doubt that there has been full and fair disclosure of all information material to the decision whether to approve the scheme. There is no element of oppression to minority shareholders in the scheme and there is no other aspect as to which the scheme might offend public policy, or adversely affect the interests of other groups who are not parties to the scheme.
Mr Jackman draws attention to one issue that arises in respect of the late dispatch of the notice of the scheme meeting to WPPA's directors. He recognises that s 249HA of the Act provides that at least 28 days' notice must be given of a meeting of a listed company's members and that s 249J requires that written notice of a meeting of a company's members be given individually to each director of the company. The notice of meeting was emailed to five directors of WPPA who are not shareholders four days before the scheme meeting, on 17 April 2021. Two of those directors attended the scheme meeting and the three other directors, who are all nominee directors of WPP plc, did not attend that meeting. Mr Jackman submits and I accept that the late dispatch of the notice of meeting to these five directors is a procedural irregularity which has not caused any substantial injustice within the meaning of s 1322(2) of the Act and is automatically validated in the absence of any application to the contrary. It is plain enough that all directors were aware of the matters relating to the scheme and the scheme meeting.
As I noted above, ASIC has confirmed that it has no objection to the scheme and provided a letter to that effect under s 411(17)(b) of the Act, and that letter is sufficient to satisfy the requirements of that section. The definition of "Excluded Shareholders" in the orders to be made by the Court will be amended to refer to the only Excluded Shareholder, Cavendish Square Holding BV, adopting the approach described by Barrett J in Re Prime Infrastructure Holdings Ltd [2010] NSWSC 1337 at [6]-[7]. There is no utility in having this Court order annexed to WPPA's constitution, where that order does not effect any change to the constitution, and WPPA should be exempted from compliance with s 411(11) of the Act in this regard: Re Anaconda Nickel Holdings Pty Ltd (2003) 44 ACSR 229; [2003] WASC 19 at [65]; Re Equinox Resources Ltd (2004) 49 ACSR 692; [2003] WASC 143.

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Judgment (6 paragraphs)

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