Kellas-Sharpe and Ors v PSAL Limited (ACN 118 825 120)

The applicants, Kellas-Sharpe and others, sought to restrain the respondent, PSAL Limited, from proceeding with a proposed scheme of arrangement under Chapter 5 of the Corporations Act 2001 (Cth). The applicants were creditors of PSAL Limited and argued that the scheme was oppressive and that PSAL Limited had engaged in misleading and deceptive conduct in relation to the scheme. The matter came before the High Court of Australia.

The High Court was required to determine whether the proposed scheme of arrangement was fair and reasonable, and whether the applicants had established grounds to restrain its implementation. Specifically, the court had to consider whether the conduct of PSAL Limited in proposing the scheme amounted to oppression or misleading and deceptive conduct, and if so, whether this warranted intervention by the court to prevent the scheme from proceeding.

In their reasoning, Hayne and Keane JJ noted that the court's power to intervene in a scheme of arrangement is limited and requires a strong case to be made out. They found that the applicants had not demonstrated that the scheme was oppressive or that PSAL Limited had engaged in misleading or deceptive conduct. The court emphasised that the scheme had been approved by a majority of creditors, which carried significant weight. The judges applied the principles that courts should be slow to interfere with the statutory process for approving schemes of arrangement, particularly where the process has been followed and the creditors have had the opportunity to consider the proposal and vote on it.

The High Court dismissed the application by Kellas-Sharpe and the other applicants, allowing PSAL Limited to proceed with its proposed scheme of arrangement.