Sovereign Life Assurance Company v Dodd

THE COURT ORDERS THAT:

1. Pursuant to sections 411(1) and 1319 of the Corporations Act 2001 (Cth) (Act), the plaintiff convene and hold a meeting (Scheme Meeting) of the holders of ordinary shares in Youfoodz (Scheme Shareholders): (a) to consider and, if thought fit, resolve 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 B to the Explanatory Booklet a copy of which is annexure "RT-7" to the affidavit of Riccardo Troiano dated 31 August 2021 (Scheme Booklet); (b) to be held on Friday 8 October 2021 commencing at 10:00 am (AEST); (c) to be conducted electronically through an online platform (which is to be accessed in accordance with the instructions in the Notice of Scheme Meeting to be sent to Scheme Shareholders pursuant to order 2 below) in accordance with the Treasury Laws Amendment (2021 Measures No 1) Act 2021 (Cth).
2. The Scheme Meeting be convened by sending on or before 7 September 2021: (a) an email to each Scheme Shareholder who has nominated an electronic address for the purposes of receiving notices of meeting from the Plaintiff (Email Shareholders) (or, in the case of joint holders, to the holder whose name appears first in the Plaintiff's register), to such address which provides access to: (i) a document substantially in the form of the Scheme Booklet (which contains among other things the Notice of Scheme Meeting at Annexure D); (ii) a personalised proxy form for the Scheme meeting substantially in the form of Annexure "RT-8" to the affidavit of Riccardo Troiano dated 31 August 2021 (Proxy Form); (b) The following hard-copy documents to each Scheme Shareholder other than an Email Shareholder (or, in the case of joint holders, to the holder whose name appears first 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 at Annexure D); (ii) a Proxy Form; (iii) in the case of Scheme Shareholders with registered addresses within Australia, a reply-paid envelope for the return of the Proxy Form; and (iv) in the case of Scheme Shareholders with registered addresses outside Australia, a return envelope for the return of the Proxy Form.
3. The documents referred to in Order 2(b) be sent: (a) in the case of Scheme Shareholders whose registered address is within Australia, by prepaid ordinary post addressed to the relevant address recorded in the Plaintiff's register; and (b) in the case of Scheme Shareholders whose registered address is outside Australia, by airmail or international courier service addressed to the relevant addresses recorded in the Plaintiff's register.
4. If, after despatch, it comes to the attention of the plaintiff that any email despatched in accordance with Order 2(a) has returned an undeliverable or undelivered receipt for an Email Shareholder's nominated email address then, in respect of that shareholder, the plaintiff is to despatch, within a reasonable time thereafter a document substantially in the form of the Scheme Booklet and a Proxy Form in accordance with Order 2(b).
5. Subject to these Orders, the Scheme Meeting 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.
6. Voting on the resolution to approve the Scheme is to be conducted by way of a poll.
7. A Proxy Form in respect of the Scheme Meeting will be valid and effective if, and only if, it is completed and delivered in accordance with its terms by 10:00 am (Sydney time) on 6 October 2021.
8. Mr Neil Kearney or failing him Mr Andrew Duff shall chair the Scheme Meeting.
9. The chair of the Scheme Meeting has the power to adjourn the Scheme Meeting to such time, date and place as he considers appropriate.
10. Compliance with rule 2.15 of the Federal Court (Corporations Rules) 2000 (Cth) (Rules) is dispensed with.
11. Notice of the hearing of an application pursuant to subsection 411(4) of the Act for an order approving the Scheme of Arrangement be published once in "The Australian" newspaper by an advertisement substantially in the form of schedule 1 to these Orders, such advertisement to be published on or before five days prior to the Scheme Meeting, and the plaintiff be otherwise exempted from compliance with rule 3.4 of the Rules.
12. The further hearing of the Originating Process is adjourned to 13 October 2021 at 10:15 am (AEST) or as soon thereafter as the business of the Court allows before the Honourable Justice Middleton.
13. There be liberty to apply. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. Schedule 1 YOUFOODZ HOLDINGS LIMITED ACN 635 434 801 NOTICE OF HEARING TO APPROVE COMPROMISE OR ARRANGEMENT TO all the members of Youfoodz Holdings Limited ACN 635 434 801 (Youfoodz) TAKE NOTICE that at 10.15am (Sydney time) on 13 October 2021 the Federal Court of Australia (Victorian Registry) at 305 William Street, Melbourne Victoria 3000 will hear an application by Youfoodz seeking the approval of a compromise or arrangement between Youfoodz and its members, if agreed to by a resolution to be considered, and, if thought fit, passed at a meeting of such members to be held virtually at 10:00 am (Sydney time) on 8 October 2021. If you wish to oppose the approval of the compromise or arrangement you must file and serve on Youfoodz a notice of appearance, in the prescribed form, together with any affidavit on which you wish to rely at the hearing. The notice of appearance and affidavit must be served on Youfoodz at its address for service at least one day before the date fixed for the hearing of the application. The address for service of Youfoodz is: c/o Baker & McKenzie, Level 19, CBW, 181 William Street, Melbourne Victoria 3000 [Attention: Riccardo Troiano].

