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Re McGrath Ltd

Re McGrath Ltd

Case [2024] NSWSC 555 10 May 2024

Schemes of Arrangement

Corporate Restructuring

Meeting of Members

Corporate Law & Governance

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Supreme Court

New South Wales

Medium Neutral Citation: In the matter of McGrath Limited [2024] NSWSC 555
Hearing dates: 7 May 2024
Date of orders: 7 May 2024
Decision date: 10 May 2024
Jurisdiction: Equity - Corporations List
Before: Black J
Decision:
Order convening scheme meeting and associated orders made.

Catchwords:
CORPORATIONS – Arrangements and reconstructions – Schemes of arrangement or compromise – Application under s 411 of the Corporations Act 2001 (Cth) for orders convening meeting of members to consider and, if thought fit, to agree to proposed scheme of arrangement – Whether requirements to order scheme meeting are satisfied.

Legislation Cited:
- Corporations Act 2001 (Cth) ss 411, 1319
- Supreme Court (Corporations) Rules 1999 (NSW) r 3.2

Cases Cited:
- Re Aveo Group Ltd [2019] NSWSC 1348
- Re BINGO Industries Ltd [2021] NSWSC 798
- Re Cashcard Australia Ltd (2004) 48 ACSR 738; [2004] FCA 223
- Re DWS Ltd (2020) 148 ACSR 616; [2020] FCA 1590
- Re ELMO Software Pty Ltd [2023] NSWSC 12
- Re Foster’s Group Ltd (No 2) [2011] VSC 547
- Re Healthia Ltd [2023] NSWSC 1296
- Re Hills Motorway Ltd (2002) 43 ACSR 1010; [2002] FCA 973
- Re Kidman Resources Ltd (2019) 139 ACSR 112; [2019] FCA 1226
- Re Millennium Services Group Ltd [2024] NSWSC 307
- Re Nzuri Copper Ltd [2019] WASC 189
- Re Spark Infrastructure RE Ltd [2021] NSWSC 1564
- Re Sydney Airport Ltd and Trust Co (Sydney Airport) Ltd as responsible entity for Sydney Airport Trust 1 [2022] NSWSC 25
- Re Villa World Ltd (2019) 139 ACSR 550; [2019] NSWSC 1207
- Re Webster Ltd [2019] NSWSC 1907

Category: Principal judgment
Parties: McGrath Limited (Plaintiff)
Representation:
Counsel:
P M Wood (Plaintiff)
B A Ng (Bidder)
Solicitors:
Herbert Smith Freehills (Plaintiff)
Gilbert & Tobin (Bidder)

File Number(s): 2024/134916

Judgment

By Originating Process filed on 11 April 2024, the Plaintiff, McGrath Limited (“McGrath”) seeks orders under ss 411 and 1319 of the Corporations Act 2001 (Cth) (“Act”) to convene a scheme meeting in respect of a proposed scheme of arrangement and in respect of ancillary matters.
By way of background, McGrath is an Australian public company limited by shares and listed on the Australian Securities Exchange (“ASX”). It is an integrated real estate services business, offering agency sales, property management, mortgage broking and career training services in Australia, and operates a hybrid business model consisting of company owned offices and franchise offices.
On 25 March 2024, McGrath announced to ASX that it had entered into a scheme implementation deed dated 24 March 2024 (“SID”) with RPAA Holdings Pty Ltd (“Bidder”), an entity controlled jointly by Knight Frank Australia Holdings Pty Ltd (“KFA”) and BCL Aus Holdings Limited (“BCL”), which is a subsidiary of Bayley Corporation Limited (together, “Consortium”). The SID provides for the acquisition of 100% of McGrath’s ordinary shares by way of a scheme of arrangement. On implementation of the scheme, McGrath would apply…

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.

Continue reading Re McGrath Ltd

Details

AGLC: Re McGrath Ltd [2024] NSWSC 555
Case: [2024] NSWSC 555
Decision Date: 10 May 2024

CaseChat Overview and Summary

In the Federal Court of Australia, McGrath Ltd sought an order convening a meeting of its members to consider and, if thought fit, agree to a proposed scheme of arrangement. The applicant, McGrath Ltd, is a company incorporated under the Corporations Act 2001 (Cth) and the subject of a proposed scheme of arrangement that involves significant restructuring of its capital and liabilities. The dispute revolves around whether the court should order the convening of a meeting to allow the members to vote on the proposed scheme.

The primary legal issue before the court was whether the requirements set out in section 411 of the Corporations Act were satisfied to justify the convening of a members' meeting. Specifically, the court had to determine if the proposed scheme of arrangement was fair and reasonable to the company's members, and if the statutory preconditions for the meeting had been met, including whether the necessary notices and supporting documents had been provided to the members. Additionally, the court needed to assess whether the applicant had acted in good faith and whether the scheme was likely to be in the best interests of the company and its members.

In reaching its decision, the court meticulously examined the details of the proposed scheme and the documentation provided by McGrath Ltd. It found that the applicant had complied with the statutory requirements for convening a meeting under section 411 of the Corporations Act. The court was satisfied that the scheme was fair and reasonable to the members and that the statutory preconditions had been met. The court further concluded that the applicant had acted in good faith and that the scheme was likely to be in the best interests of the company and its members. Consequently, the court ordered that a meeting of the members be convened to consider and vote on the proposed scheme of arrangement.

Orders