FEDERAL COURT OF AUSTRALIA

Queensland Teachers’ Union Health Fund Limited v Teachers Federation Health Limited, in the matter of Queensland Teachers’ Union Health Fund Limited [2025] FCA 481

ORDERS

DEFINITIONS

In these orders, terms have the following meanings:

(a)    TUH Company Member means a person who has been admitted as a company member of the Plaintiff as at the Scheme Record Date (being 48 hours before the Scheme Meeting or such other date as determined by the Plaintiff (and approved by the Court if necessary)).

(b)    Scheme Booklet means the explanatory statement, substantially in the form of pages 78 to 242 of Exhibit AJB-1 to the affidavit of Anna Jane Baker affirmed on 8 May 2025 Baker Affidavit, approved for the purposes of section 411(1) of the Corporations Act 2001 (Cth) including:

(i)    the inclusion of all final and contemplated annexures;

(ii)    correction of any minor typographical or grammatical errors and final typesetting and formatting;

(iii)    any minor amendments required or approved by the Australian Securities and Investments Commission (ASIC) for registration under s 412(6) of the Corporations Act;

(iv)    the correction or update of, or as a result of, any relevant date reference; and

(v)    the adoption of any other amendments approved by the Court.

THE COURT ORDERS THAT:

1.    Pursuant to ss 411(1), 413 and 1319 of the Corporations Act, the plaintiff convene and hold a meeting (Scheme Meeting) of TUH Company Members for the purposes of considering, and if thought fit, agreeing (with or without modifications or conditions) to the proposed scheme of arrangement to be made between the plaintiff and TUH Company Members (Scheme), the terms of which are set out in Annexure B of the Scheme Booklet.

2.    The Scheme Meeting be held at 4.00pm on Wednesday, 18 June 2025 (or on such other date and such other time as the Court may approve), in person at 438 St Pauls Terrace, Fortitude Valley QLD 4006, and virtually through an online meeting platform hosted by Xcend to be accessed substantially in accordance with the instructions contained in the Notice of Scheme Meeting contained in Annexure D to the Scheme Booklet.

3.    Subject to these orders, the Scheme Meeting be convened, held and conducted in accordance with:

(a)    the provisions of Part 2G.2 of the Corporations Act that apply to members of a company limited by guarantee and the provisions of the plaintiff’s constitution that are not inconsistent with Part 2G.2 that apply to meetings of members; and

(b)    the Notice of Scheme Meeting substantially in the same form or effect contained in Appendix D to the Scheme Booklet.

4.    The chairperson of the Scheme Meeting be Mr John Battams, and should he be unable to attend for any reason, Mr Terry Burke be authorised to chair the Scheme Meeting.

5.    The chairperson appointed to the Scheme Meeting have the power to adjourn or postpone the Scheme Meeting in his absolute discretion for such time and to such date as the chairperson considers appropriate.

6.    At the Scheme Meeting, the resolution to approve the Scheme be decided by way of poll.

7.    Subject to the registration of the Scheme Booklet with ASIC, the following documents be approved for distribution to TUH Company Members:

(a)    the Scheme Booklet;

(b)    a proxy form for the Scheme Meeting (substantially in the same form as the pro forma copy at pages 250 to 251 of Exhibit AJB-1 to the Baker Affidavit) (Proxy Form);

(c)    the email to be sent to Electronic Recipients (as described in paragraph 8(a) below), substantially in the form which appears at pages 246 to 247 of Exhibit AJB-1 to the Baker Affidavit; and

(d)    the hard copy letter to be sent to Hardcopy Recipients (as described in paragraph 8(b) below) substantially in the same form or effect as the document at pages 248 to 249 of Exhibit AJB-1 to the Baker Affidavit,

with distribution to occur in the manner set out in order 8.

