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[2021] FCA 1141
Federal Court of Australia
2021-09-20
Mr AJ, McKerracher J
Original judgment source is linked above.
Re Wellcom Group Ltd [2019] FCA 1655 Re Wesfarmers Ltd; Ex Parte Wesfarmers Ltd [2018] WASC 308 Sovereign Life Assurance Co v Dodd [1892] QB 573
Division: General Division
Registry: Western Australia
National Practice Area: Commercial and Corporations
Sub-area: Corporations and Corporate Insolvency
Date of hearing: 20 September 2021
Counsel for the Interested Party: Mr AJ Papamatheos
Solicitor for the Interested Party: Herbert Smith Freehills
ORDERS WAD 202 of 2021 IN THE MATTER OF EMPIRED LIMITED ACN 090 503 843 BETWEEN: EMPIRED LIMITED ACN 090 503 843 Plaintiff
AND: CAPGEMINI AUSTRALIA PTY LIMITED ACN 092 284 314 Interested party
order made by: MCKERRACHER J DATE OF ORDER: 20 SEPTEMBER 2021
RELIEF SOUGHT 1 The Plaintiff, Empired Limited, seeks orders under s 411(1) and s 1319 of the Corporations Act 2001 (Cth) to convene a meeting to consider a scheme of arrangement with its ordinary shareholders (Scheme Meeting), and ancillary relief. The Scheme is to be conducted pursuant to Pt 5.1 of the Act and provides for Capgemini Australia Pty Limited acquiring all of the shares in Empired, for cash. Empired has, in accordance with the Act, consulted with the Australian Securities and Investments Commission (ASIC). ASIC has provided its 'no intention to appear' letter.
OUTLINE OF PROPOSED SCHEME 2 Empired is an international IT services provider, headquartered in Perth and has over 1000 staff located throughout Australia, New Zealand and North America. It is listed on the Australian Securities Exchange under the trading code 'EPD'. Empired has 1,395 registered Shareholders (as at 15 September 2021) of an aggregate of 160,301,595 fully paid ordinary Shares and 17 holders of an aggregate of 8,283,834 performance rights in Empired (Empired Performance Rights) which will, if they have not vested, or if they have vested but have not been exercised by their holders and converted in accordance with their terms, automatically vest and convert into 12,425,751 additional Shares participating in the Scheme. 3 Capgemini is a proprietary company incorporated in Australia, being an Australian subsidiary of Capgemini S.E. (the Capgemini Parent). The Capgemini Parent is a public company headquartered in Paris, France, and listed on the Euronext stock exchange under the trading code 'CAP'. The Capgemini Parent owns 100% of the issued share capital in Capgemini. 4 If the Scheme is implemented as proposed: (a) the Shareholders will transfer their Shares to Capgemini; (b) the Shareholders will receive scheme consideration of AUD$1.35 for each Share that they hold as at the 'Record Date' for the Scheme, as defined under cl 1.1 of the Scheme Implementation Agreement (SIA), to be paid on the Implementation Date for the Scheme (Scheme Consideration); and (c) Empired will become a wholly-owned subsidiary of Capgemini on the Implementation Date.
EVIDENCE 5 Empired relies on the: (a) three affidavits of Mr Mark Paganin, solicitor for Empired (First, Second and Third Paganin Affidavits); (b) an affidavit of Mr David Ayers Hinton, Company Secretary of Empired, sworn and filed on 16 September 2021 (Hinton Affidavit); (c) an affidavit of Mr Thomas Stianos, in his capacity as chairperson designate for the Scheme Meeting, sworn and filed on 16 September 2021 (Stianos Affidavit); (d) an affidavit of Mr Richard Gwynn Bevan, in his capacity as alternate chairperson for the Scheme Meeting, sworn and filed on 16 September 2021 (Bevan Affidavit); and (e) an affidavit of Ms Kaylene O'Brien, in her capacity as Managing Director of Capgemini, sworn and filed on 16 September 2021 (O'Brien Affidavit).
PROCESS 6 It is well established that there are three stages to an application under s 411 of the Act: (a) Court approval of the convening of a scheme meeting, and approval of a draft explanatory statement (Scheme Booklet) to be sent to the Scheme members; (b) members voting on the Scheme at the scheme meeting; and (c) Court approval of the scheme, see Re Amcom Telecommunications Limited [2015] FCA 341 per McKerracher J (at [8]) and Re Wesfarmers Ltd; Ex Parte Wesfarmers Ltd [2018] WASC 308 per Vaughan J (at [47]). 7 The principal questions relevant to the first stage are as follows: (a) Is there a 'compromise or arrangement'? (b) Is there a 'Part 5.1 body'? (c) Are there members of a company? (d) Are there classes of members? (e) Should the Court make orders to convene a scheme meeting? 8 Each of these matters is addressed below.
