In the matter of Estia Health Limited (No 2)

[2023] NSWSC 1521

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of Estia Health Limited (No 2) [2023] NSWSC 1521

Hearing dates:

5 December 2023

Date of orders:

5 December 2023

Decision date:

07 December 2023

Jurisdiction:

Equity - Corporations List

Before:

Black J

Decision:

Orders made approving a scheme of arrangement.

Catchwords:

CORPORATIONS – Arrangements and reconstructions – Schemes of arrangement or compromise – Application under s 411 of the Corporations Act 2001 (Cth) for orders approving scheme of arrangement – Where formal requirements satisfied – Whether scheme of arrangement should be approved.

Legislation Cited:

- Corporations Act 2001 (Cth), ss 411, 1319

Cases Cited:

- Re Cirrus Networks Holdings Ltd (No 2) [2023] NSWSC 1436

- Re ELMO Software Ltd (No 2) [2023] NSWSC 81

- Re Estia Health Ltd [2023] NSWSC 1256

- Re InvoCare Ltd (No 2) [2023] NSWSC 1350

- Re Pendal Group Ltd (No 3) [2023] NSWSC 14

- Re Permanent Trustee Co Ltd (2002) 43 ACSR 601

- Re Seven Network Ltd (No 3) (2010) 267 ALR 583

- Re Staging Connections Group Ltd (No 2) [2015] FCA 1102

- Sierra Mining Ltd, in the matter of Sierra Mining Ltd [2014] FCA 694

Category:

Principal judgment

Parties:

Estia Health Limited (Plaintiff)
Firebird BidCo Pty Ltd (Bidder)

Representation:

Counsel:
M Izzo SC (Plaintiff)
J Williams SC (Bidder)

Solicitors:
MinterEllison (Plaintiff)
Allens (Bidder)

File Number(s):

2023/276387

Judgment

Nature of application and background

1. By Originating Process filed on 30 August 2023 the Plaintiff, Estia Health Ltd (“Estia Health”) sought orders under s 411 of the Corporations Act 2001 (Cth) (“Act”), inter alia, that it convene a scheme meeting to consider a scheme of arrangement, and associated directions under s 1319 of the Act. I made the orders sought at the end of the first Court hearing on 11 October 2023 for the reasons set out in my judgment delivered on 24 October 2023 (Re Estia Health Ltd [2023] NSWSC 1256). On 10 November 2023, I made orders for the despatch of supplementary information to Estia Health shareholders and the adjournment of the second Court hearing to 5 December 2023, where the period for the Foreign Investment Review Board’s review of the application had been extended with the consent of Firebird BidCo Pty Ltd (“Bidder”). The scheme meeting was then held on 15 November 2023 and the scheme resolution was passed by the requisite statutory majorities with the approval of 99.74% of the votes cast and 91.80% of Estia Health shareholders present and voting (in person or by proxy).

2. Estia Health now seeks orders at the adjourned second Court hearing that the scheme be approved pursuant to s 411(4)(b) of the Act. I made the orders sought at the end of the second Court hearing on 5 December 2023 and these are my reasons for doing so. I have drawn on the helpful submissions of Mr Izzo, who appears for Estia Health in this application, in this judgment.

Affidavit evidence

3. Estia Health reads the affidavit dated 4 December 2023 of Ms Suzy Watson, General Counsel and Chief Privacy Officer of Estia Health, at the second Court hearing. Ms Watson gave evidence of the registration of the scheme booklet and lodgement of a copy of the convening orders made by the Court at the first Court hearing with the Australian Securities and Investments Commission (“ASIC”); the dispatch of the documents relating to the scheme meeting in accordance with the orders made at the first Court hearing and the supplementary disclosure orders made on 10 November 2023; the dispatch of reminder emails to shareholders in substantially the form disclosed to the Court at the first Court hearing; and the publication of Australian Securities Exchange (“ASX”) announcements as to the second Court hearing in accordance with the orders made at the first Court hearing and the supplementary disclosure orders. Ms Watson also gave evidence of conduct of the scheme meeting and the passage of the scheme resolution and addressed the level of voter turnout at the scheme meeting; and her affidavit exhibited a letter from ASIC indicating that it had no objection to the scheme for the purposes of s 411(17)(b) of the Act. Estia Health also tendered a conditions precedent certificates executed by it, and a second conditions precedent certificate executed by it and the Bidder as to regulatory conditions, evidencing satisfaction of conditions precedent to the scheme.

