Scheme of Arrangement Approved in NSW Supreme Court

The Court approved a scheme of arrangement between the claimant and the relevant class under section 411 of the Corporations Act 2001. The scheme extended the maturity date of junior debt and modified the interest payments to include payment in kind. The Court found the scheme fair and reasonable given the support of the requisite majority by number and value of the relevant class.

Supreme Court New South Wales

Medium Neutral Citation: In the matter of [NAME] [COMPANY] [2019] NSWSC 831 Hearing dates: 30 May 2019, 14 June 2019 Decision date: 03 July 2019 Jurisdiction: Equity - Corporations List Before: Black J Decision: [ADDRESS] hearing Orders made convening scheme meetings and approving the scheme booklet for distribution to [NAME].

[ADDRESS] hearing Orders made approving scheme of arrangement between the Plaintiff and the [NAME] under s 411 of the Corporations Act 2001 (Cth). Catchwords: CORPORATIONS – arrangements and reconstructions – schemes of arrangement or compromise – application under s 411 of the Corporations Act 2001 (Cth) for orders convening meetings of members to consider and, if thought fit, approve a proposed scheme of arrangement – whether requirements to order scheme meetings are satisfied.

CORPORATIONS – arrangements and reconstructions – schemes of arrangement or compromise – application under s 411 of the Corporations Act 2001 (Cth) for orders approving proposed scheme of arrangement – whether scheme is fair and reasonable so that an intelligent and honest member of the relevant class, properly informed and acting alone, might approve it. Legislation Cited: - Corporations Act 2001 (Cth) Ch 6, Pt 5.1, ss 411, 411(1), 411(3), 411(4)(b), 411(6), 411(17), 412(1), 412(1)(a) - Corporations Regulations 2001 (Cth) regs 5.1.01, 5.6.11-5.6.36A, Sch 8 - Insolvency Practice Rules (Corporations) 2016 (Cth) - Supreme Court (Corporations) Rules 1999 (NSW) rr 2.15, 3.2, 3.4 Cases Cited: - Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485 - F T Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd (1977) 3 ACLR 69 - First Pacific Advisors LLC v Boart Longyear Ltd [2017] NSWCA 116; (2017) 121 ACSR 136 - Nicron Resources Ltd v Catto (1992) 8 ACSR 219 - [COMPANY] (1992) 34 FCR 530; 107 ALR 359; 7 ACSR 231; 10 ACLC 573 - [COMPANY] (2016) 112 ACSR 554 - [COMPANY] (No 2) [2016] FCA 481 - [COMPANY] [2017] NSWSC 1713 - [COMPANY] [2018] NSWSC 3 - Re Boart Longyear Ltd [2017] NSWSC 567 - Re Centrebet International Ltd [2011] FCA 870 - Re Centro Properties Ltd [2011] NSWSC 1465; (2011) 86 ACSR 584 - Re CSR Ltd [2010] FCAFC 34; (2010) 183 FCR 358 - [COMPANY] (No 3) [2014] FCA 753 - Re DUET Finance Ltd [2017] NSWSC 415 - Re Foundation Healthcare Ltd [2002] FCA 742; (2002) 42 ACSR 252 - Re HIH Casualty and General Insurance Ltd [2006] NSWSC 485; (2006) 200 FLR 243 - Re SAI Global Ltd [2016] FCA 1312 - [COMPANY] (No 3) [2010] FCA 400; (2010) 267 ALR 583 - Re Viralytics Ltd [2018] FCA 637 - Re [NAME] [COMPANY] [2018] NSWSC 1342 - Sovereign Life Assurance Co v Dodd [1892] 2 QB 573 Category: Principal judgment Parties: [NAME] [COMPANY] (Plaintiff) Representation: Counsel: [redacted] [NAME] (30 May 2019); [NAME] (14 June 2019) ([COMPANY])

