Re Bell Group Finance Pty Ltd (in Liq)
[2020] WASC 287
•5 AUGUST 2020
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: RE BELL GROUP FINANCE PTY LTD (IN LIQ); EX PARTE BELL GROUP FINANCE PTY LTD (IN LIQ) [2020] WASC 287
CORAM: HILL J
HEARD: 17 JULY 2020
DELIVERED : 5 AUGUST 2020
FILE NO/S: COR 85 of 2020
MATTER: IN THE MATTER OF BELL GROUP FINANCE PTY LTD (IN LIQ) AND THE OTHER COMPANIES LISTED IN SCHEDULE A TO THE ORIGINATING PROCESS
EX PARTE
BELL GROUP FINANCE PTY LTD (IN LIQUIDATION) AND OTHER COMPANIES LISTED IN SCHEDULE A TO THE ORIGINATING PROCESS
First Plaintiff
ANTONY LESLIE JOHN WOODINGS
Second Plaintiff
ACN 008 675 625 PTY LTD AND THE OTHER COMPANIES LISTED IN SCHEDULE D TO THE ORIGINATING PROCESS
Third Plaintiff
Catchwords:
Corporations law - Schemes of arrangement - Application for orders convening scheme meetings under s 411(1) of the Corporations Act 2001 (Cth) - Whether requirements to order scheme meetings are satisfied - Orders made convening meetings
Corporations law - Winding up - Application by liquidator for directions that liquidator is justified and would be acting properly in causing relevant group members to vote in favour of schemes at scheme meetings - Application by liquidator for directions that liquidator is justified in causing Western Interstate not to vote at scheme meetings - Turns on own facts
Legislation:
Corporations Act 2001 (Cth) s 411, s 1319, Sch 2 s 90-15(1)
Corporations Law, s 479(3)
Supreme Court (Corporations) (WA) Rules 2004 (WA)
Result:
Application granted
Category: B
Representation:
Counsel:
| First Plaintiff | : | Mr P A Walker |
| Second Plaintiff | : | Mr P A Walker |
| Third Plaintiff | : | Mr P A Walker |
Solicitors:
| First Plaintiff | : | Ashurst Australia |
| Second Plaintiff | : | Ashurst Australia |
| Third Plaintiff | : | Ashurst Australia |
Case(s) referred to in decision(s):
Charlton v Baber [2003] NSWSC 745; (2003) 47 ACSR 31
First Pacific Advisors LLC v Boart Longyear Ltd [2017] NSWCA 116; (2017) 320 FLR 78
Re Amcom Telecommunications Ltd [2015] FCA 341
Re Ansett Australia Ltd (No 3) [2002] FCA 90; (2002) 115 FCR 409
Re Avita Medical Ltd [2020] FCA 674
Re Bell Group (In Liq); Ex parte Woodings [2020] WASC 259
Re Bell Group Ltd (in liq); Ex parte Woodings [2020] WASC 121
Re Champion Iron Ltd [2020] FCA 81
Re CSR Ltd [2010] FCAFC 34; (2010) 183 FCR 358
Re Doray Minerals [2019] WASC 57
Re GGA Lifestyle Pty Ltd (Administrators Appointed); Ex parte Woodhouse [2019] WASC 167
Re Healthscope Ltd [2019] FCA 542; (2019)139 ACSR 608
Re HIH Casualty and General Insurance Ltd [2006] NSWSC 485; (2006) 57 ACSR 791
Re Hills Motorway Ltd [2002] NSWSC 897; (2002) 43 ACSR 101
Re Linter Textiles Corporation Ltd [1991] 2 VR 561
Re Mod Resources Ltd, Ex parte Mod Resources Ltd [2019] WASC 326
Re Navitas Ltd, Ex parte Navitas Ltd [2019] WASC 180
Re NRMA Ltd (No 1) [2000] NSWSC 82; (2000) 33 ACSR 595
Re Nzuri Copper Ltd, Ex parte Nzuri Copper Ltd (No 4) [2020] WASC 10
Re Opes Prime Stockbroking Ltd [2009] FCA 813; (2009) 179 FCR 20
Re Perth Markets Ltd [2019] WASC 417
Re Pulse Health Ltd [2017] NSWSC 651
Re SRG Limited [2018] FCA 1092
Re T & N Ltd (No 4) [2007] 1 All ER 851
Re Viralytics Ltd [2018] FCA 637
Re Wesfarmers Ltd [2018] WASC 308
The Bell Group Ltd (in liq) v Westpac Banking Corporation [No 9] [2008] WASC 239
Walker v Wimborne (1976) 137 CLR 1
HILL J:
Overview
By originating process dated 3 July 2020, the plaintiffs sought orders pursuant to s 411 of the Corporations Act 2001 (Cth) (Act) in relation to proposed schemes of arrangement (Schemes) between Bell Group Finance Pty Ltd (in liq) (BGF), a number of other Bell group companies (set out in Annexure A to these reasons) and their creditors. The Schemes are an important step in the completion of the settlement approved by this court on 15 April 2020.[1]
[1] Re Bell Group Ltd (in liq); Ex parte Woodings [2020] WASC 121.
The second plaintiff also seeks directions from this court to cause each of the Australian Bell group companies (other than Western Interstate Pty Ltd) who are creditors of the Scheme Companies to vote in favour of the Schemes. In respect of Western Interstate, the second plaintiff seeks directions from the court not to exercise any vote at the scheme meetings.
The application came before me for the first court hearing on 17 July 2020. At the conclusion of the hearing, I made orders pursuant to s 411(1) of the Act to convene meetings of the Bell group companies set out in Annexure A and their creditors to consider and vote on the proposed Schemes. I also made ancillary orders as to the convening and conduct of the meetings pursuant to s 1319 of the Act and gave the directions sought by the second plaintiff.
In making these orders, I said that I would publish written reasons for my orders subsequently. These are the reasons for the orders I made on 17 July 2020. In publishing my reasons, I have drawn on the helpful submissions of Mr Walker who appeared as counsel for the plaintiffs.
Factual Background
The second plaintiff is the court appointed liquidator or provisional liquidator of 41 companies within the Bell group of companies including the first plaintiffs. In these reasons, I will refer to the 41 companies as the Australian Bell group.