Standard of review 9 The standard of review at the First Court Hearing is whether the Scheme is not inappropriate, and is one that sensible business people might consider is of benefit to the Shareholders: Re Sonodyne International Ltd (1994) 15 ACSR 494 per Hayne J (at 499); Re Wesfarmers (at [72]-[73]); Re Spookfish Ltd [2018] FCA 1550 per Banks-Smith J (at [14]). If the proposed arrangement is one that seems fit for consideration by a meeting of members and is a commercial proposition likely to gain the Court's approval if passed by the necessary majorities, then leave should be given to convene the Scheme Meeting: Re ACM Gold Ltd; Re Mt Leyshon Gold Mines Ltd (1992) 34 FCR 530 per O'Loughlin J (at 535); Re Amcom (at [10]). The Court is not required to be satisfied that no better scheme could have been devised: Re Foundation Healthcare Ltd [2002] FCA 742; (2002) 42 ACSR 252 per French J (as his Honour then was) (at [44]); see also Re Amcom (at [10]). The Court should order the convening of the Scheme Meeting and approve the despatch of the Scheme Booklet if it is satisfied of the following matters: (a) the Scheme is an arrangement in respect of which the Court may order a meeting of the members of Empired (s 411(1) of the Act). That is: (i) the Scheme is an 'arrangement'; (ii) Empired is a 'Part 5.1 body'; (iii) the Scheme participants are members of Empired; and (iv) the Scheme Meeting will be convened between members of the same class. (b) ASIC has had a reasonable opportunity, as per s 411(2)(b) of the Act, to: (i) examine the terms of the Scheme and the Scheme Booklet; and (ii) make submissions to the Court in relation to those matters. (c) the Scheme Booklet: (i) provides adequate disclosure, as per s 412(1)(a)(i) of the Act; and (ii) contains the prescribed information set out in s 412(1)(a)(ii) of the Act, r 5.1.01 of the Corporations Regulations 2001 (Cth) and cll 8301-8310 of Sch 8 of the Corporations Regulations. (d) the procedural requirements of the Federal Court (Corporations) Rules 2000 (Cth) have been met; (e) There is no apparent reason why the Scheme should not, in due course, receive the Court's approval if the necessary majority of members' votes is achieved. (see Re Amcom (at [9]); Re Programmed Maintenance Services Ltd [2017] FCA 1265 per McKerracher J (at [10]); Re Spookfish (at [8]-[14]); Re Wesfarmers (at [60], [63]-[64]))
The Scheme Checklist addresses matters relevant to the Court's consideration 10 The parties have produced to the Court a detailed checklist which identifies where each of the matters prescribed by s 411 of the Act, the Corporations Regulations, Corporations Rules and relevant ASIC Guidance Notes are dealt with in the materials (Scheme Checklist).
Arrangement 11 The term 'arrangement' is given a wide and liberal meaning, as was observed by Santow J in Re NRMA Ltd (No 1) [2000] NSWSC 82; (2000) 156 FLR 349 (at [20]): see also Re Aldridge Uranium Ltd [2010] FCA 1263 per McKerracher J (at [24]) and Re Wesfarmers (at [60]). 12 Almost any arrangement, otherwise legal, which touches and concerns the rights and obligations of the company or its members may be given effect to under s 411 of the Act: Re International Harvester Co of Australia Pty Ltd [1953] VLR 669 (at 672).
The Scheme is in the best interests of Shareholders 13 Lonergan Edwards & Associates Limited, the independent expert appointed by Empired to assess the Scheme (Independent Expert), has prepared a report (IER). 14 The Independent Expert has concluded that the proposed Scheme is fair and reasonable, and in the best interests of Shareholders. 15 The IER states that the equity value of Empired, on a controlling interest basis, is in the range of $207-$231 million, giving a value per Share range of $1.20-$1.34. 16 It is for the members to decide if they should accept the terms of the Scheme. The Scheme is seemingly proposed in good faith. As the Full Court (Keane CJ and Jacobson J) observed in Re CSR Limited [2010] FCAFC 34; (2010) 183 FCR 358 (at [64]-[65]), it is not the appropriate time at the First Court Hearing to determine whether the Scheme would ultimately be approved by the Court.
Empired Directors recommend the Scheme 17 The directors of Empired (Messrs Stianos, John Bardwell, Richard Bevan, Cristiano Nicolli and Russell Baskerville) (Empired Directors) unanimously recommend that Shareholders vote in favour of the Scheme at the proposed Scheme Meeting, in the absence of a superior proposal and subject to the Independent Expert continuing to conclude that the Scheme is in the best interests of Shareholders. That condition has been met.