Solicitors: [redacted] [NAME] ([COMPANY]) File Number(s): 2019/165577

Judgment

Application to convene scheme meetings at the first Court hearing 1. The Plaintiff, [NAME] [COMPANY] ("[NAME]"), sought orders under s 411(1) of the Corporations Act 2001 (Cth) to allow it to convene a meeting of creditors to consider and, if thought fit, approve a proposed scheme of arrangement ("Junior Scheme") between it and holders of [NAME] ("[NAME]") issued pursuant to a note trust deed dated 9 September 2011 ("[NAME]"); and also seeks orders approving the draft explanatory statement for the scheme for distribution. I made those orders at the conclusion of the hearing on 30 May 2019 and indicated that I would deliver reasons for doing so. In these reasons, I have drawn on the helpful submissions of [NAME], who appeared with [NAME] for [NAME].

2. By way of background, [NAME] operates the [NAME] Terminal in the Port of Gladstone, Queensland. That terminal is operated on a "cost recovery" basis rather than for profit, and the revenue received by [NAME] for operating the terminal is intended to cover the expected costs of [NAME] and its holding company ("[NAME]") ([NAME] 27.5.19 [8]). [NAME] recovers its costs through a terminal handling charge, expressed as a dollar rate per tonne, which is payable by shippers who use the terminal ("ToP Shippers"). The ToP Shippers enter into take or pay agreements with [NAME], and those agreements require payment of the terminal handling charge in accordance with a terminal handling charge methodology contained in a shareholders agreement entered into by the shareholders in [NAME]. The amounts recovered by the terminal handling charge are presently not sufficient to cover [NAME]'s and [NAME]'s costs, broadly, because the terminal handling charge methodology limits the amount that [NAME] can charge ToP Shippers for finance costs, by a cap, as amended from 1 October 2018 ([NAME] 27.5.19 [47]-[50], [57]). 3. [NAME] and [NAME] point out that [NAME] currently has three main sources of indebtedness amounting to USD 3,278 million as at 29 March 2019, comprised of ([NAME] 27.5.19 [10]) approximately USD 2,519 million ("Senior Debt") owed to lenders ("Senior Financiers") under a Senior Syndicated Facility Agreement dated 9 September 2011 (as amended and restated pursuant to a deed of amendment dated 25 September 2018) ("Senior SFA") that is due to mature on 30 September 2026; approximately USD 369 million owed to the [NAME] that is due to mature on 30 September 2020 ("Junior Debt"); and approximately USD 390 million owed to [NAME] ("[NAME]") under a loan agreement that is due to mature on 6 September 2046. The rights and subordination arrangements as between the holders of Senior Debt, Junior Debt and the [NAME] are set out in a Security Trust and Intercreditor Deed ("STID") (Ex AA-1, 2040-2133), which have effect that the Senior Debt ranks ahead of the Junior Debt and the Junior Debt ranks ahead of the [NAME]. Schedule 2 to the STID, as amended in 2018, provides that the Junior [NAME] are not repayable until the Senior Debt has been repaid or refinanced and other conditions are satisfied (Ex AA-1, 853-930).

The proposed scheme 1. [NAME] and [NAME] point out that the Junior Scheme is being proposed to enhance [NAME]'s prospects of refinancing the Senior Debt and the Junior Debt, before the Senior Debt matures on 30 September 2026. They point out that, in 2018, [NAME] restructured its Senior Debt by a previous scheme of arrangement ("2018 Restructuring") that resulted in, among other things ([NAME] 27.5.19 [14]), extending the maturity date for the Senior Debt from 30 September 2018 to 30 September 2026 ("Senior Maturity Date"); [NAME] no longer having to pay interest on the principal amount outstanding on the [NAME] ("[NAME]") to the [NAME] prior to the Senior Maturity Date, except in limited circumstances; an extension of the restrictions on the [NAME]' enforcement rights to 31 March 2027 (being six months after the Senior Maturity Date); and [NAME] undertaking to the Senior Financiers to negotiate in good faith with the [NAME] for up to 6 months after the completion of the 2018 Restructuring to obtain either a consensual agreement with the [NAME] or an agreement with a majority in number of [NAME] who hold at least 75% of the [NAME] to extend the maturity date of the [NAME] to a date that falls six months after 30 September 2026 and reduce the coupon rate on the [NAME] during the term of the term facility to the Senior SFA. 2. [NAME] and [NAME] also point out that, under the [NAME] and the [NAME] Agreement, [NAME] issued ([NAME] 27.5.19 [10(a)]) 45,000 [NAME], priced in Australian Dollars, with an aggregate face value of AUD 450 million currently bearing interest at the rate of BBSY + 9% and also issued 5,000 [NAME], priced in US Dollars, with an aggregate face value of USD 50 million currently bearing interest at the rate of LIBOR + 9% per annum.