The second plaintiff was appointed as liquidator of BGF on 3 March 1993. He was appointed liquidator of eight other companies within the Australian Bell group in 1995 and as provisional liquidator of Western Interstate in January 1996. Originally, Geoffrey Totterdell was the sole liquidator of The Bell Group Ltd (in liq) (TBGL) and 13 other companies within the Australian Bell group. On 3 March 2000, the second plaintiff was appointed as joint liquidator of these companies and on 21 August 2014, following Mr Totterdell's resignation, was appointed by the court as sole liquidator of these companies.[2]
[2] Affidavit of Antony Leslie John Woodings filed 10 July 2020 [7] - [8].
The background of the very long history of litigation in which the plaintiffs have been involved since 1995 has been summarised by me previously.[3] I do not intend to repeat this summary. These reasons should be read as if they incorporated this earlier summary.
[3] Re Bell Group Ltd (in liq); Ex parte Woodings [12] - [43].
Relevantly, for the purpose of this application, the second plaintiff, together with BGF, TBGL, other Bell group companies and other persons, brought proceedings against a group of Australian and foreign banks (Banks) who were the lenders to the Australian Bell group (Bell Proceedings).[4] Those proceedings were funded by certain creditors of TBGL and BGF under indemnity agreements.[5]
[4] See The Bell Group Ltd (in liq) v Westpac Banking Corporation [No 9] [2008] WASC 239 (Owen J).
[5] Affidavit of Antony Leslie John Woodings filed 10 July 2020 [38] - [45].
Following the settlement of the Bell Proceedings in 2014, approximately $1.7 billion was paid by the Banks to the Australian Bell group.[6] As at 30 June 2020, the balance of funds held by the Australian Bell group totalled approximately $1.6 billion, following payment of post-liquidation tax and other winding up costs.[7]
[6] Affidavit of Antony Leslie John Woodings filed 10 July 2020 [32].
[7] Affidavit of Antony Leslie John Woodings filed 10 July 2020 [36] - [37], 'ALJW-8'.
Since mid‑2014, the plaintiffs have been parties to numerous proceedings in both this court and the Federal Court of Australia concerning how these funds should be distributed (Distribution Proceedings).[8] In December 2019, the parties to the Distribution Proceedings, including the second plaintiff, TBGL, BGF and the other Australian Bell group companies, entered into a series of instruments to resolve these matters, including a deed of settlement (2019 Settlement Deed).[9]
[8] Affidavit of Antony Leslie John Woodings filed 10 July 2020 [46] - [50] and [114] - [186].
[9] Affidavit of Antony Leslie John Woodings filed 10 July 2020 [187].
On 15 April 2020, I made orders approving entry into these instruments, including the 2019 Settlement Deed and the Schemes Implementation Deed dated 20 December 2019 (SID).[10]
Proposed Scheme
[10] Re Bell Group Ltd (in liq); Ex parte Woodings.
The 2019 Settlement Deed provides for a full and final resolution of all of the claims in the Distribution Proceedings and seeks to remove any remaining hurdles or issues in finalising the winding up of the Australian Bell group. This will enable an earlier distribution of the properties and recoveries of the Australian Bell group than would otherwise be the case if the Distribution Proceedings were litigated to their final conclusion.[11]
[11] Affidavit of Antony Leslie John Woodings filed 10 July 2020 [194(a)].
It is proposed that distributions will be made from the winding up of TBGL as well as proposed Schemes to be entered into by BGF and the other first plaintiffs.[12] Under the proposed Schemes:
[12] Affidavit of Antony Leslie John Woodings filed 10 July 2020 [194(c)].
(a)the Scheme Companies will be amalgamated with BGF;[13]
(b)a scheme fund (Scheme Fund) will be created immediately prior to completion comprising all assets of the Scheme Companies and any interest earned on or by the Scheme Fund from time to time, net of fees, charges and taxes;[14]
(c)the liabilities of all Scheme Companies will be transferred to BGF;[15]
(d)creditors who are parties to the 2019 Settlement Deed will receive a right to obtain a fixed amount from the Scheme Fund;
(e)external creditors with admitted claims up to $1 million will be paid in full unless there are insufficient funds in which case all external creditors (other than TBGL and BGUK) will receive a rateably reduced payment;[16]
(f)the claims of all creditors against any of the Scheme Companies will be released and discharged and the liabilities of all Scheme Companies extinguished in exchange for an entitlement to a distribution from the Scheme Fund;[17]
(g)the entitlement to a distribution will be established by a streamlined process for the proof of Scheme claims;[18]
(h)any and all claims and liabilities of the parties to the 2019 Settlement Deed that relate to 'Settled Matters' (broadly defined as matters related to the Bell Proceedings, the various Bell group liquidations and the Distribution Proceedings) will be released and discharged;[19] and
(i)the second plaintiff will be appointed as the Schemes Administrator. A Creditors' Committee will be created to advise and assist the Schemes Administrator.[20]
[13] Scheme, cls 4.1 and 5.2(a) and (b).
[14] Scheme, cl 12.
[15] Scheme, cl 4.1.
[16] Scheme, cl 13.1.
[17] Scheme, cl 6.1.
[18] Scheme, cls 7 - 8 and 13.
[19] Scheme, cls 6.2 - 6.6; Submissions [12(5)].
[20] Scheme, cls 14, 18 and 19.
If the Schemes are not approved, it is expected that creditors will not receive any distributions until 2027, and possibly later.[21] Given the history of litigation in this matter, I consider this is an optimistic estimate as to when the matter may otherwise be finalised.
[21] Explanatory Statement, [6].
Under the 2019 Settlement Deed, the major external creditors of the Scheme Companies were required to execute voting deeds poll to bind those creditors to vote in favour of the Schemes. In addition, the second plaintiff (subject to the court's directions sought by him) proposes to cause the various Australian Bell group companies who are creditors of the Scheme companies to vote in favour of the Schemes. As a consequence, it is anticipated that more than 50% of creditors by number and 75% of creditors by value will vote in favour of the Schemes.[22]
[22] Explanatory Statement, [3.5] and [4.10].
The Schemes are recommended by the second plaintiff as producing a better outcome and being in the best interests of the creditors of the Scheme Companies.[23]
[23] Explanatory Statement, [8].