Retention Payments and Short Term Incentive Payments 18 Certain executives and employees of Empired are entitled to receive a bonus or benefit (other than as a Shareholder in Empired) upon the proposed Scheme being implemented, as disclosed in s 10.4(a) of the Scheme Booklet (Retention Payments). Similar payments were considered by this Court in Re Kidman Resources Ltd [2019] FCA 1226, where O'Callaghan J said (at [96]): Likewise, the proposed incentive payment to Mr Donohue does not require him to be treated as a separate class for the purposes of the Scheme. Under the Scheme, each such Kidman Shareholder will receive the same Scheme Consideration for their Kidman Shares as the other Kidman Shareholders and the proposed incentive payment to Mr Donohue does not mean that the rights of Mr Donohue are so dissimilar as to make it impossible for him to consult together with the other Kidman Shareholders with a view to their common interest, particularly in light of such incentive payment being in recognition of the additional personal efforts by Mr Donohue to complete Kidman's obligations under the Scheme Implementation Deed and to provide a retention incentive during the period that the Scheme is ongoing. Cf Re DuluxGroup Ltd [2019] FCA 961 at [46]. 19 O'Callaghan J also found that the incentive payment in that case did not preclude the director from making a recommendation (at [99]-[117]). 20 The Retention Payments are to be in made recognition of the additional efforts required of the relevant employees and executives, and the additional and varied responsibilities taken on by those employees as a result of Empired's obligations in relation to the Scheme, which are deposed to in the Hinton Affidavit: see also Re Kidman (at [88]). The Empired Board has formed a view that the Retention Payments are reasonable in the circumstances and in line with market practice, which view was based on an independent report into market practice. 21 In addition, three executives of Empired, being its Managing Director, Chief Operating Officer and Chief Financial Officer, will receive cash bonuses upon implementation of the Scheme pursuant to Empired's 'C Suite' short-term incentive plan (Short Term Incentive Payments). These bonuses are in lieu of, rather than in addition to, Empired's usual short-term incentive arrangements. If the Scheme is not implemented, arrangements under Empired's existing short-term incentive plan will remain in place. This is consistent with the practice noted by Banks-Smith J in Re Asaleo Care Limited [2021] FCA 406 (at [63]-[66]). 22 Details of the Short-Term Incentive Payments are disclosed in the Scheme Booklet.
Part 5.1 Body 23 Section 411 of the Act confers jurisdiction on the Court in respect of a 'Part 5.1 body'. 24 The term 'Part 5.1 Body' is defined in s 9 of the Act to mean, relevantly, a company. Empired is obviously a company.
Classes of members 25 An arrangement to which s 411(1) of the Act applies is one between a company and its members, or any class of them. It is only such an arrangement to which the Court may grant its approval pursuant to s 411(6) of the Act. If there are multiple classes of members, an arrangement will need to be approved by each class. Section 411 of the Act does not define the term 'class'. In the oft-cited case of Sovereign Life Assurance Co v Dodd [1892] QB 573 (at 583), Bowen LJ stated that the term ought to be given such a meaning: …as will prevent the section being so worked as to result in confiscation and injustice, and that it must be confined to those persons whose rights are not so dissimilar as to make it impossible for them to consult together with a view to their common interest. 26 In this case there is a single class of shareholders, all of whom have the same right under the Scheme. That is, the right to receive the 'Scheme Consideration', as defined under cl 1.1 of the SIA.
DISCLOSURE OF PARTICULAR ASPECTS OF SCHEME 27 Given the ex parte nature of this hearing (see Re Permanent Trustee Co Ltd [2002] NSWSC 1177; (2002) 43 ACSR 601 per Barrett J at [7]), there are a number of aspects of the Scheme which have been brought to the Court's attention in addition to the particular financial considerations set out above. None of these matters prevents the orders sought by Empired from being made.
Vesting of Empired Performance Rights 28 As at 15 September 2021, there were 17 holders of 8,283,834 Empired Performance Rights, which were issued pursuant to the 'Empired Long Term Incentive Plan' (Long Term Incentive Plan) which was approved by the Shareholders at its annual general meetings on 28 November 2018 and 28 November 2019 as recorded in s 1.11 of the Scheme Booklet. 29 As a requirement of the SIA, and in accordance with the terms and conditions pertaining to the Long Term Incentive Plan, all outstanding Empired Performance Rights on issue will vest and convert into 'Empired Shares' (as defined under s 1.1 of the SIA) before the 'Record Date': as recorded in s 1.11 of the Scheme Booklet. 30 In accordance with the terms and conditions pertaining to the Long Term Incentive Plan, and as a result of a resolution of the Empired Board, each outstanding Empired Performance Right will, if they have not vested, or if they have vested but have not been exercised by their holders and converted in accordance with their terms, automatically vest and convert into 1.5 Empired Shares, and each Empired Performance Right holder will therefore participate in the Scheme and receive the Scheme Consideration in respect of those Empired Shares: as recorded in s 1.11 of the Scheme Booklet. 31 Performance rights substantially similar to the Empired Performance Rights have been found not to give rise to a separate class of shareholders, nor to preclude the making of a voting recommendation by holders of those rights: see Re Kidman per O'Callaghan J (at [81]-[87] and [91]-[95]); Re Wellcom Group Ltd [2019] FCA 1655 per O'Bryan J (at [49] ff). 32 In Re Kidman, O'Callaghan J said (at [113]): It seems to me that in the ordinary case a shareholder would expect each director, whether or not any one or more of them was "the main moving force" behind the company, to make their recommendation. Such an expectation is clearly reflected in the regulations. As I said, reg 8301(a) obliges "each" director make a recommendation, unless they are unavailable to do so, or they do not desire to do so, or they are not justified in doing so (and, if so in any such instance, to explain why). As counsel for Kidman submitted, and I agree, each director is required to engage actively with the proposed scheme that is to be put before the shareholders, so that the shareholders have the benefit and guidance of the knowledge and expertise of the directors - who, after all, are the persons responsible for the operation and management of the scheme company and who, by reason of their position, ought to be best placed to express a view whether or not the scheme is in the shareholders' best interests. They are, in my view, ordinarily obliged to do so even if they stand to gain personally in the form of some specific benefit if the scheme is approved, provided the benefit is sufficiently explained to shareholders. (Emphasis in original.) 33 It is to be noted that at the time of the First Court Hearing, Empired Director, Mr Russell Baskerville, holds 3,165,000 Empired Performance Rights as recorded in s 10.1 of the Scheme Booklet. In accordance with O'Callaghan J's decision in Re Kidman, Mr Baskerville has made a recommendation regarding the Scheme: as recorded at 2, 8, 14, 19, 25 and 58 of the Scheme Booklet.
