Onthehouse Holdings Limited, in the matter of Onthehouse Holdings Limited (No 2) [2016] FCA 1242

Federal Court of Australia|2016-10-19|Before: Mr J, Farrell J

Pursuant to s 411(4)(b) of the Corporations Act 2001 (Cth) (the Act), the scheme of arrangement between Onthehouse Holdings Limited (ACN 150 139 781) (OTH) and holders of fully paid ordinary shares in OTH, other than those held by or on behalf of 77 Victoria Street Venture Pty Limited in its capacity as trustee for 77 Victoria Street Trust, in the form set out in Attachment B of the Scheme Booklet which is Exhibit 1 in these proceedings, be approved.
Pursuant to s 411(12) of the Act, OTH be exempted from compliance with s 411(11) of the Act.
These orders be entered forthwith Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT 1 The plaintiff, Onthehouse Holdings Limited (ACN 150 139 781) (OTH), has applied for orders pursuant to s 411(4)(b) of the Corporations Act 2001 (Cth) approving a scheme of arrangement between the holders of fully paid ordinary shares in OTH other than shares held by or on behalf of 77 Victoria Street Venture Pty Limited in its capacity as trustee for 77 Victoria Street Trust (77VSV), in the form set out in Attachment B to the Scheme Booklet which is Exhibit 1 in these proceedings and an order under s 411(12) exempting OTH from compliance with s 411(11) of the Corporations Act. 2 Terms used in these reasons bear the same meaning as in my reasons for making orders under s 411(1) convening a Scheme Meeting to be held on 12 October 2016: see Onthehouse Holdings Limited, in the matter of Onthehouse Holdings Limited [2016] FCA 1167. 3 This is the second court hearing. The affidavits referred to in the outline of submissions which are set out in Schedule A to these reasons were read. Certificates by OTH and the Consortium (Exhibit 3) as to satisfaction of conditions precedent to the Scheme were tendered at the hearing. A list of holders who voted on the resolution to approve the Scheme was tendered (Exhibit 2) and it did not include Asgard Capital Management Limited which is identified in the Scheme Booklet as the custodian of the shares owned by 77VSV. 4 On the basis of these materials, I am satisfied that: (1) The Scheme Booklet was registered by the Australian Securities & Investments Commission (ASIC) on 9 September 2016. (2) A meeting of the shareholders of OTH was convened and held on 12 October 2016 in accordance with orders which I made on 8 September 2016 and those orders otherwise appear to have been complied with in all material respects. (3) The OTH shareholders approved the Scheme by majorities which significantly exceeded the requisite statutory majorities. With 82,631,484 OTH shares on issue, 42,492,460 votes were cast in favour of the resolution. As 15,837,745 (approximately 19.17%) of the shares are held on behalf of 77VSV and the meeting did not include the shareholder registered in respect of those shares, the turnout of eligible shareholders was significant. (4) This hearing was advertised in The Australian on 12 October 2016. (5) OTH's solicitors have not received any notification from any OTH shareholder of an intention to attend the second court hearing to oppose approval of the Scheme. The matter was called outside the courtroom at the commencement of the hearing. No one attended the hearing to oppose the Court making the orders. (6) The conditions to which the Scheme is subject (other than Court approval and lodgement of the Court's orders with ASIC) have been waived or met. (7) By letter dated 18 October 2016, ASIC has advised under s 411(17)(b) of the Corporations Act that it has no objections to the Scheme. (8) According to applicable foreign law, the deed poll signed by Sandrift Pte Limited would be enforceable in Singapore under the laws of Singapore to the extent that it is enforceable in New South Wales. As a matter of interest, I note from Mr Michael Dempsey's affidavit affirmed on 12 October 2016 that as a result of obtaining an opinion from lawyers qualified to provide advice in relation to the laws of Singapore, he caused the Deed Poll which had been executed on 6 September 2016 to be re-executed by his co-director on 30 September 2016 and the counterparts to the Deed Poll were also re-executed by PIQ1 and MCHPL on that date. (9) I have no reason to believe that OTH has not brought to the attention of the Court all matters that could be considered relevant to the exercise of the Court's discretion. (10) There appears to have been full and fair disclosure to shareholders of all information material to the decision whether to vote for or against the Scheme. (11) The Scheme appears to be fair and reasonable so that an intelligent and honest shareholder, properly informed and acting alone, might approve it. 5 I will make the orders sought by OTH. 6 I certify that the preceding five (5) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Farrell.

SCHEDULE A IN THE MATTER OF ONTHEHOUSE HOLDINGS LIMITED Proceedings NSD 1163 of 2016 PROCEDURAL SUMMARY AND OUTLINE OF SUBMISSIONS FOR SECOND COURT HEARING

These submissions are supplementary to those provided to the Court on 22 August 2016 and 7 September 2016 and are provided to confirm to the Court that the relevant procedural requirements for the proposed scheme of arrangement between the plaintiff and certain of its shareholders (Scheme) have been satisfied. For the reasons set out in these submissions, the plaintiff submits that the Court ought to approve the proposed scheme.