8.    Subject to the registration of the Scheme Booklet with ASIC, on or before 23 May 2025, the plaintiff is to cause to be issued:

(a)    to each TUH Company Member who, in accordance with the Corporations Act, has nominated an electronic address for the purpose of receiving notices of meeting from the plaintiff (Electronic Recipient), at such address, an email substantially in the form of the document which is at pages 246 to 247 of Exhibit AJB-1 to the Baker Affidavit, including:

(i)    an electronic hyperlink to view and/or download the Scheme Booklet;

(ii)    an electronic hyperlink to the webpage where the TUH Company Member can electronically lodge proxies for the Scheme Meeting;

(iii)    an electronic hyperlink to an online portal or website that is accessible by the Electronic Recipient to listen to and participate in the Scheme Meeting online; and

(iv)    an attached Proxy Form personalised with the Electronic Recipient’s details;

(b)    to each TUH Company Member (other than those referred to in order 8(a) above) (Hardcopy Recipient) by pre-paid post, or in the case of a TUH Company Member whose registered address is outside Australia, by pre-paid air mail, addressed to that TUH Company Member’s address set out in the register of members of the plaintiff:

(i)    a hard copy letter substantially in the same form or effect as the document at pages 248 to 249 of Exhibit AJB-1 to the Baker Affidavit);

(ii)    a hard copy Scheme Booklet;

(iii)    a hard copy Proxy Form personalised with the Hardcopy Recipient’s details; and

(iv)    a reply envelope addressed to the plaintiff’s registry.

9.    Rule 2.15 of the Federal Court (Corporations) Rules 2000 (Cth) (Corporations Rules) shall not apply to the Scheme Meeting, save in respect of the application of r 75-15(2) of the Insolvency Practice Rules (Corporations) 2016 (Cth).

10.    The plaintiff cause an office copy of these orders to be lodged with ASIC as soon as practicable after these orders are made.

11.    The proceeding be relisted at 10:15am on 23 June 2025 for such applications as appropriate following the Scheme Meeting.

12.    The plaintiff is to give notice of the hearing of the application pursuant to sections 411(4)(b) and 413 of the Corporations Act for orders approving the Scheme and other orders by publishing an advertisement in the public notices column of the Australian newspaper substantially in accordance with page 308 of Exhibit AJB-1 to the Baker Affidavit, such advertisement to be published for at least 5 days before the date allocated for the hearing and the plaintiff is otherwise exempted from compliance with rule 3.4 of the Corporations Rules.

13.    There be liberty to apply.

14.    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

GOODMAN J:

A. INTRODUCTION

1 At the conclusion of the first Court hearing in this proceeding on 12 May 2025, I made orders substantially in the form of the orders sought by the plaintiff (TUH) for the convening of a meeting of members of TUH under s 411(1) of the Corporations Act 2001 (Cth). I also made directions pursuant to s 1319 of that Act. These are my reasons for doing so.

2 Each of TUH and the defendant (Teachers Health) is a public company limited by guarantee which underwrites private health insurance policies and a private health insurer under the Private Health Insurance (Prudential Supervision) Act 2015 (Cth) (PHIPS Act).

3 On 2 May 2024, TUH and Teachers Health executed a merger implementation deed, which has subsequently been amended and which envisages a scheme of arrangement that, if implemented, would involve – in broad terms – all of the operations of TUH being transferred to Teachers Health; TUH members ceasing to be members of TUH; five members of TUH becoming nominated members of Teachers Health; and three directors of TUH becoming nominated directors of Teachers Health.

4 TUH has prepared a proposed scheme booklet, which contains a proposed explanatory statement within the meaning of s 412 of the Corporations Act and which attaches:

(1) the proposed scheme of arrangement;

(2) an independent expert report from Kroll Australia Pty Ltd which contains an opinion that the proposed scheme is in the best interests of TUH’s members, in the absence of any superior proposal;

(3) a deed poll executed by Teachers Health; and

(4) a proposed notice of a meeting of TUH’s members to vote on the proposed scheme (scheme meeting).

