Federal Court of Australia

Capitol Health Limited, in the matter of Capitol Health Limited (No 2) [2024] FCA 1253

ORDERS

OTHER MATTERS:

The Court notes that the Australian Securities and Investments Commission (ASIC) has been provided with the affidavit of Ronald William Smooker affirmed 28 October 2024 and the annexures thereto, the further affidavit of Ronald William Smooker affirmed 28 October 2024, a copy of the plaintiff’s outline of submissions dated 28 October 2024 and a draft of this Order.

THE COURT ORDERS THAT:

1.    Pursuant to section 1319 of the Corporations Act 2001 (Cth):

(a)    The Scheme Meeting (as defined in Order 1 made in this proceeding on 24 September 2024) (24 September 2024 Orders) be postponed to Monday, 2 December 2024 commencing at 11.00am (AEDT) at the offices of Maddocks, Level 25, Tower 2, 727 Collins Street, Melbourne Victoria (the postponed Scheme Meeting);

(b)    the plaintiff cause to be sent to the Australian Securities Exchange (ASX) as soon as practicable, but in any event by 5.00pm on 29 October 2024 for publication on the ASX’s Market Announcements Platform an announcement substantially in the form of the document at Annexure A to these Orders.

2.    Each of Orders 3 to 11 of the 24 September 2024 Orders applies to the postponed Scheme Meeting as if it had been made in the first instance in respect of the postponed Scheme Meeting, save that:

(a)    the date in Order 4 of the 24 September 2024 Orders be extended to 7.00pm (AEDT) on 30 November 2024;

(b)    the date in Order 6 of the 24 September 2024 Orders be extended to 11.00am (AEDT) on 30 November 2024;

(c)    the date in Order 11 of the 24 September 2024 Orders be extended to 26 November 2024.

3.    Valid proxy forms for the Scheme Meeting that have been lodged by shareholders of the plaintiff are deemed to be still valid for the postponed Scheme Meeting on 2 December 2024 (and any Scheme Meeting that is further postponed or adjourned in accordance with the 24 September 2024 Orders or these Orders), but the appointment of a proxy for the Scheme Meeting may be varied or revoked by the appointing shareholder at any time up to 48 hours before the postponed Scheme Meeting or any further postponement or adjournment of the postponed Scheme Meeting.

4.    The Notice of Scheme Meeting (referred to in Order 2(a)(i) of the 24 September 2024 Orders) is deemed to still be valid for the purposes of the postponed Scheme Meeting on 2 December 2024 (and any further postponement or adjournment of the postponed Scheme Meeting in accordance with the 24 September 2024 orders or these Orders).

5.    Order 12 of the 24 September 2024 Orders be vacated.

6.    The further hearing of the originating process is adjourned to a hearing before Beach J on 4 December 2024 at 2.15pm (AEDT).

7.    The plaintiff be given liberty to apply.

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

Annexure A

[The order entered is available on the Commonwealth Courts Portal]

REASONS FOR JUDGMENT

BEACH J:

1    On 24 September 2024, I ordered that Capitol Health Limited convene and hold a meeting of its shareholders on 31 October 2024 to consider a proposed scheme of arrangement, which, if implemented, will result in the acquisition of all of the shares in Capitol by Integral Diagnostics Limited (IDX) with Capitol shareholders (other than any ineligible shareholders) receiving, in exchange, shares in IDX (see Re Capitol Health Limited [2024] FCA 1120).

2    The present application made under s 1319 of the Corporations Act 2001 (Cth) seeks an order for the postponement of that meeting and ancillary orders. The necessity for this is explained by the following matters.

3    At [19] to [35] of my earlier reasons I addressed in the context of the ACCC condition precedent the market inquiries being undertaken by the ACCC in respect of the proposed transaction and noted that following discussions between the ACCC and relevant advisers there was a reasonable expectation of the ACCC being in a position to provide an indication of its feedback by 17 October 2024.

4    I noted further (at [31]) that there were several possibilities or scenarios that could arise from that indication from the ACCC and observed (at [32]) that:

However, this is all speculation at this time and subject to receiving an indication from the ACCC by 17 October 2024, Capitol will be able to make a decision regarding whether to proceed with the scheme meeting on 31 October 2024 or whether alternative arrangements or steps should be taken or considered.

