Re Boart Longyear Ltd (No 2)

[2017] NSWSC 1105

Supreme Court

New South Wales

• Summary available

Medium Neutral Citation:	In the matter of Boart Longyear Limited (No 2) [2017] NSWSC 1105
Hearing dates:	4 and 5, 13, 14, 27 July, 9, 14 August 2017
Decision date:	22 August 2017
Jurisdiction:	Equity - Corporations List
Before:	Black J
Decision:	The Court approves the proposed schemes of arrangement as altered pursuant to s 411 of the Corporations Act 2001 (Cth)
Catchwords:	CORPORATIONS — Arrangements and reconstructions — Schemes of arrangement or compromise — Applications for approval of creditors’ schemes of arrangement – where Plaintiffs seek approval of schemes in altered form – whether schemes would be approved by honest and intelligent creditor – whether schemes unfair to shareholders – whether schemes unlawful – whether schemes should be approved with alterations
Legislation Cited:	- Australian Securities and Investments Commission Act 2001 (Cth) - Companies Act 1936 (NSW), s 133 - Companies Act 1958 (Vic), s 92 - Companies Code, s 315(6) - Corporations Act 2001 (Cth), Chs 2E–2F, 6, Pts 2J.1, 5.1, ss 12, 53, 208, 210–229, 233, 259A(c), 411, 553, 563A(2), 606, 611, 625(1) - Corporations Amendment (Sons of Gwalia) Act 2010 (Cth) - Corporations Law, s 15 - Corporations Regulations 2001 (Cth), reg 5.6.23, Sch 8 cl 8303 - Evidence Act 1995 (NSW), s 136 - Joint Stock Companies Arrangement Act 1892 (NSW) - Securities Act 1933 (US), s 3(a)(10) - Supreme Court (Corporations) Rules 1999 (NSW), r 2.13 - Uniform Companies Act 1961, s 181
Cases Cited:	- Australasian Meat Industry Employees Union v Meat & Allied Trades Federation of Australia [1991] FCA 672; (1991) 32 FCR 318 - Australian Securities & Investments Commission v Australian Investors Forum Pty Ltd (No 2) [2005] NSWSC 267; (2005) 53 ACSR 305 - Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485 - Australian Trade Commission v WA Meat Exports Pty Ltd (1987) 14 ALD 314; 75 ALR 287; 7 AAR 248 - Bacnet Pty Ltd v Lift Capital Partners Pty Ltd (in liq) [2010] FCAFC 36; (2010) 183 FCR 384 - Bank of Western Australia Ltd v Ocean Trawlers Pty Ltd (19950 13 WAR 407; 16 ACSR 501 - Bateman v Newhaven Park Stud Ltd [2004] NSWSC 566; (2004) 207 ALR 406; 49 ACSR 597 - British America Nickel Corporation Ltd v M J O’Brien Ltd [1927] AC 369 - Buzzle Operations Pty Ltd (in liq) v Apple Computer Australia Pty Ltd [2010] NSWSC 233; (2010) 238 FLR 384; 77 ACSR 410 - Carruth v Imperial Chemical Industries Ltd [1937] AC 707 - First Pacific Advisors LLC v Boart Longyear Ltd [2017] NSWCA 116 - Fowler v Lindholm [2009] FCAFC 125; (2009) 178 FCR 563 - Goodfellow v Nelson Line (Liverpool) Ltd [1912] 2 Ch 324 - IPT Systems Ltd v MTIC Corporate Pty Ltd [2000] WASC 316; (2000) 158 FLR 349; 36 ACSR 454 - Mercedes Holdings Pty Ltd v Waters (No 2) [2010] FCA 472; (2010) 186 FCR 450; 78 ACSR 118 - Mount Gibson Iron Ltd [2008] ATP 4 - Orrong Strategies Pty Ltd v Village Roadshow Ltd [2007] VSC 1; (2007) 