5 TUH provided the proposed scheme booklet to the Australian Securities and Investments Commission (ASIC).

6 TUH proposes to conduct the proposed scheme meeting on 18 June 2025, ahead of a second Court hearing on 23 June 2023. The proposed “Effective Date” for the proposed scheme is 1 July 2025.

B. OVERVIEW OF THE SCHEME

7 If the proposed scheme is implemented then, in broad terms:

(1)    all TUH’s assets will be transferred to and vested in Teachers Health on the basis that all such assets will become assets of the Teachers Health Benefits Fund;

(2)    all TUH’s liabilities will be transferred to, assumed by, and become liabilities of Teachers Health;

(3)    each TUH employee will become an employee of Teachers Health;

(4)    for the purposes of the PHIPS Act and all other purposes, each TUH policy will become referable to the Teachers Health Benefits Fund;

(5)    the rights, benefits and liabilities of TUH’s policy holders, and of all persons claiming through or under them (on the one hand) and Teachers Health (on the other hand), will be the same in all respects as they would have been if the TUH policies had been issued or entered into by Teachers Health instead of TUH;

(6)    five persons nominated by the TUH board of directors, or a subcommittee of that board, for that purpose will be and become “QLD Representative Company Members”, who will join the 18 current members of Teachers Health; and

(7)    three directors of TUH will be appointed to the board of directors of Teachers Health as the initial “QLD Specialist Directors”; and

(8)    TUH will be deregistered without winding up.

C. EVIDENCE

8 TUH relied upon the following evidence.

9 First, an affidavit of Ms Anna Baker, the Chief Risk Officer of TUH. Her evidence addresses inter alia:

(1)    aspects of the history of TUH;

(2)    an overview of the proposed scheme, including its key features, the conditions precedent to its implementation, some exclusivity provisions, and the absence of any break fee;

(3)    at some length, the detailed verification process for the “TUH Information” within the proposed scheme booklet, a process with which she was closely involved;

(4)    the proposed methods of dissemination of the proposed scheme booklet;

(5)    the manner in which it is proposed that the proposed scheme meeting will be conducted, including that Mr John Battams, Chair of TUH, will act as the chairperson for the proposed scheme meeting, with Mr Terry Burke, Deputy Chair of TUH available to act as the chairperson for that meeting instead of Mr Battams if needed. Each of Mr Battams and Mr Burke has indicated that other than as disclosed in the proposed scheme booklet he has no previous relationship with or dealings with Teachers Health or any other person interested in the proposed scheme and has no interest in respect of or obligation owing to any person that may give rise to a conflict of duty if he were to act as chairperson of the proposed scheme meeting;

(6)    the constitution of TUH’s board and the unanimous resolution of that board that TUH’s members vote in favour of the proposed scheme, subject to: (a) the absence of a superior proposal; and (b) the maintenance by the independent expert of the view that the proposed scheme is in the best interests of TUH’s members. Each director, subject to the same caveats, intends to vote in favour of the proposed scheme;

(7)    proposed arrangements concerning memberships and directorships in Teachers Health. As disclosed in the proposed scheme booklet, if the proposed scheme is implemented, then:

(a)    Mr Battams, Mr Burke and three other current TUH directors (Ms Leah Martens, Ms Thalia Edmonds and Mr Mark Anghel) will become the initial “QLD Representative Company Members” of Teachers Health;

(b)    Mr Battams, Mr Burke and Ms Edmonds will also be appointed to the board of directors of Teachers Health as the initial “QLD Specialist Directors” and entitled to fees and benefits;

(c)    for each of the current TUH directors, all of TUH’s obligations with respect to access, indemnification and insurance coverage will transfer to Teachers Health;

(8)    various proposed methods of communicating with members ahead of the proposed scheme meeting and ahead of the second Court hearing;

(9)    TUH’s intention to seek a range of orders under s 413 of the Corporations Act at the second Court hearing;

(10)    TUH’s view that the proposed scheme will not materially prejudice the interests of creditors of TUH;

(11)    the position of counterparties to contracts with TUH, namely that they have been provided with notice of the proposed scheme and none has foreshadowed objecting to the proposed scheme; and

(12)    the position of TUH’s employees, all of whom will be employed by Teachers Health, albeit that some executives may be offered voluntary redundancy.

