Supreme Court New South Wales Medium Neutral Citation: In the matter of rhipe Limited [2021] NSWSC 1307 Hearing dates: 13 October 2021 Date of orders: 13 October 2021 Decision date: 14 October 2021 Jurisdiction: Equity - Corporations List Before: Black J Decision: Orders made approving the scheme of arrangement. Catchwords: CORPORATIONS – Arrangements and reconstructions – Schemes of arrangement or compromise – Application under s 411 of the Corporations Act 2001 (Cth) for orders approving scheme of arrangement – Where formal requirements satisfied – Whether scheme of arrangement should be approved. Legislation Cited: - Corporations Act 2001 (Cth), s 411 Cases Cited: - Re Alabama, New Orleans, Texas and Pacific Junction Railway Co [1891] 1 Ch 213 - Re Atlas Iron Ltd (No 2) [2016] FCA 481 - Re Aveo Group Ltd [2019] NSWSC 1679 - Re Central Pacific Minerals NL [2002] FCA 239 - Re Equinox Resources Ltd (2004) 49 ACSR 692; [2004] WASC 143 - Re Isentia Group Ltd [2021] NSWSC 1069 - Re NRMA Ltd (No 2) (2000) 156 FLR 412; (2000) 34 ACSR 261; [2000] NSWSC 408 - Re Permanent Trustee Co Limited (2002) 43 ACSR 601; [2002] NSWSC 1177 - Re Redcape Property Fund Ltd and Trust Company (RE Services) Ltd (as the responsible entity for the Redcape Property Trust) [2012] NSWSC 486 - Re rhipe Ltd [2021] NSWSC 1170 - Re Seven Network (No 3) (2010) 77 ACSR 701; [2010] FCA 400 - Re Toll Holdings Ltd (No 2) [2015] VSC 236 - Re TriAusMin Ltd (No 2) [2014] FCA 833 Category: Principal judgment Parties: rhipe Limited (Plaintiff) Representation: Counsel: J Williams SC (Plaintiff) T Wong SC (Acquirer) Solicitors: Allens (Plaintiff) Baker & McKenzie (Acquirer) File Number(s): 2021/245411 Judgment Nature of the application and affidavit evidence 1. At a first Court hearing on 7 September 2021, I made orders convening a scheme meeting in respect of rhipe Ltd ("rhipe") for the reasons set out in my judgment in Re rhipe Ltd [2021] NSWSC 1170. The proposed scheme provides for Crayon Software Experts Australia Pty Ltd, a wholly owned subsidiary of Crayon Group Holding ASA ("Crayon"), to acquire all ordinary shares in rhipe for a total cash consideration of $2.50 per rhipe share, less the amount of any special dividend of up to $0.13 per rhipe share paid before implementation of the scheme. 2. At a scheme meeting held on 11 October 2021, rhipe's shareholders approved the scheme, both by a majority in number present and voting and by more than 75% of the votes cast. As I will note below, approximately 99.88% of votes cast on the scheme resolution, and approximately 96.20% of rhipe shareholders by number present and voting, voted in favour of the scheme. After that meeting, and also on 11 October 2021, rhipe's board of directors determined that rhipe would pay a special dividend of $0.13 per share, payable on 25 October 2021. 3. At this second Court hearing, rhipe seeks an order under ss 411(4)(b) and 411(6) of the Corporations Act 2001 (Cth) approving the scheme and an order, under s 411(12) of the Act, exempting rhipe from compliance with s 411(11) of the Act in relation to the scheme. 4. rhipe relies on the affidavit dated 12 October 2021 of Mr Gary Cox, who is a non-executive director and the chairman of rhipe. He gives evidence of the conduct of the scheme meeting which was held virtually using an online meeting platform. He also refers to the poll report in respect of the scheme resolution, which recorded that more than 96% of rhipe shareholders by number and 99.88% of shareholders by percentage of votes cast voted in favour of the scheme, satisfying each of the statutory requirements in respect of the scheme. His evidence was that, following the scheme meeting, rhipe's board resolved to declare a fully franked special dividend, as defined in the scheme booklet, of $0.13 per rhipe share, which is expected to be payable on 25 October 2021. Mr Cox also referred to a subsequent announcement by rhipe to Australian Securities Exchange ("ASX") that the scheme resolution had been passed and that rhipe's board had declared the special dividend. 5. By her affidavit dated 12 October 2021, Ms Kirsten O'Hara, who is a client relationship manager with Link Market Services Ltd, which provides share registry services to rhipe, set out the process adopted for the dispatch of scheme materials to rhipe shareholders and referred to the receipt of proxy forms for the scheme meeting, the conduct of the scheme meeting and the poll report for that meeting, and noted that no issues had arisen in respect of the use of the virtual platform at that meeting. 6. By his affidavit dated 12 October 2021, Mr Charles Ashton, who is a partner in the firm of solicitors acting for rhipe in the application, referred to the registration of the scheme booklet with the Australian Securities and Investments Commission ("ASIC") after orders had been made at the first Court hearing, to supplementary disclosure which had been made by rhipe in respect of a matter affecting the independent expert's report, and to the publication of an advertisement for the second Court hearing in a national newspaper. Mr Ashton noted that the solicitors acting for rhipe had not received notice of any person proposing to appear at the second Court hearing and no shareholder appeared at that hearing to oppose the scheme. Mr Ashton also referred to an announcement made by rhipe to ASX that the acquirer, Crayon Group Holding ASA, had received written notice from the Foreign Investment Review Board that the Commonwealth had no objection to the scheme. 