The Reject Shop Limited, in the matter of The Reject Shop Limited (No 2) [2025] FCA 723 (30 June 2025)

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

1. Following a hearing held on 16 May 2025 (the convening hearing), I made orders (the convening orders) requiring the plaintiff, The Reject Shop Limited ACN 006 122 676 (TRS), to convene and hold a meeting of its shareholders (the Scheme Meeting) to consider a proposed scheme of arrangement (Scheme). I published my reasons for making those orders on 21 May 2025: Re The Reject Shop Limited [2025] FCA 522 (Re TRS (No 1)). These reasons assume familiarity with Re TRS (No 1) and adopt the same defined terms unless otherwise stated.
2. The Scheme Meeting was held on 23 June 2025, and the resolution to agree to the Scheme (Scheme Resolution) was passed by 99.98% of the votes cast with 97.30% of the TRS shareholders present and voting being in favour of the Scheme.
3. The Australian Securities and Investments Commission (ASIC) has provided a letter dated 30 June 2025 stating that, under s 411(17)(b) of the Corporations Act 2001 (Cth) (Corporations Act), it has no objection to the Scheme.
4. At the conclusion of the second court hearing on 30 June 2025, I made the orders sought by TRS approving the Scheme pursuant to s 411(4)(b) of the Corporations Act. These are my reasons for so doing.

1. The Scheme is described in some detail in Re TRS (No 1). Broadly, it provides for the transfer of all of TRS' shares to a Canadian company, Dollarama International Inc., in return for a cash payment of $6.68 per share.
2. If the Scheme is approved by the Court and is implemented:

(a) all TRS shareholders as at the Scheme Record Date of 15 July 2025, being the Scheme Participants, will receive the Scheme Consideration of $5.91 cash per Scheme Share on the Scheme Implementation Date, being 22 July 2025; and

(b) all TRS shareholders as at the Special Dividend Record Date of 7 July 2025 will receive the Special Dividend of $0.77 cash per Scheme Share on 14 July 2025.

1. Section 411(4) of the Corporations Act provides that a scheme of arrangement is binding if, at a meeting of members, it is passed by a majority of members present and voting (in person or by proxy) and by 75% of votes cast, and it is subsequently approved by order of the Court.
2. The principles relevant to the application of this provision are well settled. I gratefully adopt the summary of those principles by O'Bryan J in Re Selfwealth Ltd (No 2) [2025] FCA 416 at [9]:

In deciding whether to grant approval of a scheme of arrangement, the Court will ordinarily have regard to the following matters:

(a) that the orders of the Court, and all other applicable requirements of the Act and the Federal Court (Corporations) Rules 2000 (Cth) (Rules), in relation to the convening and conduct of the scheme meeting and the second court hearing have been complied with;

(b) that the scheme meeting so convened has approved the scheme with the requisite majorities;

(c) that there has been full and fair disclosure to members of all information material to the decision whether to vote for or against the scheme;

(d) that the scheme is fair and reasonable so that an intelligent and honest person who was a member of the relevant class, properly informed and acting alone, might approve it;

(e) that 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 that ASIC has been given the opportunity to draw the Court's attention to any relevant matter;

(f) that the conditions precedent to the scheme have been satisfied or waived, save for court approval; and

(g) that the Court is satisfied under s 411(17) that the scheme has not been proposed to avoid Ch 6 of the Act, or there is a statement from ASIC that it has no objection to the scheme.

HAVE THE STATUTORY AND PROCEDURAL REQUIREMENTS BEEN MET?

1. In respect of this issue, TRS relies on an affidavit of Kelly Ann Powers dated 27 June 2025 (Second Powers Affidavit) and an affidavit of Steven Brian Fisher, also dated 27 June 2025 (Fisher Affidavit).

1. On 16 May 2025, an office copy of the convening orders was lodged with ASIC, as required by r 3.5(b) of the Federal Court (Corporations) Rules 2000 (Cth) (Second Powers Affidavit at [13]).
2. The convening orders required TRS to convene the Scheme Meeting by providing various documents to its shareholders on or before 21 May 2025. The principal document to be provided to the TRS Shareholders was the Scheme Booklet. On 16 May 2025 and pursuant to s 412(6) of the Corporations Act, a copy of the Scheme Booklet was lodged with ASIC for registration and was registered by ASIC on the same day (Second Powers Affidavit at [11]-[12]). The Scheme Booklet was then sent or made available to shareholders on 21 May 2025 in accordance with order 2 of the convening orders(Second Powers Affidavit at [16]-[18]).

