Re K2fly Ltd; [No 2]
[2024] WASC 351
•26 SEPTEMBER 2024
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: RE K2FLY LTD; EX PARTE K2FLY LTD [No 2] [2024] WASC 351
CORAM: HILL J
HEARD: 16 SEPTEMBER 2024
DELIVERED : 16 SEPTEMBER 2024
PUBLISHED : 26 SEPTEMBER 2024
FILE NO/S: COR 114 of 2024
MATTER: IN THE MATTER OF K2FLY LTD
EX PARTE
K2FLY LTD
Plaintiff
ARGYLE BIDCO PTY LTD
Interested Party
Catchwords:
Corporations - Scheme of arrangement - Application for orders approving the scheme under s 411(4)(b) of the Corporations Act 2001 (Cth) - Orders made approving scheme
Legislation:
Corporations Act 2001 (Cth) s 411(4)(b), s 411(11), s 411(17), s 1319
Result:
Orders made approving scheme
Category: B
Representation:
Counsel:
| Plaintiff | : | J M Healy |
| Interested Party | : | A J Papamatheos |
Solicitors:
| Plaintiff | : | Steinepreis Paganin |
| Interested Party | : | DLA Piper |
Cases referred to in decision:
Re International Goldfields Ltd [2004] WASC 112
Re K2fly Ltd [2024] WASC 297
Re MAC Services Group Ltd [2010] NSWSC 1474
Re National Australia Bank Ltd [2016] VSC 62
Re Seven Network Ltd [No 3] [2010] FCA 400; (2010) 267 ALR 583
Re Wesfarmers Ltd [No 2] [2018] WASC 357
HILL J:
At the second court hearing in this matter, the plaintiff, K2fly Ltd (K2fly), applied for orders approving a proposed scheme of arrangement (Scheme). The background to this matter is set out in the judgment I delivered following the first court hearing on 5 August 2024.[1] At that hearing, I made orders for the Scheme meeting to be convened on 9 September 2024 (Orders).
[1] Re K2fly Ltd [2024] WASC 297 (First Reasons). I have adopted the same abbreviations used in the First Reasons in these reasons.
Scheme meeting
The Scheme meeting was convened and held on 9 September 2024. At the meeting, the resolution was passed by the requisite statutory majorities.
93 shareholders were present at the Scheme meeting in person and by proxy.[2] 96.77% of shareholders who voted at the meeting were in favour of the Scheme.[3] 99.94% of votes cast on the Scheme resolution were in favour of the resolution.[4]
[2] Affidavit of Mark Phillip Scudamore Foster filed 9 September 2024 [21].
[3] Affidavit of Mark Phillip Scudamore Foster filed 9 September 2024 [21].
[4] Affidavit of Mark Phillip Scudamore Foster filed 9 September 2024 [21].
Approval of Scheme
The originating process was listed before me for the second court hearing on 16 September 2024.
In addition to the affidavits relied upon at the first court hearing, K2fly relied on an additional four affidavits at the second court hearing. These were:
(a)an affidavit of Mark Phillip Scudamore Foster, a partner at Steinepreis Paganin, the solicitors for K2fly, filed 9 September 2024;
(b)two affidavits of Hugo James Shervington, a legal practitioner employed by Steinepreis Paganin, filed 9 September 2024 and 16 September 2024; and
(c)an affidavit of Lily Wang, a customer success manager employed by Automic Pty Ltd (Automic), filed 12 September 2024.
These additional affidavits address the matters K2fly was required to establish at the second court hearing.
Legal principles in respect of the Scheme approval
The approval of the proposed Scheme pursuant to s 411(4)(b) of the Corporations Act 2001 (Cth) (Act), or the second court hearing, is the third stage of approval for a scheme of arrangement. The second stage is the approval of the Scheme by the requisite statutory majorities, which occurred at the Scheme meeting.
At the second court hearing, the court has two tasks:[5]
(a)to ensure that all statutory and procedural requirements have been satisfied. This includes confirming that:[6]
(i)the meeting was convened and held in accordance with the court's earlier orders;
(ii)the resolutions were passed with the requisite statutory majorities; and
(iii)the plaintiff otherwise complied with the court's earlier orders;
(b)to determine, in the exercise of the court's discretion, whether to approve the proposed arrangement.
[5] Re Wesfarmers Ltd [No 2] [2018] WASC 357 [12].
[6] Re International Goldfields Ltd [2004] WASC 112 [7].
The court has a discretion to approve a scheme under s 411(4)(b) of the Act and is not required to approve a scheme just because the court previously made orders for the convening of a meeting or because the statutory majorities have been achieved.[7] That said, the court will usually approach the task on the basis that shareholders are better judges of what is in their commercial interests than the court.[8]
[7] Re Wesfarmers Ltd [No 2] [13]; Re Seven Network Ltd [No 3] [2010] FCA 400; (2010) 267 ALR 583 [31].
[8] Re Wesfarmers Ltd [No 2] [13]; Re Seven Network Ltd [No 3] [32] - [33].
The factors that inform the court's discretion whether or not to approve a scheme are:[9]
(a)whether the members have voted in good faith and not for an improper purpose;
(b)whether the proposal is fair and reasonable so that an intelligent and honest person who was a member of the relevant class, properly informed and acting alone, might approve it;
(c)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;
(d)whether there has been full and frank disclosure of all information material to the members' decision;
(e)whether minority shareholders would be oppressed by the scheme;
(f)whether the court is satisfied that the scheme has not been proposed to avoid ch 6 of the Act;
(g)whether ASIC has any objection to the scheme; and
(h)whether the scheme offends public policy.
[9] Re Seven Network Ltd [No 3] [35] - [40], [50], [52].