7. rhipe also tendered a letter from ASIC confirming that it has no objection to the scheme for the purposes of s 411(17)(b) of the Act and tendered certificates evidencing the satisfaction or waiver of conditions precedent to the scheme, other than that concerning the Court's approval of the scheme. Submissions and determination 1. Mr Williams, who appears for rhipe, addressed the principles applicable to approval of an acquisition scheme of arrangement in conventional and familiar terms. Section 411(4) of the Act has the effect that a scheme of arrangement is binding on rhipe shareholders if, at a meeting of rhipe shareholders, it is passed by a majority of the shareholders present and voting and by 75% of votes cast and it is approved by order of the Court. Section 411(6) of the Act provides that the Court may grant approval subject to such alterations or conditions as it thinks just. 2. At the second Court hearing, rhipe must satisfy the Court that the resolutions have been passed in accordance with the statutory requirements and the procedural requirements have been satisfied. Where those matters are established, the Court has a supervisory discretion and will consider whether the scheme involves oppression and whether the arrangement is capable of being accepted: Re Alabama, New Orleans, Texas and Pacific Junction Railway Co [1891] 1 Ch 213 at 247; Re Central Pacific Minerals NL [2002] FCA 239 at [8]-[14]; Re Redcape Property Fund Ltd and Trust Company (RE Services) Ltd (as the responsible entity for the Redcape Property Trust) [2012] NSWSC 486 at [7]. Mr Williams points to several matters that are relevant to the exercise of the Court's discretion, including whether the shareholders have voted in good faith and not for an improper purpose; 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; 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; whether there has been full and fair disclosure of all information material to the decision; whether minority shareholders would be oppressed by the scheme; whether the scheme offends public policy; and whether the interests of other groups who are not parties to, but are affected by, the scheme are dealt with appropriately: Re Permanent Trustee Co Limited (2002) 43 ACSR 601; [2002] NSWSC 1177 at [8]-[10]; Re Seven Network (No 3) (2010) 77 ACSR 701; [2010] FCA 400 at [35]-[40]; Re Aveo Group Ltd [2019] NSWSC 1679 at [15]; Re Isentia Group Ltd [2021] NSWSC 1069 at [9]. The Court will have regard to the assessment by members of their interests as manifested in the voting at the meeting: Re Central Pacific Minerals NL above at [12]; Re Redcape Property Fund Ltd and Trust Company (RE Services) Ltd (as the responsible entity for the Redcape Property Trust) above at [7]; Re Aveo Group Ltd above at [15]. The Court is not bound to approve a scheme merely because it has previously made orders for the convening of meeting of the members and the statutory majorities have been achieved: Re NRMA Ltd (No 2) (2000) 156 FLR 412; (2000) 34 ACSR 261; [2000] NSWSC 408 at [22]; Re Seven Network above at [31]; Re Atlas Iron Ltd (No 2) [2016] FCA 481 at [5]. 3. The affidavit evidence here establishes that the Court's orders in respect of the dispatch of the scheme booklet and the scheme meeting were complied with. Mr Cox's evidence establishes that the scheme was approved by the requisite majorities of votes cast and by number of rhipe shareholders present at the scheme meeting and the statutory majorities in sections 411(4) of the Act were satisfied. The voting participation rates at that meeting were not particularly high. However, as Farrell J observed in Re TriAusMin Ltd (No 2) [2014] FCA 833 at [10]-[12]: "Although the statutory requirement under s 411(4)(a)(ii) has been satisfied, it is the usual practice of the court at the second court hearing to consider the number of shareholders who attended the Scheme Meeting in person or by proxy. Low shareholder turnout may be an indication that some procedural irregularity occurred. It is inappropriate to assume (in the absence of complaint) that shareholders who did not vote either did not have notice of the meeting or were silent in protest of the scheme: Re Professional Investment Holdings Ltd (No 2) [2010] FCA 1336 at [7] and Re Seven Network Ltd (No 3) (2010) 267 ALR 583 … at [61] per Jacobson J; apathy should not be presumed to be antagonism: Re Matine Ltd (1998) 28 ACSR 268 at 295 per Santow J. 1. I was satisfied at the first Court hearing that the scheme was of such a nature and cast in such terms that, if it received the statutory majority at the scheme meeting, then the Court would be likely to approve it on the hearing of an application that was unopposed. The independent expert's report in respect of the scheme concluded that it was in the best interests of rhipe shareholders in the absence of a superior proposal. No rhipe shareholder indicated a wish to appear or appeared at the second Court hearing to object to the scheme and, as I noted above, rhipe tendered a letter from ASIC issued pursuant to s 411(17)(b) of the Act stating that ASIC has no objection to the scheme. There is no reason to doubt that rhipe has brought to the Court's attention all matters that could be considered relevant to the exercise of the Court's discretion, or to doubt that there was full and fair disclosure to members of all information material to the decision whether to vote for or against the applicable scheme. The factual information contained in the scheme booklet was verified in the usual way and the scheme booklet otherwise satisfies the relevant statutory requirements. These matters support an order approving the scheme. 2. I am satisfied that the Court should also make an order exempting rhipe from compliance with s 411(11) of the Act, where the scheme will not modify any rights of shareholders or of creditors or of persons dealing with rhipe: Re Equinox Resources Ltd (2004) 49 ACSR 692; [2004] WASC 143 at [22]; Re Toll Holdings Ltd (No 2) [2015] VSC 236 at [18]–[19]. Orders 1. For these reasons, I made the orders sought by rhipe at the conclusion of the second Court hearing in respect of the scheme. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 22 October 2021