Evidence for the first court hearing
The plaintiffs relied on four affidavits that were filed prior to the first hearing. These were:
(a)an affidavit of Adrian Chin Shien Chai sworn 3 July 2020. Mr Chai is a partner of Ashurst, the solicitors for the plaintiffs. Mr Chai set out the information provided to the Australian Securities and Investments Commission (ASIC) in relation to the Schemes. The affidavit annexed the draft Explanatory Statement, historical company extracts of the first and third plaintiffs obtained from ASIC, and the correspondence sent to ASIC enclosing the draft Explanatory Statement.
(b)an affidavit of Antony Leslie John Woodings sworn 10 July 2020. Mr Woodings is the second plaintiff and the court‑appointed liquidator or provisional liquidator of the first plaintiffs and third plaintiffs. Mr Wooding's affidavit set out the background to the former Bell group and his role in the Bell Proceedings, the Distribution Proceedings and the 2019 Settlement Deed. The affidavit confirmed a number of formal matters and outlined the nature of the proposed Schemes. By his affidavit, Mr Woodings consented to act as chairperson at the Scheme meetings and provided the necessary disclosures required by r 3.2 of the Supreme Court (Corporations) (WA) Rules 2004 (WA) (Corporations Rules). Mr Woodings also provided the necessary disclosures under the Corporations Rules for Robert Trainor, a senior member of Mr Wooding's staff, who is proposed as the alternate chairman. The affidavit annexed schedules of the creditors of each of the relevant companies, the Scheme Implementation Deed (SID), the voting deed polls, orders obtained in the English High Court of Justice in satisfaction of one of the conditions precedent, the deed relating to the third plaintiffs and BGF, and correspondence between the plaintiffs' solicitors and ASIC, and correspondence with certain of the creditors.
(c)a second affidavit of Mr Chai filed 16 July 2020. Mr Chai set out further correspondence with ASIC, the changes made to the Explanatory Statement, the condition precedent relating to Law Debenture Trust Corporation plc (LDTC) and the amendment of certain dates, and the decision made by the English High Court of Justice on the application by LDTC. The affidavit annexed the correspondence with ASIC, an updated Explanatory Statement and notices of meetings, correspondence related to the LDTC condition precedent and a copy of the judgment delivered by the English High Court of Justice on 9 July 2020;
(d)a third affidavit of Mr Chai filed 16 July 2020. Mr Chai annexed further correspondence between Ashurst and ASIC in relation to the Explanatory Statement, as well as a letter from ASIC confirming that ASIC did not propose to appear or intervene to oppose the Scheme and providing relief to Western Interstate from the requirement to annexe certain financial information.[24]
[24] Corporations Regulations 2001 (Cth), sch 8, pt 2, [8203(b)].
Nature of Proposed Scheme
The proposed Schemes seek to effect the amalgamation of the Scheme Companies with BGF as part of the 2019 Settlement Deed. The Schemes will not be effective unless and until a number of conditions precedent are satisfied or waived. The conditions precedent which are required to be satisfied are disclosed in the Explanatory Statement.[25]
[25] Explanatory Statement, [5.3]; Scheme, cl 2.
Under the proposed Schemes:
(a)All intra-Bell group creditors of which the second plaintiff is liquidator or provisional liquidator will have their right to a distribution of BGF's assets in its liquidation extinguished and will not receive any distribution from the Scheme Fund.
(b)Bell Group NV (BGNV), the Commonwealth, and LDTC/Insurance Commission of Western Australia (ICWA) will give up the right to a distribution of BGF's assets under s 555 of the Corporations Law, as well as the right to the benefit of any order under s 564 or priority payment under s 556(1)(a) of the Corporations Law for repayment of funding amounts that were advanced. In return, each will receive a right to obtain a fixed amount from the Scheme Fund, a right to any recoveries BGF might make from a few sources,[26] and to any surplus of the Scheme Fund, after a first distribution is made under the Schemes. In LDTC's case, these rights are held on behalf of ICWA.
(c)Bell Group (UK) Holdings Ltd (in liq) (BGUK), to the extent it may be a creditor of BGF, gives up the right to a distribution of BGF's assets under s 555 of the Corporations Law and receives a right to obtain a fixed amount from the Scheme Fund.
(d)WA Glendinning & Associates Pty Ltd (WAG) gives up and receives the same kind of rights as BGUK. In addition, it will receive the same kind of rights to any recoveries BGF may make from a few sources as summarised in [18(b)] above.
(e)Western International Travel Pty Ltd (WIT) gives up the right to a distribution of BGF's assets under s 555 of the Corporations Law and receives a right to prove against the Scheme fund for the full value of its claim.
(f)All creditors release and discharge all claims they may have against BGF and any of the Scheme companies and any and all claims and liabilities arising between the Scheme creditors, the second plaintiff, the various Australian Bell Companies, and the parties to the 2019 Deed of Settlement (and certain related parties) which relate to the various Settled Matters (as described at [13(h)]).
[26] These sources comprise a proof of debt in the liquidation of BGUK (the Lloyds Debt), from preference shares held in BGUK, and from rights to receive a distribution under a turnover trust mechanism that is expected to operate in TBGL's liquidation.
The order of distribution from the Scheme Fund will be:[27]
(a)first, the payment of the costs of the winding up and administration of the Schemes;
(b)second, the Fixed Sum Scheme Creditors (being TBGL, ICWA, BGNV, the Commonwealth, WAG, and BGUK) and creditors with claims up to $1,000,000;
(c)third, if there is any balance, payment of any other priority claims;
(d)fourth, to the extent there is any balance, payment of all other Scheme creditors;
(e)fifth, to the extent there is any balance, to ICWA, BGNV, the Commonwealth and WAG as agreed between those parties.
[27] Scheme, cl 13.1 and 13.5.
Counsel for the plaintiffs informed me at the hearing that the second plaintiff does not believe that there are any Scheme creditors within the fourth priority.[28] Given the length of time over which the liquidations of the Australian Bell group have been occurring, I consider that any creditors with a claim of more than $1 million would have lodged a proof of debt or otherwise made known their claim to the second plaintiff by this stage.
[28] ts 35 - 36.
If the Schemes are approved by creditors and by the court at the second court hearing, the second plaintiff will be appointed as Schemes Administrator to administer the Schemes subject to the terms of the Scheme Administrator Deed Poll.[29] Under the Deed Poll, the Schemes Administrator agrees to be bound by the Schemes as if he were a party to the Schemes and consents to the Schemes.
[29] Explanatory Statement, [5.6].
