Re Avita Medical Ltd - [2020] FCA 592

FEDERAL COURT OF AUSTRALIA
Avita Medical Limited, in the matter of Avita Medical Limited [2020] FCA 592

File number: NSD 467 of 2020

Judge: JAGOT J

Date of judgment: 30 April 2020

Catchwords: CORPORATIONS – scheme of arrangement – application for approval of scheme of arrangement under s 411 of the Corporations Act 2001 (Cth) – holding of scheme meeting online due to COVID-19 restrictions

Legislation:
Corporations Act 2001 (Cth)

Federal Court Rules 2011 (Cth)

Cases cited:
Amcom Telecommunications Limited, in the matter of Amcom Telecommunications Limited (No 4) [2015] FCA 720; (2015) 107 ASCR 341

Eagle, in the matter of Techfront Australia Pty Limited (administrators appointed) [2020] FCA 542

McGraw Hill Financial Inc v Clurname Pty Ltd [2017] FCAFC 211; (2017) 123 ACSR 467

Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) [2020] FCA 571

Date of hearing: 30 April 2020

Registry: New South Wales

Division: General Division

National Practice Area: Commercial and Corporations

Sub-area: Corporations and Corporate Insolvency

Category: Catchwords

Number of paragraphs: 18

Counsel for the Plaintiff: R P Austin with B May

Solicitor for the Plaintiff: KPMG Law

ORDERS

NSD 467 of 2020

IN THE MATTER OF AVITA MEDICAL LIMITED ACN: 058 466 523

BETWEEN:
AVITA MEDICAL LIMITED

Plaintiff

JUDGE:

JAGOT J

DATE OF ORDER:

30 APRIL 2020

THE COURT ORDERS THAT:
1.The Originating Process filed 24 April 2020 is listed for hearing at 10:15am on 11 May 2020 (First Scheme Hearing).
2.Pursuant to ss 411 and 1319 of the Corporations Act 2001 (Cth) (Act), if at the First Scheme Hearing the Court makes orders in accordance with the relief sought in prayers 1 – 3 of the Originating Process, then the following orders will apply to the conduct of the meeting (Scheme Meeting) of the Plaintiff’s members (Scheme Shareholders) convened by the Court under s 411 of the Act:
(a)the Scheme Meeting be conducted as a virtual meeting using audio and audio-visual technology without any requirement for a physical gathering of two or more persons;
(b)the Chair, members of the board of directors of the Plaintiff and the Plaintiff’s Chief Financial Officer, and such other officers and employees of the Plaintiff as it thinks fit, be given access to the Scheme Meeting online via a website in such manner as the Plaintiff thinks fit;
(c)Scheme Shareholders and proxyholders be given access to the Scheme Meeting online via a website or an application on their mobile device (mobile App) using registration procedures, login procedures and passwords provided to them and explained in the Notice of Meeting;
(d)the Plaintiff provide website and mobile access to the Scheme Meeting for such other persons (Guests) as it thinks fit;
(e)Scheme Shareholders and proxyholders be permitted to participate in discussion and voting at the Scheme Meeting through the use of audio and audio-visual technology as follows:
(i)Scheme Shareholders and proxyholders are to be permitted to submit questions or motions in writing to the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2020] FCA 592
Decision Date: 30 April 2020

CaseChat Overview and Summary

This case concerns an application by Avita Medical Ltd for approval of a scheme of arrangement under s 411 of the Corporations Act 2001 (Cth). The application was made in light of the difficulties posed by the COVID-19 pandemic, which made it impractical to hold a physical meeting of the company's shareholders to approve the scheme. The court was required to determine whether it could order that the scheme meeting be held as a virtual meeting, using audio and audio-visual technology, rather than requiring a physical gathering of shareholders. This raised issues about the extent to which the court could override the company's constitution to allow a virtual meeting, and whether the proposed method of holding the meeting would allow for proper participation by shareholders and compliance with the requirements of the Act.

