Legend Corporation Limited, in the matter of Legend Corporation Limited (No 2) [2019] FCA 1444

Introduction 1 On 5 July 2019, I made orders convening a meeting of the holders of ordinary shares of the plaintiff, Legend Corporation Limited (ACN 102 631 087) (Legend), pursuant to s 411(1) of the Corporations Act 2001 (Cth) (Act) in relation to a proposed scheme of arrangement (Scheme): Re Legend Corporation Limited [2019] FCA 1249. 2 On 22 July 2019, Justice Moshinsky made orders in relation to the dispatch to Legend shareholders of certain corrective disclosure documents. 3 On 9 August 2019, at the meeting of members convened pursuant to those orders, the Scheme was approved by 99.52% of votes cast on the resolution and by 92.42% of members present and voting either in person or by proxy. Accordingly, the requirements specified in s 411(4)(a) of the Act have been met. 4 At the second court hearing held on 16 August 2019, Legend sought an order under s 411(4)(b) of the Act approving the Scheme. No shareholder or other person appeared at the hearing to object to the Scheme. 5 At the conclusion of the hearing, I made the orders sought by Legend. These are my reasons for doing so.

Overview of the Scheme 6 The Scheme is described in my decision convening the Scheme meeting referred to above. The Scheme provides for the transfer of all Legend shares to Greenland BidCo Pty Ltd (BidCo) in consideration for a cash payment by BidCo of $0.365 per share, less the cash amount of any special dividend declared and paid by Legend. On 9 August 2019, the Board of Legend declared a special dividend of $0.07 per share. 7 Accordingly, if the Scheme is approved by the Court, then on the Implementation Date (which is anticipated to be 30 August 2019): (a) Scheme shareholders who were listed on the share register on the record date (at 7pm on 21 August 2019) will be paid the Scheme consideration of $0.295 per share plus a special dividend of $0.07 per share; and (b) all Legend shares will be transferred to BidCo and Legend will become a wholly owned subsidiary of BidCo and will be delisted from the ASX.

Relevant principles 8 Section 411(4) of the Act provides that an arrangement is binding on members and Legend only if: (a) at a meeting of members, it is passed by a majority of members present and voting (in person or by proxy) and by 75% of votes cast; and (b) it is approved by order of the Court. 9 Section 411(6) of the Act provides that the Court may grant approval subject to such alterations or conditions as it thinks just. 10 In Re Alabama, New Orleans, Texas and Pacific Junction Railway Company [1891] 1 Ch 213 at 247, Fry LJ described the role of the Court in applications of this type as follows: … the Court is bound to ascertain that all the conditions required by the statute have been complied with; it is bound to be satisfied that the proposition was made in good faith; and, further, it must be satisfied that 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 a member, might approve of it. What other circumstances the Court may take into consideration I will not attempt to forecast. 11 In deciding whether to grant approval of a scheme of arrangement, the Court will ordinarily have regard to 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 other statutory requirements have been satisfied; (d) that the Scheme 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; (e) that there has been full and fair disclosure to members and creditors of all information material to the decision whether to vote for or against the applicable scheme; and (f) 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, for example, Re Solution 6 Holdings Ltd (2004) 50 ACSR 113 at [18]-[24]; Re Permanent Trustee Co Ltd (2002) 43 ACSR 601 at [8]-[10]; Re Central Pacific Minerals NL [2002] FCA 239 at [12]-[14]; Re Seven Network Ltd (No 3) (2010) 267 ALR 583 at [35]-[39]; 77 ACSR 701; Re Signature Capital Investments Ltd (No 2) [2016] FCA 385; Re Medical Australia Ltd (No 2) [2017] FCA 1429.

