Supreme Court New South Wales Medium Neutral Citation: In the matter of CSG Limited (No 2) [2020] NSWSC 39 Hearing dates: 5 February 2020 Date of orders: 05 February 2020 Decision date: 05 February 2020 Jurisdiction: Equity - Corporations List Before: Gleeson J Decision: (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 agreed to by the said members at the meeting held on 3 February 2020 (the terms of which were set out in Annexure B to the orders of the Court made on 17 December 2019) (Scheme), be approved. (2) 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. (3) These orders be entered forthwith. Catchwords: CORPORATIONS – Scheme of arrangement – transfer scheme – approval of scheme under Corporations Act 2001 (Cth) s 411(4)(b) – whether direct evidence of conditions precedent relating to regulatory approval is appropriate – Scheme approved Legislation Cited: Corporations Act 2001 (Cth), ss 411(4), 411(11), 411(12), 411(17), Ch 6 Competition and Consumer Act 2010 (Cth), s 50 Cases Cited: Central Pacific Minerals NL (2002) FCA 239 Legend Corporation Limited (No 2) [2019] FCA 1444 MAC Services Group Limited [2010] NSWSC 1474 Macquarie Private Capital A Limited [2008] NSWSC 323 Re Mosaic Oil NL (No 2) [2010] FCA 1186 Re Permanent Trustee Co Ltd (2002) 43 ACSR 601 Re Seven Network Limited (No 3) (2010) 77 ACSR 701 Re Toll Holdings Ltd (No 2) [2015] VSC 236 W D & H O Wills Holdings Ltd Application [1999] NSWSC 866 Category: Principal judgment Parties: CSG Limited (Plaintiff) Fuji Xerox Asia Pacific Pte Ltd (Interested Party) Representation: Counsel: Mr M Oakes SC Mr R Foreman SC (Interested Party) Solicitors: Minter Ellison (Plaintiff) Corrs Chambers Westgarth (Interested Party) File Number(s): 2019/335544 Judgment 1. GLEESON J: Application is made by CSG Limited (CSG) for an order under s 411(4)(b) of the Corporations Act 2001 (Cth) approving a scheme of arrangement between itself and its shareholders. The scheme was described by Black J in his judgment given in relation to the convening of the meeting at the first court hearing: In the matter of CSG Ltd [2019] NSWSC 1905. 2. The scheme is a transfer scheme. The effect of the scheme, upon implementation, will be that all of the existing shares in CSG will be transferred by force of the scheme to Fuji Xerox Asia Pacific Pte Ltd (Fuji), a Singapore-registered company, so that CSG will become a wholly owned subsidiary of Fuji. Fuji, in turn, has agreed to make payment of the scheme consideration to the several transferors. This and related payment mechanisms and other necessary steps are provided for in an implementation deed between CSG and Fuji. 3. The meeting was held on 3 February 2019. The resolution agreeing to the scheme was passed by the requisite majorities referred to in s 411(4)(a) of the Corporations Act. It is not necessary to set out the figures in detail; it is sufficient to record that the scheme was agreed to by 99.75 per cent of votes cast by shareholders representing 88.89 per cent in number of shareholders present, either in person or by proxy. With respect to voter turnout, the votes which were cast at the meeting constituted a substantial percentage of the total number of issued shares of CSG. 4. The role of the Court at the second hearing is supervisory. The Court is concerned to be satisfied that all procedural requirements have been met, that the majority of shareholders have acted in good faith and not for any illegitimate purpose, and that the scheme is fair and reasonable: Re Seven Network Limited (No 3) (2010) 77 ACSR 701 at [31]-[40]. As to the last matter, whilst the Court must form a favourable view of the arrangement, the Court will generally take the view that shareholders are the best judges of whether an arrangement is to their commercial advantage: Re Permanent Trustee Co Ltd (2002) 43 ACSR 601 at [9]-[10]; Central Pacific Minerals NL (2002) FCA 239 at [12], [14]. 5. Affidavit evidence of Mr Squires, Mr Gajic and Mr Campbell shows that all the procedural requirements have been complied with. The meeting was convened in accordance with the orders made on 17 December 2019 and, as indicated, the scheme was agreed to by an overwhelming majority of shareholders. 6. Mr Oakes SC for CSG has drawn one matter to the Court's attention in respect to the conduct of the scheme meeting. In accordance with the practice which has developed particularly with listed companies, the result of the poll conducted at the meeting was announced to the Australian Stock Exchange (ASX) by the company after the close of the meeting. The evidence reveals that the chairperson of the meeting informed the meeting that the results of the poll in the scheme resolution would be announced via the ASX as soon as they were finalised. The meeting closed at 10.30am and I am informed from the bar table, and accept, that the announcement to the ASX of the result of the poll occurred at about 11.25am. 7. The question of whether the scheme resolution is passed at a meeting of shareholders when the result of the poll is not announced to the meeting itself but the meeting is told will be transmitted to the ASX for dissemination, and that subsequently occurs, was considered by Barrett J in MAC Services Group Limited [2010] NSWSC 1474. His Honour concluded at [22]: … Rather, it should be accepted that the process of a poll, of its nature, may extend beyond the time at which the persons making up the meeting at which it is demanded and directed cease to be together and, if the poll has been directed in such a way that the result can only crystallise after that time, the meeting is to be regarded as continuing until the result does crystallise. In using the word 'crystallise', I deliberately avoid the choice between ascertainment of the result and formal declaration of the result (see, as to this distinction in the case of election of officers, R v Coaks (1854) 3 El & Bl 249; 118 ER 1133; Lynch v McGrane (1965) 7 FLR 188). Ascertainment will always precede declaration but the important factor is, to my mind, completion of the process, as directed, so that the result is manifested in a way appropriate to the circumstances. Romer LJ, in his concurring judgment in Holmes v Keyes, said (at 217) that the tenure of the directors elected did not begin 'until the result of the poll has been made known', this being the form of words also preferred by Holland J in Ryan v South Sydney Junior Rugby League Club Ltd (1974) 3 ACLR 486 at 490. 