5    On Thursday, 17 October 2024, the ACCC informed the legal advisers for IDX that it expected to provide its market inquiries feedback letter the following day. In the afternoon on Friday, 18 October 2024 the ACCC provided that letter.

6    There has been both telephone and email dialogue between IDX’s legal advisers and the ACCC regarding the ACCC feedback letter.

7    In the morning of Wednesday, 23 October 2024, the Capitol board resolved, subject to any further developments that may arise during a proposed further call with the ACCC on 24 October 2024, that an application should be made to the Court for the postponement of the scheme meeting on the basis that the matters the subject of continuing consideration by the ACCC, including the matters outlined in the ACCC feedback letter, were unlikely to be finalised or resolved by the date of the scheme meeting.

8    It was considered that the proposed dates of 2 and 4 December 2024 for the scheme meeting and second court hearing respectively would allow for implementation of the transaction to occur, subject to shareholder and court approval, by the proposed new implementation date of 16 December 2024.

9    The proposed call with the ACCC on 24 October 2024 did not take place but rather a call took place on 23 October 2024 between the ACCC and IDX’s legal advisers, during which the ACCC informed IDX’s legal advisers that it would require the full 12 weeks review period, being from 5 September 2024 to 28 November 2024 and being the dates referred to at [22] and [23] of my earlier reasons, to complete its market inquiries and announce its findings.

10    In light of this development, the Capitol board determined to seek to have the scheme meeting postponed to a date after 28 November 2024, being 2 December 2024 and, subject to my convenience, for the second court hearing to be rescheduled for 4 December 2024. I might say that this is convenient to me.

11    Accordingly, and consistent with my observation as to potential alternative arrangements or steps (at [32] of my earlier reasons), Capitol seeks orders to this effect, together with orders relating to a new timetable which it is proposed be published by way of an ASX announcement.

12    Now Capitol’s preferred position is to seek a postponement order rather than going through the process of the chair formally opening the scheme meeting on 31 October 2024 and then adjourning the meeting to a date to be fixed. Such a process would entail inconvenience to both Capitol directors and potentially Capitol shareholders which it would be desirable to avoid if possible.

13    Further, even if the course of opening and adjourning the scheme meeting was undertaken, given that a new timetable will be required, including new dates for the scheme meeting and the second court hearing, it was considered that the appropriate course was for an application to be made to the Court for orders in respect of these matters.

14    For similar reasons, Capitol would prefer not to adopt the process of postponing the scheme meeting pursuant to order 9 of my 24 September 2024 orders, assuming that the power of the chair of the scheme meeting to postpone the scheme meeting operates prior to the scheme meeting being held, particularly where the proposed period of postponement is over a month.

15    In these circumstances, Capitol seeks both postponement and timetabling orders as part of the present application.

16    I should also note that Capitol’s constitution does not address the matter of postponement of general meetings, as distinct from the adjournment of a meeting once opened.

Section 1319 of the Corporations Act

17    Section 1319 provides:

Where under this Act, the Court orders a meeting to be convened, the Court may, subject to this Act, give such directions with respect to the convening, holding or conduct of the meeting, and such ancillary or consequential directions in relation to the meeting as it thinks fit.

18    The power under section 1319 includes the power to make orders postponing, adjourning or reconvening a scheme meeting.

19    In T Damian and A Rich, Schemes, Takeovers and Himalayan Peaks (4th ed, 2021) the authors state (at p 202) that:

It appears that the distinction between “postponement” and “adjournment” in this context turns on the commencement of the meeting; a meeting may be adjourned once it has commenced at the scheduled time whereas a meeting may be postponed prior to it commencing at the scheduled time.

20    Now where what is proposed is that the scheme meeting not proceed as scheduled in light of developments subsequent to the making of the order convening the meeting, the appropriate order is that the scheme meeting be postponed.

21    I also note that the proxy form for the scheme meeting refers to “any adjournment or postponement of [the] meeting”.