3. The Junior Scheme proposes ([NAME] 27.5.19 at [17]-[23]) the extension of the maturity date under the [NAME] from 30 September 2020 to 31 March 2027 ("Amended Junior Maturity Date"), being six months after the Senior Maturity Date; the payment of interest on the [NAME] is to be replaced with two amounts in the form of "payment in kind", namely a "Tranche 1 PIK Amount", to be paid by [NAME] to the [NAME] by the Amended Junior Maturity Date and a "Tranche 2 PIK Amount", to be paid to the [NAME] either from proceeds raised on a refinancing of the Senior Debt and the [NAME] (including [NAME], the Tranche 1 PIK Amount and Tranche 2 PIK Amount) or by the twelfth anniversary of the Amended Junior Maturity Date ("Trailing Period End Date"), if it is not paid on or before that date. 4. [NAME] and [NAME] point out that the extension of the maturity date under the [NAME] combined with the changes to the current interest payable on the Junior Debt to the Tranche 1 PIK Amount and Tranche 2 PIK Amount will reduce the total amount owing by [NAME] to the [NAME] on the Amended Junior Maturity Date (as compared to the amount which would be outstanding on the Amended Junior Maturity Date should the Junior Scheme not be implemented), and those amendments are expected to provide [NAME] and any potential refinancer with additional refinancing options including refinancing the Senior Debt with the [NAME] and the Tranche 1 PIK Amount and the Tranche 2 PIK Amount (or part of it); or refinancing the Senior Debt with the [NAME] and the Tranche 1 PIK Amount, leaving the Tranche 2 PIK Amount (or part of it) to be repaid by the Trailing Period End Date. The amendments also require [NAME] to conduct market soundings on or about the fourth and sixth anniversaries after the Junior Scheme takes effect to try to refinance the Senior Debt, [NAME], Tranche 1 PIK Amount and Tranche 2 PIK Amount; and align the terms and conditions of the [NAME] and pricing supplements and the current Intercreditor Terms with the terms of the Senior SFA, as amended under [NAME]'s 2018 Restructuring. 5. [NAME] and [NAME] also note that the Junior Scheme contemplates amendments ([NAME] 27.5.19 [16]) to the current terms and conditions and current pricing supplements, by way of an amendment deed ("Amendment Deed ([NAME])") (Ex AA-1, 110-196) and to the current Intercreditor Terms pursuant to the terms of an amendment deed ("Second Amendment Deed (STID)"), the execution and delivery which is a condition to the Junior Scheme taking effect. Their submissions address, but I need not set out, the detail of those amendments.

6. Thirteen of the fourteen [NAME], representing over 86.5% in value of the Junior Debt, have executed a Restructuring Support Deed ("[NAME]"), by which they undertook to attend the scheme meeting and vote in favour of the scheme ([NAME] 27.5.19 [74]-[76]). [NAME], [COMPANY], which is also a Senior [NAME], has not executed or acceded to the [NAME] ([NAME] 27.5.19 [76]).

