Re InvoCare Ltd (No 2)

[2023] NSWSC 1350

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of InvoCare Limited (No 2) [2023] NSWSC 1350

Hearing dates:

3 November 2023

Date of orders:

3 November 2023

Decision date:

08 November 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 ELMO Software Ltd (No 2) [2023] NSWSC 81

- Re InvoCare Ltd [2023] NSWSC 1180

- 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

Category:

Principal judgment

Parties:

InvoCare Ltd (Plaintiff)
Eternal Aus BidCo Pty Ltd (Bidder)

Representation:

Counsel:
D Thomas SC (Plaintiff)
J Sheahan KC/R Jameson (Bidder)

Solicitors:
Clayton Utz (Plaintiff)
Gilbert & Tobin (Bidder)

File Number(s):

2023/268572

Judgment

1. By Originating Process filed on 23 August 2023, the Plaintiff, InvoCare Ltd (“InvoCare”), sought orders under ss 411 and 1319 of the Corporations Act 2001 (Cth) (“Act”) that it convene and hold a meeting of holders of its fully-paid ordinary shares to consider and, if thought fit, agree to a scheme of arrangement and associated orders. The scheme provides for the transfer of all InvoCare shares to Eternal Aus BidCo Pty Ltd (“Bidder”) by InvoCare shareholders in consideration for cash, Class B shares in Eternal Aus HoldCo Ltd (“HoldCo”), the Bidder’s holding company, or a combination of the two, at the shareholder’s election and subject to specified limits. I made the orders sought by InvoCare at the end of the first Court hearing on 22 September 2023, for the reason set out in my judgment delivered on 29 September 2023 ([2023] NSWSC 1180).

2. A meeting of InvoCare shareholders was held on 31 October 2023 and the resolution to approve the scheme was passed by 81.01% of votes cast and by 85.39% of InvoCare shareholders present and voting. On 31 October 2023, InvoCare announced that it would declare a special dividend of $0.60 per InvoCare share, which is conditional upon, among other things, the scheme becoming effective. The cash consideration per InvoCare share that the Bidder must pay to InvoCare shareholders will be reduced by the amount of that special dividend so that the total amount received by an InvoCare shareholder remains $12.70 per InvoCare share.

3. InvoCare 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 3 November 2023 and these are my reasons for doing so. I have drawn on the helpful submissions of Mr Thomas, who appeared for InvoCare in this application, in this judgment.

Affidavit evidence

4. InvoCare read the affidavit dated 30 October 2023 of Ms Chiu, who is a Client Relationship Manager at Link Market Services Ltd (“LMS”). Ms Chiu noted that LMS had been retained by InvoCare to provide services in connection with the hybrid meeting of shareholders concerning the scheme. She referred to the steps taken to dispatch scheme materials to InvoCare shareholders in accordance with the orders made by the Court at the first Court hearing and to steps which had been taken to send reminder communications to InvoCare shareholders by email and by SMS, which were in uncontroversial form. Ms Chiu also outlined the steps which had been taken by LMS to record the results of proxy forms received from InvoCare shareholders.

5. InvoCare also read the affidavit dated 31 October 2023 of Ms Austin, the Head of Meetings at LMS. Ms Austin has substantial experience in conducting shareholder meetings and acted as returning officer for the InvoCare scheme meeting and conducted and facilitated the scheme meeting and recorded attendance and voting results of the scheme meeting. She referred to the conduct of the scheme meeting as a hybrid meeting and to the conduct of the vote at that meeting as a poll and the result of the votes cast at that meeting, which meet the requisite statutory requirements. She also pointed to the number and percentage of InvoCare shareholders attending that meeting, which represented approximately 41.23% of all InvoCare shares. She notes that the shareholders represented at that meeting, as a percentage of shareholders, exceeded the attendance at InvoCare’s last three annual general meetings.