Compliance with Orders convening the meeting 12 An office copy of the orders I made on 5 July 2019 (Convening Orders) was lodged with ASIC on 8 July 2019 as required by r 3.5(b) of the Federal Court (Corporations) Rules 2000. 13 The explanatory statement (which is included in the Explanatory Booklet) was registered by ASIC on 8 July 2019 prior to being sent to Scheme shareholders in accordance with s 412(6) of the Act. 14 The Convening Orders required that the Scheme meeting be convened by sending the following documents to each Scheme shareholder: a document substantially in the form set out at Tab 2 of Exhibit AC3 to the affidavit of Alberto Colla sworn 5 July 2019 (the Explanatory Booklet) and a proxy form for the Scheme meeting. The Explanatory Booklet and the proxy form were required to be sent by the following methods: (a) in the case of Scheme shareholders whose registered address is in Australia, by ordinary post; and (b) in the case of Scheme shareholders whose registered address is outside Australia, by airmail or international courier service addressed to the relevant addresses recorded in Legend's register. 15 Based on the evidence adduced at the hearing, I am satisfied that those requirements were complied with. 16 On 7 August 2019, a notice advertising the hearing listed for 16 August 2019 was published in The Australian newspaper in accordance with Order 12 of the Convening Orders.

Passing of the approval resolutions 17 The Scheme meeting was held at the Adelaide Pavilion Restaurant in the Veale Gardens, corner South Terrace and Peacock Road, Adelaide, South Australia, on 9 August 2019 commencing at 2.00pm (as required by Order 3 of the Convening Orders). 18 In accordance with Order 8 of the Convening Orders, the Scheme meeting was chaired by Mr Bruce Higgins. 19 In accordance with Order 6 of the Convening Orders, voting on the resolution in favour of the Scheme was conducted by way of poll. 20 Neither Mr Paul Cenko of KPMG, Legend's auditor (as scrutineer) nor Mr Graham Seppelt, Legend's company secretary (as returning officer), reported any issues or concerns to Mr Higgins in relation to the conduct of the Scheme meeting or the conduct of the poll. The resolution in favour of the Scheme was passed by 99.52% of votes cast on the resolution and by 92.42% of members present and voting either in person or by proxy. Accordingly, the statutory majorities set out in ss 411(4)(a)(ii)(A) and (B) of the Act have been satisfied.

Full and fair disclosure to members 21 As noted above, the explanatory statement contained in the Explanatory Booklet was registered by ASIC prior to dispatch as required by s 412(6) of the Act. The content of the explanatory statement provided to members was considered at the first court hearing. I am satisfied that the explanatory statement contained in the Explanatory Booklet satisfies the requirements in ss 411(3) and 412 of the Act. 22 Legend adduced evidence of the conduct of the Scheme meeting including the address given by the chairman and the questions and answers that followed. I am satisfied that, through the Explanatory Booklet and further consideration given to the Scheme at the Scheme meeting, there has been full and fair disclosure to members of all information material to the decision whether to vote for or against the Scheme.

Is the Scheme fair and reasonable? 23 When making orders convening the Scheme meeting, I concluded that the Scheme was fit for consideration by the members of Legend. In reaching that conclusion, I noted that the question whether to accept particular consideration for shares is quintessentially a commercial matter for members to assess. Nevertheless, the Court's role is also to scrutinise the terms of a scheme to satisfy itself that there is no element of unfairness. In respect of the present Scheme, I considered it relevant that: (a) all directors recommended that shareholders vote in favour of the Scheme; (b) all directors intended to vote their Legend shares in favour of the Scheme; and (c) the independent expert, Lonergan Edwards & Associates Limited, opined that in the absence of a superior proposal, the Scheme is fair and reasonable and is in the best interests of Legend shareholders. 24 There is no evidence of opposition to approval by the Court, or as to oppression in the conduct of the meeting of members. 25 In my view, the Scheme is fair and reasonable in the sense that an intelligent and honest person who was a shareholder of Legend, properly informed and acting alone, might approve the Scheme.

