Re Isentia Group Ltd

[2021] NSWSC 1069

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of Isentia Group Limited [2021] NSWSC 1069

Hearing dates:

20 August 2021

Date of orders:

20 August 2021

Decision date:

25 August 2021

Jurisdiction:

Equity - Corporations List

Before:

Black J

Decision:

Orders made approving the 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), s 411

Cases Cited:

- Re Alabama, New Orleans, Texas and Pacific Junction Railway Co [1891] 1 Ch 213

- Re Atlas Iron Ltd (No 2) [2016] FCA 481

- Re Aveo Group Ltd [2019] NSWSC 1679

- Re Central Pacific Minerals NL [2002] FCA 239

- Re Coca-Cola Amatil Ltd [2021] NSWSC 489
- Re Equinox Resources Ltd (2004) 49 ACSR 692; [2004] WASC 143

- Re NRMA Ltd (No 2) (2000) 156 FLR 412; (2000) 34 ACSR 261; [2000] NSWSC 408

- Re Permanent Trustee Co Limited (2002) 43 ACSR 601; [2002] NSWSC 1177

- Re Prime Infrastructure Holdings Ltd [2010] NSWSC 1337

- Re Redcape Property Fund Ltd and Trust Company (RE Services) Ltd (as the responsible entity for the Redcape Property Trust) [2012] NSWSC 486

- Re Seven Network (No 3) (2010) 77 ACSR 701; [2010] FCA 400

- Re Solution 6 Holdings Ltd (2004) 50 ACSR 113; [2004] FCA 1049

- Re Toll Holdings Ltd (No 2) [2015] VSC 236

- Re TriAusMin Ltd (No 2) [2014] FCA 833

Category:

Principal judgment

Parties:

Isentia Group Limited (Plaintiff)
Access Intelligence plc (Acquirer)

Representation:

Counsel:
J Williams SC (Plaintiff)
T O’Brien (Acquirer)

Solicitors:
Gilbert + Tobin (Plaintiff)
Herbert Smith Freehills (Acquirer)

File Number(s):

2021/175858

Judgment

Nature of the application

1. At a first Court hearing on 16 July 2021, I made orders convening a scheme meeting in respect of Isentia Group Ltd (“Isentia”) for the reasons set out in my judgment dated 27 July 2021 in Re Isentia Group Ltd [2021] NSWSC 1210. Under the scheme, Access Intelligence plc (“Access Intelligence”) will acquire all of the Isentia shares, other than those Isentia shares already held by its wholly owned subsidiary, Vuelio Australia Pty Ltd, for a total cash consideration of $0.175 per Isentia share. The scheme meeting was held on 17 August 2021 and Isentia shareholders approved the scheme, both by a majority in number present and voting and by more than 75% of the votes cast. Approximately 91.96% of shares by value, and approximately 81.45% of shareholders by number present and voting, voted in favour of the scheme.

2. At the second Court hearing heard on 20 August 2021, Isentia sought an order under s 411(4)(b) of the Corporations Act 2001 (Cth) that the scheme be approved and ancillary orders. I made those orders at the conclusion of the hearing and these are my reasons for doing so. I have drawn below on the helpful submissions of Mr Williams SC who appeared for Isentia in the application.

Affidavit evidence

3. Isentia relies on the affidavit dated 18 August 2021 of Mr Douglas Snedden, the chairman of its board and a second affidavit dated 19 August 2021 of Mr Snedden, which corrected a typographical error in his earlier affidavit. Mr Snedden refers to the conduct of the virtual scheme meeting held on 17 August 2021 and sets out the result of the poll on the scheme resolution, by which the scheme resolution was passed by 81.45% of Isentia shareholders (other than Excluded Shareholders) present and voting at the scheme meeting and by 91.96% of the total number of votes cast on the scheme resolution, satisfying the statutory majorities.

4. Isentia also relies on the affidavit dated 18 August 2021 of Mr Aaron Calder, a senior client relationship manager with Link Market Services Ltd (“Link”), and a second affidavit dated 19 August 2021 which corrects a typographical error in his earlier affidavit, which maintains Isentia’s register of shareholders and provided various services in respect of the scheme. Mr Calder outlines the process adopted for the dispatch of scheme materials to shareholders, the receipt and recording of proxy votes, the registration of attendees for the scheme meeting, and the conduct of the scheme meeting. Mr Calder confirms the result of voting at that scheme meeting and notes that the voting participation rate at that meeting (excluding the Excluded Shareholder) was broadly comparable to the voting participation rate at Isentia’s annual general meetings between 2018 and 2020.