Immediately prior to the completion of the Schemes, pursuant to s 413(2) of the Act, all of the property and recoveries of the Scheme Companies will be transferred to and vest in BGF and all of the Scheme Companies' liabilities will be transferred to and become the liabilities of BGF. This is referred to in the Explanatory Statement as a 'pooling' of the assets and liabilities of the Scheme Companies. The pooling is to occur immediately prior to completion to ensure that in the event the 2019 Settlement Deed is terminated, minimal disruption is caused to the liquidations of the Australian Bell group companies.[30]
[30] Explanatory Statement, [5.7].
The Scheme Fund will be under the exclusive control of the Schemes Administrator. The Scheme Fund will comprise all of the recoveries and property of the Scheme Companies, all other property and recoveries held by or transferred to BGF by Other Bell Participant Companies (that is, those Australian Bell Companies that are not Scheme Companies or TBGL),[31] together with any interest earned on or by the Scheme Fund following the investment of the Scheme Fund by the Schemes Administrator.
[31] Schedule D to Orders made 17 July 2020.
The second plaintiff as liquidator of the Australian Bell group considers that the 2019 Settlement Deed, which has the Schemes as a critical component, will produce a better outcome and is in the best interests of the creditors of the Scheme Companies.[32] In reaching this view, the liquidator had regard to a number of matters including the fact that the 2019 Settlement Deed was the first time since the settlement of the Bell Proceedings in 2014 that all of the parties to the Distribution Proceedings had agreed to a settlement of all claims between them.
[32] Explanatory Statement, [8].
I was provided with the draft Explanatory Statement which was submitted to ASIC on 2 July 2020[33] and the various amendments that have been made to the document since then.[34]
[33] Affidavit of Adrian Chin Shien Chai filed 3 July 2020 [4] and 'ACSC-1'.
[34] Second affidavit of Adrian Chin Shien Chai filed 16 July 2020, [13] - [16], 'ACSC-55' and 'ACSC-56'.
The Explanatory Statement contains the following sections:
(a)important information giving an overview of the Explanatory Statement, defined terms, where information prescribed under the Act may be found and recommendations to the creditors to seek independent legal and taxation advice;
(b)a listing of all key dates for the steps involved in the Schemes;
(c)an overview of the Schemes, including the advantages and disadvantages of the Schemes;
(d)a background to the Schemes, including information on the Bell group, the Bell Proceedings, the Distribution Proceedings, past settlement attempts and the 2019 Settlement Deed;
(e)an explanation of what a scheme of arrangement is and the purpose of the Schemes, the conditions precedent to the Schemes, the role of the Schemes Administrator and the creation of the Scheme Fund, claims under the Schemes, future steps if the Schemes are approved, including the winding up of the Scheme Companies and the appointment of a Creditors' Committee;
(f)implications of the Schemes not proceeding;
(g)estimated distributions both under the Schemes and in the liquidations if no Schemes were proposed;
(h)the second plaintiff's views and recommendations;
(i)reasons creditors may consider voting for the Schemes;
(j)reasons creditors may vote against the Schemes;
(k) the Scheme meetings and voting procedures;
(l) additional information, including disclosure of the material interests of directors and the Scheme Administrator, waivers by ASIC and the creditors of the Scheme Companies.
The Explanatory Statement includes a number of important annexures which will form part of the Explanatory Statement. These include the proposed Schemes, lists of the Scheme Companies, Australian Bell Companies and the creditors, the assumptions used to estimate distributions if there were no settlement or Schemes, the scale of charges for the Schemes Administrator and liquidator, voting forms and the relevant notices of meetings.
Legal principles in respect of the Scheme
Pursuant to s 411 of the Act, a scheme of arrangement can be used to re‑organise a company in a manner which will be binding on its members provided that:
(a)the arrangement is agreed by the requisite majorities as prescribed by s 411(4)(a) of the Act, namely 75% of creditors by value and 50% by number; and
(b)the court approves the arrangement pursuant to s 411(4)(b) of the Act.
There are three stages to an application under s 411 of the Act. First, the court approves the convening of a scheme meeting and the draft explanatory statement to be sent to the scheme members. Second, the scheme members vote on the proposed scheme at the scheme meeting. Third, assuming the first two stages have occurred, the court approves the proposed scheme.[35]
[35] Re CSR Ltd [2010] FCAFC 34; (2010) 183 FCR 358 [7].
There are well‑established principles which apply to the first stage of proceedings. The court will order the convening of the scheme meeting and approve the dispatch of the scheme booklet if is satisfied that:[36]
(a)there is a pt 5.1 body;
(b)there is a compromise or arrangement within the meaning of s 411 of the Act;
(c)the proposed explanatory statement contains the prescribed information[37] and provides proper disclosure;[38]
(d)the scheme is bona fide and properly proposed;
(e)ASIC has had at least 14 days' notice of the proposed hearing date and a reasonable opportunity to examine the terms of the scheme and the explanatory statement and make submissions;[39]
(f)the procedural requirements of the Act and the Corporations Rules have been met;
(g)the scheme is of such a nature that, if it receives the necessary statutory majority at the scheme meeting, the court will be likely to approve it.
[36] Re SRG Limited [2018] FCA 1092 [11]; Re Wesfarmers Ltd [2018] WASC 308 [60].
[37] Corporations Act, s 412(1)(a)(ii); Corporations Regulations, reg 5.1.01 and sch 8 cl 8301 ‑ 8310.
[38] Corporations Act, s 412(1)(a)(i).
[39] Corporations Act, s 411(2)(b).
Any issue about classes of members is usually determined at the first hearing.[40] This is so that costs and court time are not wasted which would otherwise occur if this issue was left to the second hearing.[41]
[40] Re CSR Ltd [73].
[41] Re Opes Prime Stockbroking Ltd [2009] FCA 813; (2009) 179 FCR 20 [20].
The standard of review that is undertaken by the court at the first hearing is whether the proposed scheme is not inappropriate and is one that sensible business people might consider is of benefit to its members.[42] If the proposed arrangement is one that appears fit for consideration by a meeting of members and is a commercial proposition likely to gain the court's approval if passed by the necessary majority, leave should be given to convene the meeting.[43]
[42] Re Amcom Telecommunications Ltd [2015] FCA 341 [10].
[43] Re SRG Limited [12]; Re Wesfarmers Ltd [72] - [76].
Disposition
The formal matters that the plaintiffs had to prove are satisfied.
