Konekt Limited, in the matter of Konekt Limited (No 3) [2019] FCA 2105

1. Pursuant to s 411(4)(b) of the Corporations Act 2001 (Cth), the scheme of arrangement between Konekt Limited (ACN 009 155 971) and holders of fully paid ordinary shares in Konekt in the form set out in exhibit 11, be approved.
2. Pursuant to s 411(12) of the Corporations Act, Konekt Limited (ACN 009 155 971) be exempted from compliance with s 411(11) of the Corporations Act.
3. These orders be entered forthwith. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

FARRELL J: 1 These are the reasons for orders made under ss 411(4)(b) and 411(12) of the Corporations Act 2001 (Cth) approving a proposed scheme of arrangement between Konekt Limited and its shareholders in the form of exhibit 11 in these proceedings. The background to the proposed scheme is to be found in Konekt Limited, in the matter of Konekt Limited [2019] FCA 1811 and Konekt Limited, in the matter of Konekt Limited (No 2) [2019] FCA 1997. 2 On 30 October 2019, the Court made orders that: (1) The scheme meeting to consider whether to approve the scheme be held at 10 am on 3 December 2019 at the offices of Gilbert + Tobin at Level 35, Tower Two, International Towers, 200 Barangaroo Avenue, Sydney. (2) The chairman of the meeting was to be Douglas Flynn. (3) Konekt may determine that only proxy forms received by Konekt no later than 10.00 am on 1 December 2019 are valid. (4) A poll must be taken for the resolution of the vote at the meeting, other than in relation to procedural matters. (5) A scheme booklet substantially in the form of exhibit 1 was to be sent to Konekt shareholders by email or by post. (6) A notice of the second court hearing was to be published in The Australian newspaper five days before the date fixed for the second court hearing. 3 The following evidence was read and tendered at the second court hearing: (1) An affidavit affirmed by Gemma Coyle 4 December 2019 and exhibit GC-1. Ms Coyle is a relationship manager in Issue Services at Computershare Investor Services Pty Ltd. Ms Coyle gave evidence about the following matters: Computershare maintains Konekt's share register; the preparation of scheme materials for despatch, the identification of those shareholders who had opted to receive communications by email and those shareholders, both domestic and overseas, who had elected to receive correspondence by mail; the number of Konekt shareholders (870) as at 21 November 2019 which was relevant to the despatch of supplementary scheme materials in accordance with orders made by this Court on 22 November 2019; the despatch of the scheme booklet and the supplementary scheme materials; monitoring of the share register and the despatch of packages of information to new shareholders during the period 30 October 2019 to 21 November 2019; the receipt and recording of proxies; the registration of attendees at the scheme meeting; voting at the scheme meeting and the production of a poll report. (2) An affidavit affirmed by Rachael Lindy Bassil on 5 December 2019 and exhibit RLB-4. Ms Bassil is a partner at Gilbert + Tobin and she gave evidence concerning: lodging the scheme booklet with the Australian Securities & Investments Commission (ASIC) on 31 October 2019 and ASIC's acknowledgement of its registration; a search of ASIC's records undertaken on 4 December 2019 which demonstrates that the scheme booklet was registered on 31 October 2019; the provision of a supplementary scheme booklet to ASIC on 22 November 2019 substantially in the same form as that despatched to Konekt shareholders; publication on 27 November 2019 in The Australian of notice of the date of the second court hearing; and confirmation that, as at 5 December 2019, no shareholder had advised of an intention to attend the second court hearing to oppose orders being made. (3) An affidavit sworn by Damian Eric Banks on 5 December 2019 and exhibit DEB-4. Mr Banks is the Managing Director and Chief Executive Officer of Konekt. He gave evidence concerning settling the final form of the scheme booklet and the supplementary scheme booklet; the shareholder information line; and the view of the directors concerning the provision of a Dividend Loan by Advanced Personnel Management International Pty Ltd (APM) (or an APM Group Member) to fund the Special Dividend of $0.05 per Konekt Share to be paid on 20 December 2019 (conditional on the scheme becoming effective) as discussed in the scheme booklet at section 8.11. (4) An affidavit sworn by Douglas Ronald Flynn on 5 December 2019 and exhibit DRF-1. Mr Flynn is the chairman of the board of Konekt. Mr Flynn gave evidence that he acted as chairperson of the scheme meeting; the scheme meeting was held at the time and place complying with the Court's orders; the proceedings at the scheme meeting and the results of the poll; draft minutes of the scheme meeting and a notice given to ASX Limited on 3 December 2019 concerning the outcome of the scheme meeting. (5) Exhibit 9, which is ASIC's "usual letter" dated 6 December 2019. The letter indicates that ASIC has no objection to the proposed scheme for the purposes of s 411(17)(b) of the Corporations Act. (6) Exhibit 10, which comprises certificates signed on behalf of Konekt and APM dated as at 9 December 2019 at 8.00 am indicating that all conditions (other than that relating to Court approval of the scheme) have been satisfied. (7) Exhibit 11, which is the scheme of arrangement. 4 The matters the Court must take into account in deciding whether to approve the scheme are well-established. They include: (1) Whether the orders of the Court convening the scheme meeting were complied with; (2) Whether the resolution to approve the scheme was passed by the requisite majority and whether other statutory requirements have been satisfied; (3) Whether all conditions to which the scheme is subject (other than Court approval and lodgement of the Court's orders with ASIC) have been met or waived; (4) Whether the scheme is fair and reasonable so that an intelligent and honest Konekt shareholder, properly informed and acting alone, might approve it. In considering this question, it is not the role of the Court to usurp the decision of shareholders by imposing its own commercial judgement on the scheme or to consider whether a better scheme might have been proposed; (5) Whether Konekt has brought to the attention of the Court all matters that could be considered relevant to the exercise of the Court's discretion; and (6) Whether there was full and fair disclosure to shareholders of all information material to the decision whether to vote for or against the scheme. See Solution 6 Holdings Limited ACN 003 264 006, in the matter of Solution 6 Holdings Limited ACN 003 264 006 [2004] FCA 1049; 50 ACSR 113 at [18]-[24] (Jacobson J); Re Permanent Trustee Company Limited [2002] NSWSC 1177; (2002) 43 ACSR 601 at [8]-[10] (Barrett J); Re Central Pacific Minerals NL [2002] FCA 239 at [8]-[14] (Emmett J); Seven Network Limited (ACN 052 816 789), in the matter of Seven Network Limited (No 3) [2010] FCA 400 at [35]-[39] (Jacobson J). 5 Based on the evidence tendered at the second court hearing, the scheme meeting was convened and held on 3 December 2019 in accordance with the Court's orders. Douglas Flynn acted as the chairperson of the meeting. 183 shareholders of the 870 shareholders recorded on Konekt's register as at 21 November 2019 attended and voted at the scheme meeting. The following results were achieved: For Against Abstain Votes cast 80,247,449 32,248 Nil Members 180 3 Nil Percentage 99.96% 0.04% Nil