5. Isentia also relies on the affidavit dated 19 August 2021 of Ms Rachael Bassil, who is a partner in the firm of solicitors acting for Isentia in respect of the scheme. She refers to the registration of the scheme booklet with the Australian Securities and Investments Commission (“ASIC”), the advertisement of the second Court hearing and the identity of a wholly owned subsidiary of Access Intelligence which is the Excluded Shareholder for the purposes of the scheme.

6. By an affidavit dated 12 August 2021, Mr Marc Milmo, who is a director in the corporate finance department of finnCap Ltd (“finnCap”), addresses the terms on which finnCap entered a placing agreement with Access Intelligence in the United Kingdom, which provided funding for its acquisition of the shares in Isentia. He also addresses the satisfaction and waiver of conditions precedent to that agreement, other than in respect of the scheme becoming effective and admission of the placement shares to trading on the AIM in the United Kingdom, which is expected to occur later on the day on which the Court approves the scheme. Mr Milmo’s evidence is that AIM has approved the admission of shares; that his understanding is the admission is then an administrative process and he is not aware of any reason why the shares would not be admitted, unless finnCap withdrew the application for admission; and he refers to undertakings by each of finnCap and Access Intelligence not to withdraw that application. I am satisfied that that evidence establishes that there is little practical risk that Access Intelligence will not secure the necessary funding to proceed with the acquisition of Isentia shares pursuant to the scheme.

7. By letter dated 19 August 2021 (Ex P1), finnCap confirmed that all conditions set out in the Placing Agreement other than the conditions relating to the scheme becoming unconditional and admission of the shares to AIM occurring have been satisfied or will be waived on the date of the second Court hearing. Isentia also relies on a certificate of satisfaction of conditions precedent executed by each of Isentia and Access Intelligence (Ex P2). By letter dated 19 August 2021 (Ex P3), ASIC advised, under s 411(17)(b) of the Act, that it had no objection to the proposed scheme of arrangement.

Submissions and determination

8. Section 411(4) of the Act provides that an arrangement is binding on Isentia shareholders (other than the Excluded Shareholder) and Isentia only if, at a meeting of Isentia shareholders, it is passed by a majority of the shareholders present and voting and by 75% of votes cast and it is approved by order of the Court. Section 411(6) of the Act provides that the Court may grant approval subject to such alterations or conditions as it thinks just.

9. At the second Court hearing, Isentia must satisfy the Court that the resolutions have been passed in accordance with the statutory requirements and the procedural requirements have been satisfied. Where those matters are established, the Court has a supervisory discretion and will consider whether the scheme involves oppression and whether the arrangement is capable of being accepted: Re Alabama, New Orleans, Texas and Pacific Junction Railway Co [1891] 1 Ch 213 at 247. In deciding whether to give approval to the scheme, the Court will typically wish to be satisfied that the orders of the Court convening a meeting of members were complied with; the meeting of members so convened has approved the scheme with the requisite majority; all other statutory requirements have been satisfied; the scheme is fair and reasonable so that an intelligent and honest man or woman who was a member of the relevant class, properly informed and acting alone, might approve it; 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; and there was full and fair disclosure to members of all information material to the decision whether to vote for or against the applicable scheme: Re Solution 6 Holdings Ltd (2004) 50 ACSR 113; [2004] FCA 1049 at [18]-[24]; Re Permanent Trustee Co Limited (2002) 43 ACSR 601; [2002] NSWSC 1177 at [8]-[10]; Re Central Pacific Minerals NL [2002] FCA 239 at [8]-[14]; Re Seven Network (No 3) (2010) 77 ACSR 701; [2010] FCA 400 at [35]-[39]; Re Redcape Property Fund Ltd and Trust Company (RE Services) Ltd (as the responsible entity for the Redcape Property Trust) [2012] NSWSC 486 at [7]; Re Aveo Group Ltd [2019] NSWSC 1679 at [15].

10. As Mr Williams points out, the Court will have regard to the assessment by members of their interests as manifested in the voting at the meeting: Re Central Pacific Minerals NL above at [12]; Re Redcape Property Fund Ltd and Trust Company (RE Services) Ltd (as the responsible entity for the Redcape Property Trust) above at [7]; Re Aveo Group Ltd above at [15]. The Court is not bound to approve a scheme merely because it has previously made orders for the convening of meeting of the members and the statutory majorities have been achieved: Re NRMA Ltd (No 2) (2000) 156 FLR 412; (2000) 34 ACSR 261; [2000] NSWSC 408 at [22]; Re Seven Network above at [31]; Re Atlas Iron Ltd (No 2) [2016] FCA 481 at [5].