Scheme Consideration payable to Shareholders 34 If the proposed Scheme is implemented, Shareholders will receive the Scheme Consideration on the Implementation Date: as recorded in ss 1.5, 2, 6 and 7.1(d) of the Scheme Booklet. Section 1.6 of the Scheme Booklet provides comprehensive disclosure as to how, and when, the Scheme Consideration will be paid to the Shareholders.
Deal Protection Clauses 35 Under cl 10 and cl 11 of the SIA, Empired and Capgemini have entered into 'deal protection mechanisms'.
Exclusivity Provisions 36 Clause 10 of the SIA is an exclusivity provision, which includes 'no shop' and 'no talk' and 'no due diligence' provisions. The relevant provisions (including the definition of 'Competing Proposal' under cl 1.1 of the SIA) are as follows: 10. Exclusivity arrangements 10.2 No shop During the Exclusivity Period, the Target must not, and must ensure that its Related Bodies Corporate and Representatives do not, directly or indirectly, and except with the prior written consent of the Bidder, solicit, encourage, initiate or invite (including by the provision of non-public information to any Third Party) any Competing Proposal, expression of interest, offer, proposal, enquiries, negotiations, discussions or other communications with any Third Party, or communicate any intention to do any of these things, which may reasonably be expected to encourage or lead to an actual, proposed or potential Competing Proposal. 10.3 No talk and no due diligence Subject to clause 10.4, during the Exclusivity Period, the Target must not, and must ensure that its Related Bodies Corporate and Representatives do not, except with the prior written consent of the Bidder, directly or indirectly: (a) enter into, facilitate, continue or participate in any negotiations, discussions or other communications with any Third Party in relation to any enquiry, expression of interest, offer, proposal or discussion by any person to make, or which may reasonably be expected to lead to, an actual, proposed or potential Competing Proposal; (b) disclose or otherwise provide or make available any non-public information about the business or affairs of the Target Group to a Third Party in connection with, with a view to obtaining, or which would reasonably be expected to encourage or lead to the formulation, receipt or announcement of, an actual, proposed or potential Competing Proposal (including, without limitation, providing such information for the purposes of the conduct of due diligence investigations in respect of the Target Group); (c) negotiate, accept or enter into, or offer or agree to negotiate, accept or enter into, any agreement, arrangement or understanding regarding an actual, proposed or potential Competing Proposal; or (d) communicate any intention to do any of the things listed in clauses 10.3(a), 10.3(b) or 10.3(c). … 1.1 Competing Proposal means a proposed transaction or arrangement (or expression of interest therefor), which, if implemented substantially in accordance with its terms, would result in a Third Party (either directly or indirectly and either alone or together with any Associate): (a) acquiring or having a right to acquire, or obtaining a legal, beneficial or economic interest in or control of, all or a substantial part of the business, assets or undertakings of the Target Group; (b) acquiring Control of the Target or Intergen Limited; (c) acquiring a Relevant Interest in any Target Shares, as a result of which the Third Party, together with any Associates, would have a Relevant Interest in more than 20% of Target Shares or of the shares in Intergen Limited; (d) otherwise directly or indirectly acquire or merge, or be involved in an amalgamation or reconstruction (as those terms are used in section 413(1) of the Corporations Act) with the Target or Intergen Limited; or (e) require the Target to abandon, or otherwise fail to proceed with, the Transaction, whether by way of takeover bid, members' or creditors' scheme of arrangement, reverse takeover, shareholder approved acquisition, capital reduction, buy back, sale or purchase of shares, other securities or assets, assignment of assets and liabilities, incorporated or unincorporated joint venture, dual-listed company (or other synthetic merger), deed of company arrangement, any debt for equity arrangement, recapitalisation, refinancing or other transaction or arrangement. For the avoidance of doubt, each successive material modification or variation of any proposed transaction or arrangement (or expression of interest therefor) in relation to a Competing Proposal will constitute a new Competing Proposal. 37 In relation to provisions such as the above, in Re Arthur Yates & Co Ltd [2001] NSWSC 40; (2001) 36 ACSR 758 (at [9]), Santow J held that exclusivity clauses must satisfy the following concerns: (a) any exclusivity period should be for no more than a reasonable period capable of precise ascertainment and should be properly defined; (b) an exclusivity clause should be framed so that it is subject to the overriding obligation not to breach the directors' fiduciary or other legal duties; and (c) the exclusivity clauses should be adequately disclosed in the relevant scheme booklet. 38 The introductory words in cl 10.2 and cl 10.3 of the SIA stipulate that Empired (and its Related Bodies Corporate and Representatives) must not, without the prior written consent of Capgemini, undertake any of the activities identified in cl 10.2 or cl 10.3 during the 'Exclusivity Period'. In cl 1.1 of the SIA, the 'Exclusivity Period' is defined as the period commencing on the date of the SIA (19 July 2021), and ending on the earliest of the 'End Date' (being 19 February 2022 or such other date as agreed in writing by Empired and Capgemini); or the date that the SIA is terminated in accordance with its terms; or the Implementation Date (scheduled to be 16 November 2021). The Exclusivity Period is capable of precise ascertainment. 39 The 'no talk' and 'no due diligence' exclusivity provisions in cll 10.3(a)-10.3(d) of the SIA are subject to the overriding obligation on the Empired Directors not to breach their fiduciary or statutory duties, under the 'fiduciary carve-out' in cl 10.4 of the SIA. 40 There is clear disclosure of the exclusivity provisions in cl 10 of the SIA, and Annexure A of the Scheme Booklet. In addition, the exclusivity clauses were negotiated by the parties with the assistance of external legal advisers.
