PropTech Group Limited, in the matter of PropTech Group Limited [2022] FCA 1606

O'CALLAGHAN J: 1 After a hearing on 16 December 2022, I made the orders set out above. These are my reasons. 2 By originating process filed on 28 November 2022, PropTech Group Limited (PropTech Group) sought orders pursuant to s 411(1) of the Corporations Act 2001 (Cth) (the Act) as follows: At the first hearing 1 An order under section 411(1) of the Act that the plaintiff convene a meeting of the PropTech Members for the purpose of considering, and if thought fit, agreeing (with or without alterations) to the Scheme (scheme meeting). 2 Orders or directions as to: (a) the convening, holding and conduct of the scheme meeting; (b) the time at and manner in which the scheme meeting is to be held; and (c) the persons to act as chairperson and alternate chairperson at the scheme meeting, as the Court sees fit. At the second hearing 3 An order under section 411(4)(b), and (if necessary) section 411(6) of the Act that the proposed Scheme be approved. 4 An order under section 411(12) of the Act that the plaintiff be exempted from compliance with the requirements of section 411(11) of the Act in relation to the Scheme. 3 At the hearing on 16 December 2022, PropTech Group sought the first two of those orders (the orders directed to the scheme meeting). 4 PropTech Group is a public company, limited by shares and listed on the Australian Securities Exchange (ASX). It conducts an Australian-based online real estate technology business that owns, operates and invests in property technology software-as-a-service businesses in Australia, New Zealand and the United Kingdom. 5 The proposed scheme is an acquisition scheme, under which all shares in PropTech Group will be acquired for $0.60 per share (Scheme). 6 The proposed acquirer is Rockend Technology Pty Ltd (Rockend), a subsidiary of Management Reports International Pty Ltd (MRI Australia). MRI Australia is the Australian subsidiary of MRI Software LLC (MRI Software), which is incorporated in Delaware in the United States of America. 7 If the Scheme is approved, the following will occur: (a) all the shares in PropTech Group at the "Scheme Record Date" will be transferred to Rockend; (b) PropTech Group's members will receive payment for their shares; and (c) PropTech Group will become a subsidiary of Rockend and be delisted from the ASX. 8 PropTech Group's directors have unanimously recommended that, in the absence of a superior proposal, its members vote in favour of the Scheme. PropTech Group's directors presently intend to vote in favour of the Scheme (similarly absent a superior proposal). 9 A draft scheme booklet, including the explanatory statement required by s 412 of the Act, has been prepared (Exhibit LM-6 to the fourth affidavit of Mr Lee David Mitchel affirmed on 15 December 2022). It provides a detailed description of the Scheme, including its advantages and disadvantages. 10 An independent expert report (Annexure SS-2 of the affidavit of Mr Stephen Seear affirmed 15 December 2022) has been prepared by BDO Corporate Finance (East Coast) Pty Ltd and is to be annexed to the scheme booklet. The expert report assesses the Scheme and opines that, in the absence of a superior proposal, it is fair and reasonable to, and in the best interests of, PropTech Group's members.

The proposed scheme 11 On 31 October 2022, PropTech Group, Rockend and MRI Software entered a scheme implementation deed (Annexure LM-1 of the affidavit of Mr Lee David Mitchell affirmed 25 November 2022), by which they agreed to use best endeavours to propose and implement the Scheme. 12 The terms of the Scheme are contained in Annexure 2 of the scheme implementation deed (a copy of which is to form Annexure B of the scheme booklet). 13 Section 4.6 of the scheme booklet explains in detail the implementation of the Scheme, in summary as follows: (a) "Scheme Shareholders", being those PropTech Group shareholders at the Scheme Record Date (expected to be 15 February 2023), will be entitled to receive the "Scheme Consideration" of $0.60 for every PropTech Group share held as at that date; (b) the Scheme Consideration will be paid on the "Scheme Consideration" will be paid on the "Implementation Date" (five business days after the Scheme Record Date); (c) no later than two days before the Implementation Date, Rockend must deposit the aggregate amount of the Scheme Consideration into a trust account, to be held by PropTech Group on trust for the Scheme Participants. (d) also on the Implementation Date, subject to payment of the Scheme Consideration, the shares will be transferred to Rockend. 14 Although Rockend is to pay the Scheme Consideration, it is not a party to the Scheme. 15 On 13 December 2022, Rockend and MRI Software executed a deed poll in favour of the "Scheme Participants" (being the Scheme Shareholders). An executed copy of the deed poll is at Annexure JE-3 of the affidavit of Mr John Ensign affirmed 14 December 2022 (and is to form Annexure C of the scheme booklet).

Statutory framework 16 The statutory framework relating to schemes of arrangement is set out in Part 5.1 of the Act and involves a three stage process: (a) the hearing of an application to the court for orders to convene a meeting or meetings (s 411(1)); (b) the holding of the meeting or meetings (s 411(4)(a)); and (c) the hearing of an application to the court for an order to approve the scheme (ss 411(4)(b) and 411(6)). 17 The court's discretion to make an order under s 411(1) is enlivened if: (a) a compromise or arrangement is proposed between a Part 5.1 body and its members (or any class of them); (b) an application for the order is made in a summary way by the body; (c) 14 days' notice of the hearing of the application has been given to ASIC (or such lesser period as the court or ASIC permits); and (d) the court is satisfied that ASIC has had a reasonable opportunity to: (i) examine the terms of the proposed compromise or arrangement to which the application relates and a draft explanatory statement relating to the proposed compromise or arrangement; and (ii) make submissions to the court in relation to the proposed compromise or arrangement and the draft explanatory booklet. See, by way of example only, Re Kidman Resources Ltd [2019] FCA 1226; (2019) 375 ALR 760, 763-4 [22]. 18 I was satisfied that the criteria set out above have been met. Accordingly, the court's discretion to make orders for the plaintiff to convene the scheme meeting was enlivened.

