Federal Court of Australia

PropTech Group Limited, in the matter of PropTech Group Limited (No 2) [2023] FCA 89

ORDERS

OTHER MATTERS:

A.    The proceeding concerns a scheme of arrangement between the plaintiff and the holders of ordinary shares in the plaintiff, the terms of which are set out at pages 86 to 104 of annexure “LM-1” to the affidavit of Lee David Mitchell made on 25 November 2022 – a copy of which pages is Annexure A to this order (the Scheme).

B.    There has been produced to the Court a statement in writing by the Australian Securities and Investments Commission (ASIC) in accordance with s 411(17)(b) of the Corporations Act 2001 (Cth) (the Act), stating that ASIC has no objection to the Scheme.

THE COURT ORDERS THAT:

1.    Under s 411(4)(b) of the Act, the Scheme is approved.

2.    Under s 411(12) of the Act, the plaintiff is exempted from compliance with section 411(11) of the Act in respect of the Scheme.

3.    These orders are to be entered forthwith.

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

ANNEXURE A

REASONS FOR JUDGMENT

O’CALLAGHAN J

1    After a hearing on 10 February 2023, I made the orders set out above. These are my reasons.

2    On 16 December 2022, I made the following orders (collectively, convening orders):

1.    The plaintiff is to convene and hold a meeting of the holders of ordinary shares in the plaintiff (members) to consider and, if thought fit, to approve (with or without any alterations or conditions) the scheme of arrangement (Scheme) proposed to be made between the plaintiff and the members, the terms of which are found at pages 86 to 104 of annexure “LM-1” to the affidavit of Lee David Mitchell made on 25 November 2022 (first Mitchell affidavit) (the Scheme Meeting).

2.     The Scheme Meeting is to be convened by sending on or before 23 December 2022:

(a)     in the case of members who have elected to receive shareholder communications electronically by way of email, an email substantially in the form of page 1118 of exhibit “JH-1” to the affidavit of Joseph Hanna made 14 December 2022 (Hanna affidavit) and which includes links to:

(i)     a document substantially in the form of exhibit “LM-7” to the affidavit of Lee David Mitchell made on 15 December 2022 (fourth Mitchell affidavit), which comprises the explanatory statement as required by s 412(1)(a) of the Act (Scheme Booklet) and which is to contain (among other things) the notice of scheme meeting (Notice of Scheme Meeting) substantially in the form of pages 655 to 659 exhibit “JH-1” to the Hanna affidavit; and

(ii)     an online portal or website that enables the member to lodge their proxy for the Scheme Meeting.

(b)     in the case of members who have elected to receive hard copy communications, the following documents by pre-paid post addressed to the relevant address(es) recorded in the plaintiff’s register:

(i)     a document substantially in the form of the Scheme Booklet and containing among other things the Notice of Scheme Meeting and a proxy form for the Scheme Meeting substantially in the form of pages 661 to 662 of exhibit “JH-1” to the Hanna affidavit (Scheme Proxy Form); and

(ii)     a reply paid envelope for the return of the Scheme Proxy Form; and

(c)     in the case of members who have not made an election for either electronic or hard copy communications, the following documents by pre-paid post addressed to the relevant address(es) recorded in the plaintiff’s register:

(i)     a letter substantially in the form of pages 1119 to 1120 of exhibit “JH-‍1” to the Hanna affidavit and which includes a link to a website at which the Scheme Booklet and Notice of Scheme Meeting can be downloaded; and

(ii)     a copy of the Scheme Proxy Form.

3.     Subject to these orders, the Scheme Meeting is 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.

4.     The Scheme Meeting is to be held at 11:00 am (Melbourne time) on Tuesday 7 February 2023 at the offices of RSM Australia, Level 21, 55 Collins Street, Melbourne, in Victoria.

5.     Members of the plaintiff may vote at the Scheme Meeting by attending in person or by proxy, attorney or corporate representative (if applicable).

