FEDERAL COURT OF AUSTRALIA

Think Childcare Limited, in the matter of Think Childcare Limited (No 2) [2019] FCA 2181

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to subs 411(4)(b) of the Corporations Act 2001 (Cth) (Act), the Scheme of Arrangement between the plaintiff and its members agreed to by the said members at the meeting held on 5 December 2019 (the terms of which were set out in Annexure B to the Orders of the Court made on 31 October 2019) (Scheme) be and is hereby approved.

2.    Pursuant to subs 411(12) of the Act, the plaintiff be exempted from compliance with subs 411(11) of the Act in relation to the Scheme.

3.    Pursuant to r 39.34 of the Federal Court Rules 2011 (Cth), these Orders be entered forthwith.

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

REASONS FOR JUDGMENT

MARKOVIC J:

1    On 31 October 2019 I made orders (First Hearing Orders) including an order that Think Childcare Limited (TNK) convene and hold a meeting (Scheme Meeting) of holders of fully paid ordinary shares in TNK (Shareholders) pursuant to s 411(1) of the Corporations Act 2001 (Cth) (Act) in relation to a proposed scheme of arrangement (Scheme): see Think Childcare Limited, in the matter of Think Childcare Limited [2019] FCA 1862 (Think Childcare (No 1)).

2    On 12 December 2019 at the second court hearing I made orders including an order pursuant to s 411(4)(b) of the Act approving the Scheme. These are my reasons for making that order.

the scheme

3    The Scheme is described in Think Childcare (No 1) at [2] and [6]-[7].

4    In summary, it will result in fully paid ordinary shares in TNK being stapled to fully paid ordinary shares in Think Childcare Development Limited (TND) on a one for one basis, and securities in TNK and TND being quoted on the Australian Securities Exchange together so that one such security may not be dealt without the other or others being dealt with in an identical matter and at the same time and with that restriction on dealing being noted on the register of each stapled security.

Legal principles

5    Section 411(4) of the Act provides that an arrangement is binding on the members, in this case, of TNK, only if at a meeting of members it is passed by a majority of members present and voting in person or by proxy (unless the Court otherwise orders) and by 75% of votes cast and it is approved by order of the Court.

6    The Court has a discretion whether to approve a scheme and is not bound to approve it merely because it previously made orders for the convening of a meeting or because the statutory majorities have been achieved. However, the Court will usually approach the task on the basis that members are better judges of what is in their own commercial interest than the Court: see Re Seven Network Ltd (ACN 052 816 789) (No 3) (2010) 267 ALR 583; [2010] FCA 400 at [31]-[32].

7    As summarised by TNK in its submissions, in deciding whether to grant approval of a scheme of arrangement the Court will ordinarily have regard to the following matters:

(1)    that there has been compliance with the Court’s orders convening a meeting of members;

(2)    that the members have approved the scheme with the requisite majorities;

(3)    all other statutory requirements have been satisfied;

(4)    whether 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;

(5)    whether there was full and fair disclosure to members and creditors of all information material to the decision whether to vote for or against the scheme; and

(6)    whether 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,

see for example: Medical Australia Ltd, in the matter of Medical Australia Ltd (No 2) [2017] FCA 1429; Wellcom Group Limited, in the matter of Wellcom Group Limited (No 2) [2019] FCA 1872 at [10].

Compliance with the first hearing orders and other formal matters

8    Based on the evidence relied on by TNK I was satisfied that:

(1)    the First Hearing Orders had been lodged with the Australian Securities and Investments Commission (ASIC) and the explanatory booklet had been registered by ASIC pursuant to s 412(6) of the Act;

(2)    the explanatory booklet, substantially in the form approved at the first court hearing, was dispatched to Shareholders on or before 5 November 2019 in accordance with the First Hearing Orders;

(3)    proxy forms substantially in the form of Annexure ME23 to the affidavit of Mathew Graeme Edwards sworn 29 October 2019 in the proceeding were distributed to Shareholders on 4 November 2019. However, a copy of the proxy form was not lodged with ASIC until 28 November 2019, which was outside the time required by s 218(1)(c) of the Act, a matter which I address below;

(4)    a notice of hearing substantially in the form of Annexure A to the First Hearing Orders was published in The Australian newspaper on 28 November 2019; and

(5)    the Scheme Meeting was held in accordance with the First Hearing Orders. It was chaired by Mark Gregory Kerr and held at the time and place specified in those Orders.

9    The evidence also established that the statutory majorities in ss 411(4)(a)(ii)(A) and (B) of the Act had been met.

10    As set out in Think Childcare (No 1) at [6(3)], a general meeting of TNK was to be held immediately after the Scheme Meeting and a number of resolutions were to be proposed, referred to as the Supporting Resolutions. The general meeting was held as foreshadowed on 5 December 2019 and the Supporting Resolutions were considered, a vote was taken on them and they were passed by the requisite majorities in each case.