John O'Connor Company Secretary Youfoodz Holding Limited

INTRODUCTION 1 After a hearing on 2 September 2021, I made the orders set out above. These are my reasons.

Nature of application 2 Application is made by the plaintiff ('Youfoodz') pursuant to s 411(1) of the Corporations Act 2001 (Cth) ('Act') for orders to convene a meeting ('Scheme Meeting') of the ordinary shareholders of Youfoodz for consideration of a proposed scheme of arrangement ('Scheme'). 3 The Scheme, if implemented, will result in all the shares in Youfoodz held by the shareholders recorded in the register as at the scheme record date (expected to be 7:00pm AEDT on 20 October 2021) ('Scheme Shareholders') being transferred to Cook E Services Australia Pty Ltd ('HelloFresh Nominee'), an indirectly wholly owned subsidiary of HelloFresh SE ('HelloFresh').

Originating process and supporting affidavits 4 The application is made by originating process filed on 16 August 2021. 5 In support, Youfoodz relies on the following affidavits (and exhibits thereto): (a) affidavit of Mr Riccardo Troiano dated 16 August 2021 ('First Troiano Affidavit'); (b) affidavit of Mr Andrea de Cian dated 31 August 2021 ('De Cian Affidavit'); (c) affidavit of Mr Andrew Duff dated 30 August 2021; (d) affidavit of Mr John O'Connor dated 31 August 2021 ('O'Connor Affidavit'); (e) affidavit of Mr Neil Kearney dated 31 August 2021 ('Kearney Affidavit'); (f) second affidavit of Mr Troiano dated 31 August 2021 ('Second Troiano Affidavit'); (g) affidavit of Mr Christian Ries dated 31 August 2021 ('Ries Affidavit'); (h) affidavit of Dr Laurenz Wieneke dated 31 August 2021; and (i) third affidavit of Mr Troiano dated 2 September 2021.

The Scheme 6 The Scheme forms part of Annexure "RT-3" to the First Troiano Affidavit and is summarised in the Kearney Affidavit. 7 Under the terms of the Scheme: (a) each Youfoodz share ('Youfoodz Share') held by a Scheme Shareholder ('Scheme Share') will be transferred to HelloFresh Nominee; and (b) Scheme Shareholders will receive consideration of $0.93 ('Scheme Consideration') for each Scheme Share.

The Scheme Implementation Deed 8 Youfoodz and HelloFresh entered into a Scheme Implementation Deed ('SID') on 13 July 2021. The SID also forms part of Annexure "RT-3" to the First Troiano Affidavit.

Conditions precedent to the Scheme 9 The implementation of the Scheme is subject to a number of conditions precedent as set out in cl 3.1 of the SID and cl 3 of the Scheme. 10 On the date on which the application for approval comes before the Court ('Second Court Date'), Youfoodz and HelloFresh will each provide to the Court a certificate (or such other evidence as the Court requests) confirming whether or not the conditions precedent (other than the conditions relating to Court approval and any Court-imposed conditions) have been satisfied or waived in accordance with the SID.

Scheme mechanism 11 The essential mechanism of the Scheme is as follows: (a) if the Scheme is to proceed, all conditions precedent (other than the conditions precedent relating to Court approval and any Court-imposed conditions) will be either satisfied or waived by 8:00 am on the Second Court Date; (b) if the Scheme is approved by Youfoodz shareholders and the Court, it becomes effective on the lodging of an office copy of the Court's order with ASIC, which is currently expected to occur on 13 October 2021; (c) the Implementation Date is expected to be 27 October 2021. On the Implementation Date, the Scheme Consideration will be paid to Scheme Shareholders and the Scheme Shares will be transferred to HelloFresh Nominee; and (d) Youfoodz will subsequently apply to the ASX to have itself removed from the official list of the ASX.

Deed poll 12 The obligations of HelloFresh and HelloFresh Nominee in respect of the Scheme are secured by entry into a deed poll.