1. Mr Fisher attests that, in accordance with the convening orders, the Scheme Meeting, which was conducted virtually via an online meeting platform, commenced at 2.30pm (Melbourne time) on 23 June 2025 and was chaired by him. Further, in accordance with those orders, voting on the Scheme Resolution was conducted by way of a poll (Fisher Affidavit at [5]-[6], [8]).
2. In accordance with s 411(4)(a)(ii) of the Corporations Act, the Scheme Resolution was passed by a majority in number of members present and voting (either in person or by proxy) at the Scheme Meeting, and by 75% of the votes cast on the Scheme Resolution. In particular, the evidence establishes that the Scheme Resolution was passed by 99.98% of votes cast and 97.30% of the shareholders present and voting (Fisher Affidavit at [12]).
3. The number of shares voted at the Scheme Meeting as a percentage of TRS' total issued shares eligible to vote was 62.97% and the number of shareholders who voted as a percentage of the total number of shareholders eligible to vote was 10.67% (Fisher Affidavit at [14]). TRS adduced evidence confirming that no shareholders who were eligible to vote at the Scheme Meeting were excluded from voting at the Scheme Meeting (Fisher Affidavit at [15]).
4. There is no presumption that low voter turnout suggests that shareholders did not have notice of the meeting or were silent in protest of the scheme: Re TriAusMin Ltd (No 2) [2014] FCA 833 at [10]. TRS submitted that, in light of the authorities which have suggested that "low" voter turnout means a number less than 10%, the level of turnout is not properly considered low: see Re Dropsuite Ltd (No 2) [2025] FCA 487 at [19]. In that case, Button J referred (at [20]) to the well-accepted proposition that low voter turnout is not, without more, a reason to refuse to exercise the discretion to approve a scheme. As was said by Santow J in Re Matine Ltd (1998) 28 ACSR 268 at 295, "The apathetic shareholder who chooses not to vote upon a scheme should not be presumed to be antagonistic to the scheme or to warrant paternalistic protection".
5. I accept TRS' submission. There is nothing in the circumstances of this case to suggest that there was any irregularity in the dispatch of the materials to the Scheme Shareholders, that inadequate notice was provided to Scheme Shareholders, that there was any issue that would have deterred Scheme Shareholders from attending and/or voting at the Scheme Meeting, or that any complaint has been received from any Scheme Shareholder about the procedure of the Scheme Meeting (Second Powers Affidavit at [28]). Those Scheme Shareholders who did vote voted overwhelmingly in favour of the Scheme.

1. By orders 11 and 12 of the convening orders, TRS was required to publish an announcement via the ASX Market Announcements Platform at least five days before the date set for the second court hearing, such announcement setting out the details for the hearing and the process for any person who wished to appear at the hearing to oppose the approval of the Scheme. Those orders were complied with (Second Powers Affidavit at [27]) and no person appeared at the hearing.

1. TRS tendered a certificate dated 30 June 2025 by which both TRS and Dollarama certified that, in respect of matters within their own knowledge, each condition precedent (with the exception of Court approval) had been satisfied in relation to the Scheme.

SHOULD THE DISCRETION BE EXERCISED IN FAVOUR OF THE SCHEME?

1. The Court's discretion to approve the Scheme pursuant to s 411(4)(b) is enlivened given that all statutory and procedural requirements have been met. The Court must consider whether the Scheme is fair and reasonable so that an intelligent and honest shareholder, properly informed and acting alone, might approve it: Re iSelect Ltd (No 2) [2022] FCA 1528; 166 ACSR 41 at [41].
2. For the reasons submitted by TRS, and for the reasons already expressed in Re TRS (No 1), I am satisfied that the Scheme is fair and reasonable. In particular:

(a) the Scheme has the overwhelming support of TRS' shareholders reflected in the voting results of the Scheme Meeting;

(b) it was the recommendation of all of TRS' directors that TRS shareholders vote in favour of the Scheme, for the reasons given in the Scheme Booklet, and all directors stated their intention to vote in favour of the Scheme;

(c) the Independent Expert Report concluded that the Scheme is fair and reasonable, and in the best interests of the TRS shareholders;

(d) there was full disclosure in the Scheme Booklet of all relevant matters, including the Scheme's potential benefits and disadvantages;

(e) there is no application to oppose orders approving the Scheme and no suggestion of any oppression in the conduct of the Scheme Meeting; and

(f) the Scheme contains measures to protect shareholders against performance risk.

Section 411(17)

1. The Court's power to approve a scheme is restricted by s 411(17) of the Corporations Act, which provides that the Court must not approve a compromise or arrangement unless it is satisfied that it has not been proposed for enabling the avoidance of any provision of Chapter 6, or ASIC has provided to the Court a statement in writing to the effect that it does not object to the comprise or arrangement. Even where such a statement has been provided, the Court may still refuse approval.
2. Nevertheless, in the present case, the requisite statement in writing has been provided by ASIC satisfying the requirements of s 411(17)(b) and the Court is satisfied that there is not, in any event, a proscribed purpose as described in s 411(17)(a). Consequently, the s 411(17) bar to approval of the Scheme has been lifted.

EXEMPTION FROM S 411(11)

1. Section 411(11) requires, subject to s 411(12), that a copy of the Court's order approving a scheme of arrangement be annexed to every copy of the company's constitution issued after the order is made. Pursuant to s 411(12), TRS sought an exemption from this requirement.
2. In Re Equinox Resources Ltd [2004] WASC 143; 49 ACSR 692 at [22], the Court explained the purpose of s 411(11) as being:

... to ensure that any modification of the rights of shareholders of the company which is the subject of the scheme or any other provision in the scheme which may affect the interests of persons dealing with the company, such as prospective creditors or purchasers of shares, will be sure to have the opportunity of seeing what the exact rights of shareholders in the company or of its creditors are, as modified, if at all, by the scheme which has been approved.

1. TRS submitted that it was appropriate to grant the exemption in the present circumstances given that:

(a) the Scheme will not alter the constitution of TRS or the rights of TRS' members, creditors or other persons dealing with the company;

(b) no ongoing purpose will be served by requiring the orders approving the Scheme to be annexed to TRS' constitution in circumstances where, immediately following the implementation of the Scheme, TRS will become a wholly-owned subsidiary of Dollarama International;

(c) current members of TRS are fully informed of the Scheme and will be informed in the event the Court approves the Scheme; and

(d) an order under s 411(12) is regularly made in such circumstances (see eg, Re Selfwealth (No 2) at [29]; Re iSelect (No 2) at [54]).

1. I am satisfied it is appropriate in this case to exempt TRS from the requirement of s 411(11).

1. For these reasons, on 30 June 2025, I made the orders sought by TRS approving the Scheme pursuant to s 411(4)(b) of the Corporations Act.

I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Sarah C Derrington.