Supreme Court New South Wales Medium Neutral Citation: In the matter of Sydney Airport Limited and The Trust Company (Sydney Airport) Limited as responsible entity for Sydney Airport Trust 1 (No 2) [2022] NSWSC 103 Hearing dates: 9 February 2022 Date of orders: 9 February 2022 Decision date: 11 February 2022 Jurisdiction: Equity - Corporations List Before: Black J Decision: Plaintiffs would be justified in giving effect to and implementing proposals and giving effect to consequential constitutional amendments. 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. CORPORATIONS – Arrangements and reconstructions – Application under s 63 of the Trustee Act 1925 (NSW) for judicial advice with respect to the implementation of trust scheme Legislation Cited: - Corporations Act 2001 (Cth), ss 411, 601GC - Trustee Act 1925 (NSW), s 63 Cases Cited: - Re Atlas Iron Ltd (No 2) [2016] FCA 481 - Re Australian Leisure and Entertainment Property Management Limited [2021] NSWSC 1710 - Re Aveo Group Ltd [2019] NSWSC 1679 - Re Central Pacific Minerals NL [2002] FCA 239 - Re Class Ltd (No 2) [2022] NSWSC [ ] - Re Commonwealth Managed Investments Ltd [2014] NSWSC 244 - Re Cromwell Property Securities Ltd [2006] NSWSC 1449 - Re Ellerston Global Investments Ltd [2020] NSWSC 1108 - Re Equinox Resources Ltd (2004) 49 ACSR 692; [2004] WASC 143 - Re Macquarie Goodman Funds Management Ltd (2004) 52 ACSR 194; [2004] NSWSC 1197 - Re Mirvac Ltd (1999) 32 ACSR 107; [1999] NSWSC 457 - Re NRMA Ltd (No 2) (2000) 156 FLR 412; [2000] NSWSC 408 - Re Redcape Property Fund Ltd and Trust Company (RE Services) Ltd (as the responsible entity for the Redcape Property Trust) [2012] NSWSC 486 - Re Seven Network Ltd (2010) 267 ALR 583; 77 ACSR 701; [2010] FCA 400 - Re Sydney Airport Limited and The Trust Company (Sydney Airport) Limited as responsible entity for Sydney Airport Trust 1 [2022] NSWSC 25 - Re Toll Holdings Ltd (No 2) [2015] VSC 236 Category: Principal judgment Parties: Sydney Airport Limited (First Plaintiff) The Trust Company (Sydney Airport) Limited as responsible entity for Sydney Airport Trust 1 (Second Plaintiff) Representation: Counsel: J Williams SC/T O'Brien (Plaintiff) I Jackman SC (Acquirer) Solicitors: Allens (Plaintiff) Herbert Smith Freehills (Acquirer) File Number(s): 2021/332289 Judgment 1. By Originating Process filed on 22 November 2021, Sydney Airport Limited ("SAL") sought orders under ss 411 and 1319 of the Corporations Act 2001 (Cth) ("Act") that it convene meetings of two classes of securityholders, being the UniSuper Securityholder (as defined) and all members other than the UniSuper Securityholder, to consider a proposed scheme of arrangement ("Company Scheme") relating to the acquisition of shares in SAL. The Trust Company (Sydney Airport) Limited ("TTCSAL") as responsible entity for Sydney Airport Trust 1 ("SAT1"), also sought judicial advice under s 63 of the Trustee Act 1925 (NSW) that it would be justified in convening meetings of the two classes of securityholders, again being the Unisuper Securityholder and all other securityholders to consider resolutions to amend the constitution of SAT1 and associated advice ("Trust Scheme"). 2. On 17 December 2021, I made orders convening the scheme meetings and approving a scheme booklet for distribution to securityholders, and gave judicial advice, in respect of the Company Scheme and the Trust Scheme, for the reasons set out in my judgment delivered on 21 January 2022 (Re Sydney Airport Limited and The Trust Company (Sydney Airport) Limited as responsible entity for Sydney Airport Trust 1 [2022] NSWSC 25). 3. The two Company Scheme meetings and the two Trust Scheme meetings were held in accordance with the Court's orders and judicial advice on 3 February 2022. These comprised concurrent meetings of all Scheme Securityholders other than the UniSuper Securityholder to consider the Company Scheme and Trust Scheme and, immediately thereafter, concurrent meetings of the UniSuper Securityholder to consider both the Company Scheme and Trust Scheme. At the first meetings, securityholders other than Unisuper approved the Company Scheme, both by a majority in number present and voting and by more than 75% of the votes cast. A total of 1,111,382,282 votes were cast, representing approximately 48.45% of all votes able to be cast, at those meetings. Approximately 96.03% of the votes cast by value, and approximately 79.29% of securityholders by number present and voting at those meetings, voted in favour of the Company Scheme. The two resolutions put to the first meetings to give effect to the Trust Scheme were passed by securityholders with approximately 96.1% of votes cast in favour of each resolution. UniSuper also voted in favour of the Company Scheme and Trust Scheme in respect of the UniSuper Securities at the UniSuper Scheme Meetings. No securityholder or other person then indicated an intention to appear at the second Court hearing or appeared at that hearing to object to the Company Scheme or the Trust Scheme. 