Should the Scheme be approved by the court?
Compliance with statutory and procedural requirements
I was and am satisfied, on the basis of the additional affidavits that were filed by K2fly, that:
(a)a copy of the Orders was lodged with ASIC that same day;[10]
(b)a copy of the Scheme booklet that was approved for distribution by the court at the first court hearing was lodged with ASIC and registered on 6 August 2024;[11]
(c)the Scheme booklet and applicable proxy forms were dispatched to shareholders in accordance with the Orders;[12]
(d)the Scheme meeting was convened and held on 9 September 2024 in accordance with the Orders;[13]
(e)the Scheme was approved by the requisite statutory majorities;[14]
(f)notice of the second court hearing was given by way of an ASX announcement, which was released by K2fly on 9 September 2024;[15] and
(g)ASIC informed K2fly on 13 September 2024, pursuant to s 411(17)(b) of the Act, that it has no objection to the proposed Scheme.[16]
[10] Affidavit of Hugo James Shervington filed 9 September 2024 [5], 'HJS-1'.
[11] Affidavit of Hugo James Shervington filed 9 September 2024, 'HJS-2', 'HJS-3'.
[12] Affidavit of Lily Wang filed 12 September 2024 [14] - [44], 'LW1' - 'LW22'.
[13] Affidavit of Mark Phillip Scudamore Foster filed 9 September 2024 [5] - [6].
[14]Affidavit of Mark Phillip Scudamore Foster filed 9 September 2024 [21].
[15] Affidavit of Hugo James Shervington filed 16 September 2024, 'HJS-1', p 6 - 7.
[16] Affidavit of Hugo James Shervington filed 16 September 2024, 'HJS-4'.
Counsel for K2fly drew my attention to the fact that the poll results were announced the Scheme meeting was closed. At the Scheme meeting, the chairperson advised attendees that the poll results would be announced to the ASX platform shortly after the meeting once the votes were counted. The meeting was then declared closed.[17] The results of the poll were the subject of an ASX announcement on 9 September 2024.[18]
[17] Affidavit of Mark Phillip Scudamore Foster filed 9 September 2024 [17] - [18].
[18] Affidavit of Hugo James Shervington filed 16 September 2024 'HJS-1', p 13.
The approach of a chairperson advising the meeting that results will be the subject of an announcement pursuant to s 251AA of the Act, following completion of counting of the poll and after the meeting has been formally closed, has been approved by the courts on numerous occasions.[19] No issue arises in the present case concerning the manner in which the polls were conducted or announced.
[19] Re MAC Services Group Ltd [2010] NSWSC 1474; Re National Australia Bank Ltd [2016] VSC 62 [56].
I was and am satisfied on the evidence before me that all statutory pre-conditions have been met.
Good faith and proper purpose
I am satisfied on the evidence filed by K2fly that its members voted in good faith and for a proper purpose. The proposed Scheme is to effect the acquisition of shares and does not involve any novel treatment of rights. No-one appeared at the second court hearing to object to the approval of the proposed Scheme.
Fairness and reasonableness
At the first court hearing, based on the evidence before the court, I was satisfied the proposed Scheme was of such a nature that there was no apparent reason that it should not receive approval if the requisite voting majorities were achieved at the Scheme meeting.
Nothing has occurred since the date of the first court hearing to change this view. The shareholders who voted at the meeting overwhelmingly supported the proposed Scheme.
No shareholder appeared at the second court hearing to oppose the orders sought by K2fly. I was and am satisfied that the proposed Scheme is fair and reasonable and is a Scheme that sensible businesspeople might consider to be of benefit to shareholders.
All relevant matters to the court's attention
At the first court hearing, counsel for the plaintiff drew my attention to a number of matters which are summarised at [28] - [51] of the First Reasons.
All remaining conditions precedent (apart from court approval at the second court hearing) have been satisfied or waived.[20]
Full and fair disclosure
[20] Affidavit of Hugo James Shervington filed 16 September 2024, 'HJS-2', 'HJS-3'.
At the first court hearing, based on the evidence, I was satisfied the draft Scheme booklet would provide full and fair disclosure to shareholders.
The additional affidavit evidence filed by K2fly establishes the Scheme booklet dispatched to shareholders was in the form approved for distribution by the court. Nothing has arisen to suggest there has not been full and fair disclosure of all information which was material to the decision of shareholders prior to them voting on the Scheme.
Oppression of minorities
There was no evidence that any minority has been oppressed.
Satisfaction of s 411(17) of the Act and ASIC's view
ASIC has provided a written statement to the effect that it does not object to the Scheme pursuant to s 411(17)(b) of the Act,[21] which satisfies the requirements of s 411(17). Having regard to the nature of the proposed transaction, it cannot be said the Scheme was proposed to avoid the operation of ch 6 of the Act.
Public policy
[21] Affidavit of Hugo James Shervington filed 16 September 2024, 'HJS-4'.
There is no evidence before the court that the proposed Scheme offends any aspect of public policy.
Should K2fly be exempt from complying with s 411(11) of the Act?
K2fly seeks an exemption from compliance with s 411(11) of the Act. In my view, there is no utility in requiring the court's orders approving the Scheme to be annexed to K2fly's constitution as the orders do not effect any change to the constitution. This exemption has become ordinary practice for transactions of this kind.
Conclusion and orders
At the second court hearing, I was satisfied the substantive and procedural requirements under s 411(4) of the Act had been satisfied and that it was appropriate for the proposed Scheme to be approved.
For these reasons, at the conclusion of the hearing on 16 September 2024, I made orders in terms of 'Annexure A' to this judgment in respect of the Scheme.
'Annexure A'
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
JN
Associate to the Honourable Justice Hill
26 SEPTEMBER 2024
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