Federal Court of Australia

Dropsuite Limited, in the matter of Dropsuite Limited (No 2) [2025] FCA 487

ORDERS

THE COURT NOTES THAT:

There has been produced to the Court a statement in writing by the Australian Securities and Investments Commission (ASIC) in accordance with s 411(17)(b) of the Corporations Act 2001 (Cth) (Corporations Act) that ASIC has no objection to the scheme of arrangement between the Plaintiff (Dropsuite) and its members which was agreed to by the members at a meeting held on 9 May 2025, the terms of which were set out in Annexure A to the orders of the Court made on 2 April 2025 (Scheme).

THE COURT ORDERS THAT:

1.    Pursuant to s 411(4)(b) of the Corporations Act, the Scheme be and is hereby approved.

2.    Pursuant to s 411(12) of the Corporations Act, Dropsuite be exempted from compliance with s 411(11) of the Corporations Act in respect of the Scheme.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

BUTTON J

Background

1    On 2 April 2025, the Court made orders pursuant to ss 411(1) and 1319 of the Corporations Act 2001 (Cth) (Corporations Act) convening a meeting of members holding fully paid ordinary shares in Dropsuite Limited (Dropsuite) (Scheme Shareholders) to consider and, if thought fit, approve the scheme of arrangement set out at Annexure A to those orders (Scheme) (April Orders).

2    The meeting was held on 9 May 2025 (Scheme Meeting), and the second Court hearing was held on 14 May 2025.

3    These reasons are to be read with my reasons convening the Scheme Meeting, which set out the nature of, and background to, the Scheme: Dropsuite Limited, in the matter of Dropsuite Limited [2025] FCA 306 (Dropsuite No 1).

4    At the second Court hearing, Dropsuite relied on an affidavit of Bill Kyriacou dated 13 May 2025, and an affidavit of Merryn Jill Quayle dated 14 May 2025.

Principles

5    Section 411(4) of the Corporations Act provides that a scheme of arrangement is binding if (relevantly):

(a)    at a meeting of members, the arrangement is passed by a majority in number of the members present and voting (either in person or by proxy) and by 75% of the votes cast on the resolution; and

(b)    the arrangement is approved by order of the Court.

6    In Re Australia and New Zealand Banking Group Limited (No 2) [2022] FCA 1547 (Re ANZ (No 2)), O’Bryan J set out the matters to which the Court will ordinarily have regard in deciding whether to approve a scheme of arrangement (at [10], citing Re Vault Intelligence Limited (No 2) [2020] FCA 1504 at [11] (O’Bryan J)):

(a)    that the orders of the Court convening a meeting of members were complied with;

(b)    that the meeting of members so convened has approved the Scheme with the requisite majority;

(c)    that all other requirements of the Act and the Federal Court (Corporations) Rules 2000 (Cth) (Rules) have been satisfied;

(d)    that the Scheme 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;

(e)    that there has been full and fair disclosure to members and creditors of all information material to the decision whether to vote for or against the applicable scheme; and

(f)    that 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.

Statutory and procedural requirements

Registration of Scheme Booklet and lodgement of orders with ASIC

7    On 2 April 2025, the Scheme Booklet was registered by ASIC, as required by s 412(6) of the Corporations Act. A copy of the April Orders was also lodged with ASIC on 2 April 2025, as required by r 3.5(b) of the Federal Court (Corporations) Rules 2000 (Cth) (the Rules).

Dispatch of Scheme materials

8    Paragraph 2 of the April Orders required Dropsuite to send, on or before 7 April 2025:

(a)    an email to each Dropsuite shareholder who had nominated an electronic address (Email Shareholders), containing hyperlinks to websites from which they could access and download the Scheme Booklet, electronically lodge proxy instructions, and participate in the Scheme Meeting online; and

(b)    the Scheme Booklet and associated materials in hard copy to each Dropsuite shareholder who had nominated a physical address (Hard Copy Shareholders), or who had nominated neither an electronic nor physical address (Non-Electing Shareholders).