4. I also note that the bidder consortium's members (and their affiliates) either did not cast any votes, or abstained from voting or instructed their agents not to vote or to abstain from voting at the scheme meetings, in respect of any securities held by their listed equities teams. In any event, as Mr Williams points out, the votes cast in favour of the schemes exceeded the relevant thresholds for their approval by margins comfortably in excess of the 2.64% of the scheme securities held by the consortium members. 5. At the second Court hearing, I made further orders approving the company scheme and associated orders and gave the further opinion, advice and direction of the Court, under s 63 of the Trustee Act, that TTCSAL was justified in taking certain steps to implement the trust scheme. These are my reasons for doing so. I have drawn on the helpful submissions of Mr Williams, who appears for SAL and TTCSAL in this application in this judgment. Affidavit evidence 1. At the second Court hearing, SAL and TTCSAL relied on an affidavit dated 8 February 2022 of Mr David Gonski, the chair of the scheme meetings, dealing with the conduct of and result at those meetings. SAL and TTCSAL also read an affidavit dated 8 February 2022 of Mr Guy Alexander dealing the registration of the scheme booklet with the Australian Securities and Investments Commission ("ASIC"), the dispatch of 'reminder to vote' communications to scheme securityholders, the advertisement of the second Court hearing, the absence of any notice from any person proposing to appear at the second Court hearing, announcements made by Sydney Airport concerning the results of the scheme meetings and the fact that the Foreign Investment Review Board had no objection to the schemes. By an affidavit dated 7 February 2022, Mr Barry Azzopardi addressed the despatch of scheme materials to scheme securityholders, the receipt of proxy forms, the recording of votes cast at the virtual scheme meetings and the conduct of those meetings. The applicable principles and determination in respect of approval of the Company Scheme 1. Section 411(4) of the Act provides that an arrangement is binding if, at a meeting of scheme shareholders, it is passed by a majority of scheme shareholders present and voting (in person or by proxy) and by 75% of votes cast and it is approved by order of the Court. At the second Court hearing, the Court will first determine whether the procedural requirements in respect of the scheme have been satisfied and then exercise its discretion as to whether or not to approve the scheme: Re Central Pacific Minerals NL [2002] FCA 239 at [12]; 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]; Re Aveo Group Ltd [2019] NSWSC 1679 at [15]. The Court is not bound to approve a scheme merely because it has previously made orders for the convening of meetings and the statutory majorities have been achieved and will have due regard to members' assessment of their interests as manifested in the voting at the scheme meeting, and will recognise that shareholders are generally "the best judges of whether an arrangement is to their commercial advantage", and will therefore "be reluctant to make decisions contrary to the views of security holders expressed at meetings": Re NRMA Ltd (No 2) (2000) 156 FLR 412; [2000] NSWSC 408 at [22]; Re Seven Network Ltd (2010) 267 ALR 583; 77 ACSR 701; [2010] FCA 400 at [31]; Re Atlas Iron Ltd (No 2) [2016] FCA 481 at [5]. 2. In the exercise of its discretion, the Court will generally have regard to whether scheme members 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 Seven Network Limited above at [35]-[40]; Re Aveo Group above at [15]. I have drawn on Mr Williams' submissions and my judgment in Re Australian Leisure and Entertainment Property Management Limited [2021] NSWSC 1710 in setting out these principles. 