Opus Group Limited, in the matter of Opus Group Limited (No 2) [2018] FCA 1413

BANKS-SMITH J: 1 On 26 July 2018 I made orders as to the calling of a meeting of shareholders of the plaintiff, OPUS Group Limited (OPUS), to consider a proposed scheme of arrangement: OPUS Group Limited, in the matter of OPUS Group Limited [2018] FCA 959. 2 The scheme meeting was held on 6 September 2018 and the members agreed to the scheme by the requisite statutory majority. 3 Accordingly, OPUS sought the Court's approval to the scheme on 13 September 2018 and I made such orders on that date. These are my reasons.

Jurisdiction to approve scheme 4 Section 411(4) of the Corporations Act 2001 (Cth) (Act) relevantly provides that an arrangement is binding on the members of a company and the company if, at a meeting convened in accordance with an order of the Court, a resolution in favour of the arrangement is: (a) passed by a majority in number of the members present and voting (either in person or by proxy) (s 411(4)(a)(ii)(A)); and (b) if the body has a share capital - passed by 75% of the votes cast on the resolution (s 411(4)(a)(ii)(B)), and the arrangement is approved by order of the Court.

Materials 5 OPUS relied on the affidavits that were filed for the purpose of the first hearing, together with a further seven affidavits: (a) affidavit of Ana Martinez sworn 7 September 2018 as to the lodgement of the first hearing orders with the Australian Securities and Investments Commission (ASIC), the finalisation and registration of the scheme booklet, the advertisements of the second Court hearing, and the provision of the voting report summary showing how OPUS shareholders other than Bookbuilders BVI Limited voted on the scheme resolution; (b) affidavit of Richard Celarc affirmed 10 September 2018 as to his role as chairman of the scheme meeting and the voting at the meeting; (c) affidavit of Tang Tsz Ying affirmed 10 September 2018 as to the printing and dispatch of the scheme materials, and updates to the Record Date and Implementation Date under the scheme; (d) affidavit of Luke Jones sworn 12 September 2018 as to dispatch of the scheme materials, maintenance of the register of shareholders, and the receipt of proxies; (e) affidavit of Nicole Thornton sworn 12 September 2018 as to voting at the scheme meeting; (f) affidavit of Ana Martinez sworn 12 September 2018 as to absence of notice of any complaints, notices of objection or notices of intention to appear; and (g) affidavit of Ana Martinez sworn 13 September 2018 as to satisfaction of relevant conditions precedent and relevant certificates.

Relevant considerations for second Court hearing 6 The considerations relevant to the Court's decision to approve a scheme pursuant to s 411(4)(b) of the Act are well established. Where a majority of members have approved a scheme, the Court is not bound to approve it, however the Court should be slow to conclude that a scheme is unreasonable or unfair, provided that the members have been properly informed of matters relevant to the making of their decision, as that would otherwise involve the Court substituting its commercial judgment for that of the body of members: Seven Network Limited, in the matter of Seven Network Limited (No 3) [2010] FCA 400; (2010) 267 ALR 583 at [31]-[40] (Jacobson J). 7 The matters the Court must take into account in deciding whether to approve the scheme include whether: (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) OPUS 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 OPUS has a statement from ASIC that it has no objection to the scheme: Seven Network Limited (No 3); David Jones Limited, in the matter of David Jones Limited (No 3) [2014] FCA 753 (Farrell J).

Two disclosed issues 8 OPUS properly disclosed two issues relevant to the scheme.

Service on shareholders on register at 6 August 2018 9 The effect of order 10 of the orders of 26 July 2018 was that OPUS was required to dispatch the scheme materials by no later than 6 August 2018 to shareholders who appeared on the register of members on 6 August 2018. 10 Mr Jones deposed to the fact that on 11 September 2018, OPUS became aware that the scheme materials were only dispatched to shareholders who appeared on the register of members on 2 August 2018. 11 There was a total of 33 shareholders (who held a total of 314,686 shares) who were on the register on 6 August 2018, but not on the register on 2 August 2018. Those 33 shareholders account for: (a) 5.44% of OPUS's 607 shareholders (as at 4 September 2018) by number; and (b) 0.23% of OPUS's 133,969,941 fully paid ordinary shares. 12 It is therefore apparent that OPUS failed to issue the scheme materials to 33 of its shareholders by 6 August 2018 in compliance with the orders. 13 I was provided with a table by way of aide memoire at the hearing which indicated that in a hypothetical vote where all new shareholders voted against the resolution, the resolution would still have passed with a headcount vote of 78.74% and a number of shares vote of 99.69%. 14 OPUS submitted that: (a) the fact that the omission constituted a breach of the orders is not of itself a bar to relief under s 1322 of the Act: Re QT Mutual Bank Ltd (No 2) [2016] QSC 265 at [30] (Bond J); (b) the legislative policy which underlies s 1322 is that the law should not inflict unnecessary inconvenience or invalidate transactions because of non-compliance with relevant procedural requirements where such non-compliance is the product of honest inadvertence: Re DUET Management Company 1 Ltd [2013] NSWSC 817; (2013) 95 ACSR 34 at [17] (Black J); (c) the irregularity has no impact upon the integrity of the resolution passed at the scheme meeting and has caused no substantial injustice to the shareholders as a whole; (d) the irregularity did not affect the outcome of the scheme meeting as the affected number of Shareholders represented 5.44% of all shareholders and the affected number of shares represented 0.23% of shares on issue. These numbers are not material and the resolution would have passed regardless of the irregularity: Clough Limited, in the matter of Clough Limited (No 2) [2013] FCA 1346 at [8] (Siopis J); (e) as to any substantial injustice, the affected shareholders were sent the scheme materials on 23 August 2018 and the second scheme meeting had been advertised, and featured in Australian Stock Exchange (ASX) announcements; and (f) the irregularity is of the same kind considered in Clough Limited (No 2) and Coalspur Mines Limited, in the matter of Coalspur Mines Limited (No 2) [2015] FCA 591 (Siopis J), and in both cases such irregularity was cured by s 1322(2). 15 In the circumstances, OPUS submitted that the irregularity here is cured automatically by s 1322(2). To avoid any doubt, OPUS sought a validating order under s 1322(4)(a) of the Act, even if not strictly required. That approach has been taken in other cases: see, for example, iProperty Group Limited, in the matter of iProperty Group Limited (No 2) [2016] FCA 36 at [15] (Yates J). 16 The non-compliance was clearly inadvertent. Having reviewed the evidence and the authorities relied upon, I am satisfied that the disclosed failure to comply with the dispatch order comprises a procedural irregularity that does not invalidate the resolution. However, I will also adopt the approach of Yates J and make an appropriate order under s 1322(4)(a) of the Act.