10 Secondly, an affidavit of Bradley Shane Joyce, the Chief Executive Officer of Teachers Health. Mr Joyce deposes as to, inter alia, the deed poll and the verification process undertaken by Teachers Health with respect to the “Teachers Health Information” in the proposed scheme booklet.

11 Thirdly, an affidavit of Mr Dilip Ramaswamy, a solicitor in the employ of the solicitors for TUH. His evidence addresses the deed, an overview of the proposed scheme and some of the requirements of the Federal Court (Corporations) Rules (Cth).

12 Fourthly, an affidavit of Mr James Peterson, a legal consultant in the employ of the solicitors for TUH. He deposes as to communications with ASIC concerning the proposed scheme.

13 Fifthly, a letter from ASIC to TUH dated 9 May 2025 in which ASIC indicated that:

(1)    in accordance with its usual position it would not provide a written statement under s 411(17)(b) of the Corporations Act until the second Court hearing;

(2)    ASIC had received at least 14 days’ notification of the first Court hearing, as required by s 411(2)(a) of the Corporations Act; and

(3)    ASIC had had a reasonable opportunity to examine the terms of the proposed scheme and draft explanatory statement, as required by s 411(2)(b) of the Corporations Act.

14 Finally, a letter from ASIC to TUH dated 9 May 2025 in which ASIC indicated that, pursuant to reg 5.1.01(1) of the Corporations Regulations 2001 (Cth), it will allow TUH to send an explanatory statement in relation to the proposed scheme which does not set out certain information otherwise required by paragraph 8302(d) of Part 3 of Schedule 8 to the Regulations.

D.     CONSIDERATION

D.1    Statutory framework

15 I respectfully and gratefully adopt Justice O’Bryan’s outline of the statutory framework and the Court’s role within that framework in Rex Minerals Limited, in the matter of Rex Minerals Limited [2024] FCA 1051 at [21] to [27]:

21.     Part 5.1 of the Act provides a procedure whereby an arrangement between a company and its members can be made binding on all members. Section 411 is the principal provision. The procedure involves three main steps:

(a)     an application to the Court for an order to convene a scheme meeting (s 411(1));

(b)     if such an order is made, the convening of such a meeting at which a resolution to agree to the scheme is considered (s 411(4)(a)); and

(c)     if the resolution is passed by the necessary majorities, an application to the Court for an order approving the scheme (ss 411(4)(b) and 411(6)).

22.     The present application concerns the first stage, being an application to the Court for an order to convene the Scheme Meeting. Section 411 of the Act confers a discretion on the Court to make an order convening the Scheme Meeting if certain statutory conditions are met, namely:

(a)     an arrangement is proposed between a Pt 5.1 body and its members (or any class of them (s 411(1));

(b)     an application for the order is made in a summary way by that body (s 411(1));

(c)     14 days’ notice of the hearing of the application has been given to ASIC (or such lesser period as the Court or ASIC permits) (s 411(2)(a)); and

(d)     the Court is satisfied that ASIC has had a reasonable opportunity to:

(i)    examine the terms of the proposed arrangement to which the application relates and a draft explanatory statement relating to the proposed arrangement; and

(ii)     make submissions to the Court in relation to the proposed arrangement and the draft explanatory statement required by s 412 (ss 411(2)(b) and 411(3)).

23.     In addition to these requirements of s 411, the procedure is regulated by s 412 of the Act and reg 5.1.01 and Sch 8 to the Corporations Regulations 2001 (Cth) (Regulations), and by the Federal Court (Corporations) Rules 2000 (Cth) (Rules). The Regulations and the Rules prescribe certain information which is required to be sent to the members about the Scheme.