Role of the Court at the second Court hearing

4. The general principles which guide the Court’s discretion to approve a scheme at a second Court hearing are well established and I have here drawn on my summary of those principles in Re InvoCare Ltd (No 2) [2023] NSWSC 1350 (“Invocare (No 2)”). The matters of which the Court must be satisfied in approving the scheme at the second Court hearing are whether there was compliance with the orders of the Court convening the scheme meeting or meetings; whether the resolution to approve the scheme was passed by the requisite majority and whether other statutory requirements have been satisfied; and whether 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: Sierra Mining Ltd, in the matter of Sierra Mining Ltd [2014] FCA 694 at [31]; Re ELMO Software Ltd (No 2) [2023] NSWSC 81 (“ELMO”) at [7].

5. The Court also has, in exercising its power of approval, a residual discretion whether to approve a scheme and is not bound to approve it merely because it has made orders for the convening of meetings or because the statutory majorities have been achieved: Re Seven Network Ltd (No 3) (2010) 267 ALR 583 (“Seven Network”) at [31]; Re Staging Connections Group Ltd (No 2) [2015] FCA 1102 at [12]. In exercising that residual discretion, the (non-exhaustive) matters the Court will take into account include whether the scheme is fair and reasonable so that an intelligent and honest member of the relevant class, properly informed and acting alone, might approve it; whether there was full and fair disclosure to members of all information material to the decision whether to vote for or against the scheme; and 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: Re Permanent Trustee Co Ltd (2002) 43 ACSR 601 at [8]; Seven Network at [35]-[40]; Re Pendal Group Ltd (No 3) [2023] NSWSC 14 at [10]; ELMO at [8].

Submissions and determination

6. Mr Izzo draws attention to several matters which support the approval of the scheme at this hearing. He points out that Ms Watson’s affidavit establishes that the scheme meeting was convened and held in accordance with the orders made by the Court at the first Court hearing; the reminder to vote emails sent to Estia Health shareholders were in substantially the form disclosed to the Court at the first Court hearing; and the supplementary disclosure orders were complied with.

7. The evidence establishes that, in accordance with s 411(4)(a)(ii) of the Act, the resolution to agree to the scheme was passed by a majority in number of members present and voting (either in person or by proxy) at the scheme meeting and by at least 75% of the votes cast on the resolution. Here, that resolution was passed by 99.74% of the votes cast and 91.80% of Estia Health shareholders present and voting, in each case in person or by proxy). Mr Izzo also draws attention to evidence led (in accordance with Practice Note SC Eq 4 at [26(j)]) as to the level of voter turnout, namely that 685 Estia Health shareholders voted in respect of the scheme resolution, resulting in a voter participation rate at the scheme meeting of 14.10%. which is above the voter turnout at the last three annual general meetings of Estia Health. I accept that that evidence gives rise to no reason to doubt the efficacy of the procedure for convening the scheme meeting: InvoCare (No 2) at [11].

8. Mr Izzo submits, and I accept, that the Court was satisfied, when it convened the scheme meeting, that the scheme was in a form fit for approval by the Court at a second hearing, subject to any issues that might later arise or be raised in opposition to the scheme. No such matters have arisen and I am satisfied that the scheme remains appropriate for approval by the Court. Mr Izzo also notes that, as I noted above, relevant conditions precedent to the scheme were satisfied and Estia Health has received a statement in writing from ASIC indicating that it has no objection to the scheme for the purposes of s 411(17)(b) of the Act.

9. Estia Health seeks an order under s 411(12) of the Act exempting it from compliance with s 411(11) of the Act, which would require it to annex a copy of the orders under s 411(4)(b) to its constitution. I am satisfied that order may properly be made where the scheme does not amend Estia Health’s constitution and Estia Health will become a wholly owned subsidiary of the Bidder upon implementation of the scheme: Re Cirrus Networks Holdings Ltd(No 2) [2023] NSWSC 1436 at [13].

Orders

10. For these reasons, I made the orders sought by Estia Health at the conclusion of the second Court hearing on 5 December 2023.

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Decision last updated: 08 December 2023