PSC Insurance Group Limited, in the matter of PSC Insurance Group Limited [2024] FCA 946

Federal Court of Australia|2024-08-21|Before: Mr P, Neskovcin J

Pursuant to s 411(1) of the Corporations Act 2001 (Cth) (the Act), the plaintiff convene and hold the following meetings of the holders of ordinary shares in the plaintiff (Scheme Shareholders) to consider and, if thought fit, to approve (with or without modification) the scheme of arrangement (Scheme) proposed to be made between the plaintiff and its shareholders, the terms of which are set out in Annexure A: (a) a meeting of those Scheme Shareholders who will receive a portion of their Scheme consideration as scrip consideration (Rollover Shareholders) (Rollover Shareholders Scheme Meeting) to be held on 26 September 2024 commencing at 11:00 am (AEST); and (b) a meeting of Scheme Shareholders other than Rollover Shareholders (General Shareholders) (General Scheme Meeting) to be held on 26 September 2024 commencing at 9:30 am (AEST), (together, Scheme Meetings) with the Scheme Meetings to be held as hybrid meetings: (c) in person at Pullman Melbourne on the Park, 192 Wellington Parade, East Melbourne VIC 3002; and (d) virtually by way of live webcast on an online platform.
The Scheme Meetings be convened by sending on or before 23 August 2024: (a) in the case of General Shareholders who have provided an email address to the plaintiff for shareholder communications or receipt of notices from the plaintiff (General Email Shareholders), an email substantially in the form contained at Annexure B which contains links: (i) to a website at which each General Email Shareholder can view and download an electronic copy of the document substantially in the form of Exhibit CM-7 to the affidavit of Catherine Merity affirmed on 19 August 2024 incorporating the amendments identified in Annexure CM-8 to the affidavit of Catherine Merity affirmed on 21 August 2024, which comprises the explanatory statement as required by s 412(1)(a) of the Act (Scheme Booklet) (which contains, among other things, the Notices of Scheme Meetings at Attachments 1 and 2 to the Scheme Booklet); and (ii) through which each General Email Shareholder can electronically access their personalised proxy form and lodge proxy instructions in relation to their shareholding for the General Scheme Meeting online (Proxy Website); (b) in the case of Rollover Shareholders who have provided an email address to the plaintiff for shareholder communications (Rollover Email Shareholders), an email substantially in the form contained at Annexure C which contains: (i) a link at which the Rollover Email Shareholder can view and download the Scheme Booklet (which contains, among other things, the Notices of Scheme Meetings at Attachments 1 and 2 to the Scheme Booklet); and (ii) a non-personalised proxy form; (c) in the case of Scheme Shareholders who have elected to receive physical documents under section 110E of the Act (Postal Recipients), sending the following documents by pre-paid post or pre-paid airmail: (i) a physical copy of the Scheme Booklet (which contains, among other things, the Notices of Scheme Meetings at Attachments 1 and 2 to the Scheme Booklet); (ii) a personalised proxy form; and (iii) a reply-paid envelope addressed to the plaintiff's share registry for the return of that proxy form; (d) in the case of Scheme Shareholders who have not provided an email address to the plaintiff for shareholder communications or receipt of notices from the plaintiff, or for Email Shareholders for whom the plaintiff receives an electronic notification that the email cannot be delivered, sending the following documents by pre-paid post or pre-paid airmail: (i) a proforma letter substantially in the form contained at Annexure D which contains links to a website at which the Scheme Shareholder can view and download an electronic copy of the Scheme Booklet; (ii) a personalised proxy form; and (iii) a reply-paid envelope addressed to the plaintiff's share registry for the return of that proxy form.

