McGraw Hill Financial Inc v Clurname Pty Ltd

Federal Court of Australia|2020-04-30|Before: Jagot J

The Originating Process filed 24 April 2020 is listed for hearing at 10:15am on 11 May 2020 (First Scheme Hearing).
Pursuant to ss 411 and 1319 of the Corporations Act 2001 (Cth) (Act), if at the First Scheme Hearing the Court makes orders in accordance with the relief sought in prayers 1 - 3 of the Originating Process, then the following orders will apply to the conduct of the meeting (Scheme Meeting) of the Plaintiff's members (Scheme Shareholders) convened by the Court under s 411 of the Act: (a) the Scheme Meeting be conducted as a virtual meeting using audio and audio-visual technology without any requirement for a physical gathering of two or more persons; (b) the Chair, members of the board of directors of the Plaintiff and the Plaintiff's Chief Financial Officer, and such other officers and employees of the Plaintiff as it thinks fit, be given access to the Scheme Meeting online via a website in such manner as the Plaintiff thinks fit; (c) Scheme Shareholders and proxyholders be given access to the Scheme Meeting online via a website or an application on their mobile device (mobile App) using registration procedures, login procedures and passwords provided to them and explained in the Notice of Meeting; (d) the Plaintiff provide website and mobile access to the Scheme Meeting for such other persons (Guests) as it thinks fit; (e) Scheme Shareholders and proxyholders be permitted to participate in discussion and voting at the Scheme Meeting through the use of audio and audio-visual technology as follows: (i) Scheme Shareholders and proxyholders are to be permitted to submit questions or motions in writing to the moderator of the Scheme Meeting for consideration by the Chair during the meeting, subject to the functions and powers of the Chair under the Plaintiff's Constitution and the general law; (ii) any procedural motions, if accepted by the Chair, may be dealt with by vote of Scheme Shareholders and proxyholders using the voting procedures available through the website and mobile App as if on a show of hands; (iii) voting on the resolution to approve the Scheme is to be conducted by way of a poll; (iv) all voting on a poll at the Scheme Meeting will be by vote using the voting procedures on the website and mobile App, and using technology made available to the Plaintiff to count the number of votes cast by Scheme Shareholders and proxyholders and the number of shares to which each vote relates, so that information will be available for the Chair to determine whether the voting requirements of s 411(4)(a)(ii) of the Act have been satisfied; (v) the Plaintiff to make use of technology to exclude the counting of any vote by a proxyholder where the Scheme Shareholder who has appointed the proxyholder has also cast a vote; and (vi) the Plaintiff must have available at all times during the Scheme Meeting a helpline to assist Scheme Shareholders and proxyholders who experience technical difficulties with voting or participation in the meeting; (f) Subject to the Court's orders set out above, the provisions of Part 2G.2 of the Act (save for any replaceable rule) that apply in relation to meetings of the Plaintiff's members, and the provisions Plaintiff's Constitution that apply in relation to meetings of the Plaintiff's members and are not inconsistent with Part 2G.2, will apply to the conduct of the Scheme Meeting.

The proceedings 1 This is an interlocutory application in which the plaintiff, as the applicant, seeks orders pursuant to ss 411 and 1319 of the Corporations Act 2001 (Cth) (the Act), so that if the Court makes an order convening a meeting of the members of the plaintiff, as sought in the originating process, that meeting may be conducted as a virtual meeting without requiring the physical presence of two or more persons in the same place. 2 It is not necessary, in the context of the present application, to explain the proposed scheme of arrangement in relation to the plaintiff. What is relevant for present purposes is that, if it were not already common knowledge, I have evidence before me of various legislative changes in respect of the gathering and assembly of people that have been introduced in response to the COVID-19 pandemic. It goes without saying that these legislative changes have affected the ability of the plaintiff to follow its usual practice of convening and holding its general meetings in Victoria. 3 This is why the plaintiff seeks orders to enable a virtual meeting of its members to occur. The object of these arrangements is to ensure that the meeting can occur in a way which will not result in the members of the plaintiff violating any of the legislative restrictions or placing their health at risk.

