Supreme Court New South Wales Medium Neutral Citation: In the matter of Link Administration Holdings Limited (No 2) [2024] NSWSC 529 Hearing dates: 30 April 2024 Date of orders: 30 April 2024 Decision date: 03 May 2024 Jurisdiction: Equity - Corporations List Before: Black J Decision: Orders made approving a 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) ss 411, 1319 Cases Cited: - Re Anaconda Nickel Holdings Pty Ltd (2003) 44 ACSR 229 - Re GBST Holdings Ltd [2019] NSWSC 1503 - Re Invocare Ltd (No 2) [2023] NSWSC 1350 - Re Link Administration Holdings Ltd [2024] NSWSC 331 - Re Pendal Group Ltd (No 3) [2023] NSWSC 14 Category: Principal judgment Parties: Link Administration Holdings Limited (Plaintiff) Representation: Counsel: D F C Thomas SC (Plaintiff) I Ahmed SC (Bidder) Solicitors: Herbert Smith Freehills (Plaintiff) Gilbert & Tobin (Bidder) File Number(s): 2024/88574 Judgment 1. By Originating Process filed on 7 March 2024, the Plaintiff, Link Administration Holdings Ltd ("Link") applied for orders under ss 411 and 1319 of the Corporations Act 2001 (Cth) ("Act"), in respect of a proposed scheme of arrangement. I made the orders sought by Link at the first Court hearing on 21 March 2024 at the conclusion of that hearing, for the reasons set out in an earlier judgment (Re Link Administration Holdings Ltd [2024] NSWSC 331). The applicable scheme resolution was passed by the requisite majorities at the scheme meeting held on 24 April 2024. 2. Link now seeks an order under s 411(4) of the Corporations Act 2001 (Cth) approving the proposed scheme of arrangement. I made the orders sought by Link at the conclusion of the second Court hearing on 30 April 2024 and these are my reasons for doing so. I have drawn on the helpful submissions of Mr Thomas who appeared for Link in this judgment. Affidavit and other evidence 1. In addition to the evidence led at the first Court hearing on 21 March 2024, Link reads an affidavit dated 29 April 2024 of Mr Andrew MacLachlan, its Chief Financial Officer, which addressed the registration of the scheme booklet with the Australian Securities & Investment Commission ("ASIC"); the dispatch of scheme documents to Link shareholders; the conduct of the scheme meeting and the passage of the scheme resolution and the voting participation rate at that meeting; and the publication of an announcement by Link to Australian Securities Exchange Limited giving notice of the second Court hearing. 2. Link also tendered a letter dated 29 April 2024 from ASIC confirming that it has no objection to the scheme, satisfying the requirements of s 411(17) of the Act; and a condition precedent certificate executed by Link and the acquiring entity, Mitsubishi UFJ Trust & Banking Corporation ("Bidder") evidencing satisfaction of the conditions precedent to the scheme. Applicable principles and determination 1. Mr Thomas rightly observes that the principles that apply to the role of the Court in approving a scheme of arrangement under s 411(4)(b) of the Act are well established and refers to my observations in Re Invocare Ltd (No 2) [2023] NSWSC 1350 (at [8]-[9]) in that regard. As Mr Thomas points out, the Court will need to be satisfied that the relevant procedural requirements in respect of the scheme have been met and will then exercise a discretion as to whether or not to approve the scheme. 2. The procedural requirements for the scheme, in respect of the registration and dispatch of the scheme booklet, have been satisfied. The requisite majorities for the purposes of s 411(4)(a)(ii) of the Act were also satisfied at the scheme meeting, where 264,066,615 votes (99.31% of all votes cast) representing 1,581 Link shareholders (84.91% of all Link Group shareholders present and voting either for and against the scheme, in person or by proxy) were in favour of the scheme resolution; and 1,844,374 votes (0.69% of all votes cast) representing 281 Link shareholders (15.09% of all Link Group shareholders present and voting either for or against, in person or by proxy) were against the scheme resolution. A total of 265,910,989 votes were cast at the scheme meeting (either in person or by proxy) by 1,862 Link shareholders (representing approximately 52% by number of Link shares and approximately 10% by number of Link shareholders). 3. I had addressed a question concerning a relevant interest in Link shares held by the Bidder, a consolidated subsidiary of Mitsubishi UFJ Financial Group, Inc ("MUFG"), in my earlier judgement (at [15]-[17]) as follows: "… Mr Thomas addresses the proposed treatment of shares forming MUFG's relevant interests at the scheme meeting. He points out that neither Bidder nor MUFG is the registered holder of any Link shares and they do not have the power to control voting rights attaching to, or the power to dispose of, any Link Shares. However, as is disclosed in section 6.5 of the proposed scheme booklet, MUFG and Bidder are taken to have a relevant interest (as defined in the Act) in 7.25% of Link's shares held by Morgan Stanley, an investment bank and financial services company in which MUFG has a minority interest, and 1.46% of Link shares held by First Sentier Investors ("FSI") that is a subsidiary of MSG. Mr Thomas also points out that Morgan Stanley is not controlled by MUFG and operates on the other side of an information barrier and, although FSI is a subsidiary of MUFG, it is a stand-alone business which operates independently and also on the other side of an information barrier. Mr Thomas notes that, in correspondence with Link, ASIC has pointed to a common practice for related body corporates' shares not to be voted in scheme meetings or otherwise for the Court to disregard those votes: Re Kangaroo Resources Ltd [2018] WASC 327 at [44]; T Damien & A Rich, Schemes, Takeovers and Himalayan Peaks, 4th ed, 2021 at pp 839-842. ASIC has asked Link to explain and draw to the Court's attention to how allowing the votes of FSI to count towards the shareholder approval threshold is consistent