FORMAL MATTERS 2. Originating Process. Filed 19 July 2016: Court Book Volume 1, Tab [3]. 3. Proof that the plaintiff is a part 5.1 Body: Affidavit of Crispian Paul Lynch, sworn 18 July 2016, Exhibit CPL-1, pages 1 - 37, Court Book Volume 1, Tab [4]. 4. Approval percentages. A majority in number of shareholders present and voting (97.83%) voted in favour of the scheme resolution, and the shareholders present and voting cast 99.71% votes in favour: Affidavit of Angus William Johnson affirmed 17 October 2016, paragraph [17], Court Book Volume 3, Tab [3]; Exhibit MW1 to the affidavit of Megan Walker affirmed 14 October, page [15], Court Book Volume 3, Tab [5]. 5. Explanatory Statement lodged with ASIC: Affidavit of John Williamson-Noble affirmed [18] October 2016, paragraphs [6] - [8]; Exhibit JWN2, pages 1 and 8, Court Book Volume 3, Tab [4]. 6. Despatch of Explanatory Statement to Shareholders: Affidavit of Sue Nguyen affirmed 13 October 2016, paragraphs [5] - [9], Court Book Volume 3, Tab [7]; Affidavit of Megan Walker affirmed 14 October 2016, paragraphs [17] - [23], Court Book Volume 3, Tab [5]. 7. Holding of EGM and satisfaction of condition precedent to the Scheme: Affidavit of Angus William Johnson affirmed 17 October 2016, paragraphs [4] - [5], Court Book Volume 3, Tab [3]. 8. Holding of Scheme Meeting: Affidavit of Angus William Johnson affirmed 17 October 2016, paragraphs [6] - [19], Court Book Volume 3, Tab [3]. 9. Statement in writing of notice of meeting: Affidavit of John Williamson-Noble affirmed 18 October 2016, paragraph [13], Court Book Volume 3, Tab [4]. 10. Advertisement of Second Court hearing: Affidavit of John Williamson-Noble affirmed 18 October 2016, paragraph [11], Court Book Volume 3, Tab [4]. 11. No notification of intention to appear: Affidavit of John Williamson-Noble affirmed 18 October 2016, paragraph [12], Court Book Volume 3, Tab [4]. 12. ASIC 411(17) "no objection" letter: Affidavit of John Williamson-Noble affirmed 18 October 2016, paragraph [14] and Exhibit JWN2, page 42, Court Book Volume 3, Tab [4]. 13. Execution of the deed poll: Affidavit of John Williamson-Noble affirmed 7 September 2016, paragraph [18] and Exhibit JWN-1, Tab 8, Court Book Volume 1, Tab [6]; affidavit of Michael Perry Dempsey affirmed 12 October 2016, paragraphs [13] - [17]; Exhibit MPD-4, Court Book Volume 3, Tab [8]. 14. Foreign law opinion as to enforceability of the deed poll against Sandrift in Singapore: affidavit of Lee Peiying affirmed 5 October 2016, Court Book Volume 3, Tab [9]. 15. Satisfaction of conditions precedent: certificates to be tendered. 16. Confirmation that the Scheme is fair and reasonable and in the best interests of Scheme Shareholders: Exhibit CLE-1 to the affidavit of Craig Lloyd Edwards sworn 7 September 2016, Court Book Volume 2, Tab [4].

Legal Principles 17. The principles which govern the exercise of the Court's discretion to approve a scheme of arrangement are well settled. Citing Re Solution 6 Holdings Ltd [2004] FCA 1049; Re Permanent Trustee Co Ltd [2002] NSWSC 1177; Re Central Pacific Minerals NL [2002] FCA 239; Re Seven Network Ltd (No 3) [2010] FCA 400, your Honour summarised these legal principles in Re Signature Capital Investments Limited (No 2) [2016] FCA 385 to include: (a) whether the orders of the Court convening the Scheme Meeting were complied with; (b) whether the resolution to approve the Scheme was passed by the requisite majority and whether other statutory requirements have been satisfied; (c) 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; (d) whether the Scheme is fair and reasonable so that an intelligent and honest 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; (e) whether 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 (f) whether there was full and fair disclosure to shareholders of all information material to the decision whether to vote for or against the Scheme.

Conclusion 18. It is submitted that the plaintiff has made out a case for approval of the Scheme pursuant to sub-section 411(4)(b) of the Act. The Court should also make the exemption order sought under sub-section 411(12) of the Act, that is, that there is no need for the Court order approving the Scheme to be annexed to every copy of the constitution of OTH. 19. Draft orders sought by the plaintiff are included at Tab 2 of the Court Book, Volume 3. 18 October 2016 James Lockhart SC Tenth Floor Selborne/Wentworth Chambers

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