Proposed explanatory statement and independent expert's report 1. The proposed explanatory statement for the Junior Scheme provides an overview of the structure of the explanatory statement and the Junior Scheme in section 3 and provides an overview of [NAME]'s operations and its capital structure in sections 4 and 5. Section 6 summarises the outcome of the restructuring negotiations with the [NAME] and section 7 outlines the Junior Scheme and its key steps. Section 8 provides a summary of an independent expert's report, to which I refer below; sections 9 and 10 indicate reasons why [NAME] may consider voting for or against the scheme; and sections 11-13 deal with voting procedures and additional information, including information required to be disclosed under s 412(1)(a) of the Corporations Act and reg 5.1.01 (including Schedule 8) of the Corporations Regulations 2001 (Cth).

2. An independent expert's report dated 27 May 2019 has been prepared by [NAME] of [NAME] and will be included in the proposed explanatory statement for the Junior Scheme (Ex VS-1). That report compares the position if there is no Junior Scheme and the position if the Junior Scheme proceeds and expressed the view that, under both scenarios, [NAME] would recover all that is due to them under the [NAME] (Ex VS-1, 39-40, 45). [NAME] also expresses the view that, if the Junior Scheme is put into effect, the [NAME], the Tranche 1 PIK Amount and Tranche 2 PIK Amount would be repaid in full within 8 years, being by 28 September 2026, assuming that the Senior Debt, [NAME], the Tranche 1 PIK Amount and the Tranche 2 PIK Amount would be successfully refinanced on or by 28 September 2026 due to the lower quantum of debt requiring refinance as a result of the implementation of the Junior Scheme (Ex VS-1, 39-40). He also expresses the opinion (Ex VS-1, 45) that, if the Junior Scheme is implemented, the amount owed to [NAME] would be paid in full over those 8 years at an average rate of return over the period of 8.65%; if the Junior Scheme is not implemented, the amount owed to [NAME] would be paid in full over 18.9 years at an average rate of return over the period of 13.02%; and [NAME] will have a greater prospect of refinancing the amounts owing under the [NAME] and Senior SFA by the Senior Maturity Date, 28 September 2026, if the Junior Scheme is implemented, since the total Senior [NAME] requiring refinancing, if the Junior Scheme is implemented, would be AUD 442 million less than if the Junior Scheme is not implemented (Ex VS-1, 47). [NAME] also notes that the refinance of the amounts owing under the Tranche 2 PIK Amount may be deferred for a period of up to 12 years following the Amended Junior Maturity Date if the Junior Scheme is implemented and, if this occurred, the quantum of debt required to be refinanced on or before the Senior Maturity Date is expected to be reduced as set out in his report (Ex VS-1, 47).

