FEDERAL COURT OF AUSTRALIA
PayGroup Limited, in the matter of PayGroup Limited (No 2) [2022] FCA 1350
File number(s): VID 463 of 2022 Judgment of: O’CALLAGHAN J Date of judgment: 8 November 2022 Date of publication of reasons: 11 November 2022 Catchwords: CORPORATIONS – scheme of arrangement – second court hearing – orders sought under ss 411(4)(b) and 411(6) of the Corporations Act 2001 (Cth) for approval of scheme – orders sought under s 411(12) for exemption from compliance with s 411(11) – orders made Legislation: Corporations Act 2001 (Cth) ss 411(4)(b), 411(6), 411(11), 411(12), 411(17)(b), 1322, 1322(4)(a), 1322(4)(d) Cases cited: Re Alabama, New Orleans, Texas and Pacific Junction Railway Company [1891] 1 Ch 213
Re PayGroup Ltd [2022] FCA 1026
Re ResApp Health Ltd [2022] NSWSC 1014
Re Seven Network Limited (No 3) [2010] FCA 400; (2010) 267 ALR 583
Re Vimy Resources Ltd (No 2) [2022] WASC 257
Division: General Division Registry: Victoria National Practice Area: Commercial and Corporations Sub‑area: Corporations and Corporate Insolvency Number of paragraphs: 36 Date of hearing: 8 November 2022 Counsel for the Plaintiff: Mr CT Möller SC with Mr MB Peckham Solicitor for the Plaintiff: K&L Gates Counsel for the Interested Parties: Mr B Holmes Solicitor for the Interested Parties: Gadens Lawyers ORDERS
VID 463 of 2022 IN THE MATTER OF PAYGROUP LIMITED
PAYGROUP LIMITED
Plaintiff
ORDER MADE BY:
O’CALLAGHAN J
DATE OF ORDER:
8 NOVEMBER 2022
OTHER MATTERS:
A.The proceeding concerns a scheme of arrangement between the plaintiff and the holders of ordinary shares in the plaintiff, the terms of which are set out at pages 408 to 427 of Exhibit MSMS1 to the affidavit of Mark Stephen Malhotra Samlal made on 18 August 2022 – a copy of which pages is Annexure A to this order (the Scheme).
B.There has been produced to the Court a statement in writing by the Australian Securities and Investments Commission (ASIC) in accordance with s 411(17)(b) of the Corporations Act 2001 (Cth) (the Act) stating that ASIC has no objection to the Scheme.
THE COURT ORDERS THAT:
1.Under s 1322(4)(a) of the Act the convening of the scheme meeting, and the resolution of that meeting to approve the Scheme, are not invalid by reason of any failure to have convened that meeting in accordance with paragraph 2 of the order made on 23 August 2022 (convening order).
2.Under s 1322(4)(d) of the Act:
(a)the time for sending the materials referred to in paragraph 2 of the convening order is extended, now for then, to 29 August 2022; and
(b)the time for publishing the notice referred to in paragraph 12 of the convening order is extended, now for then, to 29 September 2022.
3.Under s 411(4)(b) of the Act, the Scheme is approved.
4.Under s 411(12) of the Act, the plaintiff is exempted from compliance with section 411(11) of the Act in respect of the Scheme.
5.These orders are to be entered forthwith.
Note: Entry of orders is dealt…
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- AGLC
- Re PayGroup Limited (No 2) [2022] FCA 1350
- Case
- [2022] FCA 1350
- Decision Date
CaseChat Overview and Summary
In addressing the legal issues, the court considered several factors including compliance with the orders convening the scheme meeting, the passage of the requisite resolution, satisfaction of all statutory requirements, fairness and reasonableness of the scheme, adequate disclosure to shareholders, and the absence of any opposition from stakeholders. The court found that all non-compliances were inadvertent and procedural, and that they did not prejudice any party. The Australian Securities and Investments Commission (ASIC) had issued a "no objection" letter, and no opposition was presented at the hearing. The court was also satisfied that the scheme was proposed and voted on in good faith, supported by an independent expert's opinion and the unanimous recommendation of the directors.
