Nearmap Ltd, in the matter of Nearmap Ltd (No 2) [2022] FCA 1464

CONCLUSION IN SUMMARY FORM 3 For the reasons which follow, I was satisfied that all relevant statutory and procedural requirements have been met and that it is appropriate in the exercise of the Court's discretion to approve the Scheme. Accordingly, I made orders in the form sought by Nearmap.

THE SCHEME 4 As noted in Nearmap (No 1), the commercial purpose of the Scheme is to effect the acquisition by Thoma Bravo BidCo of all of the shares in Nearmap. If the Scheme is implemented, all of the Scheme Shares on issue as at the Scheme Record Date (the time and date for determining entitlements to the Scheme Consideration, being 7.00 pm (Sydney time) on 8 December 2022) will be transferred to Thoma Bravo BidCo and, in consideration for that transfer, each of the Scheme Shareholders will receive Scheme Consideration in the form of a cash payment of $2.10 per Scheme Share: Nearmap (No 1) at [6] to [7].

ROLE OF THE COURT 5 I gratefully adopt the recent summary of the applicable principles in respect of approving a scheme of arrangement by O'Callaghan J in Re PayGroup Limited (No 2) [2022] FCA 1350 at [29] to [30]: 29 The role of the court in approving a scheme of arrangement is supervisory. The court is not bound to approve it merely because it previously made orders for the convening of a meeting or because the statutory majorities were achieved. That said, as Jacobson J observed in Re Seven Network Limited (No 3) [2010] FCA 400; (2010) 267 ALR 583 at 588 [32], "the court will usually approach the task upon the basis that the members are better judges of what is in their commercial interests than the court". 30 The cases establish that the following matters should be taken into account, namely that: (a) the orders of the court convening the scheme meeting were complied with; (b) the resolution to approve the scheme was passed by the requisite majority, and whether other statutory requirements have been satisfied; (c) 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; (d) the scheme is fair and reasonable so that an intelligent and honest shareholder, properly informed and acting alone, might approve it; (e) there was full and fair disclosure to shareholders of all information material to the decision whether to vote for or against the scheme; (f) 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; and (g) the court is satisfied under s 411(17) that the scheme has not been proposed to avoid Chapter 6 of the Act, or that the plaintiff has a statement from ASIC that it has no objection to the scheme. 6 In considering the approval given at the Scheme Meeting, it is relevant to consider whether in passing the resolution at the Scheme Meeting (Scheme Resolution), shareholders acted in good faith and for proper purposes, and whether there is any evidence of oppression of the minority. 7 The considerations relevant to the exercise of the Court's discretion are well established. For present purposes, it suffices to extract the following passage in which Beach J described the Court's role as follows (Re Amcor (No 2) [2019] FCA 842 (at [7] and [11])): 7 …In essence, my role at the second court hearing is to assess the Scheme taking into account whether the Scheme is sufficiently fair and reasonable such that an intelligent and honest shareholder properly informed and acting alone might approve it. Of course, I can only approve a scheme of arrangement if the requisite majority of shareholders vote in favour of it, but I am not bound to approve the Scheme simply because I previously made orders for the convening of a Scheme meeting and subsequently the requisite majority agreed to it. But I accept that shareholders voting collectively at the Scheme meeting are better judges than I of what is to their commercial advantage and in their interests and accordingly, absent good reason, I should give effect to their intentions. … 11 Now as I have said, my task is to consider whether the Scheme is fair and reasonable with the test of fairness and reasonableness including a consideration of whether "an intelligent and honest [shareholder], properly informed, acting alone, might approve [the scheme]" (Fowler v Lindholm (2009) 178 FCR 563 at [79] per Emmett, Gordon and Jagot JJ). But the Scheme shareholders' vote in favour of the Scheme is evidence of its inherent fairness. Put another way, if a majority of the Scheme shareholders have approved the Scheme, it is unlikely that the Scheme would be unreasonable. Further, I do not have to be satisfied that no better Scheme could have been devised.

STATUTORY AND PROCEDURAL REQUIREMENTS 8 On the basis of the evidence led by Nearmap, I was satisfied that Nearmap has demonstrated that it has complied with the convening orders, the requirements of ss 411 to 412 of the Act, and Divs 2 and 3 of the Federal Court (Corporations) Rules 2000 (Cth) (Corporations Rules).