6.     Simon Timothy Baker, or failing him Sam Antony Sidney Plowman, is to be the chair of the Scheme Meeting.

7.     The chair of the Scheme Meeting shall have the power to adjourn the meeting to such time, date and place as they consider appropriate.

8.     The plaintiff may provide access to the Scheme Meeting for such other persons as it thinks fit.

9.     Voting on the resolution to approve the Scheme is to be conducted by way of a poll.

10.     A proxy form in respect of the Scheme Meeting will be valid and effective if, and only if, it is completed and received in accordance with its terms by 11:00 am (Melbourne time) on Sunday 5 February 2023.

11.     Compliance with r 2.15 of the Federal Court (Corporations) Rules 2000 (Rules) is dispensed with.

12.     Notice of the hearing of an application under s 411(4) of the Act for an order approving the Scheme is to be published once in “The Australian” newspaper by an advertisement substantially in the form of Annexure A to these orders, such advertisement to be published on or before 23 January 2023, and the plaintiff is otherwise exempted from compliance with r 3.4 of the Rules.

13.     The further hearing of the originating process is adjourned to 10:15 am (AEDT) on 10 February 2023.

14.     Liberty to apply is reserved.

15.     These orders are to be entered forthwith.

See Re PropTech Group Limited [2022] FCA 1606.

3    These reasons adopt the same definitions as those convening orders.

4    It is necessary to note one issue with the convening orders. Paragraph 2(a)(i) of the convening orders contains a reference to a document substantially in the form of exhibit LM-7 to the affidavit of Lee David Mitchell made on 15 December 2022. Counsel for PropTech Group brought to my attention that this should have been a reference to exhibit LM-6 of the same affidavit. Counsel submitted, and I agreed, that nothing turns on it.

5    At the hearing on 10 February 2023, PropTech Group sought the following orders for approval of the scheme:

At the second hearing

3     An order under section 411(4)(b), and (if necessary) section 411(6) of the Act that the proposed Scheme be approved.

4     An order under section 411(12) of the Act that the plaintiff be exempted from compliance with the requirements of section 411(11) of the Act in relation to the Scheme.

6    Following the first hearing, PropTech Group filed the following affidavits:

(1)    Fifth affidavit of Lee David Mitchell, affirmed 8 February 2023;

(2)    Second affidavit of Simon Timothy Baker, affirmed 8 February 2023;

(3)    Affidavit of Cavin Kurtz, affirmed 9 February 2023;

(4)    Second affidavit of Cavin Kurtz, affirmed 9 February 2023; and

(5)    Sixth affidavit of Lee David Mitchell, affirmed 10 February 2023.

7    In accordance with the convening orders, the Scheme Meeting was held on 7 February 2023. There were 173 members present (in person or by proxy), of whom 171 (representing 98.8% of members present and voting and 99.997% of votes cast) voted in favour of the resolution to approve the Scheme.

8    The evidence established that all statutory and procedural requirements for approval of the Scheme – including the statutory majorities and conditions precedent to the Scheme – were satisfied.

Scheme Meeting

9    The evidence established the following.

10    On 7 February 2023 at 11:00am AEDT, the Scheme Meeting was held in accordance with the convening orders. It was held in person, at the office of RSM Australia in Melbourne.

11    Mr Simon Baker (non-executive chairman) chaired the Scheme Meeting, in accordance with paragraph 6 of the convening orders. As required by PropTech Group’s constitution, the meeting had a quorum of at least three members present in person or by proxy.

12    Prior to the Scheme Meeting, PropTech Group received 172 valid proxy votes, representing 60.7% of the total shares on issue.

13    The resolution to approve the Scheme was conducted by poll. Mr Cavin Kurtz was appointed the returning officer for the poll, the result of which was as follows (including proxies):

14    There were zero abstentions. The resolution was passed by 98.8% of members present and voting (in person or by proxy) and 99.997% of votes cast.