INTRODUCTION 1 By originating process filed on 27 June 2024, the plaintiff (PSC Insurance Group Limited) seeks orders under ss 411(1) and 1319 of the Corporations Act 2001 (Cth) (the Act) to convene meetings of separate classes of members of PSC for the purposes of considering a proposed scheme of arrangement (Scheme). On 21 August 2024, I made orders convening such meetings. These are my reasons for making those orders. 2 The purpose of the Scheme is for an entity wholly owned by The Ardonagh Group to acquire all of the issued ordinary shares in PSC. PSC is an ASX-listed public company limited by shares. Its business is a diversified insurance services group with an international insurance platform, offering insurance broking and underwriting services. Ardonagh is an independent insurance distribution platform that offers a range of insurance-related products and services. Ardonagh reported pro forma income for FY2023 of US$1.9 billion and pro forma adjusted EBITDA of US$695 million. 3 On 8 May 2024, PSC announced that it had entered into a binding Scheme Implementation Deed (SID) with Rosedale Bidco (an entity ultimately owned by Ardonagh) under which it proposed that Rosedale Bidco acquire all of the issued shares in PSC. If the Scheme is implemented, Rosedale Bidco will acquire all of the issued shares in PSC and PSC will be delisted from the ASX. 4 The consideration to be provided for the acquisition of all of the issued PSC shares (Scheme Consideration) is of two kinds: (a) Scheme Shareholders (which is a defined term and, relevantly, does not include the "Rollover Shareholders" referred to subparagraph (b) below) (General Shareholders) will receive cash consideration of A$6.19 per PSC share (Cash Consideration); and (b) a total of eleven PSC directors and senior management who are (or who control) PSC ordinary shareholders (Rollover Shareholders) will receive non-voting 'D' shares in entities owned by Ardonagh in exchange for some of their PSC shares (Scrip Consideration) and the Cash Consideration of A$6.19 per share for the balance of their PSC shares. 5 The "Effective Date", being the date on which the Scheme will become binding on PSC shareholders, assuming the Court approves the Scheme, is expected to be 4 October 2024. Subject to Court and shareholder approvals, it is anticipated that the Scheme will be implemented and the Scheme Consideration will be paid or issued (as applicable) to Scheme Shareholders on 11 October 2024. 6 PSC has prepared a draft Scheme Booklet in respect of the Scheme which, subject to the Court's orders and registration of the Scheme Booklet by Australian Securities and Investments Commission (ASIC) pursuant to s 412(6) of the Act, it proposes to dispatch to Scheme Shareholders. The Scheme Booklet includes the explanatory statement required by s 412 of the Act and provides a description of the Scheme and its advantages and disadvantages. 7 On 4 July 2024, PSC's solicitors provided the Scheme Booklet to ASIC and requested from ASIC a statement in accordance with s 411(17) of the Act to the effect that ASIC has no objection to the proposed Scheme. Revised versions of the Scheme Booklet were subsequently provided to ASIC, with the last draft having been provided to ASIC on 19 August 2024. 8 On 20 August 2024, ASIC provided PSC with a letter in the usual form, known as a "preliminary no objection letter". The letter stated that, based on ASIC's examination of the terms of the Scheme and the Scheme Booklet, ASIC does not currently propose to appear to make submissions, or intervene to oppose the Scheme, at the first hearing. 9 The Scheme Booklet states that the independent directors of PSC (comprising the Independent Board Committee) and the full PSC board unanimously recommend that Scheme Shareholders vote in favour of the Scheme in the absence of a superior proposal and subject to the "Independent Expert" continuing to conclude that the Scheme is in the best interests of Scheme Shareholders. This recommendation is made in respect of the Cash Consideration only (as to which, see paragraph 16 below). Further, each director of PSC has confirmed that they intend to vote the PSC share which they hold or control in favour of the Scheme. 10 FTI Consulting (Australia) Pty Ltd (Independent Expert) was engaged to prepare the Independent Expert Report (IER) in respect of the proposed Scheme, which will be included as an annexure to the Scheme Booklet. The Independent Expert has assessed the range of fair values of a PSC share as being between A$5.69 and A$6.65 per share. The Independent Expert has concluded that the proposed Scheme is in the best interests of Scheme Shareholders, as the Cash Consideration is fair (and, as a result, the proposed Scheme is reasonable) in the absence of a superior offer emerging. The Independent Expert has also expressed the opinion that the Scrip Consideration per PSC share is unlikely to be worth more than the Cash Consideration, per PSC share and that the Scrip Consideration does not impact the Cash Consideration to be received by Scheme Shareholders (such that the circumstances of the Rollover Shareholders may not be a material concern for General Shareholders in their decision about whether to approve the Scheme: as to which, see further paragraphs 33 to 36 below). 11 In my view, the Scheme, if considered and adopted by members of PSC, is of such a nature that it would, if it achieves the necessary majorities, be likely to be approved by the Court at the second hearing, if it is unopposed. Accordingly, I made the orders convening the shareholder meetings.