9    The April Orders also required that the announcement published on the ASX Market Announcements Platform (stating that the Court had ordered the Scheme Meeting to be convened), include URL hyperlinks to:

(a)    a website through which Dropsuite shareholders could electronically lodge proxy instructions in relation to their shareholdings and lodge questions prior to the Scheme Meeting; and

(b)    an online meeting platform which enabled Dropsuite shareholders to view, listen to, and participate in the Scheme Meeting online.

10    Dropsuite has satisfied the above requirements.

11    Dropsuite arranged for the requisite emails to be sent to Email Shareholders on 3 April 2025, and for the requisite hard copy documents to be lodged with Australia Post for despatch to Hard Copy Shareholders and Non-Electing Shareholders on 7 April 2025.

12    Dropsuite received an undeliverable receipt in relation to eight Email Shareholders. As required by paragraph 3 of the April Orders, Dropsuite subsequently sent those shareholders the Scheme Booklet and associated materials in hard copy.

13    Noting that there were no instances of non-compliance with the April Orders in terms of the dispatch of the Scheme materials, I am satisfied that the Scheme materials were effectively dispatched to Scheme Shareholders.

Additional shareholder communications

14    As noted in Dropsuite No 1 at [28], Dropsuite engaged a third party firm to assist in a program of outbound phone calls to its top 1,000 shareholders and in engaging with certain institutional shareholders. Dropsuite gave evidence of the call scripts to be deployed, consistent with the contents of the Scheme Booklet and the recommendations stated therein. In his affidavit dated 13 May 2025, Mr Kyriacou deposed to this shareholder engagement having been conducted as planned with the top approximately 1,000 retail Dropsuite shareholders and 13 institutional Dropsuite shareholders, in accordance with the relevant call scripts.

15    Dropsuite also made arrangements with another third party firm to assist with a shareholder information line: Dropsuite No 1 at [28]. No inbound calls to the shareholder information line were received.

Conduct of the Scheme Meeting and processing of proxies

16    The Scheme Meeting was held on 9 May 2025. At the Scheme Meeting, 96.8% of shareholders present and voting (in person or by proxy) cast their votes in favour of the Scheme. This represented 99.95% of the votes cast.

17    The Scheme therefore attracted overwhelming support from voting Scheme Shareholders, and achieved the voting majorities required by s 411(4)(a)(ii) of the Corporations Act.

18    In terms of voter turnout, 19.49% of Scheme Shareholders were present and voted at the Scheme Meeting. This equated to 65.02% of the total shares entitled to be voted at the Scheme Meeting. The level of participation in the Scheme Meeting was significantly higher than the typical participation rate at Dropsuite’s Annual General Meetings in 2022, 2023 and 2024 at which between 3.0% and 4.0% of shareholders voted.

19    The voter turnout (assessed by the proportion of eligible shareholders voting) at the Scheme Meeting is well above the level of 10% that is often used to determine whether the voter turnout is “low”: see, eg Re Midway Ltd [2025] FCA 47 at [28] (Anderson J) citing Re Crown Resorts Ltd (No 2) [2022] FCA 710 at [37] (Anderson J).

20    The authorities are also clear that low voter turnout is not, without more, a reason to refuse to exercise the discretion to approve a scheme: Re Surf Lakes Holdings Limited (No 2) [2023] FCA 1601 at [17] (O’Callaghan J), referring to Santow J’s statement in Re Matine Ltd (1998) 28 ACSR 268 (Re Matine) at 295 that:

The apathetic shareholder who chooses not to vote upon a scheme should not be presumed to be antagonistic to the scheme or to warrant paternalistic protection.

21    It is also 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 TriAusMin Ltd (No 2) [2014] FCA 833 (TriAusMin) at [10] (Farrell J). It is, however, relevant to consider whether low turnout may be an indication of some procedural irregularity, or whether shareholders were deterred from attending or voting: TriAusMin at [10]–[11] (Farrell J, also referring to Santow J’s judgment in Re Matine).

22    Relevantly in the present case, there is no evidence of any irregularity in the dispatch of material to Scheme Shareholders, or of any issue that would have deterred them from attending or voting at the Scheme Meeting, whether in person or by proxy.

23    For the reasons set out above, I accept Dropsuite’s submission that the level of voter turnout in this case does not give rise to any concern that Scheme Shareholders did not have proper notice of the Scheme Meeting or that there was any irregularity that compromised the participation of Scheme Shareholders.