11. The affidavit evidence here establishes that the Court’s orders in respect of the dispatch of the scheme booklet and the scheme meeting were complied with. As I noted above, the scheme was approved by the requisite majorities of votes cast and by number of Isentia shareholders (other than the Excluded Shareholder) present at the scheme meeting and the statutory majorities in sections 411(4)(a)(ii)(A) and (B) of the Act have been satisfied. The voting participation rates at that meeting are not particularly high although they are broadly comparable to the voting participation rates at Isentia’s recent annual general meetings. However, I bear in mind the observation of Farrell J in Re TriAusMin Ltd (No 2) [2014] FCA 833 at [10]-[12] that:

“Although the statutory requirement under s 411(4)(a)(ii) has been satisfied, it is the usual practice of the court at the second court hearing to consider the number of shareholders who attended the Scheme Meeting in person or by proxy. Low shareholder turnout may be an indication that some procedural irregularity occurred. It is inappropriate to assume (in the absence of complaint) that shareholders who did not vote either did not have notice of the meeting or were silent in protest of the scheme: Re Professional Investment Holdings Ltd (No 2) [2010] FCA 1336 at [7] and Re Seven Network Ltd (No 3) (2010) 267 ALR 583 … at [61] per Jacobson J; apathy should not be presumed to be antagonism: Re Matine Ltd (1998) 28 ACSR 268 at 295 per Santow J.

12. In making orders to convene the meeting of Isentia shareholders, I was satisfied that the scheme was of such a nature and cast in such terms that, if it received the statutory majority at the meeting, the Court would be likely to approve it on the hearing of an application that was unopposed, subject to any issue arising from the conditions precedent in the placing agreement on which Access Intelligence is relying to fund the acquisition. I return to that issue below. No Isentia shareholder or other person indicated a wish to appear or appeared at the second Court hearing to object to the scheme and, as I noted above, Isentia tendered a letter from ASIC issued pursuant to s 411(17)(b) of the Act stating that ASIC has no objection to the scheme. There is no reason to doubt that Isentia has brought to the Court’s attention all matters that could be considered relevant to the exercise of the Court’s discretion, or to doubt that there was full and fair disclosure to members of all information material to the decision whether to vote for or against the applicable scheme. The factual information contained in the scheme booklet was verified in the usual way and the scheme booklet otherwise satisfies the relevant statutory requirements.

13. Mr Williams points out that, as disclosed in section 5.5 of the scheme booklet, Access Intelligence proposes to fund the scheme consideration with the proceeds of a fundraising comprising a placement of Access Intelligence shares to institutional and other investors to raise gross proceeds of approximately $88 million and a subscription of Access Intelligence shares to raise proceeds of approximately $4 million. The maximum cash consideration under the scheme is approximately $28.7 million. On 14 June 2021, finnCap entered into a placing agreement with Access Intelligence and its directors, under which finnCap conditionally placed 39,847,658 new Access Intelligence ordinary shares at a price of 120 pence per share by way of a non-pre-emptive placing to institutional and other investors. The obligations of finnCap under the placing agreement are conditional upon the satisfaction or waiver of several conditions, as set out in section 5.5(b) of the scheme booklet. I have referred above to the waiver of the remaining conditions other than that the scheme takes effect and the admission of the new shares to trading on AIM.

14. Mr Williams points out that institutional and other investors who have made commitments to invest in Access Intelligence by way of the placing have done so on the basis of the scheme becoming effective by order of the Court approving the scheme, and the first remaining condition protects those investors from the risk that the Court does not approve the scheme, and Access Intelligence cannot use the funds raised in the manner that was anticipated by investors. In any event, that condition poses no risk to Isentia shareholders since it would be satisfied before their shares were acquired under the scheme. Mr William acknowledges that the condition as to admission of the shares to AIM will be outstanding as at the second Court hearing, for several practical reasons. I am satisfied that the evidence to which I have referred indicates there is little practical risk it will not be satisfied and it provides no reason not to approve the scheme.

15. The proposed orders also include an order under section 411(6) of the Act amending the Scheme to identify the Excluded Shareholder by name, consistent with the approach taken in Re Prime Infrastructure Holdings Ltd [2010] NSWSC 1337 at [6]–[7] and in Re Coca-Cola Amatil Ltd [2021] NSWSC 489 at [14]. The only Excluded Shareholder will be Vuelio Australia Pty Ltd which is a wholly owned subsidiary of Access Intelligence. I am satisfied that the Court should also make an order exempting Isentia from compliance with s 411(11) of the Act, where the scheme will not modify any rights of shareholders or of creditors or of persons dealing with Isentia: Re Equinox Resources Ltd (2004) 49 ACSR 692; [2004] WASC 143 at [22]; Re Toll Holdings Ltd (No 2) [2015] VSC 236 at [18]–[19].

Orders

16. For these reasons, I made the orders sought by Isentia at the conclusion of the second Court hearing in respect of the scheme.

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Decision last updated: 31 August 2021