24.     The principles which apply to the exercise of the Court’s discretion at this first stage are well-known. In Re Amcor Ltd [2019] FCA 346 (Amcor), Beach J described the Court’s role at the first court hearing as follows (at [47], emphasis in original):

My function on an application to order the convening of a meeting is supervisory. At this stage I should generally confine myself to ensuring that certain procedural and substantive requirements have been met including dealing with adequate disclosure, with limited consideration of issues of fairness. But having said that, it is appropriate to consider the merits or fairness of a proposed scheme at the convening hearing if the issue is such as would unquestionably lead to a refusal to approve a proposed scheme at the approval hearing, that is, the proposed scheme appears now to be on its face “so blatantly unfair or otherwise inappropriate that it should be stopped in its tracks before going any further” (Re Foundation Healthcare Ltd (2002) 42 ACSR 252 at [44] per French J).

25.     It is not the Court’s role to usurp the shareholders’ decision whether to agree to a scheme. The question whether or not to accept particular consideration for shares is quintessentially a commercial matter for the members to assess, and they ought not be prevented from having the opportunity to do so, provided that the Court can be satisfied that they are acting on sufficient information and with time to consider what they are voting on: Crown Resorts Ltd, in the matter of Crown Resorts Ltd [2022] FCA 367 at [27], citing Amcor at [50] and Re ACM Gold Ltd (1992) 34 FCR 530 at 534.

26.     Therefore, if the arrangement is one that seems fit for consideration by the meeting of members, and is a commercial proposition likely to gain the Court’s approval if passed by the necessary majorities, then orders should be made to convene the meeting: Re Foundation Healthcare Ltd [2002] FCA 742; 42 ACSR 252 (Foundation Healthcare) at [36].

27.     In summary, the Court’s task at the first court hearing is to assess first, whether the statutory prerequisites to the making of orders convening a meeting have been met and second, whether it is appropriate for the Court to exercise its discretion in favour of making those orders.

(emphasis in original)

D.2    Enlivenment of the s 411 discretion

16 I was satisfied that each of the preconditions to the enlivenment of the Court’s discretion to make an order under s 411(1) requirements (as summarised in Rex Minerals at [22]) is met in the present case, because:

(1)    TUH, as a company registered under the Act, is a Part 5.1 body;

(2)    the proposed scheme is an “arrangement” between TUH and its members: see e.g. AGL Energy Services (Queensland) Pty Limited v AGL Energy Services Pty Limited [2010] FCA 452 at [15] (Emmett J); Woolworths Group Limited v Pinnacle Liquor Group Pty Limited [2019] FCA 1810 at [19] and [20(6)] (Farrell J);

(3)    TUH made an application for an order under s 411(1) in its originating process;

(4)    ASIC was – as it has acknowledged – given more than 14 days’ notice of hearing of the application and was given a reasonable opportunity to:

(a)    examine the terms of the proposed scheme of arrangement and the draft explanatory statement; and

(b)    make submissions to the Court in relation to the proposed scheme of arrangement and the draft explanatory statement.

D.3    Exercise of the s 411 discretion

17 I turn now to consider the exercise of the discretion.

18 I was satisfied that the orders sought should be made, taking into account the following matters in particular:

(1)    there has been compliance with the relevant provisions of the Rules and the Regulations (to the extent required after ASIC allowed non-compliance with respect to certain aspects of the Regulations). The detail of such compliance is unnecessary to recount;

(2)    verification procedures have been undertaken to ensure that each of the “TUH Information” and the “Teachers Health Information” in the proposed scheme booklet is complete and accurate in all material respects, is not misleading or deceptive in any material respect, and that there is no material omission in respect of either of the “TUH Information” or the “Teachers Health Information” which renders that information misleading or deceptive in any material respect;

(3)    the independent expert opines, as part of a reasoned report, that the proposed scheme is in the best interests of TUH’s members, in the absence of any superior proposal;

(4)    the directors of TUH have unanimously recommended that TUH’s members vote in favour of the proposed scheme, subject to the absence of a superior proposal and the maintenance by the independent expert of the view that the proposed scheme is in the best interests of TUH’s members;

(5)    there was no reason to question the bona fides of the proposed scheme or that it has been properly proposed;

(6)    having considered the evidence on this application the proposed scheme did not appear on its face to be “so blatantly unfair or otherwise inappropriate that it should be stopped in its tracks before going any further” (see In the matter of Foundation Healthcare Ltd [2002] FCA 742; (2002) 42 ACSR 252 at [44] (French J)); and

(7)    none of the other matters raised below provided a reason not to make the orders sought.