Advertisement of the approval hearing

24    By the April Orders, the Court dispensed with compliance with r 3.4 of the Rules, which would otherwise have required that notice of the second Court hearing be published in a daily newspaper circulating in the State or Territory where Dropsuite has its principal, or last known, place of business: see Dropsuite No 1 at [49]. The April Orders directed Dropsuite to publish an announcement via the ASX Market Announcements Platform setting out the details of the second Court hearing and the process for any person wishing to appear at that hearing to oppose the approval of the Scheme. The announcement was required to be published at least five days before the second Court hearing.

25    This process was followed. The announcement was published on the ASX Market Announcements Platform on 5 May 2025. No Scheme Shareholder advised Dropsuite that it wished to oppose the Scheme, and no Scheme Shareholder sought to appear at the second Court hearing. In order for the notice to be published in sufficient time before the second Court hearing date, it was published before the Scheme Meeting was held. However, the notice made it clear that the second Court hearing would only proceed if the Scheme were to be approved by the requisite majorities at the Scheme Meeting.

Satisfaction of conditions precedent

26    The Scheme is subject to a number of conditions precedent, including approval by the Foreign Investment Review Board and the Court, as well as obtaining any necessary relief, waivers, and approvals from ASIC and the ASX: see Dropsuite No 1 at [9].

27    Dropsuite has tendered a certificate verifying the satisfaction of all conditions precedent, other than Court approval. Accordingly, I am satisfied that all conditions precedent have been met (other than the conditions relating to Court approval of the Scheme).

Whether the Scheme is fair and reasonable

28    In exercising its discretion to grant approval of a scheme of arrangement, the Court will consider whether the scheme is fair and reasonable, in the sense that an intelligent and honest shareholder, properly informed and acting alone, might approve it: Re ANZ (No 2) at [10] (O’Bryan J).

29    In the present case, the voting Scheme Shareholders overwhelmingly supported the Scheme, and there was no opposition to the order for approval. This stands as evidence of the Scheme’s “inherent fairness”: Re Amcor Limited (No 2) [2019] FCA 842 at [11] (Beach J). As identified by Markovic J in Re APN Outdoor Group Limited (No 2) [2018] FCA 1633 at [4], “members are better judges of what is in their own commercial interests than the Court”.

30    For these reasons, I accept that the Scheme is fair and reasonable.

Whether there has been full and fair disclosure to members

31    At the first Court hearing, I was satisfied, having regard to the draft Scheme Booklet, that Scheme Shareholders would be properly informed as to the nature of the Scheme before the meeting: Dropsuite No 1 at [63].

32    As the finalised Scheme Booklet was distributed to Scheme Shareholders substantially in the form approved by the Court in the April Orders, I am satisfied that the disclosure requirements in s 412(1) of the Corporations Act have been satisfied.

Whether all necessary matters have been brought to the attention of the Court

33    There is nothing before the Court to suggest the existence of material matters that have not been brought to the Court’s attention.

34    One matter that was brought to the Court’s attention concerned Dropsuite’s largest shareholder, Topline Capital Management, LLC (Topline).

35    As noted in Dropsuite No 1 at [16]–[17]:

16    On 28 January 2025, Dropsuite published an announcement on the ASX announcements platform. Amongst other things, the announcement said that Topline Capital Management, LLC (Topline), which then held or controlled approximately 31% of Dropsuite’s issued share capital, intended to vote its shares in favour of the Scheme. Since the publication of that announcement, Topline disposed of a significant portion of its shareholding, and (at the time of the first Court hearing) holds or controls approximately 10.5% of Dropsuite’s issued share capital. As stated in the Scheme Booklet, Topline continues to intend to vote its remaining — but still significant — shareholding in favour of the Scheme.

17    As explained in the Scheme Booklet, another Dropsuite shareholder, Harvest Lane Asset Management Pty Ltd (Harvest Lane) made an application to the Takeovers Panel (Panel) in respect of Topline’s voting intentions, as set out in the 28 January 2025 ASX announcement, and Topline’s subsequent sale of Dropsuite shares. It sought final orders requiring Topline to return to a 31% interest in Dropsuite and vote that interest in favour of the Scheme. The Panel made interim orders, on 20 March 2025, which preclude Topline selling any further shares until the earliest of: further order, determination of the Panel proceedings or two months from the date of the interim orders. Counsel for Dropsuite confirmed that it is not envisaged that the outcome of the Panel proceeding will affect the progress of the Scheme or the holding of the Scheme meeting. If there are further material developments in the Panel proceeding, Dropsuite will publish an announcement on the ASX announcements platform.

