FEDERAL COURT OF AUSTRALIA Recall Holdings Limited, in the matter of Recall Holdings Limited (No 2) [2016] FCA 419 File number: NSD 1230 of 2015 Judge: YATES J Date of judgment: 21 April 2016 Catchwords: CORPORATIONS – scheme of arrangement – second court hearing – application for approval Legislation: Corporations Act 2001 (Cth) ss 411, 412 Securities Act of 1933 (US) s 3 Cases cited: Recall Holdings Limited, in the matter of Recall Holdings Limited [2015] FCA 1142 Date of hearing: 21 April 2016 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 15 Counsel for the Plaintiff: Mr IM Jackman SC Solicitor for the Plaintiff: Allens Counsel for Iron Mountain Incorporated: Mr P Brereton SC Solicitor for Iron Mountain Incorporated: Minter Ellison ORDERS NSD 1230 of 2015 IN THE MATTER OF RECALL HOLDINGS LIMITED (ABN 27 116 537 832) RECALL HOLDINGS LIMITED (ABN 27 116 537 832) Plaintiff JUDGE: YATES J DATE OF ORDER: 21 APRIL 2016 THE COURT ORDERS THAT: 1. Pursuant to s 411(4)(b) of the Corporations Act 2001 (Cth) (the Act), the scheme of arrangement between the plaintiff and its members (the scheme), in the form contained in Appendix 4 of the scheme booklet issued by the plaintiff and dated 23 October 2015, being Exhibit 1 in the proceeding, be approved. 2. The plaintiff lodge with the Australian Securities and Investments Commission a copy of the approved scheme at the time of lodging a copy of these orders. 3. Pursuant to s 411(12) of the Act, the plaintiff be exempted from compliance with s 411(11) of the Act in relation to the scheme. 4. The plaintiff be granted liberty to apply. THE COURT NOTES THAT: 5. Iron Mountain Incorporated will rely on the Court's approval of the scheme for the purposes of qualifying for exemption from the registration requirements of the Securities Act of 1933 (US), provided for by s 3(a)(10) of that Act, in connection with the implementation of, and the provision of consideration, under the scheme. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT YATES J: 1 The plaintiff, Recall Holdings Limited, seeks orders pursuant to s 411(4)(b) of the Corporations Act 2001 (Cth) (the Act) approving a scheme of arrangement, the terms of which are contained in Appendix 4 of the scheme booklet which is Exhibit 1 in the proceeding (the scheme). 2 On 22 October 2015, the Court made orders pursuant to s 411(1) of the Act providing for the convening of a meeting of members to consider the scheme and, if thought fit, agree to it, with or without modification (the scheme meeting): Recall Holdings Limited, in the matter of Recall Holdings Limited [2015] FCA 1142 (the earlier reasons). 3 Subsequent orders were made as follows: On 25 November 2015, the Court ordered, amongst other things, that the date for holding the scheme meeting be postponed to 17 March 2016 and that a letter be sent to members notifying them of that fact. On 2 March 2016, the Court ordered, amongst other things, that the scheme meeting be further postponed to 19 April 2016 and that a letter be sent to members notifying them of that fact. The orders also required the present court hearing to be advertised in The Australian Financial Review newspaper on or before 13 April 2016. On 1 April 2016, the Court ordered, amongst other things, that a supplementary scheme booklet be dispatched to members by no later than 6 April 2016. 4 On 19 April 2016, the meeting was held and the scheme was agreed to by the majorities required under s 411(4)(a)(ii) of the Act. 5 The following affidavits have been read in support of the orders now sought: Barry Ira Medintz, affirmed 20 April 2016; Vijay Cugati, affirmed 20 April 2016; and Ivana Aurelia Sjarifudin, affirmed 20 April 2016. 6 On the evidence before me, I am satisfied that the explanatory statement, represented by the scheme booklet, was registered with the Australian Securities and Investments Commission (ASIC) on 23 October 2015. The scheme meeting was convened and held under s 411 of the Act in accordance with the orders made on 22 October 2015, as varied by the subsequent orders to which I have referred. At that meeting, 94.56% of the members holding ordinary shares in the plaintiff who were present and voting, either in person or proxy, voted in favour of the scheme and 99.90% of the votes cast were in favour of the scheme. A notice of this hearing was published in The Australian Financial Review newspaper on 13 April 2016, in accordance with the orders made on 2 March 2016. No person has come forward to oppose the scheme. ASIC has provided a statement in writing that it has no objection to the scheme. Accordingly, there is no impediment under s 411(17) of the Act to the Court giving the approval that is sought. 