Break Fee 41 Clause 11.2 of the SIA is a reimbursement fee provision, which states that Empired agrees to pay Capgemini a reimbursement fee (defined as the 'Target Payment' in cl 1.1 of the SIA) of AUD$2,333,844 if the Scheme is not implemented for specific reasons (Empired Reimbursement Fee). Clause 11.2 of the SIA (and the definition of Target Payment) provides as follows: 11.2 The Target Payment The Target agrees to pay the Target Payment to the Bidder without deduction, set-off or withholding if: (a) (Competing Proposal) a Competing Proposal is announced before the earlier of the Second Court Date and termination of this agreement, and within 12 months after the date of such announcement, the Third Party who announced the Competing Proposal (or any of its Associates) completes a Competing Proposal; (b) (Change of recommendation) during the Exclusivity Period, a majority of the Target directors fail to recommend the Scheme or adversely changes, adversely modifies, adversely qualifies or withdraws their support of the Scheme or their Recommendation or Voting Intention or publicly recommends, supports or endorses a Competing Proposal, unless it occurs: (i) after the Independent Expert concludes in the Independent Expert's Report that the Scheme is not in the best interests of Target Shareholders (except where that conclusion is due to the existence, announcement or publication of a Competing Proposal); (ii) after the Independent Expert changes or publicly withdraws its conclusion that the Scheme is in the best interests of Target Shareholders (except where that conclusion is due to the existence, announcement or publication of a Competing Proposal); (iii) after the Target has become entitled to terminate this agreement pursuant to clause 15.3(b)(i) and has given the appropriate notice to the Bidder; or (iv) pursuant to clause 8.1(c); or (c) (Termination) the Bidder terminates this agreement in accordance with: (i) clause 15.2(b)(i); or (ii) clause 15.2(b)(iv) due to a Target Prescribed Occurrence occurring, or being discovered, announced, disclosed or otherwise becoming known to the Bidder; or (d) (Matching right) there is a breach of clause 10.6 by the Target. 42 Applying the reasoning of Barker J in Re Rusina Mining NL [2010] FCA 517 (at [52]), the Empired Reimbursement Fee is not excessive, and will not operate coercively, as: (a) the Empired Reimbursement Fee will not be payable where the Scheme becomes effective: (cl 11.7 of the SIA); (b) the Empired Reimbursement Fee, being AUD$2,333,844, represents approximately 1% of the equity value of Empired on a fully diluted basis, if regard is had to the maximum consideration payable under the Scheme. This is equal to the 1% figure noted in the 'Takeovers Panel Guidance Note 7 - Lock-up devices'; (c) Capgemini is also liable to pay a 'Bidder Payment' of AUD$2,333,844 (which effectively operates as a reverse break fee) under certain circumstances: cl 11.3 of the SIA; (d) the Empired Reimbursement Fee has been negotiated at arm's length and in accordance with industry practice; and (e) there has been full disclosure of the Empired Reimbursement Fee in both the SIA and the Scheme Booklet: as recorded in cl 11 of the SIA and Annexure A to the Scheme Booklet.
Conditions Precedent 43 Implementation of the Scheme is subject to the conditions precedent set out in cl 3.1 of the SIA. Section 1.7 and Annexure A of the Scheme Booklet disclose the conditions precedent to the Scheme which remain outstanding as at the date of the Scheme Booklet. 44 The 'OIO' condition precedent in cl 3.1(c) of the SIA was satisfied by Empired on 23 August 2021 as recorded in the O'Brien Affidavit. 45 As at the date of the first hearing, there was no fact, matter or circumstance known to Empired or Capgemini that has resulted in, or is likely to result in, the failure of any conditions precedent to the implementation of the Scheme. 46 The parties intend to provide particulars of the satisfaction or waiver of all conditions precedent to the implementation of the Scheme (including the requirements that there be no 'Target Material Adverse Change' or 'Target Prescribed Occurrence' prior to the 'Delivery Time' (as those terms are defined in the SIA)), at the hearing seeking orders approving the Scheme.
Convening the Scheme Meeting 47 Empired will convene the Scheme Meeting in accordance with Pt 2G.2 of the Act and the terms of its Constitution.