15    Accordingly, the statutory majorities required by s 411(4)(a) of the Corporations Act 2001 (Cth) – the resolution being passed by a majority in number of the members present and voting, and by 75% of votes case – were satisfied.

Role of the court

16    The principles relevant to the exercise of the court’s power to approve a scheme of arrangement are well understood. See, by way of example only, Crown Resorts Limited (No 2) [2022] FCA 710 at [11] (Anderson J).

17    In making an order pursuant to s 411(4)(b) of the Act (approving a scheme of arrangement), the role of the court is supervisory. The court is not bound to approve a scheme merely because it previously made orders convening a meeting or because statutory majorities were achieved. However, as Jacobson J observed in Re Seven Network Limited (No 3) [2010] FCA 400; (2010) 267 ALR 583 at 588 [32], “the court will usually approach the task upon the basis that the members are better judges of what is in their commercial interests than the court”. As a matter of practical and commercial reality, this must be correct.

18    The cases establish that the following matters should be taken into account:

(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.

See, by way of example only, Re PayGroup Limited (No 2) [2022] FCA 1350.

Disposition

19    In light of the detailed and helpful written submissions of Mr CT Möller and Mr MB Peckham on behalf of PropTech Group, there were only two matters that required further consideration at the hearing.

20    First, as noted above, there was a minor error in the convening orders (a reference to an exhibit LM-7 instead of exhibit LM-6). In my view, this error is immaterial and does not invalidate the steps taken by PropTech Group. Section 1322 of the Act deals with irregularities and s 1322(2) provides as follows:

A proceeding under this Act [taken by courts to include a scheme meeting] 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.

21    As submitted by counsel for PropTech Group: the error was obvious, the intention of the order is plain, and the error can be cured as a matter of construction. Accordingly, I am not of the opinion that the irregularity has caused, or may cause, any injustice.

22    Second, having reviewed the affidavit of Lee David Mitchell affirmed 10 February 2023, the following matters were established:

(a)    ASIC issued a letter to the Directors of PropTech Group, stating that under s 411(17)(b) of the Act, it had no objection to the Scheme; and

(b)    each of the relevant conditions precedent (other than court approval) had been satisfied or waived.

23    In this case, I was satisfied of the following matters:

(a)    there is nothing to suggest that the Scheme was proposed other than in good faith;

(b)    there is nothing to suggest that PropTech Group’s members voted other than in good faith;

(c)    PropTech Group’s members overwhelmingly supported the Scheme, as reflected in the voting results at the Scheme Meeting;

(d)    the opinion of the independent expert was that the Scheme and associated transactions are in the best interests of PropTech Group’s members;

(e)    the recommendation from all of PropTech Group’s directors was that members vote in favour of the Scheme;

(f)    PropTech Group has brought to the court’s attention all matters that could be considered relevant to the exercise of its discretion, including the error in the convening orders;

(g)    the Scheme Booklet contained full disclosure of the potential benefits and disadvantages of the Scheme, and had been examined by ASIC;

(h)    there is nothing to suggest that any PropTech Group member will be oppressed by the Scheme (here, the Scheme contains measures to protect members against performance risk);

(i)    the Scheme will not alter the constitution of PropTech Group or the rights of members, creditors or other persons dealing with it; and

(j)    there is nothing to suggest that the Scheme offends public policy.

24    In summary, the evidence clearly established that the Scheme was made in good faith and was “at least so far fair and reasonable, as that an intelligent and honest [person], who is a member of the class, and acting alone in respect of [their] interest as such a member, might approve of it”. See Re Alabama, New Orleans, Texas and Pacific Junction Railway Company [1891] 1 Ch 213 at 247 (Fry LJ).

25    It was therefore appropriate to make the orders sought by PropTech Group, including the order under s 411(12) of the Act that PropTech Group be exempted from compliance with s 411(11).

Associate:

Dated:    14 February 2023