The applicable principles 1. [ADDRESS] will order the convening of the scheme meeting and approve the proposed explanatory statement if it is satisfied that [NAME] is a Part 5.1 body; the proposed scheme is an arrangement within the meaning of s 411 of the Corporations Act; the scheme booklet will provide proper disclosure to creditors; the scheme is bona fide and properly proposed; the Australian Securities and Investments Commission ("ASIC") has had a reasonable opportunity to examine the terms of the scheme and the scheme booklet and make submissions and has had 14 days' notice of the proposed hearing date; the procedural requirements of the Corporations Rules have been met; and there is no apparent reason why the scheme should not, in due course, receive the Court's approval if the necessary majority of votes is achieved: [COMPANY] (2016) 112 ACSR 554 at [30]; Re DUET Finance Ltd [2017] NSWSC 415 at [15]; [COMPANY] [2017] NSWSC 1713 at [20]; Re [NAME] [COMPANY] [2018] NSWSC 1342 at [17]. 2. [ADDRESS]'s approach at a first Court hearing is that "the court will not ordinarily summon a meeting unless the scheme is of such a nature and cast in such terms that, if it receives the statutory majority at the … meeting the court would be likely to approve it on the hearing of a petition which is unopposed": F T Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd (1977) 3 ACLR 69 at 72; Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485 at 504. If the arrangement is one that seems fit for consideration by the meeting of members or creditors and is a commercial proposition likely to gain the Court's approval if passed by the necessary majorities, then leave should ordinarily be given: [COMPANY] (1992) 34 FCR 530; 107 ALR 359; 7 ACSR 231; 10 ACLC 573; Re Foundation Healthcare Ltd [2002] FCA 742; (2002) 42 ACSR 252 at [36] and [44]; Re CSR Ltd [2010] FCAFC 34; (2010) 183 FCR 358 at [58]. [ADDRESS] is not required to be satisfied that no better scheme could have been proposed, and will give attention at a first hearing to whether it is reasonable to suppose that sensible businesspeople might consider the arrangement proposed to be of benefit to members or creditors: Re Centrebet International Ltd [2011] FCA 870 at [29]; Re SAI Global Ltd [2016] FCA 1312 at [18]; Re DUET Finance Ltd above at [14]; Re [NAME] [COMPANY] above at [19]. [ADDRESS]'s function under s 411 of the Corporations Act is to consider only the scheme put forward to it and not to speculate what other compromises or arrangements might have been devised, and it will proceed on the basis that, if the proposed scheme does not take effect, there will be no scheme and the situation will be one in which the rights and obligations that would have been affected by the scheme are not altered; and the Court will not seek to prompt an applicant to take some other course by declining to convene a scheme meeting or approve a scheme on discretionary grounds: [NAME] (1992) 8 ACSR 219 at 236; Re Centro Properties Ltd [2011] NSWSC 1465; (2011) 86 ACSR 584 at [28]-[31]; [COMPANY] above at [22].

Relevant features of the proposed scheme 1. It is uncontroversial that [NAME] is a Part 5.1 body. I am satisfied that the nature of the scheme involves an element of compromise between [NAME] and its [NAME] and provides prima facie evidence that there is an "arrangement" within s 411 of the Corporations Act: [COMPANY] above at [48]. I am also satisfied that [NAME] has committed itself to propounding the scheme and that the scheme is bona fide and has been properly proposed. [NAME] and [NAME] consent to act as chairperson and alternative chairperson of the scheme meeting, in accordance with r 3.2 of the Supreme Court (Corporations) Rules 1999 (NSW). There is evidence of verification of factual information in the proposed scheme booklet and of notification to ASIC.

2. As [NAME] and [NAME] point out, ss 411(3) and 412(1) of the Corporations Act require the disclosure of information explaining the "effect" of the scheme and information that is "material" to a creditor's decision whether or not to agree to it. That information should be presented in a form that is intelligible to reasonable members of the class to whom it is directed, and contain information that is realistically useful having regard to the complexity of the proposal: Re HIH Casualty and General Insurance Ltd [2006] NSWSC 485; (2006) 200 FLR 243 at [81]-[83]; [COMPANY] above at [28]. I am satisfied that the proposed explanatory statement, to which I have referred above, meets these requirements. 3. [NAME] and [NAME] also address the question whether creditors would need to vote in different classes at the scheme meeting. In Sovereign Life Assurance Co v Dodd [1892] 2 QB 573 at 583, Bowen LJ set out the well-established formulation of when separate classes of creditors were required for a scheme of arrangement as follows: It seems plain that we must give such a meaning to the term "class" as will prevent the section being so worked as to result in confiscation and injustice, and that it must be confined to those persons whose rights are not so dissimilar as to make it impossible for them to consult together with a view to their common interest.

1. In First Pacific Advisors LLC v Boart Longyear Ltd [2017] NSWCA 116; (2017) 121 ACSR 136 at [80], Bathurst CJ (with whom Beazley P and Leeming JA agreed) observed that that formulation involved three questions: First, what are the rights which existing creditors (or members) have against the company and to what extent are they different. Second, to what extent are those rights differently affected by the scheme. Third, does the difference in rights or different treatment of rights make it impossible for the creditors (or members) in question to consider the scheme as one class.

