PropTech Group Limited, in the matter of PropTech Group Limited (No 2) [2023] FCA 89

Federal Court of Australia|2023-02-10|Before: O'Callaghan J

OTHER MATTERS: A. The proceeding concerns a scheme of arrangement between the plaintiff and the holders of ordinary shares in the plaintiff, the terms of which are set out at pages 86 to 104 of annexure "LM-1" to the affidavit of Lee David Mitchell made on 25 November 2022 - a copy of which pages is Annexure A to this order (the Scheme). B. There has been produced to the Court a statement in writing by the Australian Securities and Investments Commission (ASIC) in accordance with s 411(17)(b) of the Corporations Act 2001 (Cth) (the Act), stating that ASIC has no objection to the Scheme.

Under s 411(4)(b) of the Act, the Scheme is approved.
Under s 411(12) of the Act, the plaintiff is exempted from compliance with section 411(11) of the Act in respect of the Scheme.
These orders are to be entered forthwith. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. ANNEXURE A

Scheme Meeting 9 The evidence established the following. 10 On 7 February 2023 at 11:00am AEDT, the Scheme Meeting was held in accordance with the convening orders. It was held in person, at the office of RSM Australia in Melbourne. 11 Mr Simon Baker (non-executive chairman) chaired the Scheme Meeting, in accordance with paragraph 6 of the convening orders. As required by PropTech Group's constitution, the meeting had a quorum of at least three members present in person or by proxy. 12 Prior to the Scheme Meeting, PropTech Group received 172 valid proxy votes, representing 60.7% of the total shares on issue. 13 The resolution to approve the Scheme was conducted by poll. Mr Cavin Kurtz was appointed the returning officer for the poll, the result of which was as follows (including proxies): For Against Total Votes Votes 94,489,733 2850 94,492,583 % of Votes 99.997 0.003 100 Holders 171 2 173 % of Holders 98.8 1.2 100

14 There were zero abstentions. The resolution was passed by 98.8% of members present and voting (in person or by proxy) and 99.997% of votes cast. 15 Accordingly, the statutory majorities required by s 411(4)(a) of the Corporations Act 2001 (Cth) - the resolution being passed by a majority in number of the members present and voting, and by 75% of votes case - were satisfied.

Role of the court 16 The principles relevant to the exercise of the court's power to approve a scheme of arrangement are well understood. See, by way of example only, Crown Resorts Limited (No 2) [2022] FCA 710 at [11] (Anderson J). 17 In making an order pursuant to s 411(4)(b) of the Act (approving a scheme of arrangement), the role of the court is supervisory. The court is not bound to approve a scheme merely because it previously made orders convening a meeting or because statutory majorities were achieved. However, 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". As a matter of practical and commercial reality, this must be correct. 18 The cases establish that the following matters should be taken into account: (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. See, by way of example only, Re PayGroup Limited (No 2) [2022] FCA 1350.

Disposition 19 In light of the detailed and helpful written submissions of Mr CT Möller and Mr MB Peckham on behalf of PropTech Group, there were only two matters that required further consideration at the hearing. 20 First, as noted above, there was a minor error in the convening orders (a reference to an exhibit LM-7 instead of exhibit LM-6). In my view, this error is immaterial and does not invalidate the steps taken by PropTech Group. Section 1322 of the Act deals with irregularities and s 1322(2) provides as follows: A proceeding under this Act [taken by courts to include a scheme meeting] is not invalidated because of any procedural irregularity unless the Court is of the opinion that the irregularity has caused or may cause substantial injustice that cannot be remedied by any order of the Court and by order declares the proceeding to be invalid. 21 As submitted by counsel for PropTech Group: the error was obvious, the intention of the order is plain, and the error can be cured as a matter of construction. Accordingly, I am not of the opinion that the irregularity has caused, or may cause, any injustice. 22 Second, having reviewed the affidavit of Lee David Mitchell affirmed 10 February 2023, the following matters were established: (a) ASIC issued a letter to the Directors of PropTech Group, stating that under s 411(17)(b) of the Act, it had no objection to the Scheme; and (b) each of the relevant conditions precedent (other than court approval) had been satisfied or waived. 23 In this case, I was satisfied of the following matters: (a) there is nothing to suggest that the Scheme was proposed other than in good faith; (b) there is nothing to suggest that PropTech Group's members voted other than in good faith; (c) PropTech Group's members overwhelmingly supported the Scheme, as reflected in the voting results at the Scheme Meeting; (d) the opinion of the independent expert was that the Scheme and associated transactions are in the best interests of PropTech Group's members; (e) the recommendation from all of PropTech Group's directors was that members vote in favour of the Scheme; (f) PropTech Group has brought to the court's attention all matters that could be considered relevant to the exercise of its discretion, including the error in the convening orders; (g) the Scheme Booklet contained full disclosure of the potential benefits and disadvantages of the Scheme, and had been examined by ASIC; (h) there is nothing to suggest that any PropTech Group member will be oppressed by the Scheme (here, the Scheme contains measures to protect members against performance risk); (i) the Scheme will not alter the constitution of PropTech Group or the rights of members, creditors or other persons dealing with it; and (j) there is nothing to suggest that the Scheme offends public policy. 24 In summary, the evidence clearly established that the Scheme was made in good faith and was "at least so far fair and reasonable, as that an intelligent and honest [person], who is a member of the class, and acting alone in respect of [their] interest as such a member, might approve of it". See Re Alabama, New Orleans, Texas and Pacific Junction Railway Company [1891] 1 Ch 213 at 247 (Fry LJ). 25 It was therefore appropriate to make the orders sought by PropTech Group, including the order under s 411(12) of the Act that PropTech Group be exempted from compliance with s 411(11). I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice O'Callaghan.

Corporations Act 2001(Cth)ss 411(4)(a)-(b), 411(11), 411(12), 411(17)(b), 1322(2)

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