Youfoodz 13 Youfoodz specialises in the production and distribution of ready-made meals and other convenience food products for residential (home delivery), retail, corporate and government customers. 14 Youfoodz was registered as a public company limited by shares on 9 August 2019. It was listed on the ASX (ASX:YFZ) on 7 December 2020 and its ordinary shares commenced trading on the ASX on 8 December 2020. 15 Youfoodz has the following securities on issue: (a) 134,547,468 Youfoodz Shares; and (b) 53,332 options ('Youfoodz Options'). 16 Youfoodz' directors are: (a) Mr Kearney (Non-Executive Chair); (b) Mr Stuart Nash (Non-Executive Director); (c) Ms Julie McPherson (Non-Executive Director); (d) Mr Duff (Non-Executive Director); and (e) Mr Lance Giles (Managing Director and Chief Executive Officer). 17 The number of Youfoodz Shares held by or on behalf of Youfoodz directors is as follows: Director Number of Youfoodz Shares (direct and indirect interests) Neil Kearney 20,000 Stuart Nash 20,000 Julie McPherson 20,000 Andrew Duff 20,000 Lance Giles (and 18,852,256 associates) TOTAL 18,932,256

18 The number of Youfoodz Options held by or on behalf of Youfoodz directors is as follows: 19 Youfoodz' substantial shareholders are as follows:

HelloFresh 20 HelloFresh is the world's leading meal-kit company. 21 HelloFresh was founded in Berlin in November 2011 and went public on the Frankfurt Stock Exchange in November 2017. It is headquartered in Berlin and has offices in New York, London, Amsterdam, Sydney, Toronto, Auckland, Paris and Copenhagen. 22 The management board of HelloFresh comprises: (a) Mr Dominik Richter (Chief Executive Officer); (b) Mr Thomas Griesel (Chief Executive Officer International); (c) Mr Christian Gärtner (Chief Financial Officer); and (d) Mr Edward Boyes (Chief Commercial Officer). 23 As at the date of the Scheme Booklet (defined below), none of HelloFresh or any of its associates has any relevant interest or voting power in any Youfoodz Shares.

STATUTORY FRAMEWORK 24 The principles applicable at a first court hearing in relation to a scheme proposed under s 411 of the Act are well established. 25 The statutory framework relating to schemes of arrangement 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)). 26 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) 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. 27 I am satisfied that the criteria set out above have been met and that, accordingly, the Court's discretion to convene the scheme meetings is enlivened. 28 I make particular mention of the explanatory statement. 29 The draft scheme booklet dated 31 August 2021 (Annexure "RT-7" to the Second Troiano Affidavit) ('Scheme Booklet') sets out details of the features and effects of the Scheme and is the proposed explanatory statement as required by section 412(1)(a) of the Act. 30 The location in the Scheme Booklet of the matters prescribed by the Act and Sch 8 to the Corporations Regulations 2001 (Cth) to be included in the explanatory statement is set out in Annexure "RT-6" to the Second Troiano Affidavit. 31 Regarding verification of the information contained in the Scheme Booklet: (a) the O'Connor Affidavit evidences the verification process undertaken by Youfoodz in relation to the Scheme Booklet (other than the 'Hello Fresh Information' (as defined in the Scheme Booklet) and the draft Independent Expert Report); (b) the Ries Affidavit evidences the verification process undertaken by HelloFresh in relation to the HelloFresh Information contained in the earlier draft scheme booklet dated 16 August 2021; and (c) Mr Andrea de Cian in the De Cian Affidavit gives evidence regarding the opinions expressed by himself and Ms Jannaya James in the Independent Expert Report which is annexed to that affidavit. 32 I am satisfied that there is evidence that the Scheme Booklet contains all information material to a Youfoodz shareholder's decision whether or not to vote for the Scheme and accordingly provides proper disclosure.