3. I am satisfied that the statutory and procedural requirements for the Company Scheme under s 411 of the Act have been satisfied. There is no reason to think that SAL has not complied with the disclosure requirements in s 412 of the Act in respect of the explanatory statement for the Company Scheme. The resolutions in respect of the Company Scheme were passed by a majority in number of members present and voting (either in person or by proxy) at the scheme meeting and by more than 75% of the votes cast on the resolution in accordance with s 411(4)(a)(ii) of the Act and there was a reasonable level of attendance at that meeting. 4. Mr Williams points out that, by error, notice of the scheme meetings was initially not given to the external auditor of SAL and the trust under s 249K and 252G of the Act, but that oversight was corrected and the auditor attended those meetings. I accept that this matter is a procedural irregularity under s 1322(1)(b)(ii) of the Act or an accidental omission under section 1322(3) of the Act and the meetings are validated by s 1322(2) or s 1322(3) of the Act: Re Ellerston Global Investments Ltd [2020] NSWSC 1108; Re Class Ltd (No 2) [2022] NSWSC 80 at [10]. 5. There is no reason to doubt that the Company Scheme is fair and reasonable in that an intelligent and honest person who was a member of the relevant class, properly informed and acting alone, might approve it, given SAL shareholders' support for the scheme resolution; the SAL directors' recommendation that shareholders vote in favour of the scheme for the reasons given in the scheme booklet; the independent expert's opinion that the Company Scheme and Trust Scheme are in the best interests of securityholders, in the absence of a superior proposal; and the disclosures in the scheme booklet of the potential benefits and disadvantages of the schemes. SAL has tendered a letter from ASIC indicating that it has no objection to the scheme under s 411(17)(b) of the Act, and there is evidence that the conditions precedent to the Company Scheme (other than Court approval of the Company Scheme and the grant of the judicial advice) have been waived or satisfied. There is no reason to think that any other necessary matters have not been brought to the Court's attention. 6. I am satisfied that the Court should approve the Company Scheme and also make an order exempting SAL 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 SAL: 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]. For these reasons, I made the orders sought by SAL in respect of the Company Scheme at the second Court hearing. Judicial advice in respect of the Trust Scheme 1. The role of the Court in granting judicial advice at the second Court hearing is of a similar nature to that in company schemes under Pt 5.1 of the Act. An application for judicial advice that the responsible entity is justified in giving effect to and implementing a restructuring approved by unitholders can be brought before the Court once unitholders' views, expressed through voting at the relevant meeting or meetings, is known and any unitholder who wishes to appear to oppose the application is given an opportunity to do so: Re Mirvac Ltd (1999) 32 ACSR 107; [1999] NSWSC 457 at [48]; Re Macquarie Goodman Funds Management Ltd (2004) 52 ACSR 194; [2004] NSWSC 1197 at [10]. At the second hearing, the Court will consider whether the procedural requirements for the obtaining of the unitholders' approval have been satisfied, and the Court then gives considerable weight to the level of support for the proposed transaction, and to whether any person appears at the second Court hearing to express any opposition to it: Re Cromwell Property Securities Ltd [2006] NSWSC 1449 at [23]; Re Commonwealth Managed Investments Ltd [2014] NSWSC 244 at [3]. I have again drawn on Mr Williams' submissions and my judgment in Re Australian Leisure and Entertainment Property Management Limited above in setting out these principles. 2. TTCSAL seeks orders under s 63 of the Trustee Act to the effect that it would be justified in giving effect to and implementing the transactions contemplated by the resolutions passed by unitholders at the Trust Scheme meetings. There is nothing to suggest that those resolutions should not be given effect or that TTCSAL in its capacity as responsible entity of SAT1 would not otherwise be justified in giving effect to those resolutions and the proposed transaction. For these reasons, I was also satisfied that I should also give the judicial advice sought by TTCSAL as responsible entity of SAT1 and I also made orders to that effect at the second Court hearing. ********** Amendments 15 February 2022 - Amendment to Representation section. 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: 15 February 2022