1. In this case, one [NAME], [COMPANY], is also a Senior [NAME], and four [NAME] or affiliates of [NAME], are A Class Shareholders and holders of [NAME] ("[NAME]"). [NAME] and [NAME] submit, and I accept, that this does not give rise to any class issues, where the Junior Scheme does not affect the rights of Senior Financiers or [NAME].

Other relevant matters at the first Court hearing 1. [NAME] and [NAME] also drew attention to several matters that may be relevant to the exercise of the Court's discretion under s 411 of the Corporations Act, although they submit, and I accept, that these matters are potentially relevant at the second rather than the first Court hearing and are not such that the Court would not approve the scheme if it secured the applicable majorities at a scheme meeting. 2. [NAME] and [NAME] submit, and I accept, that the potential benefits of the Junior Scheme to the [NAME], including potentially accelerating repayment of their debt and improving the prospects of refinancing, are such that the Court can be satisfied that there is no apparent reason why the Junior Scheme should not, in due course, receive the Court's approval if the necessary majority of votes is achieved. They submit, and I accept, that it is not an obstacle to the scheme that it effects amendments to the terms of the current terms and conditions and the current pricing supplements by each of the [NAME], Security Trustee, [NAME] and [NAME] executing and delivering the Second Amendment Deed (STID), some of which could otherwise be effected only by all [NAME]' consent, since there are several cases where amendments to the terms of finance documents have been made by schemes of arrangements agreed to by the requisite majorities of creditors and approved by the Court: see the examples cited in [COMPANY] above at [38]. 3. [NAME] and [NAME] also submit, and I accept, that the fact that the [NAME] requires the parties to it, including a large majority of the [NAME] to take all reasonable steps to implement the restructuring contemplated in it, including attending the scheme meeting and voting in favour of the scheme ([NAME] 27.5.19 [77]) is not a reason not to convene the scheme meeting, where support agreements are relatively common in the context of creditors' schemes: Re Boart Longyear Ltd [2017] NSWSC 567 at [9], [88]; [COMPANY] above at [16]. 4. [NAME] and [NAME] also recognise that [NAME] has agreed to pay a one-off consent fee equal to USD 1 million, subject to the Junior Scheme being implemented, to several [NAME] who executed the [NAME] to reimburse them for costs incurred by them in relation to considering the proposed amendments to the current terms and conditions and the Current Intercreditor Terms. The remainder of the consent fee will be paid to participating [NAME] (Other than ToP Shippers) who executed the [NAME] in proportion to their respective holdings of Junior Debt or in such proportions as may otherwise be agreed ([NAME] 27.5.19 [78]-[80]). They note that all [NAME] had the opportunity to enter into the [NAME] and all [NAME] (including ToP Shippers) other than [COMPANY] agreed to the consent fee by executing the [NAME] and associated correspondence ([NAME] 27.5.19 [76]), although those [NAME] that are also ToP Shippers and the [COMPANY] (which did not execute the [NAME]) will not receive that fee. They submit, and I accept, that the English case law has accepted consent fees and not treated them as raising class issues where they are relatively small compared to the size of the outstanding debt, as is the case here, and it is not likely that a creditor with substantial objections on commercial grounds would be swayed in their view by such a fee: Re [NAME] [COMPANY] above at [33]. 5. [NAME] and [NAME] refer to ongoing litigation in respect of the [NAME] holders, where two [NAME] holders have alleged, inter alia, that [NAME] failed to pay the [NAME] dividend entitlements on several dates; that [NAME] did not properly apply the Cashflow Waterfall (as defined) to certain funds and [NAME] failed to enforce certain rights to receive interest payments; and that [NAME] failed to correctly set or vary the Terminal Handling Charge ([NAME] 27.5.19 [91]). I addressed the fact of that litigation in a previous scheme in Re [NAME] [COMPANY] above and accept that it also provides no reason not to convene the scheme meeting in respect of the Junior Scheme. [NAME] and [NAME] also point out that the scheme does not effect changes to several transaction documents in respect of the Senior [NAME] holders; the changes made to the Intercreditor Terms do not require a scheme; and the present scheme does not involve either Senior Financiers or [NAME] holders. They fairly recognise that the Court may take into account any objection made by any Senior Financiers or [NAME] holders to the scheme at the second court hearing: Re Centro Properties Ltd above at [22]-[27].