SHOULD THE DISCRETION BE EXERCISED? 33 I have had the benefit of detailed written submissions by Mr Michael Borsky QC and Dr Elizabeth Boros on behalf of the plaintiff, which raised the following particular features of the Scheme for the attention of the Court: (a) the Managing Director's recommendation; (b) performance risk; (c) exclusivity provisions (d) break fee; (e) deemed warranty; (f) classes; and (g) purpose of the Scheme (ie not to avoid Chapter 6 of the Act). 34 There are no matters arising from these submissions that require explanation in these reasons. None of the factors are out of the ordinary or provide a reason for the Court to refrain from making an order convening the Scheme Meeting. 35 In Re Amcor Ltd [2019] FCA 346, Beach J described the Court's role at the first court hearing as follows (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) 42 ACSR 252 at [44] per French J)… 36 It is appropriate to also recall the comments of Hayne J (as a judge of the Supreme Court of Victoria, as his Honour was then) in Re Sonodyne International Ltd (1994) 15 ACSR 494 at 499-500: …in the end the question that is presented at this stage of the process of a company propounding and implementing a scheme of arrangement is whether the scheme is such that it could reasonably be supposed by sensible business people to be for the benefit of the class concerned. That is, the test in the present case is whether it is reasonable to suppose that sensible business people might consider that the arrangement proposed by the company is of benefit to its members. I do not consider that that question requires, or in the circumstances of this case permits the court to embark upon a nice analysis of whether the chance that is now offered to members to derive some benefit from their shareholding is likely or unlikely to occur. Of course, there may be cases in which the appearance of benefit to members or creditors is properly classified as illusory but I do not consider that that is this case. It has often been said both in the context of schemes of arrangement and elsewhere that the court is not to substitute its judgment on affairs of business for the judgment of the business people concerned. If the members of this company consider that the chance is worth pursuing then they may choose to vote for it. If they do not, or for some other reason they consider that the scheme should not be approved, then they will vote against it. At the stage of determining whether or not to permit the matter to be put to members, I do not consider that it is right for the court now to conclude that what is proposed is not an arrangement because there is no sufficient prospect of benefit to members. In saying that I am not to be taken as expressing any view of any kind on the matters of business judgment that have been raised and debated in the course of argument beyond saying that I consider that the arrangement is one which could reasonably be supposed by sensible business people to be for the benefit of members as a whole. Even if the requisite majority of members vote in favour of the scheme that will still leave wholly open the question whether the court should in all the circumstances approve of it. 37 Therefore, it is clear that the Court at this stage is not considering whether it will approve the scheme: the enquiry is far more limited to considering whether sensible business people could consider the arrangement to be for the benefit of members as a whole. The Court should be careful not to preclude the members of the company from having the opportunity to consider the scheme. 38 As to any issues arising as to class, the test for identifying a class for the purposes of a scheme of arrangement is set out in the well-known authority of Sovereign Life Assurance Company v Dodd [1892] 2 QB 573, where Bowen LJ set out the test for identifying a class for scheme of arrangement purposes as follows (at 583): It seems plain that we must give such a meaning to the term 'class' as will prevent the section being so worked as to result in confiscation and injustice, and that it must be confined to those persons whose rights are not so dissimilar as to make it impossible for them to consult together with a view to their common interest. 39 Issues arising from any question as to class can be dealt with at the second court hearing. In Re Healthscope Limited (2019) 139 ACSR 608, Beach J observed that Bowen LJ's test: [118] …requires a commercial evaluative judgment to be made of the transactions, circumstances and consequences said to justify the delineation, in the context of the particular scheme and its effect overall. Moreover, if the asserted discriminating feature can be dealt with at the second court hearing, there is less of a need to be definitive at the first court hearing in terms of class definition except in a clear class. Moreover one should be cautious about stipulating separate classes. It can easily and wrongly empower a minority view; I can of course easily deal with excessive or oppressive majority influences at the second stage… […] [120] …one option is not to order separate meetings but to leave the matter to the second court hearing approval stage… 40 In this instance, votes cast on the relevant resolution to approve the Scheme will be 'tagged' for the purposes of identification if any issues later arise about class. 41 If any issue does arise, the 'tagged' votes will be drawn to the Court's attention at the second court hearing. This preserves for the Court the option to consider at the second court hearing any unfairness produced by shareholder voting in a single class.

OTHER OBSERVATIONS 42 Other orders will be made in line with recent decisions of the Court dealing with aspects relating to the conduct of the Scheme Meeting, proposed dispatch procedures, and the holding of virtual scheme meetings. 43 I am satisfied that ASIC has had reasonable opportunity to consider the Scheme and the explanatory statement, and to appear at the first court hearing if it chose to do so, and that ASIC has no objections at this stage. 44 I note that the relevant directors have confirmed that all statements of fact contained in the Scheme Booklet are true and accurate in all respects and are not misleading or deceptive, and that all information material for disclosure has been fully and accurately disclosed and is contained in the Scheme Booklet. 45 I also note that the Independent Expert Report is before the Court. In the opinion expressed in the Independent Expert Report, the Scheme is fair and reasonable, and as such the Scheme is in the best interests of the relevant shareholders as a whole in the absence of a superior proposal.

CONCLUSION 46 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, and that it is therefore appropriate to make the orders sought the plaintiff. 47 In summary: (a) the terms of the Scheme are in a conventional form; (b) there is no reason why the Scheme, if considered and adopted by the members, is not of such a nature as would be likely to be approved by the Court at the second court hearing; (c) the relevant shareholders are to be presented with a detailed analysis of the Scheme by independent experts, including a detailed discussion of its advantages and disadvantages, and have the recommendation of the relevant directors; (d) the Scheme Booklet meets the statutory requirements; and (e) it cannot be said that the Scheme on its face so blatantly unfair or otherwise inappropriate that it should be stopped in its tracks before going any further. 48 This is an appropriate case for the exercise of my discretion to make orders convening a meeting of shareholders to enable the Scheme to be considered. I certify that the preceding forty-eight (48) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Middleton.