Dispatch of Scheme materials 9 Based on the evidence led by Nearmap at the second court hearing, I was satisfied that the scheme materials were dispatched to Scheme Shareholders, including Email Shareholders (Scheme Shareholders who nominated an electronic address to receive documents from Nearmap), Hardcopy Shareholders (Scheme Shareholders who elected to receive documents from Nearmap in physical form) and Postal Shareholders (Scheme Shareholders who are not Email Shareholders or Hardcopy Shareholders), as required by, and within the time required by, the convening orders. 10 Nearmap raised for the Court's attention one minor matter in this respect. Pursuant to the convening orders, Nearmap was required to send Postal Shareholders and Hardcopy Shareholders a letter detailing the method of access to the Scheme Booklet in accordance with the form provided in evidence to the Court at the first court hearing. Postal Shareholders were sent a letter in that format in compliance with the convening orders. However, the wording of the letter sent to Hardcopy Shareholders was altered in a minor way to reflect the fact that a physical copy of the Scheme Booklet was enclosed in accordance with the preferences of the Hardcopy Shareholders. 11 I was satisfied that the letter sent to Hardcopy Shareholders was "substantially in the form of" the letter as required by the convening orders. The changes made were necessary and appropriate, given the fact that the letter to Hardcopy Shareholders enclosed a hard copy of the Scheme Booklet. The change did not interfere with the Court-approved "message" to Hardcopy Shareholders by way of unilateral supplementation or involve advocacy as to how shareholders should vote. To the extent that the alteration could be characterised as technical non-compliance with the convening orders, I was satisfied that the variation in the wording of the letter sent to the Hardcopy Shareholders was a procedural irregularity that did not cause any substantial injustice within the meaning of s 1322(2) of the Act. 12 As required by r 3.5(b) of the Corporations Rules, an office copy of the convening orders was lodged with the Australian Securities and Investments Commission (ASIC) on 21 October 2022.

Full and fair disclosure to members 13 On the basis of the evidence relied upon at the first court hearing, I was satisfied that the Scheme Booklet was adequate in meeting the disclosure obligations imposed by s 412 of the Act: Nearmap (No 1) at [35]. The verification processes undertaken in respect of the Scheme Booklet have been addressed in the evidence before me. Since the first court hearing, the Scheme Booklet has been registered by ASIC. Having regard to ss 412(6) and 412(8), registration of the Scheme Booklet by ASIC provides further assurance in relation to the adequacy of the disclosure in the Scheme Booklet. I was satisfied that there has been full and fair disclosure to Scheme Shareholders of all material information.

Receipt and processing of proxy voting instructions 14 The requirements in relation to the receipt and processing of proxies set out in the convening orders were satisfied.

Conduct of Scheme Meeting and voting results 15 The written submissions provided by Nearmap in advance of the second court hearing addressed in detail the requirements of the convening orders in relation to the conduct of the Scheme Meeting and the evidence led demonstrated that the Scheme Meeting was held at the required time and place on the required date, and in the required manner. 16 In accordance with s 411(4)(a)(ii) of the Act, the Scheme Resolution was passed by a majority in number of members present and voting (either in person or by proxy) at the Scheme Meeting, and by 75% of the votes cast on the Scheme Resolution. The evidence establishes that the Scheme Resolution was passed by 78.47% of the votes cast and by 77.28% of shareholders present and voting (in each case, in person or by proxy). 17 The number of shares voted at the Scheme Meeting as a percentage of Nearmap's total issued share capital was approximately 64.92%, and the number of shareholders who voted as a percentage of the total number of Nearmap's shareholders was approximately 16.35%. 18 Nearmap submitted that although the level of shareholder turnout (by number of shareholders) was relatively low, there was no suggestion in the evidence that shareholders were deterred from attending the Scheme Meeting or did not have notice of the Scheme Meeting: Re TriAusMin Ltd (No 2) [2014] FCA 833 at [10]-[12]; Re Amcor at [18]-[20]. 19 Except for the minor irregularity in the letter sent to Hardcopy Shareholders, which I have addressed above, there is nothing to suggest that there was any irregularity in the manner of dispatch of material to the shareholders. The evidence demonstrates that Scheme Shareholders were provided with notice of the Scheme Meeting. There is no evidence of any issue that would have deterred Scheme Shareholders from voting at or from attending the Scheme Meeting. Finally, it is significant that those shareholders who did vote, voted in favour of the Scheme such that the requisite statutory majority was achieved and the number of shares voted as a percentage of Nearmap's total issued share capital was high, being 64.92%.

Advertisement of second court hearing 20 In accordance with r 3.4 of the Corporations Rules, Nearmap published a notice of the hearing to approve the Scheme in The Australian newspaper not later than 5 days' prior to the date fixed for the hearing of the application, and the notice was in accordance with Form 6. 21 Prior to the second court hearing, Nearmap did not receive any formal or informal notice that any person intended to appear to oppose the Scheme, or for any other reason. Indeed, there were no appearances at the second court hearing from any shareholder or other interested party wishing to oppose the Scheme.

