In the matter of Villa World Limited

[2019] NSWSC 1509

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Villa World Limited [2019] NSWSC 1509
Hearing dates:	15 October 2019
Date of orders:	15 October 2019
Decision date:	04 November 2019
Jurisdiction:	Equity - Corporations List
Before:	Black J
Decision:	Orders made approving the scheme of arrangement.
Catchwords:	CORPORATIONS – scheme of arrangement – application for orders approving scheme of arrangement – where scheme of arrangement involves shareholders in target company transferring their shares to acquirer – where votes cast satisfy statutory majorities – whether scheme of arrangement should be approved.
Legislation Cited:	- Corporations Act 2001 (Cth) ss 411(1), 411(3), 411(4), 411(4)(a)(ii)(A), 411(4)(a)(ii)(B), 411(4)(b), 411(6), 411(11), 411(12), 411(17)(b), 412
Cases Cited:	- Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485 - F T Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd (1977) 3 ACLR 69 - Re Alabama, New Orleans, Texas and Pacific Junction Railway Co [1891] 1 Ch 213 - Re Medical Australia Ltd (No 2) [2017] FCA 1429 - Re Seven Network Ltd (No 3) [2010] FCA 400 - Re Signature Capital Investments Limited (No 2) [2016] FCA 385 - Re Toll Holdings Ltd (No 2) [2015] VSC 236 - Re Villa World Limited [2019] NSWSC 1207
Category:	Principal judgment
Parties:	Villa World Limited (Plaintiff) AVID Property Group Australia Pty Limited (Interested Party)
Representation:	Counsel: I M Jackman SC (Plaintiff) M Oakes SC (Interested Party)   Solicitors: Allens (Plaintiff) Clayton Utz (Interested Party)
File Number(s):	2019/258291

Judgment

1. On 6 September 2019, I made orders, inter alia, convening a meeting of the holders of ordinary shares of Villa World Limited (“Villa World”) pursuant to s 411(1) of the Corporations Act 2001 (Cth) in relation to a proposed scheme of arrangement and approving a scheme booklet to be distributed to shareholders in connection with the scheme. In summary, the scheme provides for the acquisition of all of the shares in Villa World by AVID Property Group Australia Pty Limited (“AVID”) for cash consideration of $2.035 per share held by a Villa World shareholder. The scheme also contemplates that Villa World shareholders will receive a special dividend of $0.31 per share held by them, conditional on the scheme becoming effective. The total cash consideration payable to shareholders who hold shares on both of the Scheme Record Date and the special Dividend Record Date (terms as defined) is $2.345 per share. I set out the reasons for making those orders in an earlier judgment (Re Villa World Limited [2019] NSWSC 1207).

2. The scheme was subsequently approved by 97.96% of votes cast and 91.36% of shareholders present in person or by proxy at a meeting of Villa World shareholders held on 11 October 2019. At the second Court hearing on 15 October 2019, Villa World sought an order under s 411(4)(b) of the Act that a scheme of arrangement between it and its members be approved and an order, under s 411(12) of the Act, that it be exempt from compliance with s 411(11) of the Act in relation to the scheme. I made the orders sought on that date. These are my reasons for doing so.

Affidavit evidence

3. Villa World relied on the affidavit dated 14 October 2019 of Mr Christopher Buttery, who is a relationship manager at Computershare Investor Services Pty Ltd (“Computershare”). Mr Buttery outlined the services provided by Computershare to Villa World, which included maintenance of a register of Villa World’s shareholders; the steps taken in respect of the dispatch of the scheme booklet and proxy forms, including by email, post and airmail; and the steps taken to receive and record proxy votes for the scheme meeting. Mr Buttery also outlined the manner in which the scheme meeting was conducted on 11 October 2019, and referred to the conduct of the vote on the scheme resolution and the preparation of a poll report setting out the number and percentage of Villa World shareholders who voted for and against that resolution, and the percentage of votes cast for and against the scheme resolution.

4. Villa World also relied on the affidavit dated 14 October 2019 of Mr Mark Odgers-Jewell, its independent non-executive director and chair. Mr Odgers-Jewell referred to the conduct of the scheme meeting and noted that the results of the poll in respect of the scheme resolution was that some 1,015 shareholders voted in favour and 96 against, with 12 abstaining, resulting in a 91.36% vote in favour of the scheme by number of shareholders voting; and some 79,026,112 shares were voted in favour of the scheme, 1,645,326 shares were voted against, and 63,328 shares abstained, resulting in a 97.96% vote in favour of the scheme by number of shares voted. Mr Odgers-Jewell rightly noted that, on that basis, a majority in number of Villa World shareholders present and voting on the scheme resolution and more than 75% of the votes cast on the scheme resolution had been in favour of the scheme.