the scheme mechanism 12 Under the Scheme, Rosedale Bidco intends to acquire all of the issued ordinary shares in PSC. Rosedale Bidco is a wholly owned subsidiary of, and special purpose vehicle incorporated by, Ardonagh for the purpose of the Scheme. 13 The Scheme Consideration is to comprise: (a) Cash Consideration of A$6.19 per share payable to General Shareholders (being Scheme Shareholders who are not Rollover Shareholders); and (b) for Rollover Shareholders (being eleven PSC directors and PSC senior management), the Scrip Consideration for a portion of their PSC shares and the Cash Consideration of A$6.19 per share for the balance of their PSC shares. 14 The amount of Cash Consideration paid may be reduced by the amount per share of any future dividend or capital return declared or paid by PSC prior to the Effective Date, but there are presently no plans for any such further dividend or capital return to be declared or paid. 15 Under the Scheme, the General Shareholders and Rollover Shareholders will be treated as separate shareholder classes and each shareholder class will be required to vote to approve the Scheme at separate Scheme meetings. As such, the General Shareholders and the Rollover Shareholders need to separately vote in favour of the Scheme for it to proceed. 16 The PSC directors unanimously recommend that General Shareholders vote in favour of the Scheme in the absence of a superior proposal and subject to the Independent Expert continuing to conclude that the Scheme is in the best interests of Scheme Shareholders. That recommendation is in respect of the Cash Consideration only. As the Rollover Shareholders have made a binding election to receive Scrip Consideration for a proportion of their holding of PSC shareholders, the PSC board did not make any recommendation in relation to the Scrip Consideration. 17 The Scheme requires that the Scheme Consideration be paid or issued to Scheme Shareholders on the implementation date. The Scheme requires Rosedale Bidco to deposit (or procure the deposit) of cleared funds equal to the amount of the Cash Consideration into a trust account operated by PSC, as trustee for Scheme Shareholders, by no later than the business day before the implementation date. The transfer of the PSC shares to Rosedale Bidco is subject to payment of the Scheme Consideration to Scheme Shareholders. 18 Ardonagh intends to fund the aggregate amount of the Cash Consideration through cash on balance sheet from recently drawn term loans and funding from its existing shareholders to be raised prior to the Scheme being implemented. To that end, Tara Topco Limited, which is the ultimate holding company of Rosedale Bidco, has entered into a legally binding commitment letter with each equity investor who is committing funding, under which the equity investors agree to cause Tara Topco to receive an amount of funds if the Scheme becomes effective. Each equity investor has also undertaken to Tara Topco in the commitment letter that it will have (or otherwise manages, controls or advises funds which have) sufficient undrawn capital commitments of funds available to enable it to cause Tara Topco to receive, directly or indirectly, its respective proportion of the sponsor funding in full for the purposes of paying the Cash Consideration under the Scheme. Tara Topco has undertaken, in favour of PSC, to procure that any amounts received by it pursuant to the commitment letter will be provided directly or indirectly to Rosedale Bidco on or prior to the business day before the Implementation Date. 19 Tara Topco is not a party to the Scheme and is not bound by it. The established practice of requiring third party entities providing the Scheme Consideration to execute a Deed Poll in favour of the Scheme Shareholders has been followed in this case. Under the SID, Rosedale Bidco is to execute and deliver the Deed Poll before the first Court hearing. Under the Deed Poll, Tara Topco gives undertakings and warranties in favour of Scheme Shareholders regarding the performance of its obligations with respect to Scheme Consideration. In addition, Ardonagh Group Holdings Limited (AGHL) has also given undertakings to procure and guarantee the performance of Rosedale Bidco's obligations under the Deed Poll and the Scheme.

