Federal Court of Australia QV Equities Limited, in the matter of QV Equities Limited (No 2) [2024] FCA 727 File number(s): NSD 589 of 2024 Judgment of: HALLEY J Date of judgment: 4 July 2024 Date of publication of reasons 5 July 2024 Catchwords: CORPORATIONS – members' scheme of arrangement – second court hearing – application pursuant to s 411(4)(b) of the Corporations Act 2001 (Cth) (Act) for approval of scheme – exemption from compliance with s 411(11) of the Act – application granted Legislation: Corporations Act 2001 (Cth) ss 411, 1319 Federal Court (Corporations) Rules 2000 (Cth) r 3.5 Cases cited: FT Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd (1977) 3 ACLR 69 In the matter of BINGO Industries Limited [2021] NSWSC 911 QV Equities Limited, in the matter of QV Equities Limited [2024] FCA 567 MOQ Limited, in the matter of MOQ Limited (No 2) [2022] FCA 1364 Re Toll Holdings Limited (No 2) [2015] VSC 236 Seven Network Limited (ACN 052 816 789), in the matter of Seven Network Limited (No 3) (2010) 77 ASCR 701; [2010] FCA 400 Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 18 Date of hearing: 4 July 2024 Counsel for the Plaintiff: Ms T Wong SC and Ms S Scott Solicitor for the Plaintiff: Hazelbrook Legal Counsel for the Interested Party Mr A Oakes Solicitor for the Interested Party Mills Oakley ORDERS NSD 589 of 2024 IN THE MATTER OF QV EQUITIES LIMITED QV EQUITIES LIMITED ACN 169 154 858 Plaintiff order made by: HALLEY J DATE OF ORDER: 4 JULY 2024 THE COURT ORDERS THAT: 1. Pursuant to s 411(4)(b) of the Corporations Act 2001 (Cth) (Act), the scheme of arrangement between the plaintiff and holders of ordinary shares in the plaintiff, agreed to by the said members at the meeting held on 28 June 2024, the terms of which are set out in Annexure B to Exhibit 1 in this proceeding (Scheme), be approved. 2. The plaintiff is to lodge with the Australian Securities and Investments Commission a sealed copy of these orders, pursuant to s 411(10) of the Act. 3. Pursuant to s 411(12) of the Act, the plaintiff be exempt from compliance with s 411(11) of the Act in relation to the Scheme. 4. These orders be entered forthwith. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT (REVISED FROM THE TRANSCRIPT) HALLEY J: A. INTRODUCTION 1 On 24 May 2024, I made orders under s 411(1) and s 1319 of the Corporations Act 2001 (Cth) (Act) that the plaintiff, QV Equities Limited ACN 169 154 858 (QVE) convene and hold a meeting (Scheme Meeting) of its members to consider, and if thought fit, approve a proposed scheme of arrangement (Scheme) between QVE and holders of its fully paid ordinary shares (Scheme Participants): see QV Equities Limited, in the matter of QV Equities Limited [2024] FCA 567. 2 QVE now seeks orders under s 411(4)(b) of the Act approving the Scheme and orders under s 411(12) of the Act that it be exempted from compliance with s 411(11) of the Act in relation to the Scheme. 3 The application is supported by written and oral submissions from QVE's counsel, Ms T Wong SC and Ms S Scott, and further affidavits from the Chair of QVE, Anthony McKillop, and QVE's solicitor with carriage of the matter, Lucy Adamson. The affidavits address the necessary formal requirements and relevant discretionary considerations for the approval of a scheme of arrangement by the Court. Mr A Oakes, of counsel, appeared for the bidder, WAM Leaders Limited ACN 611 053 751 (WAM Leaders) and confirmed WAM Leaders' support for QVE's application for approval of the Scheme. B. Scheme Meeting 4 The Scheme Meeting was held on Friday, 28 June 2024 and the resolution in favour of the Scheme was passed by the requisite statutory majorities. 5 The booklet for the Scheme (Scheme Booklet) explained that, if the Scheme is implemented, (a) it will result in the acquisition of all the shares in QVE by WAM Leaders, (b) Scheme Participants will receive shares in WAM Leaders, or if they make a valid election, a cash consideration for each QVE share held or a combination of shares in WAM Leaders and a cash consideration, and (c) QVE will subsequently be delisted. c. fORMAL rEQUIREMENTS 6 As to the formal procedural requirements and the orders made on 24 May 2024 at the first court hearing (24 May 2024 Orders), I am satisfied from the affidavit evidence relied upon by QVE that: (a) a sealed copy of the 24 May 2024 Orders and a copy of the Scheme Booklet were lodged with the Australian Securities and Investments Commission (ASIC) as required by r 3.5(b) of the Federal Court (Corporations) Rules 2000 (Cth); (b) the Scheme Booklet was registered by ASIC on 24 May 2024; (c) on 28 May 2024, I made further orders to correct an error in the election form contained in the Scheme Booklet and later that day a corrected Scheme Booklet and a copy of my further orders were lodged with ASIC, and the corrected Scheme Booklet was registered by ASIC; (d) the Scheme Booklet was despatched to Scheme Participants in accordance with the 24 May 2024 Orders; (e) the Scheme Meeting was held in accordance with the 24 May 2024 Orders; and (f) an announcement about the second court hearing was published by QVE on 26 June 2024 through the ASX Market Announcements Platform. 7 As to the requisite statutory majorities for approval of a scheme of arrangement for the purposes of s 411(4)(a) of the Act, I am satisfied that they have been achieved. The affidavit evidence establishes that: (a) 91.87% of Scheme Participants that were present and voting (either in person or by proxy) at the Scheme Meeting voted in favour of the Scheme resolution; and (b) 92.29% of the votes cast (in person or by proxy) at the Scheme Meeting were cast in favour of the Scheme resolution. 