Orders at first Court hearing 1. The orders proposed by [NAME] modify the operation of r 2.15 of the Corporations Rules in several respects. That rule provides that, subject to any direction to the contrary, regs 5.6.11–5.6.36A of the Corporations Regulations apply to meetings ordered by the Court. I will make orders dispensing with the corresponding provisions of the Insolvency Practice Rules (Corporations), adopting the same course as was adopted in Re Viralytics Ltd [2018] FCA 637 at [37]–[40] and in Re [NAME] [COMPANY] above. I will also make directions permitting service of notice of the scheme booklet on [NAME] by serving it in electronic form to specified email addresses, consistent with a now common practice: Re Viralytics Ltd above at [35].

2.

For these reasons, I made orders in the form initialled by me and placed in the file at the conclusion of the first Court hearing on 30 May 2019.

Application for approval of scheme at second court hearing 1. The scheme meeting was held on 12 June 2019 and the statutory majorities in favour of the scheme were achieved. At the second Court hearing, [NAME] sought orders under s 411(4)(b) of the Corporations Act approving the scheme of arrangement between it and the [NAME]. I made those orders at the conclusion of the second Court hearing on 14 June 2019. These are my reasons for making those orders, and I have drawn on the helpful submissions of [NAME] and [NAME] in these reasons.

2. The principles applicable to the exercise of the Court's discretion to approve a scheme at the second Court hearing are well established. In determining whether to approve a scheme at a second Court hearing, the Court will have regard to matters including whether the Court's orders convening the scheme meeting were complied with; whether the resolution to approve the scheme was passed by the requisite majority and whether other statutory requirements have been satisfied; whether all conditions to which the scheme is subject have been met or waived, other than in respect of Court approval and lodgement of the Court's orders with ASIC; whether the scheme is fair and reasonable so that an intelligent and honest member of the relevant class, properly informed and acting alone, might approve it; whether the proponent has brought to the Court's attention all matters that could be considered relevant to the exercise of the Court's discretion; and whether there was full and fair disclosure to creditors of all information material to the decision whether to vote for or against the scheme: [COMPANY] (No 3) [2014] FCA 753 at [3]; [COMPANY] (No 2) [2016] FCA 481 at [6]. [ADDRESS] has a discretion to approve a scheme and is not bound to approve it merely because it has made orders for the convening of meetings or because the statutory majorities have been achieved: [COMPANY] (No 3) [2010] FCA 400; (2010) 267 ALR 583 at [31]; [COMPANY] (No 2) above. [ADDRESS] will recognise that creditors are generally the best judges of their own commercial interests in that regard: [COMPANY] (No 3) above at [33]; [COMPANY] [2018] NSWSC 3 at [10].

Compliance with orders convening the scheme meeting 1. As I noted above, in determining whether to approve a scheme, the Court will have regard to whether the Court's orders convening the scheme meeting were complied with. There is evidence that the explanatory materials for the scheme meeting were dispatched, in accordance with orders made at the first Court hearing, to email addresses for the [NAME] ([NAME] 13.6.19 [5], [8]-[9]). The scheme meeting was held and conducted in accordance with the Court's orders ([NAME] 12.6.19 [7]-[9]) and there is evidence as to receipt and collation of proxy forms and proofs of debt and the admission of proofs of debt ([NAME] 12.6.19 [13]). I am satisfied that the process adopted in respect of proxies was consistent with that ordered by the Court, for the reasons set out in [NAME]'s and [NAME]'s further submissions made on 14 June 2019.