The court considered two recent decisions of the Federal Court which had permitted virtual meetings of creditors during company administrations, as well as guidelines issued by the Australian Securities and Investment Commission (ASIC) in response to the pandemic. It accepted the plaintiff's submission that the court's powers under ss 411 and 1319 of the Act allowed for the ordering of a virtual scheme meeting, notwithstanding the provisions of the plaintiff's constitution. The court was satisfied that the proposed method of holding the virtual meeting, including the use of technology to enable voting and discussion, was sufficient to allow for proper participation by shareholders and compliance with the requirements of the Act.

The court made orders allowing the scheme meeting to be held as a virtual meeting, with shareholders and proxyholders given access online and able to participate in discussion and voting through the use of audio and audio-visual technology. The plaintiff was also required to make available a helpline to assist shareholders who experienced technical difficulties. The orders also provided that the provisions of Part 2G.2 of the Act and the plaintiff's constitution, insofar as they were not inconsistent with the Act, would apply to the conduct of the scheme meeting. The plaintiff was given liberty to apply for any variation of these orders.

Orders

Orders of the court

1. The Originating Process filed 24 April 2020 is listed for hearing at 10:15am on 11 May 2020 (First Scheme Hearing).

2. Pursuant to ss 411 and 1319 of the Corporations Act 2001 (Cth) (Act), if at the First Scheme Hearing the Court makes orders in accordance with the relief sought in prayers 1 – 3 of the Originating Process, then the following orders will apply to the conduct of the meeting (Scheme Meeting) of the Plaintiff’s members (Scheme Shareholders) convened by the Court under s 411 of the Act:

(a) the Scheme Meeting be conducted as a virtual meeting using audio and audio-visual technology without any requirement for a physical gathering of two or more persons;

(b) the Chair, members of the board of directors of the Plaintiff and the Plaintiff’s Chief Financial Officer, and such other officers and employees of the Plaintiff as it thinks fit, be given access to the Scheme Meeting online via a website in such manner as the Plaintiff thinks fit;

(c) Scheme Shareholders and proxyholders be given access to the Scheme Meeting online via a website or an application on their mobile device (mobile App) using registration procedures, login procedures and passwords provided to them and explained in the Notice of Meeting;

(d) the Plaintiff provide website and mobile access to the Scheme Meeting for such other persons (Guests) as it thinks fit;

(e) Scheme Shareholders and proxyholders be permitted to participate in discussion and voting at the Scheme Meeting through the use of audio and audio-visual technology as follows:

(i) Scheme Shareholders and proxyholders are to be permitted to submit questions or motions in writing to the moderator of the Scheme Meeting for consideration by the Chair during the meeting, subject to the functions and powers of the Chair under the Plaintiff’s Constitution and the general law;

(ii) any procedural motions, if accepted by the Chair, may be dealt with by vote of Scheme Shareholders and proxyholders using the voting procedures available through the website and mobile App as if on a show of hands;

(iii) voting on the resolution to approve the Scheme is to be conducted by way of a poll;

(iv) all voting on a poll at the Scheme Meeting will be by vote using the voting procedures on the website and mobile App, and using technology made available to the Plaintiff to count the number of votes cast by Scheme Shareholders and proxyholders and the number of shares to which each vote relates, so that information will be available for the Chair to determine whether the voting requirements of s 411(4)(a)(ii) of the Act have been satisfied;

(v) the Plaintiff to make use of technology to exclude the counting of any vote by a proxyholder where the Scheme Shareholder who has appointed the proxyholder has also cast a vote; and

(vi) the Plaintiff must have available at all times during the Scheme Meeting a helpline to assist Scheme Shareholders and proxyholders who experience technical difficulties with voting or participation in the meeting;

(f) Subject to the Court's orders set out above, the provisions of Part 2G.2 of the Act (save for any replaceable rule) that apply in relation to meetings of the Plaintiff’s members, and the provisions Plaintiff’s Constitution that apply in relation to meetings of the Plaintiff’s members and are not inconsistent with Part 2G.2, will apply to the conduct of the Scheme Meeting.

