Youfoodz Holdings Limited, in the matter of Youfoodz Holdings Limited (No 2) [2021] FCA 1288

Introduction and background 2 The background to this matter is set out in Youfoodz Holdings Limited, in the matter of Youfoodz Holdings Limited [2021] FCA 1081 ('initial judgment'), where I made orders, inter alia, convening a meeting of the shareholders of Youfoodz to consider and resolve to approve a proposed scheme of arrangement pursuant to ss 411(1) and 1319 of the Corporations Act 2001 (Cth). These reasons assume familiarity with the reasons for the initial judgment and adopt the definitions used in those reasons. In effect, the Scheme involves an acquisition by HelloFresh of all the shares in Youfoodz. 3 Following the orders made in the initial judgment ('Convening Orders'), the Scheme Meeting was held on 8 October 2021 by virtual means, at which resolutions approving the Scheme were passed by 94.07% of Youfoodz shareholders present and voting, and 99.87% of votes cast. Accordingly, at the hearing, Youfoodz sought orders pursuant to s 411(4)(b) of the Act approving the scheme, and other ancillary orders in respect of procedural matters. 4 In addition to the affidavits relied upon during the first scheme hearing as set out in the initial judgment, Youfoodz further relied on the following affidavits (and annexures thereto): (a) affidavit of Neil Kearney sworn 11 October 2021 (Second Kearney Affidavit); (b) affidavit of Steven Hodkin affirmed 11 October 2021 (Hodkin Affidavit); (c) affidavit of David Parkinson affirmed 11 October 2021 (Parkinson Affidavit); (d) affidavit of Nicholas Welsh affirmed 11 October 2021 (Welsh Affidavit); (e) affidavit of Sue Stanton affirmed 11 October 2021 (Stanton Affidavit); (f) affidavit of Riccardo Troiano sworn 11 October 2021 (Fourth Troiano Affidavit); and (g) affidavit of Riccardo Troiano sworn 13 October 2021 (Fifth Troiano Affidavit).

Legal principles 5 In approving a scheme of arrangement, the role of the Court is supervisory, requiring the Court to be satisfied that there has been no oppression and that the compromise or arrangement is one which is capable of being accepted by shareholders looking to their own commercial advantage: Re NRMA Ltd (2000) 156 FLR 349; [2000] NSWSC 82 at [41]. 6 In Re Opus Group Limited (No 2) [2018] FCA 1413, the relevant principles were usefully summarised by Banks-Smith J as follows: [6] The considerations relevant to the Court's decision to approve a scheme pursuant to s 411(4)(b) of the Act are well established. Where a majority of members have approved a scheme, the Court is not bound to approve it, however the Court should be slow to conclude that a scheme is unreasonable or unfair, provided that the members have been properly informed of matters relevant to the making of their decision, as that would otherwise involve the Court substituting its commercial judgment for that of the body of members: Seven Network Limited, in the matter of Seven Network Limited (No 3) [2010] FCA 400; (2010) 267 ALR 583 at [31]-[40] (Jacobson J). [7] The matters the Court must take into account in deciding whether to approve the scheme include whether: (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: Seven Network Limited (No 3); David Jones Limited, in the matter of David Jones Limited (No 3) [2014] FCA 753 (Farrell J).