19 In summary, the proposed scheme of arrangement appeared to be one fit for consideration by TUH’s members (for reasons including that it appeared that TUH’s members will be properly informed); and represented a commercial proposition likely to meet with the Court’s approval at the second Court hearing on an unopposed application.

D.4.    Other matters

20 Senior counsel for TUH appropriately raised for consideration the following further matters. Senior counsel submitted, and I accepted, that none of these matters provided a reason not to make the orders sought.

D.4.1    Classes of members

21 Senior counsel submitted, and I accepted, that the fact that some of the members of TUH will, if the proposed scheme is implemented, receive remuneration from Teachers Health qua directors that other members of TUH will not receive does not require the creation of a separate class of members. There remains sufficient community of interest between all members of TUH for the proposed scheme to have a single class of members voting: see, e.g., Nine Entertainment Group Limited, in the matter of Nine Entertainment Group Limited (No 1) [2012] FCA 1464; (2012) 211 FCR 439 at 446 to 447 ([53] to [63]) (Jacobson J).

D.4.2    Section 413 to be invoked

22 TUH intends to seek a range of orders under s 413 of the Corporations Act at the second Court hearing, if the proposed scheme is approved by its members at the proposed scheme meeting. The orders that TUH intends to seek under s 413 include orders that relate to: (1) the transfer of all assets, liabilities, and policies to Teachers Health without the need for further acts; (2) ensuring that each TUH employee will become an employee of Teachers Health subject to the terms of the proposed scheme; (3) facilitation of all legal proceedings pending by or against TUH being continued by or against Teachers Health; and (4) the deregistration of TUH by ASIC without any winding up. The proposed orders also provide for consequential matters such as any reference to TUH in a TUH policy or business contract being read as references to Teachers Health upon the proposed scheme being given effect.

23 It is appropriate to provisionally identify that the orders proposed under s 413 are capable of being made at or after the second Court hearing to approve the proposed scheme under s 411(4)(b): see Chevron (TAPL) Pty Ltd v Chevron Australia Pty Ltd, in the matter of Chevron (TAPL) Pty Ltd [2022] FCA 220 at [46] (Banks-Smith J) and the authorities there cited.

24 The pre-conditions required for the making of orders under s 413 are that:

(1)    the compromise or arrangement must be proposed “for the purposes of, or in connection with, a scheme for the reconstruction of a Part 5.1 body or Part 5.1 bodies or the amalgamation of 2 or more Part 5.1 bodies”; and

(2)    under the proposed scheme “the whole or any part of the undertaking or of the property of a body concerned in the scheme … is to be transferred to a company”: see Chevron at [47] and the text of s 413(1).

25 Each of those requirements is met by the proposed scheme and thus the foreshadowed orders under s 413 appeared capable of being made.

D.4.3    Material contracts

26 The evidence established that TUH has reviewed all relevant agreements with counterparties, namely:

(1)    two contracts with material counterparties, HAMB Systems Ltd and National Australia Bank Limited;

(2)    99 contracts with counterparties where the contract will be transferred to Teachers Health by operation of law upon the proposed scheme becoming effective (transferred counterparties);

(3)    13 contracts with counterparties where the counterparty has contracts with both Teachers Health and TUH (hybrid counterparties); and

(4)    12 contracts with counterparties where TUH intends to, among other things, provide notice of termination and an effective termination date (terminated counterparties).

27 TUH has conferred extensively with the material counterparties since the signing of the deed and neither of them has disclosed any intention to object to the proposed scheme.