Electronic Despatch of Documents 48 Where Shareholders have nominated to receive electronic communications and notices from Computershare Investor Services Pty Ltd on behalf of Empired, Empired proposes to send an email broadcast to the electronic mailing addresses nominated by those Shareholders (Email Shareholders), containing a link to a website at which those shareholders can access the Scheme Booklet and lodge their proxies in respect of the Scheme. 49 Empired's Constitution provides that Empired may give a notice to any shareholder by 'such other means as permitted by [the Act]'. 50 The cumulative effect of ss 249J(3)(ca), 249J(3A), 412(1) and 1319 of the Act allows the Court to give such orders as to provide the electronic despatch of the Scheme Booklet: see Re Alinta Ltd (ABN 11 119 985 590) (No 2) [2007] FCA 1378 per Emmett J; MDA National Ltd v Medical Defence Australia Ltd [2014] FCA 954 per Yates J (at [105]). 51 As at 15 September 2021, 660 of the 1,394 Shareholders on the Empired register of members have elected to receive electronic notices of meetings from Computershare on behalf of Empired (Email Shareholders), and Empired's primary means of serving notices on these shareholders is by way of electronic means via Computershare. 52 In my opinion, if the Court approves the form of the emails to be despatched to Email Shareholders, it is appropriate for despatch to those shareholders to be effected by sending an email containing a hyper link at which the Scheme documents can be accessed. This seems to accord with the views of Yates J in Re Billabong International Ltd [2018] FCA 106 (at [38]). A copy of the email proposed to be sent to Email Shareholders is in evidence. 53 In the event that, after despatch to an electronic mail address, Computershare receives a bounce-back message indicating that the notice has not been delivered, Computershare will send physical copies of the Scheme Booklet and Scheme Proxy Form to the registered postal address of the relevant Shareholders, by prepaid post if within Australia, or by international airmail or air courier if the relevant Shareholder's address is outside of Australia. 54 Twenty-two Shareholders have expressly elected to receive notices of meetings by physical post at first instance (Postal Shareholders). Empired will despatch the Scheme Booklet and Scheme Proxy Form to the Postal Shareholders by priority prepaid post or prepaid international airmail or air courier. 55 As at 15 September 2021, 688 of the 1,407 Shareholders on the Empired register of members have not made any express election regarding whether to receive notices of meetings by electronic means or by physical post (Default Shareholders). By default, Empired would ordinarily send notices of meetings to these shareholders by post in accordance with s 249J of the Act. 56 Empired proposes to despatch the Scheme documents to the Default Shareholders by sending each Default Shareholder a notice by priority pre-paid post or prepaid international airmail or air courier (as relevant) (Notice of Access), which notice will contain: (a) the address of a website which enables those Shareholders to access and download the Scheme Booklet; (b) the address of a website which enables those Shareholders to access, complete and lodge their proxy form for the Scheme Meeting online; and (c) a phone number by which those Shareholders may request to be sent printed copies of the Scheme Booklet. 57 With the Notice of Access, Empired proposes to send the Default Shareholders a physical copy of the Scheme Proxy Form, and a return envelope addressed to Computershare. 58 The form of Notice of Access which Empired proposes to send to the Default Shareholders is also in evidence. 59 The method of despatch proposed by Empired for the Default Shareholders (Notice of Access Method) is now commonplace, particularly in light of the ongoing COVID-19 pandemic. Recent decisions of this Court and the Supreme Court of Western Australia in which orders were made for despatch by a method substantially the same as the Notice of Access Method include: (a) Re NTM Gold Ltd; Ex parte NTM Gold Ltd [2021] WASC 22 per Vaughan J (at [80]-[81]), (noting the importance of giving shareholders the option to receive hard copy materials); (b) Re RXP Services Ltd [2021] FCA 38 per Beach J; Order 2(b) (at iv); and (c) Re Galaxy Resources Ltd; Ex parte Galaxy Resources Ltd [2021] WASC 277 per Hill J (at [73]-[76]). 60 The evidence also discloses the intention that if Computershare receives any request for a printed copy of the Scheme Booklet from any Default Shareholder, Computershare will send a physical copy to that Shareholder by prepaid post or express prepaid international airmail or air courier (as relevant).
Timing of advertisement 61 Rule 3.4 of the Corporations Rules 2000 requires a newspaper advertisement to be published 'at least 5 days before' the Second Court Hearing. 62 Empired proposes to publish a notice in 'The Australian' newspaper on Tuesday, 26 October 2021, being 6 calendar days before the date of the Second Court Hearing on Monday, 1 November 2021. 63 Empired seeks, and I approve, an order otherwise exempting it from compliance with r 3.4, given that, read in conjunction with r 1.61 of the Federal Court Rules 2011 (Cth), r 3.4 requires the advertisement to be published on or before Monday, 25 November 2021. As the Scheme Meeting is scheduled for Monday, 25 November 2021, the outcome of the Scheme Meeting will not be known in time to publish the advertisement on that date. Examples of orders of the kind sought by Empired include those made in Re Staging Connections Group Ltd [2015] FCA 1012 per Gleeson J (order 18) and Re Tiger Resources Ltd [2019] FCA 2186; (2019) 141 ACSR 203 per Gleeson J (order 11).