7 I am satisfied that the scheme is fair and reasonable, having regard to the unanimous recommendation of the plaintiff's directors that members vote in favour of the scheme (in the absence of a superior proposal); the opinion of the independent expert, KPMG Financial Advisory Services (Australia) Pty Ltd, that the scheme is fair and reasonable and that, in the absence of a superior proposal, is in the best interests of the plaintiff's members; the significant majorities attained in favour of the scheme at the scheme meeting; and the fact that no person has come forward to oppose the scheme. 8 The orders made by the Court provided for the dispatch by email of the scheme booklet (which included the explanatory statement required under s 412(1) of the Act and the notice of meeting), proxy forms and other communications to members who had nominated an electronic address for the purpose of receiving communications from the plaintiff. The orders required that, for other members, such documents were to be sent by ordinary post (for those members whose registered addresses were in Australia) or by prepaid air mail or air courier (for those members whose registered addresses were outside Australia). The evidence shows that the dispatch of documents was made in accordance with those orders. 9 When dispatch was made by email, the evidence shows that, in a very small number of cases (representing no more than 1.18% of members and 0.07% of all shares on issue at the voting record date) a "bounce back" was received, thereby indicating that the communication was ineffective. When this happened in the case of the dispatch of the scheme booklet and proxy forms, a hard copy of the scheme booklet and a proxy form were mailed to the registered address of each intended recipient. Although not required by the Court's orders, this step was undertaken as a matter of good practice. Unfortunately, the same step was not taken in respect of subsequent communications. It would have been desirable for that step to have been taken. 10 Nevertheless, in light of the pattern of voting at the scheme meeting, and in particular the substantial majorities attained, I am satisfied that the failure to take this step, as a matter of good practice, does not stand as a reason for refusing to approve the scheme. There is no reason to suppose, in respect of those members, that their views would have reflected a different pattern of voting had the material also been dispatched to them by mail, air mail or air courier. Even if it be assumed that a different pattern of voting would have resulted in respect of those members, that pattern could not have affected the overall result of the voting. 11 A certificate has been tendered in the form of a deed made by the plaintiff and Iron Mountain Incorporated (Iron Mountain) (the parties to the Scheme Implementation Deed referred to at [2] of the earlier reasons) confirming that all conditions precedent to the scheme (other than those related to court approval) have been satisfied or waived. 12 All necessary procedural requirements, including compliance with the Court's orders, have been satisfied for the approval that is now sought. There is no discretionary reason why approval should not be given. I therefore propose to order that the scheme be approved. I will also order that, pursuant to s 411(12) of the Act, the plaintiff be exempted from compliance with s 411(11) of the Act. 13 Finally, I note that Iron Mountain will rely on the Court's approval of the scheme for the purpose of qualifying for exemption from the registration requirements of the Securities Act of 1933 (US), provided for by s 3(a)(10) of that Act, in connection with the implementation of, and the provision of consideration under, the scheme. 14 In this connection, the Standard Consideration under the scheme comprises a cash component and New Iron Mountain Securities, either as New Mountain CDIs or New Mountain Shares (fully-paid common shares in the capital of Iron Mountain). The plaintiff and Iron Mountain advised the Court of this intended reliance at the time that orders were sought for convening the scheme meeting. The orders I propose to make will note the reliance on the Court's approval of the scheme for the stated purpose. 15 Orders will be made accordingly. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates. Associate: Dated: 22 April 2016