Requisite majority and other statutory requirements 1. [ADDRESS] will also have regard to whether the resolution to approve the scheme was passed by the requisite majority and whether other statutory requirements have been satisfied. The resolution to approve the scheme was passed by the necessary majorities, where 92.9% of the [NAME] by number voted in favour of the Junior Scheme and 86.2% of [NAME] by value voted in favour of the Junior Scheme ([NAME] 12.6.19 [24]-[25]). The votes of [NAME] who held Senior Debt (or had some interest directly or through an affiliate or as a trust party) were tagged (Ex DDM-1, p 1) but do not undermine that result.

2. The other statutory requirements in respect of the scheme were also satisfied. No issue under s 411(17) arises where a scheme could not be effected as a takeover under Chapter 6 of the Corporations Act. ASIC has had a reasonable opportunity to examine the explanatory statement and make submissions to the Court in relation to it. [NAME] published a notice of this hearing in a national newspaper in the form required by r 3.4 of the Corporations Rules, with a minor modification which was necessary by reason of a shorter period between the scheme meeting and the second Court hearing and caused no difficulty ([NAME] 13.6.19 [8]; Ex AA-3, 1).

Satisfaction of conditions 1. As I noted above, the Court will have regard to whether all conditions to which a scheme is subject have been met or waived, other than in respect of Court approval and lodgement of the Court's orders with ASIC. There is evidence that each of the necessary conditions precedent to the scheme has been satisfied ([NAME] 27.5.19 [82]; [NAME] 13.6.19 [9]-[13]; Ex AA-3).

Whether the scheme is fair and reasonable 1. [ADDRESS] will have regard to whether the scheme is fair and reasonable so that an intelligent and honest member of the relevant class, properly informed and acting alone, might approve it. Several considerations support a conclusion that the scheme is fair and reasonable. First, as I have noted above, the scheme received the support of the requisite majority by number and value of [NAME] although one [NAME] voted against it. Second, [NAME] did not receive any notice of appearance from any person seeking to object to the scheme at the second Court hearing and no-one appeared at this hearing to oppose the scheme. Third, the independent expert report of [NAME] (which I reviewed above) identified the potential advantages of the Junior Scheme for [NAME]. 2. [NAME] and [NAME] fairly drew attention, at the second Court hearing, to amendments to the Amendment Deed ([NAME]) and the Second Amendment Deed (STID) that were requested by the [NAME] trustee, several days after the first Court hearing and shortly before the meeting of [NAME], to confirm the capacity in which it entered the relevant documents and included limitation of liability clauses in the same form as in other associated transaction documents. Those amendments were notified to the [NAME] after the scheme meeting; no [NAME] has objected to them; and they have been accepted by the several parties to the Amendment Deed ([NAME]) and the Second Amendment Deed (STID). 3. [NAME] and [NAME] submitted, and I accepted for the reasons indicated in the course of oral submissions at the second Court hearing, that the amended documents fall within the definition of the "Amendment Deed ([NAME])" and the "Second Amendment Deed (STID)" in the Junior Scheme as documents "substantially" in specified forms. It seems to me that those amendments had no substantive legal impact, having regard to the existence of the corresponding provisions in the other transaction documents, and did no more than restate the existing legal role and limitations on liability of the [NAME] trustee. There is no need to exercise the Court's power under s 411(6) of the Act to grant its approval to a compromise or arrangement subject to such alterations or conditions as it thinks just arises in this situation, although I would have approved the Junior Scheme including the relevant amendments to the Amendment Deed ([NAME]) and the Second Amendment Deed (STID) under s 411(6) of the Act had it been necessary to do so.

Orders at the second Court hearing 1. For these reasons, I made orders as proposed by [NAME] approving the Junior Scheme at the second Court hearing on 14 June 2019.

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