Virtual meeting 64 Given COVID19 factors, Empired proposes to conduct the Scheme Meeting electronically without any physical meeting. The online meeting platform will be accessible by a website address provided in the 'Important notices' section of the Scheme Booklet, ss 2, 3.1, 7.1 of the Scheme Booklet, the Notice of Scheme Meeting, and in the Notice of Access and Access Email (as defined in the Hinton Affidavit). The virtual meeting platform will allow Shareholders and their proxies, attorneys or corporate representatives to participate in the Scheme Meeting, including by voting and asking questions during the Scheme Meeting. 65 The online meeting platform can be accessed from the latest version of Microsoft Edge, Safari, Google Chrome and Firefox web browsers. 66 All Shareholders will be able to log into the online meeting platform using their shareholder number and their registered postcode, whether or not they have received a Notice of Access or Access Email. 67 On 13 August 2021, the Treasury Laws Amendment (2021 Measures No. 1) Act 2021 (Cth) inserted Pt 2G.5 into the Act, which allows a company to convene a meeting of its members using virtual meeting technology (among other things), provided the technology gives the persons entitled to attend the meeting, as a whole, a reasonable opportunity to participate without being physically present in the same place. This measure is temporary, but will remain in place until 31 March 2022: s 1679F of the Treasury Laws Amendment (2021 Measures No. 1) Act 2021 (Cth). As set out above, the online meeting platform proposed to be used by Empired to conduct the Scheme Meeting meets the requirements of s 253Q of the Act, in that it: (a) allows participants a reasonable opportunity to exercise a right to speak, including by asking questions orally during the meeting; and (b) allows participants to vote during the meeting in real time. 68 Recent examples of orders for scheme meetings to be held electronically, without any physically meeting of two or more shareholders, include: (a) Re Saracen Mineral Holdings Ltd [2020] WASC 483 per Hill J (order 3(c)); and (b) Re Asaleo Care Limited per Banks-Smith J (at [74]-[78]), where her Honour found that the Court had jurisdiction under s 411 and s 1319 of the Act to make the orders, and took into account COVID-19 in exercising the discretion).
Risk and Title 69 'Performance risk' is addressed by timing the provision of the Scheme Consideration such that on or before the 'Business Day' prior to the 'Implementation Date' (as those terms are defined in the SIA), Capgemini is required to pay an amount equal to the total Scheme Consideration to be paid to Scheme Shareholders (as that term is defined in the SIA) into a trust account maintained by Empired as trustee for the Scheme Shareholders (see cl 5.1 of the SIA). The transfer of Scheme Shareholders' Scheme Shares (as that term is defined in the SIA) will not occur until the Scheme Consideration has been provided to them (see cl 4.2(a) of the Scheme document). 70 'Performance risk' is further addressed by the provision by the Capgemini Parent to Capgemini of a letter of support, by which the Capgemini Parent has undertaken to provide to Capgemini adequate funding to enable Capgemini to pay any and all amounts required under the SIA in consideration for the acquisition of the Empired Shares, as recorded in the O'Brien Affidavit. 71 Capgemini has executed a 'Deed Poll' pursuant to which Capgemini, amongst other things, has undertaken in favour of each 'Scheme Shareholder' to: (a) deposit (or procure the deposit of) an amount equal to the total Scheme Consideration in cleared funds into the 'Trust Account' by no later than the 'Business Day' before the Implementation Date (as those terms are defined in the Deed Poll); and (b) undertake all other actions attributed to it under, and otherwise comply with, the Scheme, as if named as a party to the Scheme, in each case subject to and in accordance with the terms of the Scheme document. 72 The Scheme document provides that Capgemini will deposit the Scheme Consideration in cleared funds. A conceptually similar clause was approved by Lindgren J in Re Investa Properties Ltd [2007] FCA 1104 (at [22]-[30]), though the clause in this instance offers greater performance risk protection as the relevant Re Investa obligation was to pay the consideration into a trust account by twelve noon on the Implementation Date of that scheme (compared with several weeks before that date in this instance). There is, in all the circumstances, no significant performance or credit risk in relation to the Scheme.
The Warranty 73 Clause 7.4(d) of the Scheme document provides for each Shareholder warranting that all of their Shares will be fully paid and transferred free from any encumbrances. 74 The terms of this deemed warranty are in substantially similar terms to those in Re APN News & Media Ltd [2007] FCA 770; (2007) 62 ACSR 400 and Re ABB Grain Ltd [2010] FCA 1309. In Re APN News (at [57]-[63]), Lindgren J stated that a deemed warranty must be no more than a device directed to ensuring that a scheme participant whose shares are subject to an encumbrance is not unfairly advantaged. Secondly, the attention of scheme participants must be drawn to the existence of the deemed warranty in the scheme. That has occurred in this instance in s 2 and s 7.2 of the Scheme Booklet.
ASIC's Consideration of the Scheme Booklet 75 The jurisdiction of the Court to make an order convening meetings under s 411(1) is conditional upon the matters set out in s 411(2). Section 411(2) requires that the Court be satisfied of two matters before making an order. First, that ASIC has been given 14 days' notice of the hearing, or such lesser period of notice as the Court or ASIC permits: s 411(2)(a). Second, that ASIC has had a reasonable opportunity to examine the terms of the Scheme and the Scheme Booklet and to make submissions to the Court: s 411(2)(b). 76 The Scheme Booklet was lodged with ASIC on 1 September 2021. Notice of the date and time of the hearing was given to ASIC on 3 September 2021, as soon as the date and time had been confirmed with the Court. ASIC's 'usual letter' was in evidence at the hearing.