8 As to the conditions precedent to the implementation of the Scheme set out in the scheme implementation agreement dated 12 March 2024 (and amended by a letter of variation dated 3 May 2024), I am satisfied that the conditions precedent certificates, tendered at the hearing, establish that all conditions precedent, other than Court approval, have been satisfied or waived. 9 Finally, ASIC has provided a letter pursuant to s 411(17)(b) of the Act stating that it has no objections to the Scheme, which was tendered at today's hearing. D. DISCRETIONary CONSIDERATIONS 10 In addition to being satisfied that the formal requirements stipulated in the Act for the approval of a scheme of arrangement and any relevant conditions precedent have been satisfied or waived, the Court must also consider, as a matter of discretion, whether the Scheme should be approved. 11 In MOQ Limited, in the matter of MOQ Limited (No 2) [2022] FCA 1364 at [7]-[11], I summarised the principles relevant to the exercise of the discretion to grant approval to a scheme under s 411(4)(b) of the Act after it had been approved at a meeting of members or creditors, by reference to well established authorities, including the statements by Jacobson J in Seven Network Limited (ACN 052 816 789), in the matter of Seven Network Limited (No 3) (2010) 77 ACSR 701; [2010] FCA 400 at [35]-[40]. It is sufficient for present purposes to provide the following summary of those principles. 12 First, the Court has a discretion whether to approve a scheme and is not bound to approve it merely because it has previously made orders for the convening of meetings or because the statutory majorities have been achieved. 13 Second, the Court will usually approach the task on the basis that the members are better judges of what is in their commercial interests than the Court. 14 Third, the following specific matters have been taken into account for the purpose of informing the exercise of the discretion to approve a scheme of arrangement: (a) whether the shareholders have voted in good faith and not for an improper purpose; (b) whether the proposal is fair and reasonable such 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 Court's attention all matters that could be considered relevant to the exercise of the Court's discretion; (d) whether there has been full and fair disclosure of all information material to the decision; (e) whether minority shareholders would be oppressed by the scheme; and (f) whether the scheme offends public policy. 15 I am satisfied that it is appropriate for the discretion to be exercised to approve the Scheme for the following reasons: (a) the overwhelming vote of the Scheme Participants at the Scheme Meeting in favour of the Scheme; (b) the unanimous recommendation by the QVE board, other than Simon Conn who abstained by reason of a conflict of interest, that Scheme Participants vote in favour of the Scheme; (c) the independent expert, Lonergan Edwards & Associates Limited, concluded that the Scheme is fair and reasonable and in the best interests of the Scheme Participants, and I am satisfied that there is no evidence to the contrary and nothing suggests that the opinion should not be accepted; (d) the reasonableness of the Scheme was established, at least on a prima facie basis, at the first court hearing, pursuant to the principle in FT Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd (1977) 3 ACLR 69 at 72 (Street CJ, with whom Hutley and Samuels JJA agreed); (e) there is nothing before me to suggest that the Scheme Participants voted other than in good faith, that they cast their votes for an improper purpose, or that any member had been treated in a way that may be characterised as oppressive; (f) nor is there anything before me that materially casts doubt on the procedural integrity of the processes followed for the Scheme Meeting; (g) no notice had been received of any opposition to the Scheme and no shareholders appeared to oppose the Scheme being approved at the second court hearing today; (h) fairness can be inferred, in all the circumstances, including the obtaining of the statutory majorities in the Scheme Meeting in a context where I am satisfied that there was adequate and verified disclosure and those who voted did so as the best judges of their own interests; and (i) given the voter turnout percentages at the Scheme Meeting were significantly higher than the turnout at QVE's last annual general meeting and higher than the turnout at QVE's annual general meetings in 2021 and 2022, and the evidence as to the despatch of the Scheme Booklet, there was nothing to suggest that there was any flaw in the procedure for convening the Scheme Meeting. E. Section 411(11) exemption 16 Section 411(11) of the Act provides that copies of all orders made by the Court for approving a scheme pursuant to s 411(4)(b) of the Act must be annexed to every copy of the company's constitution issued after the approval of the scheme. Section 411(12) of the Act provides that the Court may exempt a company from complying with s 411(11) of the Act. 17 I am satisfied that it is appropriate to make an order pursuant to s 411(12) of the Act exempting QVE from compliance with s 411(11) of the Act, in circumstances where QVE will become a wholly owned subsidiary of the acquirer upon implementation of the Scheme: Re Toll Holdings Limited (No 2) [2015] VSC 236 at [18]-[19] (Robson J); In the matter of BINGO Industries Limited [2021] NSWSC 911 at [13] (Black J). F. Disposition 18 For the foregoing reasons outlined above, I am satisfied that orders should be made approving the Scheme and exempting QVE from compliance with s 411(11) of the Act. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Halley. Associate: Dated: 4 July 2024