1. I agree with that reasoning. No issue arises in the present case concerning the manner in which the poll was conducted. 2. No shareholder has appeared to oppose the scheme. The Court may thus be satisfied that no shareholder desires to raise any matter of objection so far as approval of the scheme is concerned. This, coupled with the expression of shareholders' wishes through voting, is a powerful indicator of shareholders' own views as to where their interests lie. 3. An independent expert's report of Lonergan Edwards & Associates Limited included in the scheme booklet, states that the scheme is fair and reasonable and in the best interests of CSG's shareholders in the absence of a superior offer. Mr Craig Edwards, a co-author of that report, has deposed that he holds that opinion, which is supported by the analysis contained in the report. ASIC had an opportunity to examine the report before the first court hearing. It did not appear at that hearing to argue that the report was unreliable or defective or flawed. 4. I am satisfied that the scheme is fair and reasonable, taking into account the director's recommendation; the existence and content of the independent expert report which has been verified by one of its co-authors; that shareholders having received that report as part of the scheme booklet and explanatory statement voted by overwhelming majority to agree to the scheme; that there is no evidence of oppression in the conduct of the scheme meeting; and that no shareholder has come forward to oppose the scheme. 5. There has been tendered a letter dated 4 February 2020, from a delegate of ASIC stating that, under s 411(17)(b) of the Corporations Act, ASIC has no objection to the scheme. Having regard to the provisions of s 411(17), the court need not pursue the question of avoidance of the provisions of Chapter 6 of the Corporations Act: Macquarie Private Capital A Limited [2008] NSWSC 323 at [29]-[35]; Re Mosaic Oil NL (No 2) [2010] FCA 1186 at [30]-[33]. 6. One further matter should be mentioned. The implementation deed contains provisions for the giving of certificates on each side as to the performance of conditions precedent and other necessary matters. The certificates in the form of a deed given by both CSG and Fuji have been tendered. Whilst this is a useful technique to have been adopted to simplify the task of proving satisfaction of conditions precedent which relate to complex circumstances, it has been said that, where there are important regulatory issues at stake, it is desirable that the Court be provided with additional evidence to show that the regulatory approval to which the condition relates has in fact been given, and not merely that there is a certificate to that effect: W D & H O Wills Holdings Ltd Application [1999] NSWSC 866 at [11] (Austin J). 7. Senior counsel for CSG drew to the Court's attention comments of O'Bryan J in the matter of Legend Corporation Limited (No 2) [2019] FCA 1444 at [28] - [30] concerning the discussion in some cases as to the need for primary evidence, as to the satisfaction of conditions precedent or whether it is sufficient for the parties to provide certificates confirming that conditions have been satisfied or waived. It is not necessary, for present purposes, to comment on the remarks expressed in that case. 8. In the present case the conditions precedent stated in the scheme include various approvals by regulators, namely, the Australian Competition and Consumer Commission (ACCC) and the New Zealand Commerce Commission with respect to the acquisition of the shares in CSG by Fuji. CSG tendered evidence to show that the ACCC does not intend to conduct a public review of the proposal pursuant to s 50 of the Competition and Consumer Act 2010 (Cth), and that the NZCC does not intend to undertake any further enquiries at this time. It is appropriate that such evidence should have been adduced, in addition to evidence that certificates had been given by the parties. 9. I am satisfied that it is appropriate that the Court grant approval of the scheme as envisaged by s 411(4)(b) of the Corporations Act. 10. In addition, an order is sought exempting CSG from the requirements of s 411(11) of the Corporations Act which requires a copy of the Court's order under s 411(4)(b) to be annexed to the company's constitution issued after the order has been made, unless the Court exempts the company from compliance with that requirement. An exemption order under s 411(12) is appropriate in the present circumstances where the scheme does not amend CSG's constitution and, upon implementation, CSG will become a wholly owned subsidiary of Fuji: Re Toll Holdings Ltd (No 2) [2015] VSC 236 at [18]-[19]. There is no utility in requiring compliance with s 411(11). 11. Accordingly, the Court makes the following orders: 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 agreed to by the said members at the meeting held on 3 February 2020 (the terms of which were set out in Annexure B to the orders of the Court made on 17 December 2019) (Scheme), be approved. 2. 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. 3. These orders be entered forthwith. ********** Amendments 17 March 2020 - Amendment to jurisdiction - not visible 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: 17 March 2020