28 TUH has sent notices of the proposed scheme to the transferred counterparties, hybrid counterparties and terminated counterparties and to date, none has indicated an intention to object to the proposed scheme. There was also no evidence to suggest the effect of the proposed scheme on material contracts makes it unlikely that the proposed scheme would be approved at or after the second Court hearing.

D.4.4    Creditors

29 The position of creditors is a consideration relevant to the exercise of the discretion whether to approve the proposed scheme at the second Court hearing and it is appropriate to consider the position of creditors in a preliminary way at this juncture.

30 The proposed scheme booklet discloses that TUH does not believe that the proposed scheme will materially prejudice the interests of the creditors of TUH, or that any material new liability (other than transaction costs) will be incurred by TUH as a consequence of the implementation of the proposed scheme. The merged business of TUH and Teachers Health is likely to have a strong net asset position. Ms Baker’s evidence is that the merged business would have had total net assets of approximately $787.9 million if the merger had taken place as at 31 December 2024. The interests of creditors are therefore unlikely to be unfairly affected by the approval or implementation of the proposed scheme.

31 There are no entities with security interests over assets of TUH which are registered under the Personal Property Securities Act 2009 (Cth).

D.4.5    Employees

32 If the proposed scheme were to be approved, then on the “Effective Date”: (1) all employees of TUH would become employees of Teachers Health on the same terms and conditions (including any accrued entitlement to employee benefits and length of service) on which they were employed by TUH immediately before the “Effective Date”; and (2) voluntary redundancy offers may be made available to relevant TUH executive employees where there is more than one executive employee of TUH and Teachers Health who could fill that role. Thus, it was not apparent that the interests of employees would be adversely affected if the proposed scheme proceeds.

D.4.6    APRA Approval

33 Section 33(2) of the PHIPS Act requires that TUH and Teachers Health seek and obtain written approval from the Australian Prudential Regulatory Authority (APRA) before the TUH policies which are referrable to TUH’s Health Benefits Fund can be made referable to the Teachers Health Benefits Fund. On 24 February 2025, APRA provided such approval.

D.4.7    Performance risk

34 On 9 October 2024 and as required by the deed, Teachers Health executed the deed poll in favour of TUH and each TUH member, pursuant to which Teachers Health agreed, subject to the proposed scheme becoming effective, to:

(1)    perform its obligations under the deed and the proposed scheme as approved; and

(2)    conduct the merged business operations in accordance with the “Binding Operational Principles” described in cl 5 of the deed poll.

35 As senior counsel for TUH submitted, this is a well-established method of managing performance risk.

D.4.8    Break Fee

36 There is no break fee payable under the deed.

D.4.9    Exclusivity arrangements

37 Clause 13 of the deed includes “no shop” and “no talk” obligations during an “Exclusivity Period”. The “no talk” obligation is subject to a fiduciary carve-out in cl 13.9 of the deed. The “Exclusivity Period” as defined in clause 1.1 of the deed is the period from and including the date of the deed (2 May 2024) until the earlier of: (1) the “Effective Date”, meaning “the date on which an office copy of the Court order made under section 411(4)(b) and section 413 of the Corporations Act approving the Scheme is lodged with ASIC”, (2) the date of termination of the deed in accordance with its terms; (3) the Sunset Date (being either 5.00pm on 30 June 2026 or 30 September 2026 or such time as agreed between TUH and Teachers Health). It is therefore capable of precise ascertainment and as noted earlier the proposed “Effective Date” is 1 July 2025. The exclusivity provisions are disclosed in the proposed scheme booklet. Exclusivity provisions of this kind have previously been accepted as appropriate: see e.g. In the matter of ELMO Software Pty Ltd [2023] NSWSC 12 at [29] (Black J) and the authorities there cited.