6. InvoCare also read the affidavit dated 31 October 2023 of its solicitor, Mr Sise, who referred to the steps which had been taken to check the scheme booklet after it was approved by the Court and before it was dispatched to InvoCare shareholders, and to the fact that the scheme booklet was made available to InvoCare shareholders. Mr Sise also referred to the lodgement of the scheme booklet and orders with the Australian Securities and Investments Commission (“ASIC”) and to steps which had been taken to check election forms as to scrip consideration, proxy forms, the broadcast email, access letter and reminder email before they were dispatched. Mr Sise also outlined the position in respect of the election to receive scrip consideration to which I referred in my judgment in respect of the first Court hearing. The number of elections received for scrip consideration satisfied the minimum scrip threshold and was not so large as to trigger a scale-back requirement in respect of the scrip consideration. Mr Sise also referred to the conduct of the shareholder information line and to the release by InvoCare of an announcement to the Australian Securities Exchange (“ASX”) giving notice of the second Court hearing. He also addressed voting by key executives of InvoCare at the scheme meeting and that the effect of their votes was not material to the outcome of the scheme meeting.

7. InvoCare also tendered its announcement to the ASX on 31 October 2023 of the voting results of the scheme meeting (Ex P1) and a condition precedent certificate in common form (Ex P2). InvoCare also tendered a letter dated 2 November 2023 from ASIC to InvoCare (Ex P3) which advised, under s 411(17)(b) of the Act, that ASIC had no objection to the proposed scheme of arrangement.

Role of the Court at the second Court hearing

8. The general principles which guide the Court’s discretion to approve a scheme at a second Court hearing are well established. 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: Re ELMO Software Ltd (No 2) [2023] NSWSC 81 (“ELMO”) at [7].

9. 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

10. Mr Thomas submits and I accept that all statutory conditions for the Court’s approval have been satisfied. As I noted above, the scheme was approved by 85.39% of InvoCare shareholders present and voting (in person or by proxy) and 81.01% of votes cast on the resolution; has tendered a signed certificate addressing satisfaction or waiver of conditions precedent to the scheme; and has also tendered a letter from ASIC indicating that it has no objection to the scheme under s 411(17)(b) of the Act.

11. The evidence led by InvoCare confirms compliance with the Court’s previous orders, including as to dispatch of documents to InvoCare shareholders in the manner required by the orders made on 22 September 2023, as required by Practice Note SC Eq 4 (“Harmonised Practice Note”) at [26(i)]. Mr Thomas points out that InvoCare also dispatched reminder communications to InvoCare shareholders to remind them of the scheme meeting and the opportunity to vote, and I accept that the terms of the reminder emails did not travel beyond the form of reminder email disclosed to the Court at the first Court hearing and noted in my earlier judgment at [8]. As I noted above, InvoCare also leads evidence of voter turnout in accordance with Harmonised Practice Note [26(j)], and the voter turnout at the scheme meeting was better than the turnout at the last three annual general meetings of InvoCare. That evidence gives rise to no reason to doubt the efficacy of the procedure for convening the scheme meeting.

12. As contemplated at the first Court hearing, InvoCare tagged the votes of nine key executives at the scheme meeting, where they had entered arrangement with InvoCare and HoldCo, to which I referred in my earlier judgment. Four of the nine key executives directly or indirectly held InvoCare shares; three of them voted all of their shares (totalling approximately 0.10% of votes cast) in favour of the scheme and one of them abstained. Those votes had no material impact on whether the statutory thresholds for approval of the scheme were satisfied. I have referred to outbound and inbound communications with InvoCare shareholders above and no issue arises from those communications.

13. InvoCare has published a notice of the second Court hearing to the ASX as contemplated by the orders made at the first Court hearing and no shareholder appeared to oppose approval of the scheme. The Court can be satisfied that the scheme is fair and reasonable having regard to the independent expert report contained in the scheme booklet; the scheme received the support of the statutory majorities of InvoCare shareholders who voted on it; and no reason has emerged at the second Court hearing why the scheme should not be approved. For these reasons, I made the orders sought by InvoCare at the conclusion of the second Court hearing on 3 November 2023.

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Decision last updated: 09 November 2023