In the matter of Thorn Group Limited (No 2)

[2023] NSWSC 1523

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of Thorn Group Limited (No 2) [2023] NSWSC 1523

Hearing dates:

30 November 2023

Date of orders:

30 November 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 InvoCare Ltd (No 2) [2023] NSWSC 1350

- Re iSelect Ltd (No 2) (2022) 166 ACSR 41; [2022] FCA 1528

- 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

- Re Telstra Corporation Ltd (No 2) (2022) 163 ACSR 543; [2022] NSWSC 1460

- Re Thorn Group Ltd [2023] NSWSC 1299

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

Category:

Principal judgment

Parties:

Thorn Group Limited (Plaintiff)

Representation:

Counsel:
J C Giles SC (Plaintiff)

Solicitors:
MinterEllison (Plaintiff)

File Number(s):

2023/307019

Judgment

Background

1. By Originating Process filed on 27 September 2023, Thorn Group Ltd (“Thorn”) applied for an order under s 411(1) of the Corporations Act 2001 (Cth) (“Act”) that it convene a scheme meeting in respect of a proposed scheme of arrangement and associated orders, including directions under s 1319 of the Act. I made the orders sought by Thorn at the end of the first Court hearing on 20 October 2023 for the reasons set out in my judgment delivered on 31 October 2023 (Re Thorn Group Ltd [2023] NSWSC 1299). On 27 November 2023, a special general meeting to approve ancillary transactions and the scheme meeting were held and the necessary resolutions were passed by the requisite majorities.

2. Thorn now seeks orders at the 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 30 November 2023 and these are my reasons for doing so. I have drawn on the helpful submissions of Mr Giles, who appears for Thorn in this application, in this judgment.

Affidavit evidence

3. Thorn read the affidavit dated 29 November 2023 of Mr Peter Lirantzis, its Chief Executive Officer. Mr Lirantzis referred to the registration of the explanatory booklet for the scheme and the orders convening the scheme meeting with the Australian Securities and Investments Commission (“ASIC”) and outlined the process adopted to dispatch documents relating to the scheme to Thorn shareholders, which complied with orders made at the first Court hearing. He referred to an announcement made by Thorn to the Australian Securities Exchange (“ASX”) of the dates for the scheme meeting and the second Court hearing and to the conduct of the shareholder information line in respect of the scheme. He also outlined events at the general meeting and scheme meeting held on 27 November 2023, where, as I noted above, both the scheme resolution and associated resolutions required to be put to the general meeting had been passed by the requisite majorities. He indicated that no superior proposal had been received by Thorn as at the date of his affidavit.

4. Thorn also tenders a conditions precedent certificate dated 30 November 2023 executed by it and a letter dated 29 November 2023 from ASIC to Thorn indicating that ASIC has no objection to the proposed scheme under s 411(17(b)) of the Act.

Role of the Court at the second Court hearing

5. 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].

6. 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

7. Mr Giles points out that Mr Lirantzis’ affidavit, to which I referred above, confirms, inter alia, registration of the explanatory booklet and lodgement of a copy of the convening orders for the scheme with ASIC; dispatch of the documents relating to the scheme meeting as required by the orders made at the first Court hearing; dispatch of reminder emails and letters to shareholders in substantially the form disclosed to the Court at the first Court hearing; the publication of an ASX and website announcement regarding the second hearing; the holding of the scheme meeting and passage of the scheme resolution (and the necessary shareholder approval resolutions at the preceding general meeting); and the voter turnout at the scheme meeting;

8. Mr Giles submits, and I accept, that Mr Lirantzis’ affidavit establishes that the scheme meeting was convened and held in accordance with the Court’s orders, and reminders to vote were also sent to shareholders by email and letter in substantially the form disclosed to the Court at the first Court hearing. 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, attorney or corporate representative (if applicable)) at the scheme meeting, and by more than 75% of the votes cast on the resolution. The evidence establishes that the resolution to agree to the scheme was passed by 89.53% of the votes cast and 82.29% of Thorn shareholders present and voting (in each case, in person or by proxy).

9. Mr Lirantzis’ evidence (led in accordance with the Practice Note SC Eq 4 at [26(j]) indicates that 175 Thorn shareholders (excluding the Excluded Shareholders, as defined) cast a vote in respect of the scheme resolution out of a total number of 2,688 Thorn shareholders, resulting in a voter participation rate at the scheme meeting of 6.51%. Although that is not a high turnout, it is within the range of the turnout at the last three annual general meetings of Thorn, and does not raise any doubt as to the efficacy of the procedure for convening the scheme meeting: InvoCare (No 2) at [11]. As Mr Giles point out, there is no evidence of any issue that would have deterred shareholders from voting at or from attending the scheme meeting; and those shareholders who voted did so overwhelmingly in favour of the scheme, and the case law has approved schemes where there has been a low voter turnout: Re Telstra Corporation Ltd (No 2) (2022) 163 ACSR 543; [2022] NSWSC 1460 at [19]; Re iSelect Ltd (No 2) (2022) 166 ACSR 41; [2022] FCA 1528 at [33].

10. Mr Giles points out that the conditions precedent to the scheme have been satisfied, and points to the tender of the conditions precedent certificate to which I referred above. As Mr Giles point out, 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. As I noted above, ASIC has also indicated that it has no objection to the scheme for the purposes of s 411(17)(b) of the Act.

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

12. For these reasons, I made the orders sought by Thorn at the conclusion of the second Court hearing on 30 November 2023.

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Decision last updated: 08 December 2023