Each of the first plaintiffs were registered companies prior to the Act coming into force. Pursuant to s 1378(1) of the Act (read with s 126 of the Corporations Law), they are companies registered under the Act and, accordingly, pt 5.1 bodies.
The proposed Schemes constitute an 'arrangement'. Section 411 of the Act covers a wide range of arrangements which touch or concern the rights and obligations of a company, its members or creditors.[44]
[44] Re NRMA Ltd (No 1) [2000] NSWSC 82; (2000) 33 ACSR 595 [20].
The plaintiffs filed the affidavit required by r 3.2 of the Corporations Rules regarding the persons who have been nominated to be the chairperson and alternate chairperson for the Scheme meetings.[45]
[45] Affidavit of Antony Leslie John Woodings filed 10 July 2020 [258] - [262].
By letter dated 16 July 2020, ASIC confirmed that it had been given 14 days' notice of the hearing and had a reasonable opportunity to examine the terms of the Scheme and the draft explanatory statement.[46] ASIC also gave notice that it did not propose to appear at the first hearing to make submissions or intervene to oppose the Scheme.[47]
[46] Third affidavit of Adrian Chin Shien Chai filed 16 July 2020, 'ACSC-59', p 18.
[47] Third affidavit of Adrian Chin Shien Chai filed 16 July 2020, 'ACSC-59', p 19.
On the materials before me, there was nothing to suggest that the proposed Schemes were not properly proposed.
Class issue
The Act does not define the term 'class'. To determine whether separate classes of members are required, the test involves three questions.[48] First, what are the rights which existing members have against the company and to what extent are they different. Second, to what extent are these rights affected differently by the scheme. Third, does the different treatment of rights make it impossible for the members in question to consider the scheme as one class.
[48] First Pacific Advisors LLC v Boart Longyear Ltd [2017] NSWCA 116; (2017) 320 FLR 78 [80].
The test is not one of identical treatment but of 'community of interest'.[49] It is necessary for the court to determine whether the rights of different groups, viewed in the context of the proposed scheme, are so dissimilar as to make it impossible for them to consult together with a view to their common interests.[50] Ordinarily, divergent commercial interests external to share membership will not be a factor which differentiates classes, although this is a question of degree.[51]
[49] Re Hills Motorway Ltd [2002] NSWSC 897; (2002) 43 ACSR 101 [12].
[50] Re Wesfarmers Ltd [95]; Re Healthscope Ltd [2019] FCA 542; (2019)139 ACSR 608 [106] - [107].
[51] Re NRMA Ltd (No 1) [79]; Re Wesfarmers Ltd [95].
In approaching the issue of classes, a practical, business-like approach should be adopted by the court.[52] As Finkelstein J noted in Re Opes Prime Stockbroking, there is a built-in safeguard against majority oppression in that the court is not bound by the decision of the meeting.[53]
[52] Re Healthscope Ltd [118].
[53] Re Opes Prime Stockbroking Ltd [66].
In the case of an insolvent company, where the scheme is proposed as an alternative to an insolvent liquidation, it is the rights as creditors in the insolvent liquidation of the company that should be compared.[54]
[54] First Pacific Advisors LLC v Boart Longyear Ltd [83] citing Re T & N Ltd (No 4) [2007] 1 All ER 851 [87] (David Richards J).
In determining whether creditors form separate classes, a commercial evaluative judgment is made of the transactions, circumstances and consequences that might be said to justify any separate classes of creditors, considered in the context of the proposed scheme and its overall effect.[55]
[55] Re Healthscope Ltd [118].
In this case, the plaintiffs proposed, and I accepted, that given the terms of the proposed Schemes, there were two relevant classes of creditors of BGF and there should be two Scheme meetings for that company to consider the proposed Scheme.[56] The evidence before me is that BGF has five (or possibly six) external creditors and a large number of intra‑group creditors.[57]
[56] Affidavit of Antony Leslie John Woodings filed 10 July 2020 [17] and 'ALJW-5'.
[57] Affidavit of Antony Leslie John Woodings filed 10 July 2020 [17] and 'ALJW-5'.
For all other companies, there is only one class of creditors.
Funding Creditors
In BGF, the first class of creditors are the Funding Creditors. These creditors are the BGNV, the Commonwealth and LDTC (as the trustee for bonds held by ICWA).
Whilst all creditors have the right to share pari passu in the distribution of BGF's assets under s 555 of the Corporations Law, the Funding Creditors have additional rights. These additional rights comprise:
(a)the potential for an order pursuant to s 564 of the Corporations Law that may give the Funding Creditors an advantage over other creditors of BGF regarding the distribution of BGF's assets; and
(b)a priority payment under s 556(1)(a) of the Corporations Law for repayment of the funding advanced to BGF to meet the costs of the Bell Proceedings.
In relation to the Funding Creditors, under the Scheme, they will have their right to the benefit of any order pursuant to s 564 or any priority payment pursuant to s 556(1)(a) of the Corporations Law extinguished.[58] All creditors, including the Funding Creditors, will have their right to share pari passu in a distribution of BGF's assets under s 555 extinguished. Counsel for the plaintiffs submitted at the hearing before me, which I accept, that the Funding Creditors are giving up rights that are potentially very valuable.[59]
[58] Scheme, cls 5.2(d), 6.1 and 9.3.
[59] ts 27.
The evaluation to be undertaken by the Funding Creditors in deciding whether to vote for or against the Schemes will include:
(a)the large potential advantage they may receive over other creditors of BGF should the Schemes not proceed;
(b)the risk of not establishing an entitlement to that advantage;
(c)the time required to quantify that advantage in contested proceedings;
(d)the opportunity cost of failing to obtain a distribution for seven or more years; and
(e)the costs the Funding Creditors may expect to incur in establishing and quantifying their rights in contested proceedings.
In contrast, all other creditors of BGF do not have to undertake the same risk versus reward analysis or consideration of the opportunity cost of being kept out of funds that had been advanced to the liquidator of BGF for the prosecution of the Bell Proceedings. These creditors are not giving up any similar rights under the Scheme.
Counsel for the plaintiffs submitted and I accept that these groups of creditors have interests which are adverse;[60] the remaining creditors stand to benefit at the expense of the Funding Creditors giving up their valuable rights under s 564.[61] For this reason, I do not consider that these two groups can be expected to meet and consult to decide whether the Schemes are for their common good.[62]
[60] ts 27.