Proper Disclosure 77 The Court is required to be satisfied, prima facie, that there has been proper disclosure with nothing that is misleading or deceptive in any material sense: Re NRMA per Santow J (at [3]). The Scheme Booklet meets the disclosure requirements of s 411(3) and s 412, ASIC Regulatory Guide 60, the takeover provisions of the Act and Sch 8 of the Corporations Regulations. Accordingly, I am satisfied that there has been proper disclosure. 78 Additionally, the Court should be satisfied that there is nothing apparently misleading or deceptive in the Scheme Booklet. Empired Directors consider the contents of the Scheme Booklet to be accurate insofar as statements of fact that relate to Empired. Empired established a Due Diligence Committee to coordinate the Scheme process, which included the verification of all statements (which are not self-evident) which have been prepared by, and are the responsibility of, Empired in the Scheme Booklet. 79 Certain information in the Scheme Booklet has been provided by Capgemini (Bidder Information). The Bidder Information was subject to verification, which was undertaken by Capgemini, as described in the Hinton Affidavit. 80 The explanatory statement must provide proper disclosure as required by s 411(3) of the Act (as explained further below). It must essentially set out 'all the main facts as will enable shareholders to exercise their judgement on the proposed scheme': Re NRMA (at [16]); Re Anatolia Energy Limited [2015] FCA 1134 per McKerracher J (at [22]) and Re Programmed Maintenance (at [33]-[34]). The provision of disclosure by way of explanatory statements can be a matter of balance. It has been recognised that too much information is capable of overwhelming shareholders and that summaries of documents such as an implementation agreement or a concise version of an expert report is appropriate: Re Anatolia Energy (at [23]); Re Innamincka Petroleum Ltd [2010] FCA 1421 (at [11]); Re Tower Australia Group Ltd [2011] FCA 224 (at [16]). 81 The Scheme Booklet appropriately discloses the terms of the Scheme. The body of the text of the explanatory statement is contained in introductory parts as well as ss 1-11 of the Scheme Booklet (see 1-72 of the Scheme Booklet).
Section 411(17) 82 Section 411(17) is not considered at the First Court Hearing. Barrett J comprehensively considered the s 411(17) issue in Re Macquarie Private Capital A Ltd [2008] NSWSC 323 (at [23]-[31]), coming to the conclusion at [31] that the issue was a matter for the Second Court Hearing. I (and others) respectfully agree.
EVIDENCE NECESSARY FOR A FIRST COURT HEARING 83 The necessary evidence for the First Court Hearing in relation to Empired, may be summarised as follows: (a) formal evidence of the Scheme company which confirms that Empired is a 'Part 5.1 body'; (b) details of Empired's capital structure (as recorded in the Hinton Affidavit) - as at the date of the hearing, there are 160,301,595 Empired Shares on issue held by 1,394 Shareholders, and 8,283,834 Empired Performance Rights on issue held by 17 holders, which will convert to 12,425,751 additional Empired Shares participating in the Scheme; (c) Empired's Constitution; (d) evidence that Empired has committed itself to propounding the Scheme: see cl 2.1(a) of the SIA. This provides prima facie evidence that the Scheme is bona fide and has been properly proposed; (e) the text of the Scheme Booklet containing the statutory explanatory statement, the IER, the summary of the SIA, the text of the Scheme, the text of the Deed Poll, the Notice of Scheme Meeting and the proxy form, provides prima facie evidence that it is an 'arrangement' within s 411 of the Act; (f) verification of factual information in the Scheme Booklet, thus providing prima facie evidence of proper disclosure; (g) disclosure includes compliance with Pt 3 of Sch 8 of the Corporations Regulations, the Scheme Checklist tendered identifies the location of the prescribed disclosure in the Scheme Booklet; (h) proof of the Independent Expert's opinion, giving the Court prima facie evidence of fairness - see Annexure B to the Scheme Booklet annexed to the Third Paganin Affidavit, and the First Paganin Affidavit in draft form; (i) consents to act as chair and alternate chair for the purposes of the Scheme Meeting, as recorded in the Stianos Affidavit and the Bevan Affidavit; (j) notice to ASIC, as recorded in the First Paganin Affidavit, this provides prima facie evidence that s 411(2)(a) has been activated; (k) the 'usual letter' from ASIC that it does not propose to appear at the First Court Hearing. ASIC's practice is not to give a s 411(17) statement until the Second Court Hearing. ASIC's 'usual letter' provides prima facie evidence that s 411(2)(a) and s 411(2)(b) have been satisfied; and (l) compliance with Federal Court Practice Note: C&C-1 'Commercial and Corporations Practice Note' (this appears in the 'Important Notices' section of the Scheme Booklet).
CONCLUSION AND ORDERS SOUGHT 84 On the basis of these matters, the orders were made as sought. I certify that the preceding eighty-four (84) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice McKerracher.
MDA National Ltd
Medical Defence Australia Ltd
[2021] WASC 277
[2021] WASC 22
[2020] WASC 483
[2018] WASC 308
(1992) 34 FCR 530
(2010) 183 FCR 358
(2000) 156 FLR 349