5. Villa World also relied on the affidavit dated 14 October 2019 of Mr Julian Donnan, a solicitor acting for it in respect of the scheme, which referred to registration of the scheme booklet with the Australian Securities and Investments Commission (“ASIC”) and to a number of minor amendments made in the scheme booklet from the form in which it was approved by the Court. Mr Donnan also referred to the advertisement that was published as to the second Court hearing and noted that he did not receive any notice that any person proposed to appear at the hearing to oppose the scheme. There was also no appearance by any opponent to the scheme when the second Court hearing was called.

6. Mr Donnan also referred to an announcement made by Villa World to the Australian Securities Exchange (“ASX”) that the acquirer, AVID, had received a no objection letter from the Foreign Investment Review Board (“FSRB”) in respect of its proposed acquisition of Villa World shares by way of the scheme; to the announcement of a special dividend to Villa World shareholders; and to the announcement of the results of the scheme meeting made to the ASX. Mr Donnan’s affidavit exhibited a letter provided by ASIC, in common form, indicating that ASIC had no objection to the proposed scheme under s 411(17)(b) of the Act.

7. An affidavit dated 15 October 2019 of Ms Nicole Bannerman dealt with the satisfaction of conditions precedent in respect of the scheme and confirmed that the Scheme Implementation Agreement and Deed Poll had not been terminated as at the date of the second Court hearing, and a certificate as to satisfaction of conditions precedent was tendered.

Submissions and determination

8. Mr Jackman, who appears for Villa World, points out that s 411(4) of the Act provides that an arrangement is binding on members and Villa World only if, at a meeting of members, it is passed by a majority of members present and voting (in person or by proxy) and by 75% of votes cast, and it is approved by order of the Court. Section 411(6) provides that the Court may grant approval subject to such alterations or conditions as it thinks just.

9. As Mr Jackman points out, when the necessary statutory conditions are met, the Court has a supervisory discretion: Re Alabama, New Orleans, Texas and Pacific Junction Railway Co [1891] 1 Ch 213 at 247. In deciding whether to grant approval to a scheme of arrangement, the Court will ordinarily have regard to whether its orders convening the meeting of members were complied with; whether that meeting approved the scheme with the requisite majorities; whether all other statutory requirements for the scheme have been satisfied; 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 and creditors of all information material to the decision whether to vote for or against the applicable 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 Seven Network (No 3) [2010] FCA 400 at [35]–[39]; Re Signature Capital Investments Limited (No 2) [2016] FCA 385; Re Medical Australia Ltd (No 2) [2017] FCA 1429.

10. Mr Jackman submits, and I accept, that the affidavit evidence that I have summarised above establishes that the Court’s orders for convening the meeting were complied with. I have referred above to the votes cast at the scheme meeting and that the statutory majorities in ss 411(4)(a)(ii)(A) and (B) of the Act have been satisfied. ASIC has issued a letter in common form under s 411(17)(b) of the Act stating that it has no objection to the scheme. All statutory pre-conditions to the Court’s approval have been satisfied.

11. Mr Jackman also points out that, in making orders at the first hearing to convene the meeting of shareholders, the Court was satisfied that the scheme was “of such a nature and cast in such terms that, if it receives the statutory majority at the meeting, the Court would be likely to approve it on the hearing of an application that is unopposed”: Re Villa World Limited above at [17], citing F T Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd (1977) 3 ACLR 69 at 72, approved by Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485 at 504. He rightly points out that nothing has occurred since the first Court hearing that alters that position. No shareholders have sought to oppose approval of the scheme by the Court, and there is no suggestion of any oppression in the conduct of the meeting of members. As I noted above, Villa World has led evidence of the satisfaction or waiver of the conditions precedent, other than Court approval, in respect of the scheme.

12. Mr Jackman points out that evidence which showed that the factual information contained in the scheme booklet was verified was tendered at the first Court hearing, and the scheme booklet otherwise satisfies the requirements in ss 411(3) and 412 of the Act. I have referred above to the evidence of further announcements made by Villa World to the ASX as to relevant matters, namely the declaration of the special dividend and the satisfaction of a condition relating to FIRB approval. As I noted in my earlier judgment, Mr Jackman drew the Court’s attention to several matters warranting consideration at the first Court hearing, which I addressed in that judgment. There is no reason to doubt that all necessary matters have been brought to the Court’s attention and those matters would not warrant the Court refusing to approve the scheme at the second Court hearing.

13. The order sought by Villa World exempting it from compliance with s 411(11) of the Act is properly made where the scheme does not amend its constitution and, on implementation of the scheme, Villa World will be a wholly owned subsidiary of AVID: Re Toll Holdings Ltd (No 2) [2015] VSC 236 at [18]–[19].

14. For these reasons, I made the orders sought by Villa World at the conclusion of the second Court hearing.

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Decision last updated: 05 November 2019