[61] See Re HIH Casualty and General Insurance Ltd [2006] NSWSC 485; (2006) 57 ACSR 791 [74]; Re Opes Prime Stockbroking Ltd [67] - [69].
[62] Re Hills Motorway Limited [12]; Plaintiffs' submissions [52].
In both oral and written submissions, counsel for the plaintiffs specifically addressed the position of LDTC and ICWA.[63] LDTC is the trustee of subordinated bonds issued by BGF and ICWA is the holder of all the subordinated bonds. In Bell Group Ltd (in liq) v Westpac [No 9], Owen J considered LDTC's rights as a creditor of BGF. His Honour held that LDTC had the same rights against BGF in its winding up as any other ordinary unsecured creditor.[64] The subordination mechanism of the trust deed is effected through a redistribution of amounts that LDTC may recover from BGF pursuant to rights that other creditors have against LDTC/ICWA under a turnover trust; it does not restrict LDTC/ICWA's rights against BGF as a creditor. As a consequence, he contended that the subordinated status of the bonds does not mean that LDTC should be placed in a separate class to the other creditors.[65]
[63] Plaintiff's submissions [54].
[64] Bell Group Ltd (in liq) v Westpac [No 9] [3320] - [3326]; ts 18 - 19 and 29 - 30.
[65] See, Re Linter Textiles Corporation Ltd [1991] 2 VR 561, 566.
I accept these submissions. Accordingly, I consider that LDTC is not in a different position to the other Funding Creditors and should be in the class of Funding Creditors for the purpose of the Scheme meeting of BGF.
All other creditors
All creditors other than the Funding Creditors will have the same right to share in a distribution of BGF's assets. These other creditors did not advance any funding to the liquidator of BGF and have no right to any repayment under s 564. These creditors are entitled to prove for a parri passu distribution of assets in proportion to their claims. Counsel for the plaintiffs contended that each of these creditors fundamentally has the same interest which makes it possible for them to consult together.[66]
[66] Plaintiffs' submissions [60].
There are essentially two groups of creditors within this group; the external creditors and the intra‑group creditors.
Turning first to the external creditors, I accept that there is some difference between the external creditors as some[67] will be receiving a fixed amount while others, such as WIT, will receive a relatively fixed entitlement for their claims, currently anticipated to be a payment of 100 cents in the dollar.
[67] WAG, and, to the extent that it has a claim against BGF, possibly BGUK.
At the hearing before me and in their written submissions, counsel for the plaintiffs specifically referred me to the pre‑Schemes commitments entered into by the major external creditors of BGF which requires these creditors to vote in favour of the Schemes. Counsel contended that these commitments are relevant but not determinative in determining class composition.[68] In this regard, he noted that if these creditors were considered to comprise a separate class of creditors, WIT would be in a class all on its own, as the only creditor of BGF not bound in some way to support the Schemes.[69] Counsel submitted that as a creditor with less than 0.1% of the value of all of the claims in BGF's liquidation, WIT should not be put in a position where it can effectively veto the Schemes. In his view, this would not be a 'practical or business‑like' approach to the determination of the question of class composition and demonstrated that the pre‑Schemes commitments were not of themselves class creating.[70]
[68] Re Healthscope Ltd [116] - [117]; Re Pulse Health Ltd [2017] NSWSC 651 [13].
[69] Affidavit of Antony Leslie John Woodings filed 10 July 2020, 'ALJW-11', SID, cls 4.2 and 5.2.
[70] Plaintiff's submissions [55(3)].
Turning first to the position of WAG, BGUK and WIT, a clear community of interest exists between these creditors as in giving up their rights to a distribution in the liquidation of BGF, all three creditors stand to receive a relatively fixed entitlement in a way that is more expeditious, certain and cost-effective than in BGF's liquidation.[71] Counsel noted that while the differences in rights between these creditors created different levels of risk and reward, this did not create a new community of interest; they were different levels within the one class.[72]
[71] Explanatory Statement, [7].
[72] ts 31 - 32.
Following correspondence with ASIC, counsel for the plaintiffs informed the court that the plaintiffs intend to tag the votes of WIT at the Scheme meetings. This will allow the court to consider any impact of these arrangements at the second court hearing.[73]
[73] Second affidavit of Adrian Chin Shien Chai filed 16 July 2020, 'ACSC-51', p 49; ts 32 - 33.
I am satisfied that the differences in the rights to distribution between WIT and the remaining external creditors is not of a nature as would make it impossible for them to consult and vote on the proposed Scheme. By tagging the votes of WIT, it will enable to the court to consider the position at the second court hearing.
In relation to the intragroup creditors, such as Bell Bros, it was submitted that despite being treated differently to WAG, BGUK and WIT under the Schemes, they also belonged to the class of 'all other creditors'.
In considering this submission, the interests of the intragroup companies who are in liquidation should be equated with the interests of their creditors.[74] Under the proposed Schemes, the intragroup creditors will release and extinguish their liquidation rights against BGF and not receive any distribution from the Scheme Fund. For most of the intragroup creditors, the only creditors are the Deputy Commissioner of Taxation, who has agreed to receive a fixed share of the Scheme Fund under the 2019 Settlement Deed, and either TBGL or BGF. If distributions were made to these companies, almost all distributions would ultimately be received by TBGL or BGF.[75]
[74] Charlton v Baber [2003] NSWSC 745; (2003) 47 ACSR 31 [53]; Walker v Wimborne (1976) 137 CLR 1.
[75] ts 34 - 35.
As a result, by way of collapsing the company structure into one and dealing with the rights collectively, layers of costs and administration are avoided. In the context of long running and costly proceedings and disputes between creditors, I accept that this approach is commercially sensible and that there is a community of interest between the intragroup companies and the non-funding creditors.
Conclusion on classes
I accept that the difference in the interests of Funding Creditors and all other creditors means that there is insufficient community of interest between all creditors of BGF for them to consider in the one meeting whether the BGF Scheme is in their collective interests.
In my view, the creation of two classes of creditors for the Scheme meetings is appropriate. As noted above, any issues concerning the voting of WIT and the other creditors can be considered at the second court hearing.
Conditions precedent
There are number of conditions precedent to the Scheme.[76] Mr Woodings deposed that aside from the condition precedent set out below, he was not aware of any circumstance that would result in a failure or non-satisfaction of any of the conditions precedent to the Schemes.[77]
[76] Schemes, cl 2.
