Japara Healthcare Limited, in the matter of Japara Healthcare Limited (No 2) [2021] FCA 1317

Japara Healthcare Limited, in the matter of Japara Healthcare Limited (No 2) [2021] FCA 1317 - FCA 2021 case summary — Zoe

[5]

Applicable principles 11 I discussed the applicable principles in Re Verdant Minerals Ltd (No 2) [2019] FCA 841 at [6]-[7]. For ease of reference, I incorporate the substance of those paragraphs into these reasons in the following paragraphs. 12 In approving a scheme of arrangement, the role of the Court is supervisory, requiring the Court to be satisfied that there has been no oppression and that the compromise or arrangement is one that is capable of being accepted by shareholders looking to their own commercial advantage. In Re NRMA Ltd (No 1) (2000) 156 FLR 349 (Re NRMA Ltd) at [41], Santow J quoted with approval the following passage from Renard IA and Santamaria JG, Takeovers and Reconstructions in Australia (Butterworths, Sydney, 1990, loose-leaf), at [1523]: … the court will determine: (1) whether all the conditions required by s 411 have been complied with; (2) whether the majority of members or creditors, though acting regularly, have acted in good faith and not in pursuit of some illegitimate purpose; and (3) whether the proposal was "at least so far fair and reasonable, as that an intelligent and honest man, who is a member of that class, and acting alone in respect of his interest as such member, might approve it".* Fundamentally, the jurisdiction is supervisory; the court is concerned to be satisfied that there has been an absence of oppression and that the compromise or arrangement is one which is capable of being accepted: see Re Dorman Long & Co Ltd [1934] Ch 635; Scottish Insurance Corp Ltd v Wilsons and Clyde Coal Co Ltd [1949] AC 462 at 486. * Per Fry LJ in Re Alabama, New Orleans, Texas and Pacific Junction Railway Co [1891] 1 Ch 212 at 247. 13 In deciding whether to give final approval to a scheme of arrangement, the Court will typically wish to be satisfied of the following matters: (a) that the orders of the Court convening a meeting of members were complied with; (b) that the meeting of members so convened has approved the scheme with the requisite majority; (c) that all the statutory requirements have been complied with; (d) that the majority of members have acted in good faith and not for any illegitimate purpose; (e) there is no suggestion of oppression of any minority; (f) that the scheme is fair and reasonable so that an intelligent and honest person, who is a member and acting alone in respect of his or her interest as a member, might approve it; (g) that there was full and fair disclosure to members of all information material to the decision whether to vote for or against the scheme; and (h) that 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. See Re NRMA Ltd at [41] per Santow J; Re Seven Network Ltd (No 3) (2010) 267 ALR 583 at [31]-[44] per Jacobson J; Re Solution 6 Holdings Ltd (2004) 50 ACSR 113 at [18]-[21]; Re Signature Capital Investments Ltd (No 2) [2016] FCA 385 at [4]; Re Medical Australia Ltd (No 2) [2017] FCA 1429 at [4]-[5]; Re Permanent Trustee Co Ltd (2002) 43 ACSR 601 at [8]-[10]; and Re Healthscope Ltd (No 2) (2019) 136 ACSR 259 at [6]-[7], [11]-[14].

[10]

Low voter turnout 25 The number of shares voted at the Scheme Meeting as a percentage of Japara's total issued share capital was 51.43%, and the number of shareholders who voted as a percentage of the total number of Japara's shareholders was 12.53%. 26 Although the level of shareholder turnout of 12.53% may be considered relatively low, Japara submits, and I accept, that this does not give rise to any concern that shareholders were deterred from attending the Scheme Meeting or did not have notice of it. 27 The leading authority on the court's approach to low voter turnout is Re TriAusMin Ltd (No 2) [2014] FCA 833 where Farrell J approved a scheme where 10.94% of shareholders, holding 52.90% of shares, voted at the scheme. Her Honour held as follows (at [10]): Although the statutory requirement under s 411(4)(a)(ii) has been satisfied, it is the usual practice of the Court at the second court hearing to consider the number of the shareholders who attended the Scheme Meeting in person or by proxy. Low shareholder turnout may be an indication that some procedural irregularity occurred. It is inappropriate to assume (in the absence of complaint) that shareholders who did not vote either did not have the notice of the meeting or were silent in protest of the scheme ... apathy should not be presumed to be antagonism: [Re Matine Limited (1998) 28 ACSR 268 at 295 per Santow J]. 28 Her Honour's analysis has been applied in a number of subsequent cases: see Re Sienna Cancer Diagnostics Limited (No 2) [2020] FCA 1088 (Re Sienna Cancer Diagnostics) at [33]-[34] and cases there cited; see also Re Amcor Ltd (No 2) [2019] FCA 842 at [18]-[20] per Beach J. 29 Japara submits, and I accept, that the low voter turnout in the present case does not give rise to any concern that shareholders were deterred from attending or did not have notice of the Scheme Meeting. In particular: (a) there is nothing to suggest any irregularity in dispatch of material to the shareholders; (b) shareholders were provided with notice of the Scheme Meeting; (c) there is no evidence of any issue that would have deterred shareholders from voting at or from attending the Scheme Meeting, and Japara has not received any complaint from any shareholder that they did not receive notice of the Scheme Meeting; and (d) those shareholders who did vote, voted overwhelmingly in favour of the Scheme. 30 In addition, the level of voter turnout is consistent with (and higher than) the voter turnout for Japara's Annual General Meetings held between 2018 and 2020.

[14]

Exercise of discretion 41 As noted above, ASIC has issued a "No objection under s 411(17)(b)" letter, stating that ASIC has no objection to the Scheme. 42 At the time of the hearing on 25 October 2021, Japara had not received notice that any person intended to appear at the hearing to oppose the Scheme. No person wishing to object to the Scheme sought to appear at the hearing. 43 In my view, this is an appropriate case for the Court to make an order approving the Scheme pursuant to s 411(4)(b) of the Corporations Act. In reaching this view, I have had regard to the role of the Court (as described earlier) and to the following matters: (a) the overwhelming support of the Japara Shareholders as reflected in the voting results of the Scheme Meeting. I note that courts generally take the view that shareholders are in the best position to judge whether an arrangement is in their commercial interests, and the court should be reluctant to make a decision contrary to the views expressed by the shareholders at the meeting; (b) the recommendation from all Japara directors that Japara Shareholders vote in favour of the Scheme, for the reasons given in the Scheme Booklet, and the fact that the directors stated their intention to vote all of the Japara Shares held or controlled by them in favour of the Scheme; (c) the opinion of the independent expert that the Scheme is fair and reasonable and in the best interests of Japara Shareholders; (d) the disclosures in the Scheme Booklet which set out a detailed description of the proposed Scheme, including the potential benefits and disadvantages of the Scheme; (e) there is no application to oppose the orders approving the Scheme, and no evidence as to any oppression in the conduct of the Scheme Meeting; (f) the Scheme contains measures to protect shareholders against performance risk; (g) 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 and for proper purposes; and (h) there is no suggestion of oppression of any minority, and no evidence that any third party will be disproportionately adversely affected by the operation of the Scheme.

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