Sections 411 and 1319 of the Act 4 In the written submissions for the plaintiff, reference has been made to the terms of both s 411 and s 1319 of the Act. 5 The submissions for the plaintiff refer to the judgment of McKerracher J in Amcom Telecommunications Limited, in the matter of Amcom Telecommunications Limited (No 4) [2015] FCA 720; (2015) 107 ASCR 341 at [44], in which his Honour emphasised that "the Court's statutory power as to the making of orders for meetings under s 411(1) as supplemented by s 1319 is broad." 6 Reference has also been made to the Court's broad power under r 1.32 of the Federal Court Rules 2011 (Cth) to make "any order that the Court considers appropriate in the interests of justice", as well as r 1.33, which provides that "the Court may make an order subject to any conditions the Court considers appropriate." 7 In McGraw Hill Financial Inc v Clurname Pty Ltd [2017] FCAFC 211; (2017) 123 ACSR 467 at [25], the Full Court (Allsop CJ, Jagot and Yates JJ) said: Rules 1.32 to 1.35 are important weapons in the Court's armoury to enable the overarching purpose of the 'civil practice and procedure provisions'… to be achieved as identified in section 37M(1) of the [Federal Court of Australia Act 1976 (Cth)]. The overarching purpose is to facilitate the just resolution of disputes according to law, as quickly, inexpensively and efficiently as possible. 8 I accept the submission for the plaintiff that the orders sought in the present application will facilitate the efficient implementation of a proposed commercial restructuring transaction according to law in the difficult circumstances posed by COVID-19.

Recent decisions regarding the holding of virtual meetings 9 My attention has been drawn to two recent decisions of the Court involving the holding of virtual meetings, albeit in different contexts. The first is Eagle, in the matter of Techfront Australia Pty Limited (administrators appointed) [2020] FCA 542, in which Farrell J made orders which, amongst other things, permitted company administrators to hold meetings of creditors during the administration by telephone or audio-visual conference in place of a physical meeting. Similar orders were made for the conduct of meetings of any committee of inspection formed by the creditors. 10 Subsequently, in Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) [2020] FCA 571, Middleton J allowed an application by administrators to hold, amongst other things, creditors' meetings by video-link or telephone rather than in person. 11 There appears to be some issue between the two decisions in the treatment of the requirement that a place for the meeting be specified. 12 It has also been pointed out to me that the Australian Securities and Investment Commission (ASIC) has adapted its approach to meetings of companies in response to the COVID-19 pandemic, issuing guidelines regarding upcoming annual general meetings of companies and financial reporting requirements. 13 Reference has been made in these submissions for the plaintiff to a potential issue arising under the constitution of the plaintiff. The provisions of the constitution governing meetings are at cll 28 to 40. Clause 32.1 of the constitution provides that a general meeting can only transact business if a quorum of members is present, while cl 32.2 of the constitution provides that a quorum is three members. It is submitted that, on one view, these clauses do not permit the scheme meeting to be held as a virtual meeting using audio and audio-visual technology without a physical gathering of two or more persons.

Discussion 14 I accept the plaintiff's submission that since the scheme meeting is a meeting to be ordered by the Court under s 411(1) of the Act, the constitution of the company concerned may be overridden by the exercise of the statutory power if the Court sees fit, and in the present case I do see fit. 15 I accept the submissions for the plaintiff that the Court's powers under ss 411 and 1319 of the Act allow for the ordering of a virtual scheme meeting by the Court, notwithstanding the provisions of the plaintiff's constitution. The affidavit evidence before me discloses that the plaintiff intends to appoint its usual provider of share registry services - Computershare Investor Services Pty Limited (Computershare) - to provide the meeting and the live webcast that will accompany the meeting. 16 The affidavit evidence discloses that Computershare will engage the services of the third party provider Lumi Holdings Limited (Lumi) to provide the technology that will enable shareholders and property holders to register, observe, lodge questions or motions, and vote during the scheme meeting. This will occur by way of Lumi's website and, as an alternative for shareholders, by Lumi's pre-downloaded application on a security holder's mobile device. The webcast of the scheme meeting will also be able to be viewed through the plaintiff's website. 17 The evidence satisfies me that the holding of the meeting using the technology proposed will enable effective participation in the meeting and voting as well as the recording of voting as required. I accept the submissions of the plaintiff that by conducting the scheme meeting as a virtual meeting in the manner and by means of the audio and audio-visual technology described above, security holders of the plaintiff will have a reasonable opportunity to observe and participate in the scheme meeting and cast their vote on a scheme in a way that satisfies both the requirements of ASIC as well as those of the Act 18 In terms of ASIC, there is evidence that the plaintiff has been in communication with ASIC. ASIC has advised that it does not currently intend to appear at the hearing of the interlocutory application. It is aware of the arrangements which are to be made for the virtual meeting to take place. In these circumstances, it seems to me that the plaintiff's proposal is the only practicable and reasonable manner in which the scheme meeting can take place. Orders will be made as sought. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot.

Court of Australia Act 1976(Cth)

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (5 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (4)