11    On 11 December 2019 ASIC issued a letter pursuant to s 411(17)(b) of the Act to the directors of TNK stating that it had no objection to the Scheme.

12    TNK and TND jointly confirmed that, in relation to matters within their respective knowledge, each of the conditions precedent in cl 3.1 of the scheme implementation deed (SID), other than that relating to Court approval and the coming into effect of the Court’s orders made at the second court hearing, had been satisfied or waived in accordance with the terms of the SID.

13    As noted at [8(3)] above, a copy of the proxy form was not lodged with ASIC until 28 November 2019, which was outside the time required by s 218(1)(c) of the Act. As submitted by TNK, I accepted that this was a procedural irregularity which is automatically validated by s 1322(2) of the Act in the absence of a successful application to the contrary.

14    Relevantly, s 218(1)(c) of the Act requires a public company to lodge any other document that is proposed to accompany a notice convening a meeting and that relates to a proposed resolution with ASIC at least 14 days before notice convening the relevant meeting is given. The proxy form was such a document but it was not lodged with ASIC until 28 November 2019, which was outside the time prescribed by s 218(1)(c).

15    Section 1322(2) of the Act relevantly provides that:

(2)    A proceeding under this Act 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.

16    In SGIC Insurance Ltd v Insurance Australia Ltd (2004) 51 ACSR 593; [2004] FCA 1638 (SGIC), among other things described as minor errors and omissions, the explanatory statement was only registered with ASIC after it had been served. At [15] Jacobson J said that each of the errors brought to the Court’s attention related to a proceeding under the Act within s 1322(2) and that “[e]ach is a procedural irregularity which is not invalidated unless the court is of the opinion that it has or may cause substantial injustice and declares the proceeding to be invalid”. His Honour concluded at [16] that it was unnecessary for there to be a validating order because validation was brought about by s 1322(2) and the plaintiffs in that case had not brought an application under s 1322(4) of the Act. The same approach was taken by Barrett J in Re Capel Finance Ltd (2005) 54 ACSR 270; [2005] NSWSC 522 at [9] where there was non-compliance with provisions of the Act as to timing, including relevantly that the explanatory statement was not lodged for registration prior to its dispatch but very soon afterwards.

17    In this case the failure to lodge the proxy form within the time required by s 218(1)(c) of the Act is not a matter that would cause concern. The proxy form was dispatched on 4 November 2019 with the explanatory booklet and it was later lodged, albeit late, with ASIC. As was the case in SGIC, the lodgement of the proxy form is a proceeding under the Act within s 1322(2) of the Act and is a procedural irregularity which is not invalidated unless the court is of the opinion that it has or may cause substantial injustice and declares the proceeding to be invalid. I was not of that opinion. The procedural irregularity is validated by operation of s 1322(2) such that no validating order was required.

18    I was thus satisfied that TNK had complied with the First Hearing Orders and all statutory pre-conditions to the Court’s approval of the Scheme.

discretionary matters

19    In making orders for the convening of the Scheme Meeting I was satisfied that the “Scheme is of such a nature and is cast in such terms that, if it was considered and agreed to by the requisite statutory majority, the Court would be likely to approve it on the hearing of an unopposed application”: Think Childcare (No 1) at [35]. There was nothing that had occurred since the making of the First Hearing Orders to warrant a departure from that conclusion.

20    In particular I note the following matters:

(1)    the terms of the Scheme were subject to extensive disclosure in the explanatory booklet, including an independent expert’s report as to the potential advantages of the stapling proposal compared to its disadvantages and expressing an opinion that the Scheme was in the best interests of Shareholders, and market releases;

(2)    no person notified any opposition to the Scheme to the plaintiff or its solicitors and no one appeared at the second court hearing to oppose the Scheme;

(3)    since the announcement of the Scheme no competing proposal that is equal to or more favourable to Shareholders than that provided under the Scheme has been submitted;

(4)    the factual material included in the explanatory booklet had been verified and the explanatory booklet complied with ss 411(3) and 412 of the Act;

(5)    there was nothing to suggest that Shareholders voted other than in good faith or that they cast their votes for an improper purpose or that any member was treated in a way that could be characterised as oppressive; and

(6)    I was satisfied that TNK had brought to the attention of the Court all matters that could be considered relevant to the exercise of the Court’s discretion.

21    In light of those matters, I was satisfied that an order approving the Scheme should be made.

conclusion

22    For those reasons I made the orders sought by TNK.

Associate:

Dated:    28 January 2020