36    ASIC suggested, and Dropsuite agreed, that Topline’s votes at the Scheme Meeting should be “tagged” to enable verification that Topline voted in accordance with its publicly stated intention and, if necessary, determination of whether the voting of Topline’s shares was determinative: Dropsuite No 1 at [21].

37    On 4 April 2025, the Takeovers Panel made a declaration of unacceptable circumstances and final orders to the effect that Topline must not sell, transfer or dispose of any shares or interests in shares in Dropsuite, nor decrease its voting power in Dropsuite, until the day after the Scheme Meeting, and must vote all its shares (as at the date of the Scheme Meeting) in favour of the Scheme.

38    Dropsuite’s records indicate that the number of shares that Topline voted or caused to be voted in favour of the Scheme (7,204,887) is 158,147 shares short of the total shares held by Topline (7,363,034). Dropsuite has confirmed with Topline’s founder and managing partner that Topline’s holdings remained at 7,363,034 shares, and that Topline issued instructions to BNP Paribas Nominees Pty Ltd (being the holder of its shares) via its stockbroker to vote all of its shares in favour of the Scheme. Mr Kyriacou was also informed by Topline’s founder and managing partner that all of Topline’s shares had been voted in favour of the Scheme. This is consistent with the poll reports, which provide figures for votes against the Scheme, and abstentions. Those figures show the number shares voted against the Scheme, and the shares the subject of an abstention, are significantly lower than 158,147.

39    Dropsuite has made enquiries regarding the reasons for the discrepancy.

40    Having regard to the outcome of the Scheme Meeting and the voter turnout outlined above, the lack of clarity regarding 158,147 of Topline’s shares is not material to the question of whether or not the Scheme should be approved.

Section 411(17)

41    The Court’s power to approve a scheme of arrangement is restricted by s 411(17) of the Corporations Act. Section 411(17) provides that the Court must not approve a compromise or arrangement unless:

(a)     it is satisfied that the compromise or arrangement has not been proposed for the purpose of enabling any person to avoid the operation of any of the provisions of Chapter 6; or

(b)     there is produced to the Court a statement in writing by ASIC stating that ASIC has no objection to the compromise or arrangement …

42    On 13 May 2025, Dropsuite received a “no objection” letter from ASIC. This letter satisfies the requirements of s 411(17)(b). Further, there is nothing in the material before the Court to suggest that the Scheme was proposed for the proscribed purpose described in s 411(17)(a).

Exemption from s 411(11)

43    Section 411(11) of the Corporations Act requires that, subject to any exemption obtained pursuant to s 411(12), a copy of the Court’s order approving a scheme of arrangement must be annexed to every copy of the company’s constitution issued after the order is made.

44    Dropsuite sought an order under s 411(12) of the Corporations Act exempting it from compliance with s 411(11).

45    Dropsuite submitted, and I accept, that an exemption from compliance with s 411(11) is appropriate in circumstances where:

(a)    the Scheme will not alter Dropsuite’s constitution or the rights of its members, creditors or other persons dealing with the company;

(b)    no ongoing purpose would be served by requiring the orders approving the Scheme to be annexed to Dropsuite’s constitution;

(c)    current members of Dropsuite have been informed of the Scheme and will be informed of the Court’s approval of the Scheme; and

(d)    immediately following implementation of the Scheme, Dropsuite will be a wholly owned subsidiary of NinjaOne Australia Pty Ltd, which is, of course, well aware of the Scheme.

Conclusion

46    For the reasons outlined above, I consider that it is appropriate that the Court exercise its discretion to grant approval of the Scheme.

47    Accordingly, orders will be made for the Scheme to be approved, together with ancillary orders exempting Dropsuite from compliance with s 411(11) of the Corporations Act.

Associate:

Dated:    14 May 2025