Introduction
1 I made the orders set out above at a hearing held on 8 November 2022. These are my reasons.
2 On 23 August 2022, I made the following convening orders:
1. The plaintiff is to convene and hold a meeting of the holders of ordinary shares in the plaintiff (members) to consider and, if thought fit, to approve (with or without any alterations or conditions) the scheme of arrangement (Scheme) proposed to be made between the plaintiff and the members, the terms of which are found at pages 408 to 427 of Exhibit MSMS1 to the affidavit of Mark Stephen Malhotra Samlal made on 18 August 2022 (first Samlal affidavit) (the Scheme Meeting).
2. The Scheme Meeting is to be convened by sending on or before 26 August 2022:
(a) in the case of members who have elected to receive shareholder communications electronically by way of email (Email Members), an email substantially in the form of pages 661 to 663 of Exhibit MSMS1 to the first Samlal affidavit and which includes links to a document substantially in the form of pages 154 to 235 of Exhibit MSMS2 to the affidavit of Mark Stephen Malhotra Samlal made on 22 August 2022 (second Samlal affidavit), which comprises the explanatory statement as required by s 412(1)(a) of the [Corporations Act 2001 (Cth) (the Act)] (Scheme Booklet) and which is to contain (among other things) the notice of scheme meeting (Notice of Scheme Meeting) and a proxy form for the Scheme Meeting (Scheme Proxy Form) substantially in the form of pages 89 to 97 of Exhibit MSMS2 to the second Samlal affidavit;
(b) in the case of members who are not Email Members, the following documents by pre-paid post addressed to the relevant address(es) recorded in the plaintiff's register:
(i) a document substantially in the form of the Scheme Booklet, which contains among other things the Notice of Scheme Meeting and the Scheme Proxy Form; and
(ii) a reply paid envelope for the return of the Scheme Proxy Form.
3. Subject to these orders, the Scheme Meeting is be convened, held and conducted in accordance with the provisions of:
(a) Part 2G.2 of the Act (save for any applicable replaceable rule) that apply to a meeting of the plaintiff's members; and
(b) the plaintiff's constitution that apply in relation to meetings of members and that are not inconsistent with Part 2G.2 of the Act.
4. The Scheme Meeting is to be held at 11:00 am (AEST) on Friday 30 September 2022 at the offices of K&L Gates, Melbourne, level 25, 525 Collins Street, Melbourne, in Victoria.
5. Members of the plaintiff may vote at the Scheme Meeting by attending in person or by proxy, attorney or corporate representative (if applicable).
6. Ian Richard Basser, or failing him David Grahame Fagan, is to be the chair of the Scheme Meeting.
7. The chair of the Scheme Meeting shall have the power to adjourn the meeting to such time, date and place as they consider appropriate.
8. The plaintiff may provide access to the Scheme Meeting for such other persons as it thinks fit.
9. Voting on the resolution to approve the Scheme is to be conducted by way of a poll.
10. A proxy form in respect of the Scheme Meeting will be valid and effective if, and only if, it is completed and received in accordance with its terms by 11:00 am (AEST) on 28 September 2022.
11. Compliance with r 2.15 of the Federal Court (Corporations) Rules 2000 (Rules) is dispensed with.
12. Notice of the hearing of an application under s 411(4) of the Act for an order approving the Scheme is to be published once in "The Australian" newspaper by an advertisement substantially in the form of Annexure A to these orders, such advertisement to be published on or before five days prior to the Scheme Meeting, and the plaintiff is otherwise exempted from compliance with r 3.4 of the Rules.
13. The further hearing of the originating process is adjourned to 10:15 am (AEDT) on 25 October 2022.
14. Liberty to apply is reserved.
15. These orders are to be entered forthwith.
See Re PayGroup Ltd [2022] FCA 1026.
3 These reasons adopt the same definitions as those convening orders.
4 In accordance with the convening orders, the scheme meeting was held on 30 September 2022. There were 231 members present (in person or by proxy, excluding one member who directed their proxy to abstain from voting), of whom 229 (representing 99.1342% of members voting and 99.9959% of the votes cast) voted in favour of the resolution to approve the Scheme.
5 At the adjourned hearing on 25 October 2022, an application for an adjournment was granted, because it had been realised that the convening orders had not been strictly complied with, and it was necessary to put on sworn evidence in that regard, and to give the Australian Securities and Investments Commission (ASIC) an opportunity to respond.
6 There were four matters of non-compliance with the convening orders, which PayGroup's legal representatives dubbed the advertising issue, the delayed dispatch issue, the annexure issue, and the mode of dispatch issue.
7 Put briefly:
(1) The advertising issue was that whereas the effect of the convening orders was to require the advertisement of the second court hearing to be published by 23 September 2022, it was published on 29 September 2022.