Power to make orders and discretion 20 Section 411(1) of the Act confers a discretion on the Court to make an order if certain requirements are satisfied, namely: (a) a compromise or arrangement is proposed between a Part 5.1 body and its members (or any class of them); (b) 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 statement. 21 PSC filed a number of affidavits to establish compliance with the Act, in addition to the Corporations Regulations 2001 (Cth) and the Federal Court (Corporations) Rules 2000 (Cth). 22 I am satisfied that the requirements under s 411(1) of the Act have been satisfied in the present case and the Court's power is enlivened. I am also satisfied that the relevant provisions of the Regulations and the Rules have been satisfied, subject to waiver of compliance with respect to one aspect of the Regulations and a dispensation sought in respect of compliance with r 3.4 of the Rules, as referred to below. 23 The Court's function on an application to convene a meeting is supervisory. In Re Amcor Ltd [2019] FCA 346, Beach J described the Court's role at the first court hearing in the following terms at [47]: My function on an application to order the convening of a meeting is supervisory. At this stage I should generally confine myself to ensuring that certain procedural and substantive requirements have been met including dealing with adequate disclosure, with limited consideration of issues of fairness. But having said that, it is appropriate to 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 a proposed scheme at the approval hearing, that is, the proposed scheme appears now to be on its face "so blatantly unfair or otherwise inappropriate that it should be stopped in its tracks before going any further" (Re Foundation Healthcare Ltd [2002] FCA 742; (2002) 42 ACSR 252 at [44] per French J). 24 In Re DuluxGroup Ltd (2019) 136 ACSR 546; [2019] FCA 961 at [19], O'Bryan J summarised the matters which the Court needs to be satisfied of as follows: (a) first, that 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": FT Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd (1977) 3 ACLR 69 at 72 per Street CJ; ASC v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485 at 504; Re Coles Group Ltd (2007) 25 ACLC 1380 at [29]-[36] per Robson J; and (b) second, that "the members [are to be] properly informed as to the nature of the scheme before the scheme meeting": Re NRMA Insurance Ltd (No 1) [2000] NSWSC 82; (2000) 156 FLR 349 at [30]; [2000] NSWSC 82; 33 ACSR 595; Re Foundation Healthcare [2002] FCA 742; (2002) 42 ACSR 252 at [38]. 25 I will now deal with those matters.

The Scheme is fit for consideration 26 As PSC submitted, the question of whether shareholders ought to accept particular consideration for their shares is quintessentially a commercial matter for the members of PSC to assess, and they ought not be prevented from having the opportunity to do so provided that the Court can be satisfied that they are acting on sufficient information and with time to consider what they are voting on: Re Oz Minerals Limited [2023] FCA 197 at [15] (Beach J), citing Re Amcor at [50] (Beach J). 27 The Court will also scrutinise the terms of the Scheme to satisfy itself that there is no element of unfairness in those terms that would be likely to preclude the approval of the Scheme if it came before the Court for approval: Re DuluxGroup at [22] (O'Bryan J). 28 In this case, relevant to the question of fitness, PSC raised the following features of the Scheme for the attention of the Court: (a) performance risk; (b) directors' interests in the Scheme; (c) the Scrip Consideration offered to Rollover Shareholders; (d) shareholder class considerations; (e) the break fee and reverse break fee; (f) exclusivity provisions; and (g) deemed shareholder warranty.

Performance risk 29 In considering whether to approve the Scheme, the Court will consider the "performance risk" regarding obligations to be performed by a non-party to the Scheme: Re Amcor at [53] (Beach J); Re DuluxGroup at [25] (O'Bryan J). 30 In this case, the entities providing the Scheme Consideration are not parties to the Scheme and are not bound by the Scheme. However, a number of measures have been implemented to address the performance risk arising from the obligation of Rosedale Bidco to pay the Scheme Consideration. First, the performance of Rosedale Bidco's obligations under the SID and the Deed Poll are guaranteed by AGHL and the parties to the Deed Poll, including Tara Topco, have given various other undertakings and warranties in favour of Scheme Shareholders regarding the performance of Rosedale Bidco's obligations in respect of the Scheme, including with respect to the Scheme Consideration. Second, the terms of the Scheme are such that the transfer of the PSC shares under the Scheme is subject to payment of the Scheme Consideration to Scheme Shareholders. This condition effectively removes any performance risk, insofar as the transfer of PSC's shares in return for the Scheme Consideration is concerned: Re Oz Minerals at [38] (Beach J).