with this approach. Link accepts that such a common practice exists in respect of bidders and their related bodies corporates. However, Mr Thomas submits that an exception to the general position arises where the relevant shares are held on behalf of third party beneficiaries by a related body corporate of the bidder operating as a professional fund manager or custodian: Schemes, Takeovers and Himalayan Peaks at p 840. He submits that, in those situations, there is no good reason for the shares held by the fund manager or custodian not to be voted in accordance with decisions reached by the manager or custodian with regard to their contractual and general law duties to their third party beneficiaries, and that the alternative would risk disenfranchising beneficial owners of shares merely by reason of the identity of their fund manager or custodian. Mr Thomas also points out that, consistent with that exception, Perpetual, a professional fund manager, voted Pendal shares held by it on behalf of its funds or client discretionary accounts in favour of the Pendal scheme in 2023, although the voting of those shares had no effect on the outcome and the Court did not need to consider whether those shares ought be excluded in determining the result of the scheme meeting: Re Pendal Group Ltd (No 3) [2023] NSWSC 14 at [16]. Mr Thomas submits that, where FSI is a professional fund manager, its and MUFG's consequential relevant interest in Link is held in a fiduciary capacity and is subject to the terms of the relevant client mandate under which it must act in its clients' interest and it is appropriate that the votes be counted. That position is plainly also the case, a fortiori, in respect of Morgan Stanley in which MUFG has a minority interest. Mr Thomas notes that Link has indicated to ASIC that it will tag all shares in which MUFG has a relevant interest so that any impact of those votes can be identified at the second Court hearing and taken into account in the exercise of the Court's discretion. It seems to me that approach allows a proper balance between not disenfranchising Morgan Stanley, FSI and their third party investors, and allowing the Court to assess the impact of this matter on the vote at the second Court hearing and, where this approach is to be adopted, these matters do not give rise to any reason not to convene the scheme meeting." 1. Mr Thomas notes that the Bidder's relevant interest in Links shares is largely held through nominee holders who also hold Link shares for other unassociated Link shareholders, and this matter is addressed in Mr MacLachlan's affidavit read at this hearing. He points out that, if it were assumed that votes attached to all shares in which the Bidder had a relevant interest at 3.00 pm on 22 April 2024 (the voting cut off date) were included in the votes cast in favour of the scheme, the scheme resolution would still have been passed by the requisite statutory majorities if those votes in favour were disregarded. Where the voting of those shares had no effect on the outcome of the scheme meeting, this matter gives rise to no reason not to approve the scheme: compare Re Pendal Group Ltd (No 3) [2023] NSWSC 14 at [16]. 2. As I noted above, Link published a notice of the second Court hearing for approval of the scheme on the ASX Market Announcements Platform on 24 April 2024. Link tendered a conditions precedent certificate at the hearing, indicating that all of the relevant conditions precedent have been satisfied or waived, other than the condition relating to Court approval of the scheme. As I noted above, ASIC has also confirmed that it has no objection to the scheme for the purposes of s 411(17)(b) of the Act, and that confirmation is sufficient to satisfy the requirements of that section. 3. The matters that the Court will generally take into account in the exercise of the Court's discretion include whether the scheme complies with the statutory and regulatory requirements for schemes of arrangement, and that is satisfied here. The Court will have regard to whether shareholders have voted in good faith and not for an improper purpose; whether there has been accurate and comprehensive disclosure of the details of the scheme and its effect to those voting on it; and whether minority shareholders would be oppressed by the scheme; and none of these matters give rise to concern here. There is no reason to doubt that the scheme is fair and reasonable in the sense that an intelligent and honest shareholder who is a member of the relevant class, properly informed and acting alone might approve it. As Mr Thomas points out, the independent expert's report in respect of the scheme here concluded that the scheme was fair and reasonable and in the best interests of Link shareholders in the absence of a superior proposal, and Link shareholders have agreed to the scheme by the requisite majorities. There is also no suggestion that the scheme offends public policy; and there is also no reason to doubt that all matters that could be considered relevant to the exercise of the Court's discretion have been brought to the attention of the Court. Mr Thomas submits and I accept that the Court's discretion is appropriately exercised to approve the scheme pursuant to s 411(4)(b) of the Act. 4. Mr Thomas also submits, and I accept, that there is no utility in annexing the Court order made in this scheme to Link's constitution, where that order does not effect any change to the constitution or to any rights of Link shareholders, creditors or of persons dealing with Link. I accept that submission and, consistent with the case law, I will make an order under s 411(12) of the Act exempting Link from that requirement: Re Anaconda Nickel Holdings Pty Ltd (2003) 44 ACSR 229 at 240 [65]; Re GBST Holdings Ltd [2019] NSWSC 1503 at [15]). Orders 1. For these reasons, I made the orders sought by Link at the second Court hearing on 30 April 2024. ********** 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: 03 May 2024