Should the discretion be exercised? 19 The principles which apply to the exercise of the court's discretion are well-understood. The court must be satisfied that: (a) the scheme is fit for consideration by the proposed meeting in the sense that it is of such a nature and cast in such terms that, if it achieves the statutory majority at the meeting, the court would be likely to approve it on the hearing of a petition which is unopposed; and (b) members are to be properly informed as to the nature of the scheme before the scheme meeting. 20 The role of the court at the first court hearing is supervisory. Justice Finkelstein summarised relevant authorities in an oft cited passage in Re CSR Ltd (2010) 183 FCR 358, 379-80 [74]-‍[76], explaining that the court should generally confine itself to ensuring that certain procedural and substantive requirements are met (for example, that there will be adequate disclosure), with limited consideration of issues of fairness. The court should only consider the merits or fairness of a proposed scheme at the convening hearing if the issue is such as would "unquestionably" lead to a refusal to approve the scheme at the approval hearing; that is, the scheme may "appear on its face so blatantly unfair or otherwise inappropriate that it should be stopped in its tracks before going any further" (quoting Re T & N Ltd [No 3] [2007] 1 All ER 851, 862 [19] (David Richards J) and Re Foundation Healthcare Ltd [2002] FCA 742; (2002) 42 ACSR 252, 265 [44] (French J)). 21 I had the benefit of detailed written and oral submissions by Mr CT Möller and Mr MB Peckham on behalf of the plaintiff. 22 Those submissions raised the following features of the Scheme to demonstrate that it is fit for consideration by the proposed meeting: (a) equity incentives; (b) the interests of Mr Joseph Hanna and Mr Scott Wulff (directors of PropTech Group); (c) Performance risk; (d) the deemed warranty by PropTech Group's members; (e) exclusivity provisions; (f) the "break fee" and "reverse break fee"; and (g) the purpose of the Scheme (that is, not to avoid Chapter 6 of the Act). 23 Counsel submitted, and I agree, that none of these matters is unusual nor provides reason to deem the Scheme unfit for consideration by the proposed meeting. There are no matters arising from those submissions that require explanation in these reasons. 24 PropTech Group's submissions also raised the following matters relevant to whether the members will be properly informed as to the nature of the scheme before the scheme meeting: (a) explanation of the effect of the compromise or arrangement; (b) setting out the prescribed information; and (c) setting out any other material information. 25 These matters relate to prescriptions imposed by s 412(1)(a) of the Act, and reg 5.1.01 and Schedule 8 to the Corporations Regulations 2001 (Cth). There are no matters arising from those submissions that require explanation in these reasons. 26 Finally, PropTech Group's submissions raised the following matters for the court's consideration: (a) ASIC's role; (b) independent expert's role; (c) verification of information; (d) approval of the draft scheme booklet by the court; and (e) sending the draft scheme booklet to PropTech Group's members. 27 There are no matters arising from those submissions that require detailed explanation in these reasons. It is worth noting that schemes of arrangement are not required to be the subject of a report by an independent expert unless the parties have a common director, or the acquiring company controls 30% of the scheme company (neither of which is the case here). See Corporations Regulations 2011 reg 5.1.01 and Schedule 8 cls 8303 and 8306. However, PropTech Group has obtained a report from an independent expert as to whether, in its opinion, the Scheme is in the best interests of PropTech Group's members. 28 This is a matter worth noting because, while not prescribed in these circumstances, the act of obtaining an independent expert report can enhance the informed vote by members at the meeting. This is a worthwhile endeavour which assists the court in deciding to exercise its discretion.

Disposition 29 For the above reasons, I was satisfied that the Scheme is of such a nature and cast in such terms that, if it achieves the statutory majorities at the scheme meeting, the court would be likely to approve it at a second court hearing. I was also satisfied that the information to be provided to members as to the nature of the scheme before the scheme meeting is adequate. 30 PropTech succinctly and accurately summarised those reasons as follows: (a) the terms of the proposed Scheme are in a conventional form for an acquisition scheme; (b) there is no reason the Scheme, if considered and adopted by the members, would not likely be approved by the Court at the second hearing; (c) the PropTech Group members will receive the careful analysis and assessment by an independent expert of the transaction and its advantages and disadvantages, as well as the recommendation of PropTech Group's directors; (d) the draft scheme booklet meets all the statutory requirements, has been carefully prepared and verified by PropTech Group (and Rockend, where relevant), and has been examined by ASIC; and (e) it cannot be said that the Scheme appears to so blatantly unfair or otherwise inappropriate that it should be stopped in its tracks before going any further. 31 It was therefore appropriate to make the orders sought by PropTech Group. I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice O'Callaghan.