Based on these findings, the court approved the scheme of arrangement. It made orders under sections 1322(4)(a) and 1322(4)(d) of the Corporations Act to validate the convening of the scheme meeting and extend certain deadlines. The court also approved the scheme under section 411(4)(b) and exempted the plaintiff from compliance with section 411(11) under section 411(12) of the Act. The orders were to be entered forthwith, ensuring the scheme could proceed as planned.
Orders
Orders of the court
1. Under s 1322(4)(a) of the Act the convening of the scheme meeting, and the resolution of that meeting to approve the Scheme, are not invalid by reason of any failure to have convened that meeting in accordance with paragraph 2 of the order made on 23 August 2022 (convening order).
2. Under s 1322(4)(d) of the Act:
(a) the time for sending the materials referred to in paragraph 2 of the convening order is extended, now for then, to 29 August 2022; and
(b) the time for publishing the notice referred to in paragraph 12 of the convening order is extended, now for then, to 29 September 2022.
3. Under s 411(4)(b) of the Act, the Scheme is approved.
4. Under s 411(12) of the Act, the plaintiff is exempted from compliance with section 411(11) of the Act in respect of the Scheme.
5. These orders are to be entered forthwith.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
The cases establish that the following matters should be taken into account, namely that: (a)the orders of the court convening the scheme meeting were complied with;(b)the resolution to approve the scheme was passed by the requisite majority, and whether other statutory requirements have been satisfied;(c)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;(d)the scheme is fair and reasonable so that an intelligent and honest shareholder, properly informed and acting alone, might approve it;(e)there was full and fair disclosure to shareholders of all information material to the decision whether to vote for or against the scheme;(f)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(g)the court is satisfied under s 411(17) that the scheme has not been proposed to avoid Chapter 6 of the Act, or that the plaintiff has a statement from ASIC that it has no objection to the scheme.Consideration In light of the detailed and helpful submissions of counsel for PayGroup, the only issue that required consideration at the hearing on 8 November was in respect of (a) above. As I have explained, I accepted that each matter of non‑compliance was inadvertent, and caused no prejudice. I also accepted that each was also procedural and capable of remediation under s 1322 of the Act. ASIC issued a “no objection under s 411(17)(b)” letter, stating that it had no objection to the Scheme. Further, no person appeared at the second hearing to oppose the Scheme or for any other reason. I was in this case satisfied that:(a)there is nothing to suggest that the Scheme was proposed other than in good faith;(b)there is nothing to suggest that PayGroup’s members voted other than in good faith;(c)PayGroup’s members overwhelmingly supported the Scheme, as reflected in the voting results at the Scheme Meeting;(d)the opinion of the independent expert was that the Scheme and associated transactions are in the best interests of PayGroup’s members;(e)the recommendation from all of PayGroup’s directors was that members vote in favour of the Scheme;(f)at the time the submissions were filed, and since then, there has been no opposition to the Scheme by ASIC or any PayGroup member;(g)PayGroup has brought to the court’s attention all matters that could be considered relevant to the exercise of its discretion;(h)the Scheme Booklet contained full disclosure of the potential benefits and disadvantages of the Scheme;(i)there is nothing to suggest that any member will be oppressed by the Scheme (to the contrary, the Scheme contains measures to protect shareholders against performance risk); and(j)there is nothing to suggest that the Scheme offends public policy. In light of these matters, I was satisfied that the Scheme was made in good faith and is “at least so far fair and reasonable, as that an intelligent and honest [person], who is a member of the class, and acting alone in respect of [their] interest as such a member, might approve of it”. See Re Alabama, New Orleans, Texas and Pacific Junction Railway Company [1891] 1 Ch 213 at 247.