Directors' interests in the Scheme 31 As mentioned above, the independent directors of PSC (comprising the Independent Board Committee) and the full PSC board unanimously recommend that Scheme Shareholders vote in favour of the Scheme in the absence of a superior proposal and subject to the Independent Expert continuing to conclude that the Scheme is in the best interests of Scheme Shareholders. Each director of PSC has confirmed that they intend to vote the PSC shares which they hold or control in favour of the Scheme. To the extent that that recommendation is made by PSC directors who are also Rollover Shareholders, that recommendation is subject to the express disclosures contained in the Scheme Booklet about the interests of and benefits that those directors stand to gain as a result of the Scheme. Specifically, those interests or benefits are as follows: (a) First, each director who is a Rollover Shareholder will receive Scrip Consideration in respect of a portion of their PSC shares. The precise type of Scrip Consideration depends on the tax residency of the director in question, but in each case, the scrip comprises non-voting 'D' shares in an entity owned by Ardonagh. These matters have been appropriately disclosed in the Scheme Booklet. (b) Second, two directors who are also Rollover Shareholders (Ms Tara Falk and Mr James Kalbassi) have unvested "Loan Funded Shares", which the PSC board has resolved will vest according to an accelerated schedule if the Scheme is implemented. That schedule is subject to Ms Tara Falk and Mr James Kalbassi remaining an employee of, or engaged by, the PSC group at the applicable vesting date. Further, all amounts owing by Ms Falk and Mr Kalbassi in respect of their Loan Funded Shares will be deducted from the aggregate Cash Consideration payable to them upon implementation of the Scheme. These matters have been appropriately disclosed in the Scheme Booklet. (c) Third, if the Scheme is implemented, Mr Tony Robinson, the Managing Director of PSC, will be paid a "Transaction Bonus" of $400,000 by PSC. The Scheme Booklet states that this payment recognises the significant role played by Mr Robinson in connection with the Scheme and the additional personal efforts required of him to successfully implement the Scheme. (d) Fourth, two of the directors (Ms Falk and Mr Kalbassi) will be paid a "Retention Payment" of £1.5 million each by Ardonagh if the Scheme is implemented. These payments are to incentivise Ms Falk and Mr Kalbassi, as key PSC employees, to remain within the Ardonagh business for a period following the implementation of the Scheme. To that end, Ms Falk and Mr Kalbassi are required to continue in their employment for approximately two years following the implementation of the Scheme. These matters are disclosed in the Scheme Booklet. PSC has provided evidence that the PSC board considers that the Retention Payments are reasonable and necessary to ensure the successful implementation of the Scheme. 32 I am satisfied that none of the above interests or benefits is of such a nature as to preclude the directors in question from making a voting recommendation to Scheme Shareholders regarding the Scheme. The nature of the different interests or benefits is adequately disclosed in the Scheme Booklet and the IER, and PSC has provided evidence as to the commercial basis for the benefits the directors stand to gain as a result of the Scheme.

Scrip Consideration offered to Rollover Shareholders 33 The Scheme Consideration comprises Cash Consideration to be paid to General Shareholders and Rollover Shareholders will receive the Scrip Consideration for a portion of their PSC shares and the Cash Consideration for the balance of their shares. 34 The Scrip Consideration is being offered to eleven Rollover Shareholders who hold 8.35% of the total number of PSC shares on issue. The director Rollover Shareholders hold 8.14% of the total number of PSC shares on issue. The Rollover Shareholders have made a binding election to receive Scrip Consideration in respect of a portion of their PSC shares. According to the evidence filed by PSC, the Scrip Consideration issued to Rollover Shareholders is intended to be of comparable value to the Rollover Shareholders per PSC share as the Cash Consideration. 35 The Independent Expert has expressed an opinion that the indicative value of the Scrip Consideration per PSC share is unlikely to be worth more than the Cash Consideration per PSC share and does not impact the Cash Consideration to be received by the General Shareholders. Further, having regard to those matters and the binding election made by the Rollover Shareholders to receive the Scrip Consideration, the circumstances of the Rollover Shareholders may not be a material concern for General Shareholders in making their decision about whether to approve the Scheme. 36 As mentioned above, the question of whether shareholders ought to accept particular consideration for their shares is quintessentially a commercial matter for the members to assess and they ought not be prevented from having the opportunity to do so, provided the Court can be satisfied that they are acting on sufficient information and with time to consider what they are voting on: Re Oz Minerals at [15] (Beach J). I am satisfied that the Scrip Consideration being offered to Rollover Shareholders is adequately disclosed to Scheme Shareholders in the Scheme Booklet and the IER. That disclosure will enable Scheme Shareholders to form a commercial assessment about the Scheme Consideration and make an informed vote on whether or not to approve the Scheme.