Section 249M of the Corporations Act

22    Order 3 of my 24 September 2024 orders, which order reflects rule 3.3(2) of the Federal Court (Corporations) Rules 2000 (Cth) save for the reference to replaceable rules, provides:

Subject to these orders, the Scheme Meeting be convened, held and conducted in accordance with the provisions of:

(a)    Pt 2G.2 of the Act (save for any replaceable rule that is displaced or modified by the plaintiff’s constitution) 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 Pt 2G.2 of the Act.

23    Section 249M of the Act (which is in Part 2G.2) provides that “[w]hen a meeting is adjourned, new notice of the resumed meeting must be given if the meeting is adjourned for 1 month or more”.

24    Section 249M is a replaceable rule and as such can be displaced or modified by the relevant company’s constitution under section 135(2).

25    Clause 12.6 of Capitol’s constitution is in the following terms:

When a meeting is adjourned for 30 days or more, notice of the resumption of the adjourned meeting shall be given in the same manner as for the original meeting, but otherwise, it is not necessary to give any notice of any adjournment or of the business to be transacted on the resumption of the adjourned meeting.

26    Under clause 26 of that constitution, a notice of a general meeting is to be given in accordance with the requirements of the Act, clause 26 (which in effect deals with the mode of notice) and the listing rules. Accordingly, the effect of clause 12.6 in the context of the present desire to defer the scheme meeting would, if the scheme meeting was adjourned, be to require notice to be given to shareholders in accordance with clause 26 of the time and date at which the scheme meeting will resume.

27    In Re Amcom Telecommunications Limited (No 3) [2015] FCA 596, the matters under consideration by McKerracher J included whether an order should be made to reconvene the scheme meeting. In that matter, the scheme meeting had been adjourned twice by the chair of the scheme meeting pursuant to the first court hearing orders with the second adjournment to a future date, time and place to be announced (see [24] and [25]).

28    As the scheme meeting had been adjourned for more than one month, a question arose as to whether a new notice of meeting had to be issued with at least 28 days’ notice being given of the adjourned meeting. In that case, the effect of two provisions of the constitution, which applied to the scheme meeting by reason of rule 3.3(2) of the Rules, was that 28 days’ notice was required to be given of the adjourned scheme meeting. Amcom sought an order that the notice of scheme meeting contained in the scheme booklet remained valid despite the operation of those constitutional provisions.

29    McKerracher J in that matter made an order reconvening the scheme meeting, which was to be held around 3 weeks after the date of the order, and further ordered that the notice of scheme meeting in the original scheme booklet was deemed to still be valid for the purposes of the reconvened scheme meeting. In making that second order, McKerracher J observed (at [70] and [71]) that there was no amendment to the proposed scheme, that no prejudice arose and that in any event the fact that no new notice of meeting was issued or that less period of notice had been given as was required under the constitution were matters that the court could take into account at the second court hearing.

30    In the present case, both section 249M and clause 12.6 of the constitution refer to an adjournment of a meeting whereas Capitol is seeking a postponement order in relation to a meeting that has not yet taken place.

31    Now as section 249M and clause 12.6 make no reference to a “postponement”, it is unclear whether (hypothetically) this means that a meeting could be postponed for a period of 6 months say or longer without the need for a new notice of meeting to be provided.

32    But to avoid any potential argument or position being put as to whether a postponement is to be considered in the same light as an adjournment for the purpose of those provisions, Capitol has also sought an order to the effect that the notice of scheme meeting remains valid in respect of the postponed scheme meeting proposed to be held on 2 December 2024. In my view this is appropriate.

33    Significantly for present purposes, the scheme has not changed and the only reason for the postponement of the scheme meeting is to enable the 12 weeks ACCC process to take its course.

Form of order

34    It is proposed that the Capitol shareholders be informed of the proposed postponement of the scheme meeting together with the revised timetable by way of an ASX announcement, rather than sending any document to shareholders by the method set out in the 24 September 2024 orders.

35    In my view, given the reasonably straightforward nature of the information and the proximity of the announcement to the date of the currently scheduled scheme meeting, being 31 October 2024, the proposed ASX announcement is both an appropriate and effective way to communicate the relevant information to Capitol shareholders.

36    I should say that the approach adopted to the form of the postponement order and the proposed ASX announcement follows, in substance, the form of the postponement order made by Robson J on 13 June 2017 in Re SMS Management & Technology Limited in proceedings in the Supreme Court of Victoria (S ECI 2017 000089).