[77] Affidavit of Antony Leslie John Woodings filed 10 July 2020 [245].
Under cl 3.1(b) of the 2019 Settlement Deed, by 20 July 2020, LDTC was required to obtain directions from the English High Court that it is acting properly and is justified in not taking steps to prevent or interfere with the settlement (Negative Direction Condition Precedent) and that any directions not be subject to appeal.[78] This date can only be extended by 'Creditor Majority', as that term is defined in the 2019 Settlement Deed.
[78] Affidavit of Antony Leslie John Woodings filed 10 July 2020 [236] - [240]; Schemes, cl 2.1(g).
LDTC has obtained directions from the English High Court. However, the condition precedent will not be satisfied unless the approval precedent date is extended to at least 31 July 2020, the first date after the period for any appeals against the final orders expires.[79] In his second affidavit, Mr Chai deposed that on 10 July 2020, on the instructions of the second plaintiff, he wrote to the solicitors for the parties to the 2019 Settlement Deed seeking their consent to the extension of 'Approval Condition Precedent Date' and the 'Schemes Condition Precedent Date', as those terms are defined in the 2019 Settlement Deed. The parties have consented to the extension of these dates to 1 August 2020 and 26 August 2020 respectively.[80]
[79] Affidavit of Antony Leslie John Woodings filed 10 July 2020 [240].
[80] Second affidavit of Adrian Chin Shien Chai filed 16 July 2020, [17] - [18].
I do not consider that this is a matter that should prevent the convening of the Scheme meetings. This matter can be revisited at the second court hearing.
Explanatory Statement
I have read the initial draft of the Explanatory Statement (as provided to ASIC). I have also been provided with the communications between ASIC and the plaintiffs' solicitors in relation to ASIC's review of the draft Explanatory Statement.
I was and am satisfied that there will be proper disclosure as to the effect of the proposed Schemes and the material considerations for the creditors.
There is evidence before me as to the due diligence and verification process that was undertaken by the second plaintiff.[81] On the basis of this evidence, I accept that:
(a)the second plaintiff undertook a process of due diligence and verification to verify the accuracy of statements in the Explanatory Statement based on his knowledge and experience as liquidator or provisional liquidator; and
(b)appropriate steps have been taken to satisfy the second plaintiff that the Explanatory Statement does not omit any material information.
[81] Affidavit of Antony Leslie John Woodings filed 10 July 2020 [223] - [230].
Based on the checklist contained within the draft Explanatory Statement,[82] I was satisfied that it contained the prescribed information in accordance with s 412(1)(a)(ii) of the Act and sch 8 of the Corporations Regulations.
Other matters
[82] Explanatory Statement, [1.3].
The plaintiffs also sought orders pursuant to s 1319 of the Act for electronic dispatch of the Explanatory Statement. I note that these orders are now common.[83] Details were provided as to the terms of the proposed electronic notification.[84] I was and am satisfied that an order for electronic dispatch of the Explanatory Statement was appropriate.
[83] See, for example, Re SRG Ltd [48]; Re Doray Minerals [2019] WASC 57 [72].
[84] Affidavit of Antony Leslie John Woodings filed 10 July 2020 [268].
In response to the current COVID-19 pandemic, Commonwealth, State and Territory governments have passed legislation, made regulations and issued directives which prevent interstate and overseas persons from physically attending meetings held in Western Australia, where the Scheme meetings will take place.[85] As a result of the restrictions, the plaintiffs sought directions pursuant to s 1319 of the Act that there be the capacity for the Scheme meetings to be conducted, at least in part, as virtual meetings.[86]
[85] Explanatory Statement, Notice of Meeting and [11.1].
[86] Corporations (Coronavirus Economic Response) Determination (No 1) 2020 (Cth) cl 5.
The plaintiffs also sought the exclusion of r 2.15 of the Corporations Rules and the modified application of div 75 of the Insolvency Practice Rules (Corporations) 2016 (Cth) as set out in their originating process at [16]. Orders seeking the exclusion of r 2.15 are common at the first court hearing.[87] In Re Viralytics Ltd, similar orders were sought by counsel and made by Gleeson J, who noted that the court frequently dispensed with these legislative requirements and that making such orders was appropriate.[88]
[87] See, Re Navitas Ltd, Ex parte Navitas Ltd [2019] WASC 180; Re Mod Resources Ltd, Ex parte Mod Resources Ltd [2019] WASC 326; Re Perth Markets Ltd [2019] WASC 417; Re Nzuri Copper Ltd, Ex parte Nzuri Copper Ltd (No 4) [2020] WASC 10; Re Champion Iron Ltd [2020] FCA 81; Re Avita Medical Ltd [2020] FCA 674.
[88] Re Viralytics Ltd [2018] FCA 637 [39] - [40].
At the hearing before me, I raised two matters with counsel at the hearing before me. The first was to extend the date by which proxy forms were required to be lodged. I considered that this date should be extended until 5.00 pm (AWST) on 8 August 2020 so that all creditors, and in particular any creditors based outside Australia, had until close of business of the working week to lodge any proxies for the meeting.[89] Counsel for the plaintiffs agreed with this proposal and the orders made by the court reflect this later date.
[89] ts 48 - 49.
The second matter concerned the advantages and disadvantages of the Schemes set out in the Explanatory Statement. The first advantage listed in the statement was the approval by the court of the entry into and implementation of the 2019 Settlement Deed, which involves the Schemes as a critical part of the settlement.[90] I considered that the placement of the court's approval at the top of the advantages may imply that the court considers that creditors should vote in favour of the Schemes and that the Schemes should be approved. This is not the effect of the orders previously made by the court. At the hearing, counsel for the plaintiffs advised that this item would be removed from the final Explanatory Statement to be dispatched to creditors.[91]
[90] Explanatory Statement, [3.6].
[91] ts 43 - 44.
Taking into account all of these matters, I considered that there was no apparent reason why the Scheme should not, if the necessary special resolution of creditors is passed, receive the court's approval.
Directions for voting by the second plaintiff at the Scheme meetings
The second plaintiff also sought directions as to how he should cause certain Australian Bell group companies to vote at the Scheme meetings.