Shareholder class considerations 37 Sections 411(1) and (4) of the Act refer to a compromise or arrangement between, relevantly, members or a "class" of members. The word "class" is not defined in s 411. 38 The question arises as to whether there is a need for General Shareholders and Rollover Shareholders to meet separately, as a separate class of shareholders, to consider and vote on the Scheme in accordance with the requirements of s 411 of the Act. The relevant question in this context is whether the rights of one group of members are so dissimilar from the rights of other members as to make it impossible to consult together with a view to their common interest: Re Healthscope Ltd (2019) 139 ACSR 608; [2019] FCA 542 at [107] (Beach J). Even if members receive different treatment or benefits under or as a result of the Scheme, it does not necessarily follow that separate class meetings are required. It is a question of degree: Re DuluxGroup at [44] (O'Bryan J), citing Re Hills Motorway Ltd (2002) 43 ACSR 101; [2002] NSWSC 897 at [12] (Barrett J). 39 As mentioned above, the Rollover Shareholders have made a binding election to receive Scrip Consideration in respect of a portion of their PSC shares, which election from certain of the Rollover Shareholders was a condition precedent to the implementation of the Scheme. For the director Rollover Shareholders, the precise type of Scrip Consideration depends on the tax residency of the director, but in each case, the scrip comprises non-voting 'D' shares in an entity owned by Ardonagh. The Independent Expert has expressed an opinion that the Scrip Consideration per PSC share is unlikely to be worth more than the Cash Consideration per PSC share and does not impact the Cash Consideration to be received by the General Shareholders. However, to the extent that the Rollover Shareholders stand to receive the Scrip Consideration in addition to the Cash Consideration under the Scheme, their interests differ from those of General Shareholders who will not receive the Scrip Consideration. I accept PSC's submission that the different Scheme Consideration offered to General Shareholders and Rollover Shareholders means there is insufficient community of interests between all members and separate class meetings are warranted in this case.

Break fee and reverse break fee 40 Under the SID, a "Reimbursement Fee" or a "Reverse Reimbursement Fee" (also known as a "break fee" or "reverse break fee") is payable in specified circumstances. The break fee payable by PSC is in the amount of $22,600,000, which represents approximately 1% of the total equity value of PSC. The circumstances in which the break fee may be payable are as follows: (a) during the Exclusivity Period, if one or more PSC board members withdraws or adversely changes or qualifies their support for the Scheme or recommends that Shareholders accept or vote in favour of a competing proposal; (b) a competing proposal is announced during the Exclusivity Period; and (c) Rosedale Bidco is entitled to terminate the SID. 41 The SID states that the reason for the break fee and reverse break fee is that each party will incur significant costs in connection with the Scheme. The SID records the nature of the costs that will be incurred by the parties if the Scheme is not implemented, and the commercial basis for the parties' agreement to the break fee and reverse break fee. PSC has filed evidence that the break fees and reverse break fees have been calculated to reimburse the relevant party for its reasonable external and internal costs and opportunity costs in connection with the Scheme and are a genuine estimate of the costs that would be incurred by each party if the Scheme was not implemented. These matters are disclosed in the Scheme Booklet. 42 Break fees and reverse break fees are now commonplace in schemes: Re DuluxGroup at [31] (O'Bryan J). I am satisfied that the terms of the break fee payable by PSC are not such as to render the Scheme unfair to members. The commercial basis of the break fee is to recover costs. The break fee is not triggered if PSC shareholders reject the Scheme at the relevant Scheme Meeting and so that aspect should not influence their decision (see Re SILK Laser Australia Ltd [2023] FCA 1191 at [30] (Halley J)). The reverse break fee is of obvious benefit to PSC.

Exclusivity provisions 43 The SID contains a number of exclusivity provisions which apply during the "Exclusivity Period", being nine months from 8 May 2024, unless the SID is terminated earlier. The exclusivity provisions include "no shop", "no talk" and "no due diligence" provisions. The "no talk" and "no due diligence" provisions are expressed to be subject to PSC directors' fiduciary duties. 44 Such exclusivity provisions are ordinarily found in scheme implementation agreements: DuluxGroup at [36] (O'Bryan J). The Exclusivity Period was considered by Ardonagh and the board of PSC to be reasonable and commercially necessary to secure the Scheme transaction. In my view, the Exclusivity Period is reasonable having regard to the size, nature and complexity of the transaction. I am satisfied the exclusivity arrangements are reasonable and have been adequately disclosed in the Scheme Booklet and do not prevent the Court making an order to convene a meeting of members to vote on the Scheme.