Record Date and Implementation Date 17 Mr Ying deposed to amendments to the Record Date and Implementation Deed (as defined in the scheme booklet) as they appear in the dispatched scheme booklet. After consultation with the ASX, the Record Date was varied by one day and announced by ASX announcement. After consultation with the Hong Kong Stock Exchange, the expected Implementation Date was varied by five days. That change of date was also the subject of an ASX announcement, together with notice that any further changes to the expected date would also be announced through the ASX. I consider that in the circumstances OPUS has taken appropriate steps to publicise such matters to its shareholders.

New shareholders 18 For completion, I note that Mr Jones deposed to steps taken to ensure that members who acquired shares after 6 August 2018 were also sent hardcopy or electronic sets of the scheme booklet and proxy forms/links. Whilst not a non-compliance issue (the cut-off date for dispatch under the orders being 6 August 2018), I acknowledge the steps that were taken and consider them to have been appropriate, in light of the right of such shareholders to vote at the meeting.

OPUS has complied with the orders and other procedural requirements 19 Subject to what has just been addressed, having reviewed the evidence, I am satisfied the procedural requirements of the Act have been met. 20 The orders and scheme booklet were lodged with ASIC. 21 The Court's orders of 26 July 2018 regarding dispatch of the notice of meeting, scheme booklet and proxy form to the members were otherwise complied with. 22 The meeting was advertised as required by the orders as amended. 23 The scheme meeting was convened and held in accordance with the orders as amended. The outcome of the voting was as follows: (a) 163 shareholders present and voting (including by proxy) voted in favour of the scheme resolution and 13 voted against; (b) 92.61% of shareholders present and voting (including by proxy) voted in favour of the scheme resolution; (c) 121,824,370 shares held by shareholders present and voting (including by proxy) were voted in favour of the scheme resolution and 70,165 were voted against; and (d) 99.94% of shares held by shareholders present and voting (including by proxy) were voted in favour of the scheme resolution.

Voting excluding Bookbuilders BVI Limited and Mr Celarc 24 In its communications with the solicitors for OPUS prior to the first Court hearing, ASIC requested that OPUS report on the outcome of the voting, excluding the votes of Bookbuilders BVI Limited and Mr Celarc and his associates. 25 The evidence as to such outcome is as follows: (a) 157 shareholders present and voting (including by proxy) voted in favour of the scheme resolution and 13 voted against; (b) 92.35% of shareholders present and voting (including by proxy) voted in favour of the scheme resolution; (c) 8,640,323 shares held by shareholders present and voting (including by proxy) were voted in favour of the scheme resolution and 70,165 were voted against; and (d) 99.19% of shares held by shareholders present and voting (including by proxy) were voted in favour of the scheme resolution. 26 Taking into account that outcome, there is no reason to believe that the votes cast at the meeting were not representative of the views of the shareholders and there is no basis upon which I would infer that there was any oppression in respect of the vote.

The scheme is fair and reasonable 27 The Court generally takes the view that the members are in the best position to judge whether an arrangement is in their commercial interests and will be reluctant to make a decision contrary to the views expressed at the meeting. 28 The conclusion of the independent expert was to the effect that the scheme is fair and reasonable. In particular, the independent expert stated that the advantages of the restructure by way of the scheme outweigh the disadvantages, and that taking into account expected greater investor interest and access to equity capital, it is reasonable to believe that the price of Left Field Printing Group Limited (LFPG) shares will be positively re-rated, at least over the medium term (as noted in OPUS Group Limited at [6], under the scheme OPUS shareholders receive three shares in LFPG as consideration for each share held in OPUS). 29 Proof of the relevant statutory majorities is sufficient to establish that prima facie the scheme is fair. The members were provided with an explanation of the operation of the scheme at the meeting. No person came forward at either hearing to oppose the scheme. The scheme is commercially viable and does not prejudice the interests of the shareholders. 30 Taking into account those matters, I consider that the scheme is evidently fair and reasonable.

Conditions precedent were satisfied 31 Ms Martinez provided evidence from each of OPUS and LFPG as to satisfaction of the relevant conditions precedent provided by the Scheme Implementation Agreement. Certificates were provided to that effect.

ASIC's statement provided 32 ASIC provided a letter advising that it has no objection to the scheme in accordance with s 411(17)(b) of the Act.

Disposition 33 In the circumstances, I was satisfied that the scheme should be approved by the Court and accordingly I made orders to that effect at the hearing. OPUS also sought exemption from compliance with s 411(11) of the Act. I considered it appropriate to grant the exemption. I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Banks-Smith.