37    As to the requested ancillary orders, the approach adopted has been to apply the relevant orders made on 24 September 2024 to the proposed postponed scheme meeting with dates extended where applicable. Moreover, the proposed orders include an order that the notice of scheme meeting is to remain valid for the postponed scheme meeting. Related to this, the proposed orders also include an order that the proxy forms lodged to date remain valid.

38    Now the Court has power to make such an order under section 1319 concerning proxies in these circumstances.

39    In Re Amcom Telecommunications Limited (No 2) [2015] FCA 410, as to the position of proxies lodged to date, McKerracher J observed (at [11]) that “[t]he Court can make orders under s 1319 as to the validity of proxies lodged in relation to a scheme meeting, and that the meeting proceed.”

40    McKerracher J made the necessary deemed validity order in relation to proxies that had already been lodged, observing (at [16] to [18]):

Where, as here, there has been no consequent amendment to a proposed scheme of arrangement, there is no, or little, reason to doubt that all original proxy forms are deemed to still be valid.

In other situations, the members who originally voted in favour of the scheme are deemed to have voted in favour of the two resolutions relating to the revised scheme: Damian T and Rich A, Schemes, Takeovers and Himalayan Peaks (3rd ed, Ross Parsons Centre of Commercial, Corporate and Taxation Law, 2013) (at 144) and the cases there cited.

Importantly, members can withdraw the proxy by revoking it if they so choose: see also Re Citect Corporation Ltd (2006) 225 ALR 137 per Barrett J.

41    Further, Black J in Re The Trust Company (RE Services) Limited as responsible entity of Vital Harvest Freehold Trust (No 2) [2021] NSWSC 397 made validity orders in respect of lodged proxies in circumstances where the scheme consideration had been increased.

42    In the present circumstances, a postponement of the scheme meeting is proposed in circumstances where the directors maintain their voting recommendation, the independent expert has maintained its opinion and the terms of the scheme have not changed. In these circumstances, it is appropriate for the proposed proxy validity order to be made.

43    Now it is noted that the proposed extended date for the voting eligibility order and the date for delivering proxies is Saturday, 30 November 2024.

44    As to the proposed voting eligibility order, this will mean that Capitol shareholders who are eligible to vote at the postponed scheme meeting will be, in effect, those shareholders on the register as at 7.00pm on Friday, 29 November 2024.

45    As to the proposed extended date for the delivering of proxies, being 48 hours before the proposed postponed scheme meeting on Monday, 2 December 2024, Black J in Re Webcentral Group Limited [2020] NSWSC 1279 had cause to consider the proposal in that matter for the proxy deadline to be a Sunday but did not consider that this gave rise to a reason not to convene the scheme meeting (see his Honour’s observations at [37]).

46    In Re CSG Limited [2019] NSWSC 1905, which was considered by Black J in Re Webcentral Group Limited, a different approach was taken by Black J with the making of specific orders for the relevant proxy cut-off date to be a Friday, being some 65 hours before the scheme meeting on the following Monday, rather than the Saturday before the meeting, and where the orders had to address the relevant 48 hour requirement in each of s 250B(1) and the company’s constitution.

47    In the present case, as with Re Webcentral Group Limited, the proposed extended date for the delivering of proxies is consistent with section 250B(1) and Capitol’s constitution (clause 12.17(e)).

48    Further, the proposed timetable has been provided to the ASX and the ASX confirmed yesterday that it did not object to the proposed timetable. But in any event, any issue regarding the delivering of a proxy form is a matter that can be addressed at the second court hearing.

49    Accordingly, it is appropriate in the present case to adopt the position taken in Re Webcentral Group Limited.

50    Finally, in the event that a further postponement or adjournment of the scheme meeting is required, it is presently proposed that Capitol will rely upon either the postponement or the adjournment power conferred on the chair in order 9 of my 24 September 2024 orders, as applied to the postponed scheme meeting by virtue of order 2 of the proposed postponement orders, unless it is considered in the relevant circumstances that an approach to the Court should be made for relevant further orders.

51    For these reasons I made the necessary orders on the papers this morning.

Associate:

Dated:    29 October 2024