Deemed shareholder warranty 45 The Scheme provides that if the Scheme is implemented, each Scheme Shareholder is deemed to have warranted to PSC and Rosedale Bidco that all of their PSC shares are fully paid, free from all encumbrances and restrictions on transfer of any kind, that they have full power and capacity to sell and transfer their PSC shares (together with any rights attaching to those shares) to Rosedale Bidco pursuant to the Scheme, and they have no existing right to be issued any PSC shares or any other securities by PSC. 46 This warranty is in the usual form and such warranties are common place in schemes and acceptable as long as the warranty is sufficiently disclosed in the explanatory statement to shareholders: Re Amcor at [56] (Beach J); Re DuluxGroup at [27] (O'Bryan J). I am satisfied that the deemed warranty is adequately disclosed in the Scheme Booklet.

Shareholders will be properly informed 47 The second matter relevant to the exercise of the Court's discretion is the adequacy of the information to be provided to shareholders. There are three aspects to the requirements of s 412(1) of the Act: (a) First, the explanatory statement must explain the effect of the compromise or arrangement and, in particular, state any material interest of the directors and the effect on those interests of the compromise or arrangement so far as it is different from the effect on the like interests of other persons. I am satisfied that these matters are addressed in the Scheme Booklet. (b) Second, the explanatory statement must set out the prescribed information, being the information in reg 5.1.01 and Schedule 8 (Part 3) of the Regulations. PSC requested and ASIC has granted a waiver from compliance with paragraph 8302(h) of Schedule 8 (Part 3) of the Regulations. Otherwise, the solicitors for PSC have prepared a table showing the specific requirements of the Regulations and the location in the Scheme Booklet of the statements by which those requirements are complied with. (c) Third, the explanatory statement must set out any other information that is material to the making of a decision whether to agree with the compromise or arrangement, being information which is within the knowledge of the directors and has not previously been disclosed: s 412(1)(a)(ii) of the Act. In my view, the Scheme Booklet, on its face, seems to satisfy that requirement. 48 Ms Catherine Merity, a solicitor acting for PSC, gave evidence regarding the verification procedures implemented by PSC to ensure that the Scheme Booklet does not contain any misleading or deceptive statements and satisfies the applicable disclosure requirements. Ms Merity is the Chairperson of the Due Diligence Committee established in connection with the Scheme. I am satisfied as to the processes and procedures implemented by PSC with the aim of ensuring that: the Scheme Booklet includes all information material to the making of a decision by a shareholder whether or not to vote in favour of the Scheme; each relevant statement is accurate; no material facts or considerations have been omitted and the Scheme Booklet is not misleading or deceptive in any material respect. 49 The draft Scheme Booklet also contains statements and information prepared on behalf of AGHL and Rosedale Bidco that were provided to PSC for inclusion in the draft Scheme Booklet. Ms Katherine Hill, Chief Counsel - Mergers & Acquisitions at AGHL, gave evidence regarding the process undertaken by Ardonagh for the verification of those statements and information for inclusion in the draft Scheme Booklet. On the basis of that process, Ms Hill was satisfied that the statements and information prepared on behalf of AGHL and Rosedale Bidco for inclusion in the draft Scheme Booklet are true and complete, accurate and not misleading and that there was a reasonable basis for all forward looking statements contained in that information. 50 PSC proposes to dispatch a copy of the Scheme Booklet, which includes the Notice of Scheme Meetings, proxy forms and the IER, to PSC shareholders on or before 23 August 2024. PSC proposes to send the Scheme Booklet electronically and in hard copy. As at 6 August 2024, only 28 out of 2,352 shareholders had elected to receive physical documents under s 110E of the Act. PSC proposes to send a hard copy of the Scheme Booklet to those shareholders. For those shareholders who have provided an email address to PSC for the receipt of shareholder communications and notices from PSC, PSC proposes to send those shareholders an email providing details of how they can view and download a copy of the Scheme Booklet and its attachments. PSC shareholders will also be able to access a copy of the Scheme Booklet from a microsite that will be available to PSC shareholders. 51 As mentioned above, PSC has obtained the IER in which the Independent Expert has expressed an opinion that the Scheme is in the best interests of Scheme Shareholders, as the Cash Consideration is fair (and, as a result, the Scheme is reasonable) in the absence of a superior offer emerging. The IER is to be an annexure to the Scheme Booklet. The IER also describes the advantages and disadvantages of the Scheme. 