Consideration 7 Taking the above matters referred to by Banks-Smith J into account: (a) The evidence and submissions presented by Youfoodz at the Second Scheme Hearing indicated that, with one exception, the Convening Orders had been complied with in relation to the conduct of the meeting and the dispatch and publication of Scheme documents. Youfoodz brought to my attention that Order 2 of the Convening Orders in relation to the dispatch of Scheme documents to Youfoodz shareholders was complied with one day late. Youfoodz submitted that the late dispatch had not caused any substantial injustice to shareholders, as shareholders had still received at least 28 days' notice of the Scheme Meeting in accordance with s 249HA of the Act and the Scheme Booklet had been accessible from the Australian Securities Exchange announcements platform since 2 September 2021. Although it was submitted by Youfoodz that the late dispatch was a mere procedural irregularity cured by s 1322(2) of the Act, out of an abundance of caution, Youfoodz sought an order extending the time for compliance with Order 2 of the Convening Orders, which I have made. (b) Section 411(4) of the Act renders an arrangement binding on members or creditors (as the case may be) if and only if the arrangement is approved by more than 50% by number and 75% or more by votes or debts, of members or creditors present and voting, and by the Court. As noted at paragraph 3 above, the Scheme was approved by the requisite statutory majorities. (c) All other statutory conditions have been satisfied. In particular, in accordance with s 412(6) of the Act, the explanatory statement in relation to the Scheme was registered with ASIC on 2 September 2021 prior to being sent to shareholders. Further, I am satisfied under s 411(17) that the Scheme has not been proposed to avoid Chapter 6 of the Act. Pursuant to s 411(17)(b), on 12 October 2021 ASIC provided a letter to Youfoodz stating that it had no objection to the Scheme. Lastly, as per the Conditions Precedent Certificate executed by Youfoodz and HelloFresh, the conditions precedent set out in clause 3.1 of the Scheme were relevantly satisfied or waived. (d) I am satisfied that the Scheme is fair and reasonable so that an intelligent and honest Youfoodz shareholder, properly informed and acting alone, might approve it, having regard to the following matters: (i) the comfortable satisfaction of the requisite statutory majorities referred to above; (ii) there is nothing to suggest that the Scheme was proposed by Youfoodz other than in good faith; (iii) the Scheme Booklet fully disclosed to shareholders the potential advantages and disadvantages of the Scheme; (iv) the terms and nature of the Scheme and the transaction, and in particular, the measures contained in the Scheme to protect shareholders against performance risk; (v) the unanimous recommendation in favour of the Scheme by the Youfoodz directors; (vi) the opinion of the independent expert that, in the absence of a superior alternative proposal, the Scheme was fair and reasonable and in the best interests of shareholders; (vii) there is nothing to suggest that the Youfoodz shareholders voted other than in good faith and there is no evidence of any oppression; (viii) no Youfoodz shareholder gave any notice of intention to oppose the Scheme, nor did any shareholder oppose the approval of the Scheme at the Second Scheme Hearing; (ix) ASIC has no objection to the Scheme; and (x) lastly, in its submissions Youfoodz brought to my attention a number of interests or arrangements under the Scheme which could theoretically give rise to a question of class creation, but submitted that none of those arrangements were class creating. Nevertheless, the relevant votes of any such separate classes of shareholders were 'tagged' for the purposes of identification if any issues later arose about classes. I am satisfied that the results of those tagged votes indicate that any class delineations would not have affected the satisfaction of the statutory majorities in relation to the Scheme approval resolution. Accordingly, any questions as to class creation are unnecessary for me to decide. (e) I am satisfied that there was full and fair disclosure to shareholders of all information material to the decision whether to vote for or against the scheme. 8 As an ancillary matter, Youfoodz also sought orders pursuant to s 411(12) of the Act exempting it from compliance with s 411(11), which requires 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. Youfoodz submitted that an exemption order was appropriate here, given there was no alteration to the Youfoodz constitution, and upon implementation of the Scheme, Youfoodz would become a wholly-owned subsidiary of HelloFresh. 9 Youfoodz submitted that s 411(12) orders are regularly made on this basis: see, for example, Think Childcare Limited, in the matter of Think Childcare Limited (No 2) [2021] FCA 1228 at [43]; Re Vault Intelligence Limited (No 2) [2020] FCA 1504 at [34]; Re Transcomm Credit Co-operative Limited [2016] VSC 835 at [33]; and Re Cytopia Limited (No 2) [2010] VSC 4 at [20]. I accepted Youfoodz' submission and have made the sought order.

Conclusion 10 For the reasons stated above, it is appropriate that the Court approve the Scheme, pursuant to s 411(4)(b) of the Act. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Middleton.