(2) The delayed dispatch issue was that whereas the convening orders required that the Scheme materials be sent to members on 26 August 2022, they were not sent until 29 August 2022.
(3) The annexure issue was that the convening orders themselves incorrectly referred to the penultimate version of annexure F to the Scheme Booklet (exhibited to an affidavit made on 22 August 2022), rather than the final version (exhibited to an affidavit made on 23 August 2022 - the morning of the first court hearing).
(4) The mode of dispatch issue was that whereas paragraph 2 of the convening orders required either that an email (in the form approved by the court) be sent to Email Members, or a hard copy Scheme Booklet be sent to those members who were not Email Members, some members (897 in total) were not sent the approved email or a hard copy Scheme Booklet. Instead, they were sent a "Notice and Access Letter", which provided a QR code with a link (to the same page linked in the approved email) at which the Scheme Booklet could be downloaded.
8 It is not necessary to explain further the causes of the mistakes. Detailed evidence was put on to explain what happened, and I readily accepted that each matter was inadvertent, and caused no prejudice. I also accepted that each was also procedural and capable of remediation under s 1322 of the Act.
9 There was one other matter that I should mention.
10 On about 26 August 2022, PayGroup engaged external consultants, Georgeson Shareholder Communications Australia Pty Ltd, to conduct an outbound calling campaign to inform PayGroup's members of the Scheme and to encourage their participation in the Scheme Meeting.
11 Calls were conducted according to a script (a copy of which was in evidence) that was written to be neutral and to avoid any personal opinions. Further, reports about the campaign and its results were prepared. They too were in evidence.
12 The purpose of the campaign, so the evidence established, was to:
(a) confirm members had received their documentation;
(b) ensure members were fully aware of the Scheme Meeting and proxy deadline;
(c) explain the importance of participating in the voting process;
(d) answer any general questions regarding the Scheme (in accordance with another script, again carefully neutral); and
(e) record member queries and document re-mail requests for follow-up.
13 The difficulty that arose was that the calling campaign had not been mentioned at the first hearing.
14 In its Report 539 - ASIC regulation of corporate finance: January to June 2017, ASIC gave guidance about the use of telephone campaigns in members' schemes of arrangement. The report said at [126]:
If a company proposing a members' scheme of arrangement seeks to engage with members ahead of the scheme meeting, they should take care and ensure that:
(a) information other than that contained in the scheme booklet is not discussed;
(b) the court is advised at the first court hearing-before approving the explanatory statement and convening the scheme meeting-of the company's proposed communications and any information sessions;
(c) they do not interfere with the court approved 'message' before the meeting: see Re Centro Retail Ltd [2011] NSWSC 1321 at [10]-[11]; and
(d) they keep records of any information presented by way of those communications and make those records available to ASIC.
15 The evidence was that the relevant PayGroup officer was not aware of that ASIC report.
16 PayGroup accepted that, before undertaking the telephone campaign, it should have informed the court and sought approval of the information provided during the proposed campaign. It submitted, however, that the telephone campaign was conducted in a manner consistent with the ASIC report; information other than that contained in the Scheme Booklet was not discussed; there was no interference with the court approved "message" before the Scheme Meeting; and records of information presented by those communications were kept and have been made available to ASIC. The evidence made good those submissions, and I accept them. Compare Re Vimy Resources Ltd (No 2) [2022] WASC 257 (Strk J); and Re ResApp Health Ltd [2022] NSWSC 1014 (Black J).
17 ASIC had the opportunity to review the evidence adduced to explain the reasons for and effect of the non-compliance, and had nothing to say about it.
18 Other than those matters, the statutory and procedural requirements for approval of the Scheme - including the statutory majority and the conditions precedent to the Scheme - were satisfied.
19 Since the first hearing, PayGroup has filed seven further affidavits, as follows:
(1) affidavit of Ian Richard Basser, PayGroup's chairman and a non-executive director, affirmed on 18 October 2022;
(2) affidavit of Oliver Robert Carton, PayGroup's company secretary, sworn on 25 October 2022;
(3) three affidavits of Andrew Michael Gaffney, a partner of K&L Gates, PayGroup's solicitors, affirmed on 25 and 27 October and 8 November 2022;
(4) affidavit of Michael Peter Stretton, a relationship manager at Computershare Investor Services Pty Limited (which maintains PayGroup's register of shareholders), affirmed on 26 October 2022; and
(5) affidavit of Mark Stephen Malhotra Samlal, PayGroup's managing director, affirmed on 27 October 2022.
20 The acquirer, Deel Australia Holdings Pty Ltd and Deel, Inc., also filed an affidavit of Vaughan Petherbridge, a partner of Gadens, the solicitors for the acquirer, affirmed on 8 November 2022.