Seven of the companies seeking relief in this application, namely TBGL, BGF, Albany Broadcasters Ltd (in liq), Bell Bros Holdings Ltd (in liq), Bell Publishing Group Pty Ltd (in liq), Wigmores Tractors Pty Ltd (in liq) and W & J Investments Ltd (in liq), were ordered to be wound up by orders of the court made before 23 June 1993.[92] By reason of s 1408(1) of the Corporations Act 2001 (Cth), the winding up of these companies is governed by the Corporations Law.
Application for directions
[92] Affidavit of Antony Leslie John Woodings filed 10 July 2020 [12], 'ALJW1'.
The plaintiffs' application for directions is made pursuant to s 479(3) of the Corporations Law (in relation to the seven companies who were ordered to be wound up prior to 23 June 1993) and s 90‑15(1) of sch 2 to the Act in relation to the remaining companies. Section 90‑15(1) is in wide terms and allows the court to make such orders as it thinks fit in relation to the external administration of a company.
Legal Principles
The approach of the court on an application for directions by an external administrator is well-established. As Goldberg J stated in Re Ansett Australia Ltd (No 3):[93]
There must be something more than the making of a business or commercial decision before a court will give directions in relation to, or approving of, that decision. It may be a legal issue of substance or procedure, it may be an issue of power, propriety or reasonableness, but some issue of this nature is required to be raised.
[93] Re Ansett Australia Ltd (No 3) [2002] FCA 90; (2002) 115 FCR 409 [65].
Subject to the liquidator making full and fair disclosure of the material facts, the effect of a direction is to protect the liquidator from claims that they have acted unreasonably, inappropriately, or in breach of their duties; it does not determine rights and liabilities that arise out of the proposed transaction. Put another way, the order of the court sanctions a proposed course of conduct by the liquidator.
As was noted by Vaughan J in Re GGA Lifestyle Pty Ltd (Administrators Appointed); ex parte Woodhouse:[94]
A direction that an external administrator may properly and justifiably carry out a proposed course of conduct is used to signify that it is appropriate that he or she do so. It is a conventional form of direction in common use. It is implicit in such an order that the court is approving the proposed conduct. Often a proposed direction in this form will raise an issue of propriety or reasonableness. Directions are available and appropriate on that basis. (citations omitted)
[94] Re GGA Lifestyle Pty Ltd (Administrators Appointed); Ex parte Woodhouse [2019] WASC 167 [23].
In this case, an order or direction is sought in terms that the plaintiff would be acting properly and is justified in causing all Australian Bell group companies who are creditors of Scheme companies, with one exception, to attend and vote in favour of the resolutions to agree to the Schemes. The one exception is Western Interstate. In respect of that company, the second plaintiff seeks directions that he would be acting properly and is justified in causing Western Interstate not to exercise any right to vote.
Disposition
For the following reasons, I was and am satisfied that the plaintiff would be acting properly and be justified in causing the various Australian Bell group companies, other than Western Interstate, to vote in favour of the proposed Schemes.
First, I was and am satisfied that there is a potential conflict of interest in the duties the second plaintiff owed as liquidator of various companies within the Australian Bell Group Company. As I have previously noted,[95] the second plaintiff is operating in an unusual liquidation where litigation has already run for more than 25 years and there is a deep and entrenched history of litigation between the parties. I consider that in these circumstances, it is appropriate that the second plaintiff receives the protection of these directions as the course of conduct proposed appears to be reasonable.
[95] Re Bell Group Ltd (in liq); Ex parte Woodings [84].
Second, consistent with the decisions that I have previously made,[96] I consider that it is reasonable and appropriate for the second plaintiff to facilitate the settlement to maximise the prospects that the Schemes will be approved and for him to vote in accordance with the proofs of debt which have been lodged.
[96] Re Bell Group Ltd (in liq); Ex parte Woodings; Re Bell Group (In Liq); Ex parte Woodings [2020] WASC 259.
Third, in respect of Western Interstate, given that this proof of debt is the subject of litigation (which is to be resolved by the 2019 Settlement Deed), it is appropriate that the second plaintiff not exercise any right to vote in favour of the proposed Schemes.
Conclusion
At the hearing before me, I was satisfied that the substantive and procedural requirements under s 411(1) of the Act had been satisfied and that the proposed Schemes were fit for consideration by the creditors.
I was also satisfied that it was appropriate to make the orders and directions sought by the plaintiff.
For these reasons, at the conclusion of the hearing on 17 July 2020, I made orders in terms of Annexure 'B' to this judgment in respect of the Scheme.
SCHEDULE A
Scheme Companies
No Company
ACN 008 773 411 Pty Ltd (in liquidation) (formerly Harlesden Pty Ltd)
Albany Broadcasters Limited ACN 008 674 600 (in liquidation)
Ambassador Nominees Pty Ltd ACN 009 105 800 (in liquidation)
Bell Bros Pty Ltd ACN 008 672 375 (in liquidation)
Bell Bros Holdings Ltd ACN 008 695 056 (in liquidation)
Bell Equity Management Limited ACN 009 210 208 (in liquidation)
Bell Group Finance Pty Ltd ACN 009 165 182 (in liquidation)
Bell Publishing Group Pty Ltd ACN 008 704 452 (in liquidation)
Dolfinne Pty Ltd ACN 009 134 516 (in liquidation)
Dolfinne Securities Pty Ltd ACN 009 218 142 (in liquidation)
Great Western Transport Pty Ltd ACN 009 669 121 (in liquidation)
Harlesden Finance Pty Ltd ACN 009 227 561 (in liquidation)
Industrial Securities Pty Ltd ACN 008 728 792 (in liquidation)
Maradolf Limited ACN 005 482 806 (in liquidation)
Maranoa Transport Pty Ltd ACN 009 668 393 (in liquidation)
Neoma Investments Pty Ltd ACN 009 234 842 (in liquidation)
TBGL Enterprises Limited ACN 008 669 216 (in liquidation)
WAON Investments Pty Ltd ACN 008 937 166 (in liquidation)
Wanstead Pty Ltd ACN 008 775 120 (in liquidation)
Wanstead Securities Pty Ltd ACN 009 218 160 (in liquidation)
Western Interstate Pty ltd ACN 000 224 395 (provisional liquidator appointed)
Western Transport Pty Ltd ACN 009 666 308 (in liquidation)
Wigmores Tractors Pty Ltd ACN 008 679 221 (in liquidation)
SCHEDULE B
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
MG
Research Orderly to the Honourable Justice Hill
5 AUGUST 2020
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