52 It is necessary that the explanatory statement be registered by ASIC before the Notice of Meeting is sent to PSC: s 412(6) of the Act. Before registering the statement, ASIC must conclude that the explanatory statement appears to comply with the requirements of the Act and must form the opinion that the statement does not contain any matter that is false in a material particular or is materially misleading in the form and context where it appears: ss 412(7) and (8) of the Act. The Scheme Booklet has been provided to ASIC. I do not apprehend any difficult regarding registration. 53 Section 411(1) of the Act provides that, if the Court has made an order convening a meeting or meetings of members or creditors, the Court "may approve the explanatory statement." Consistently with the approach taken by Robson J in Re IXLA Ltd [2007] VSC 573 at [38], I do not propose to make an order formally approving the explanatory statement in the form of the Scheme Booklet (see also Re Amcor at [114]-[115] (Beach J) and Re DuluxGroup at [63] (O'Bryan J)). 54 It is proposed that the Scheme Meetings will be held on 26 September 2024 (with the meeting for General Shareholders commencing at 9:30 am, and the meeting for Rollover Shareholders commencing at 11:00 am). The Scheme Meetings will be conducted as hybrid meetings, that is, providing Scheme Shareholders with the opportunity to attend either in person (either themselves, or via proxy, attorney or corporate representative) or electronically via an online platform. PSC's Constitution allows PSC to hold hybrid meetings of members and, as PSC submitted, the Court has the power to make an order for a hybrid meeting: Re Avita Medical Ltd [2020] FCA 592 at [5]-[7] and [18] (Jagot J). 55 PSC seeks an order to deal with the case where a Scheme Shareholder appoints a proxy, but then attends the meeting in person. The Scheme Booklet provides that Scheme Shareholders may vote prior to their relevant Scheme Meeting by direct vote, or at their relevant Scheme Meeting either in person, online, by attorney or corporate representative, or by proxy. 56 The Scheme Booklet further states: Your appointment of a proxy does not preclude you from personally attending and voting at the relevant Scheme Meeting (online or in person). The appointment of your proxy is not revoked merely by your attendance to, and participation in, the relevant Scheme Meeting. However if you vote on the Scheme Resolution, any vote made by your proxy on your behalf will not be counted. 57 Section 249Y(3) of the Act provides that: A company's constitution (if any) may provide for the effect that a member's presence at a meeting has on the authority of a proxy appointed to attend and vote for the member. However, if the constitution does not deal with this, a proxy's authority to speak and vote for a member at a meeting is suspended while the member is present at the meeting. 58 This is sometimes referred to as the "Default Rule". PSC's Constitution does not specifically address the effect of a member's presence at a meeting on the authority of a proxy to attend and vote for that member and, accordingly, the Default Rule comes into operation. PSC seeks an order overriding the Default Rule so as to reduce the risk that Scheme Shareholders might inadvertently preclude their proxy or attorney from voting simply because the shareholder wishes to be present (either in person or online) at the relevant Scheme Meeting to observe or participate (but not to vote). An order in similar circumstances was made by Justice Jackman in Re Vita Group Ltd (2023) 165 ACSR 576; [2023] FCA 400 at [11]-[12] and I made such an order in this case. 59 PSC seeks an order dispensing with compliance under r 3.4 of the Rules, which provides that, unless the Court otherwise orders, the plaintiff must publish a notice of the second Court hearing (that is, the hearing of the application for approval of the Proposed Scheme) in a daily newspaper circulating generally in the State or Territory where PSC has its principal place of business at least five days before the date of that hearing, and the notice must be in accordance with Form 6 of the Rules. 60 PSC intends to publish the notice of the second Court hearing via an ASX announcement and on the PSC website. In these circumstances, it is appropriate to relieve PSC from the requirement to publish notice of the second Court hearing in a newspaper. 61 Having regard to the matters set out above concerning the Scheme Booklet and the orders to be made for its distribution, I am satisfied that Scheme Shareholders will be properly informed as to the nature of the Scheme before the meeting.

Conclusion 62 I am 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 the second meeting, if it is unopposed. 63 Accordingly, I made orders for the first meeting to be convened, together with ancillary orders. I certify that the preceding sixty-three (63) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Neskovcin.

Corporations Act 2001(Cth)ss 411(1), 1319

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