Conditions Precedent 26 Clause 3.1 of the Scheme stipulates that the Scheme is conditional upon and will not become effective unless the following conditions precedent are satisfied: (a) all of the conditions in clause 3.1 of the Scheme Implementation Agreement (other than the condition relating to Court approval of the Scheme) are satisfied or waived in accordance with the terms of the Agreement by 10am on the second court hearing date; (b) neither the Scheme Implementation Agreement nor the Deed Poll is terminated in accordance with its terms before 10am on the second court hearing date; (c) the Court has approved the Scheme pursuant to s 411(4)(b) of the Act, including with any alterations made or required by the Court under s 411(6) of the Act as are agreed to in writing by Legend and BidCo; (d) such other conditions made or required by the Court under s 411(6) of the Act as are acceptable to Legend and BidCo are satisfied or waived; and (e) the order of the Court approving the Scheme under s 411(4)(b) of the Act becomes effective. 27 Clause 3.5 of the Scheme Implementation Agreement sets out a regime for certificates to be provided by Legend and BidCo to the Court regarding the satisfaction or waiver of conditions precedent. 28 There has been some discussion in the cases whether, at the second court hearing to approve a scheme which is subject to conditions precedent, there is a need for primary evidence as to the satisfaction of the conditions precedent or whether it is sufficient for the parties to provide certificates confirming that the conditions have been satisfied or waived: see for example Re Fiducian Investment Management Services Limited (No 2) (2015) 228 FCR 587 (at [44] to [49]) and Re Wesfarmers Ltd [2018] WASC 308 (at [128] and [129]). In my view, the answer to that question depends upon the subject matter of the condition and the possible effect on members' interests if the condition is waived rather than satisfied. If the failure of a condition precedent may adversely affect the interests of members, the Court may require primary evidence of satisfaction rather than a certificate stating that the condition has been "satisfied or waived" (an illustration is given by Re Spicers Ltd (No 2) [2019] FCA 1110 at [26]-[37]). On the other hand, the subject of a condition may be such that it is incapable, in a practical sense, of proof by primary evidence: for example, a condition that there has been no adverse change in the financial position of a company. 29 In the present matter, Legend and BidCo each provided to the Court a signed certificate confirming that, in respect of matters within their knowledge, each of the conditions precedent: (a) in clause 3.1 of the Scheme Implementation Agreement (other than the condition relating to Court approval of the Scheme) has been satisfied or waived in accordance with the terms of the Agreement; and (b) in clauses 3.1(a) and (b) of the Scheme has been satisfied. 30 The Schedule to each of the conditions precedent certificates provided to the Court contained primary evidence (where available) regarding the satisfaction of those conditions precedent. In my view, no issues arose with respect to the interests of members from those certificates and the supporting evidence.

Section 411(17) 31 Section 411(17) of the Act provides that the Court must not approve a compromise or arrangement unless: (a) it is satisfied that the compromise or arrangement has not been proposed for the purpose of enabling any person to avoid the operation of any of the provisions of Chapter 6; or (b) there is produced to the Court a statement in writing by ASIC to the effect that ASIC has no objection to the compromise or arrangement, but the Court need not approve a compromise or arrangement merely because a statement by ASIC that it has no objection to the compromise or arrangement has been produced to the Court as mentioned in s 411(17)(b). 32 Legend provided the Court with a letter from ASIC issued pursuant to s 411(17)(b) of the Act stating that ASIC has no objection to the Scheme. In those circumstances, there is no need for the Court to consider s 411(17)(a), particularly where no issue has been raised concerning Ch 6 of the Act by any person: Re Tatts Group Ltd (No 2) [2017] VSC 770.

Have all necessary matters been brought to the attention of the Court? 33 At the first hearing, Legend notified the Court of several matters warranting the attention of the Court. These matters were considered by the Court: Re Legend Corporation Limited [2019] FCA 1249 at [29]-[80]. In my view, none of those issues justifies the Court refusing to approve the Scheme.

Orders sought 34 For the reasons given, I made the order sought by Legend approving the Scheme pursuant to s 411(4)(b) of the Act. 35 Legend also sought an order under s 411(12) of the Act exempting it from compliance with s 411(11), which requires a copy of the Court's order under s 411(4)(b) to be annexed to the company's Constitution. An order under s 411(12) is appropriate in circumstances where the Scheme does not amend Legend's Constitution and where, upon implementation, Legend will become a wholly owned subsidiary of BidCo: Re Toll Holdings Ltd (No 2) [2015] VSC 236 at [18]-[19]. I therefore made that order. I certify that the preceding thirty-five (35) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice O'Bryan.