Conditions Precedent 22 Both the SID and the Scheme include provisions requiring Nearmap and Thoma Bravo BidCo to provide a certificate to the Court at the second court hearing confirming whether or not all of the conditions precedent have been satisfied or waived (other than the conditions relating to the Court's approval of the Scheme). Nearmap tendered certificates demonstrating that all relevant conditions precedent had been satisfied or waived, apart from the conditions relating to the Court's approval of the Scheme. 23 I was satisfied that all conditions precedent to the Scheme, other than the Court's approval and the lodgement of the Court's approval order with ASIC, had been satisfied or waived. In the circumstances, any future doubt as to the binding nature of the Scheme had been removed: Re Vault Intelligence Ltd (No 2) [2020] FCA 1504 at [25].

DISCRETION 24 I was satisfied that all statutory and procedural requirements were met. I now turn to consider whether in the exercise of discretion the Scheme should be approved.

The Scheme is fair and reasonable 25 I was satisfied that the Scheme is fair and reasonable, in the sense that an intelligent and honest shareholder, properly informed and acting alone, might approve the Scheme. My reasons are as follows. 26 First, the support of the Scheme Shareholders as reflected in the voting results of the Scheme Meeting establishes that prima facie the Scheme is fair: Re Amcor at [7] to [11]. Secondly, the Nearmap directors recommended that Nearmap shareholders vote in favour of the Scheme for the reasons given in the Scheme Booklet, and each stated their intention to vote the Nearmap shares held or controlled by them in favour of the Scheme: see Nearmap (No 1) at [16] to [18]. Thirdly, the independent expert opined that the Scheme is in the best interests of Scheme Shareholders: see Nearmap (No 1) at [9]. Fourthly, the disclosures in the Scheme Booklet included a detailed description of the proposed Scheme, including the potential benefits and disadvantages of the Scheme: see Nearmap (No 1) at [72] to [73]. Fifthly, no shareholder sought to oppose the orders approving the Scheme, and no evidence suggested any oppression in the conduct of the Scheme Meeting. Finally, the Scheme contains adequate measures to protect shareholders against performance risk. Accordingly, I was satisfied that the Scheme is fair and reasonable in the requisite sense.

Good faith and no oppression 27 Nearmap submits, and I was satisfied, that there is nothing to suggest that the Scheme has been proposed other than in good faith, or that the Nearmap shareholders voted other than in good faith and for proper purposes. There is also 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.

Matters brought to the attention of the Court 28 At the first court hearing, Nearmap raised for the consideration of the Court several matters warranting the Court's attention. I was satisfied that none of those matters presented an impediment to the orders sought at the second court hearing approving the Scheme. Nearmap did not raise any additional matters of substance that were of concern at the second court hearing.

Section 411(17) 29 ASIC issued a statement in writing in accordance with s 411(17)(b) of the Act stating that it has no objection to the Scheme. Accordingly, while it does not follow that the Court must necessarily approve the Scheme, it was open for the Court to do so. Given ASIC's position, it was not necessary for the Court to satisfy itself separately under s 411(17)(a) that the Scheme was not proposed for the purpose of enabling any person to avoid the operation of Chapter 6 of the Act. In the circumstances, I was satisfied that a full and fair process has been followed in accordance with s 411 and that s 411(17) did not present a bar to the approval of the Scheme.

EXEMPTION FROM SECTION 411(11) 30 Nearmap requested an exemption from compliance with s 411(11) of the Act. Section 411(11) requires, subject to s 411(12), that a copy of the Court's order approving a scheme of arrangement be annexed to every copy of the company's constitution issued after the order is made. Section 411(12) allows the Court to exempt a body from compliance with this provision or to determine the period during which it shall comply. 31 I was satisfied that exemption from compliance with s 411(11) was appropriate in the circumstances and consistent with authority for the following reasons: (1) the Scheme will not alter the constitution of Nearmap or the rights of Nearmap shareholders, creditors or other persons dealing with the company; (2) no ongoing purpose will be served by requiring the orders approving the Scheme to be annexed to Nearmap's constitution; and (3) current shareholders of Nearmap are fully informed of the Scheme and will be informed in the event that the Court approves the Scheme. See, for example, Re Amcor at [41]; Re Healthscope [2019] FCA 759; 136 ACSR 259 at [41]; Re APN Property Group Limited (No 3) [2021] VSC 490 at [68] to [69].

CONCLUSION 32 For the reasons given, I made orders in the terms sought by Nearmap approving the Scheme. I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Cheeseman.