3. The plaintiff has liberty to apply on 3 business days’ written notice to the Court in relation to any variation of these orders.

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

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

I accept the submission for the plaintiff that the orders sought in the present application will facilitate the efficient implementation of a proposed commercial restructuring transaction according to law in the difficult circumstances posed by COVID-19. Recent decisions regarding the holding of virtual meetings My attention has been drawn to two recent decisions of the Court involving the holding of virtual meetings, albeit in different contexts. The first is Eagle, in the matter of Techfront Australia Pty Limited (administrators appointed) [2020] FCA 542, in which Farrell J made orders which, amongst other things, permitted company administrators to hold meetings of creditors during the administration by telephone or audio-visual conference in place of a physical meeting. Similar orders were made for the conduct of meetings of any committee of inspection formed by the creditors. Subsequently, in Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) [2020] FCA 571, Middleton J allowed an application by administrators to hold, amongst other things, creditors’ meetings by video-link or telephone rather than in person. There appears to be some issue between the two decisions in the treatment of the requirement that a place for the meeting be specified. It has also been pointed out to me that the Australian Securities and Investment Commission (ASIC) has adapted its approach to meetings of companies in response to the COVID-19 pandemic, issuing guidelines regarding upcoming annual general meetings of companies and financial reporting requirements. Reference has been made in these submissions for the plaintiff to a potential issue arising under the constitution of the plaintiff. The provisions of the constitution governing meetings are at cll 28 to 40. Clause 32.1 of the constitution provides that a general meeting can only transact business if a quorum of members is present, while cl 32.2 of the constitution provides that a quorum is three members. It is submitted that, on one view, these clauses do not permit the scheme meeting to be held as a virtual meeting using audio and audio-visual technology without a physical gathering of two or more persons. Discussion I accept the plaintiff’s submission that since the scheme meeting is a meeting to be ordered by the Court under s 411(1) of the Act, the constitution of the company concerned may be overridden by the exercise of the statutory power if the Court sees fit, and in the present case I do see fit. I accept the submissions for the plaintiff that the Court’s powers under ss 411 and 1319 of the Act allow for the ordering of a virtual scheme meeting by the Court, notwithstanding the provisions of the plaintiff’s constitution. The affidavit evidence before me discloses that the plaintiff intends to appoint its usual provider of share registry services – Computershare Investor Services Pty Limited (Computershare) – to provide the meeting and the live webcast that will accompany the meeting.

Ratio Decidendi

Legal Principle Established

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File number:	NSD 467 of 2020
Judge:	JAGOT J
Date of judgment:	30 April 2020
Catchwords:	CORPORATIONS – scheme of arrangement – application for approval of scheme of arrangement under s 411 of the Corporations Act 2001 (Cth) – holding of scheme meeting online due to COVID-19 restrictions
Legislation:	Corporations Act 2001 (Cth) Federal Court Rules 2011 (Cth)
Cases cited:	Amcom Telecommunications Limited, in the matter of Amcom Telecommunications Limited (No 4) [2015] FCA 720; (2015) 107 ASCR 341 Eagle, in the matter of Techfront Australia Pty Limited (administrators appointed) [2020] FCA 542 McGraw Hill Financial Inc v Clurname Pty Ltd [2017] FCAFC 211; (2017) 123 ACSR 467 Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) [2020] FCA 571
Date of hearing:	30 April 2020
Registry:	New South Wales
Division:	General Division
National Practice Area:	Commercial and Corporations
Sub-area:	Corporations and Corporate Insolvency
Category:	Catchwords
Number of paragraphs:	18
Counsel for the Plaintiff:	R P Austin with B May
Solicitor for the Plaintiff:	KPMG Law