D.4.10    Recommendation by TUH directors who are to become Teachers Health directors

38 As noted earlier, Mr Battams, Mr Burke and Ms Edmonds have also been nominated to be the initial “QLD Specialist Directors” and they, together with Ms Martens and Mr Anghel have been nominated to be the initial “QLD Representative Company Members” of Teachers Health. Details of the interests of the TUH directors, including any benefits they may receive on or in connection with the proposed scheme becoming effective, are disclosed in the proposed scheme booklet. I accepted the submission that these nominations do not make it necessary for the directors to refrain from making a recommendation, given the disclosure of their interests: see, e.g., In the matter of Intega Group Limited [2021] NSWSC 1434 at [22] (Black J).

D.4.11    Demutualisation

39 If the proposed scheme proceeds then the members of TUH will, by dint of TUH’s deregistration, cease to be members of TUH and, in turn, forego a contingent interest or benefit which potentially could be derived on either a demutualisation or winding up of TUH.

40 This has been disclosed in the proposed scheme booklet. The proposed scheme booklet also discloses that under the deed poll, Teachers Health has agreed not to undertake, or take steps to undertake, a demutualisation at any time within a period of three years after the “Effective Date”, unless the Teachers Health board of directors has determined, in good faith and after having obtained written advice from its external legal and financial advisers, that not doing so would constitute a breach of its fiduciary or statutory duties.

41 Further, the independent expert opines that although it is conceivable that TUH could receive a superior proposal for its members, no superior proposal for TUH has emerged despite the announcement of the proposed merger in May 2024. The independent expert also opines that the likelihood of a superior proposal is extremely low, given that: (1) any alternative proposal would need to have the support of the TUH board of directors, which conducted an extensive analysis of suitable alternatives and arrived at the merger the subject of the proposed scheme; and (2) other parties have had considerable time to consider and make an alternative proposal. I note also that the independent expert also opined that in view of, inter alia, the limited by guarantee status of TUH, the value of a TUH member’s interest in TUH cannot be quantified.

D.4.12     Communications with members

42 First Advisers Pty Ltd has been engaged by TUH to assist with parts of TUH’s company members relations strategy for the proposed scheme including an inbound “TUH Information Line”. The scripts for the proposed inbound calls are in evidence. First Advisers may also establish an outbound call campaign for the purposes of engaging with TUH’s members and encouraging them to vote or lodge a proxy. It is intended that the outbound call campaign will only be utilised if participation in proxy lodgement or registrations to attend the proposed scheme meeting virtually are lower compared to previous annual TUH meetings. In addition to, or substitution of, an outbound call campaign, TUH may send email or text messages to its members reminding them to vote or lodge a proxy. Copies of those documents are also in evidence, including the script for the possible outbound call campaign and proposed emails and text messages. I accepted the submission that an order approving the scripts and other outbound documents is not necessary: see, e.g., Vita Group Ltd, in the matter of Vita Group Ltd [2023] FCA 400; (2023) 165 ACSR 576 at [32] (Jackman J); DDH1 Limited, in the matter of DDH1 Limited [2023] FCA 982 at [22] (Colvin J).

D.4.13    Proposed despatch of documents

43 TUH has engaged Xcend Pty Ltd to provide registry services in relation to the proposed scheme meeting and to assist with facilitating the distribution of the final version of the scheme booklet to TUH’s members. It is proposed that this occur by email for members who have nominated an electronic address for the purposes of receiving notices of meeting and proxy forms from TUH; and otherwise by pre-paid post.

D.4.14    Conditions precedent

44 Implementation of the proposed scheme is subject to conditions precedent which need to be satisfied or (if permitted) waived in accordance with the terms of the deed. These conditions are set out in the proposed scheme booklet. Senior counsel for TUH submitted, based upon Ms Baker’s evidence, that there are no concerns about the extant conditions precedent not being satisfied or waived by the date of the second Court hearing and it is anticipated, as required under the deed, that TUH and Teachers Health will provide to the Court a conditions precedent certificate at the second Court hearing.

E. CONCLUSION

45 For the above reasons, I made orders substantially in the form of the orders sought by TUH at the conclusion of the hearing on 12 May 2025.

Associate:

Dated:    14 May 2025