First Pacific Advisors LLC v Boart Longyear Ltd

First Pacific Advisors LLC (the applicant) appealed to the Court of Appeal of New South Wales against orders made by the primary judge convening meetings of creditors and members of Boart Longyear Ltd (the company) to consider proposed schemes of arrangement. The dispute concerned whether certain secured creditors of the company could be placed in the same class for the purposes of voting on the proposed schemes.

The central legal issues before the Court of Appeal were whether the primary judge erred in finding that the secured creditors could be placed in the same class, whether the primary judge misapplied the authorities concerning the composition of separate classes in schemes of arrangement, and whether the primary judge erred in failing to hold that the differences in rights between the secured creditors made it impossible for them to consult together with a view to their common interest.

The Court of Appeal affirmed the primary judge's decision, holding that the secured creditors were correctly placed in the same class. The Court reasoned that while the secured creditors had different security interests, these differences did not prevent them from consulting together with a view to their common interest in the success of the scheme. The Court applied the principle that the test for determining separate classes is whether the creditors have a sufficient commonality of interest to enable them to consult together with a view to their common interest, and that differences in the precise nature of their security do not necessarily mandate separate classes.

The Court of Appeal granted the applicant leave to appeal but ultimately dismissed the appeal, ordering the appellant to pay the respondents’ costs.