207 FLR 245 - Perpetual Custodians Ltd (as custodian for Tamoran Pty Ltd as trustee for Crivelli) v IOOF Investment Management Ltd [2013] NSWCA 231; (2013) 304 ALR 436 - Phosphate Co-operative Co of Australia Pty Ltd v Shears (No 3) [1989] VR 665 - Primacon Holding GmbH v Credit Agricole [2011] EWHC 3746 (Ch); [2013] BCC 201 - Re Alabama, New Orleans, Texas and Pacific Junction Railway Co [1891] 1 Ch 213 - Re Aldridge Uranium Ltd (No 2) [2010] FCA 1424 - Re Amcom Telecommunications Ltd (No 4) [2015] FCA 720; (2015) 107 ACSR 341 - Re Anglo American Insurance Ltd [2001] 1 BCLC 755 - Re Anglo-Continental Supply Co Ltd [1922] 2 Ch 723 - Re Apcoa Parking Holdings GmbH [2014] EWHC 3849 (Ch); [2015] 4 All ER 572 - Re Application of NRMA Ltd (No 1) [2000] NSWSC 82; (2000) 156 FLR 349 - Re Application of NRMA Ltd (No 2) [2000] NSWSC 408; (2000) 156 FLR 412 - Re Aston Resources Ltd [2012] FCA 229 - Re Atlantic Gold NL (No 2) [2014] FCA 869 - Re Atlas Iron Ltd [2016] FCA 366; (2016) 112 ACSR 554 - Re Atlassian Corporation Pty Ltd [2013] FCA 1451 - Re Australian Co-operative Foods Ltd [2008] NSWSC 1221 - Re Bluebrook Ltd [2009] EWHC 2114; [2010] 1 BCLC 338 - Re Boart Longyear Ltd [2017] NSWSC 567 - Re Boart Longyear Ltd [2017] NSWSC 756 - Re British Aviation Insurance Co Ltd [2005] EWHC 1621 (Ch); [2006] 1 BCLC 665 - Re BRL Hardy Ltd [2003] SASC 97; (2003) 45 ACSR 397 - Re BTR Plc [2000] 1 BCLC 740 - Re Central Pacific Minerals NL [2002] FCA 239 - Re Centro Properties Ltd (in its capacity as responsible entity of Centro Property Trust) [2011] NSWSC 1465; (2011) 86 ACSR 584 - Re Chevron (Sydney) Ltd [1963] VR 249 - Re City of Melbourne Bank Ltd (1897) 19 ALT 80 - Re CSR Ltd [2010] FCAFC 34; (2010) 183 FCR 358; 77 ACSR 592 - Re David Jones Ltd (No 2) [2014] FCA 720; (2014) 101 ACSR 381 - Re Dee Valley Group Plc [2017] EWHC 184 (Ch) - Re Direct Acceptance Corporation Ltd (1987) 5 ACLC 1037 - Re Dominion Insurance Company of Australia Ltd (subject to scheme of arrangement) [2017] NSWSC 730 - Re English, Scottish and Australian Chartered Bank [1893] 3 Ch 385 - Re Equitable Life Assurance Society [2002] EWHC 140 (Ch); All ER (D) 109; 2 BCLC 510 - Re Glendale Land Development Ltd (in liq) [1982] 2 NSWLR 563; (1982) 7 ACLR 171; 1 ACLC 562 - Re Hawk Insurance Co Ltd [2001] EWCA Civ 241; 2 BCLC 480 - Re HIH Casualty and General Insurance Ltd [2005] NSWSC 240; (2005) 190 FLR 398; 53 ACSR 12 - Re HIH Casualty and General Insurance Ltd [2006] NSWSC 485; (2006) 57 ACSR 791 - Re Holders Investment Trust Ltd [1971] 2 All ER 289; 1 WLR 583 - Re Independent Practitioner Network Ltd (No 2) [2008] FCA 1593; (2008) 26 ACLC 1249 - Re Investorinfo Ltd [2005] FCA 1848; (2005) 24 ACLC 44 - Re Jax Marine Pty Ltd [1967] 1 NSWR 145 - Re Kalgoorlie Lake View Pty Ltd [2005] FCA 1440; (2005) 56 ACSR 144 - Re Landmark Corporation Ltd [1968] 1 NSWR 759 - Re Linton Park Plc [2005] EWHC 3545 (Ch); [2008] BCC 17 - Re Matine Ltd (1998) 28 ACSR 268 - Re National Bank Ltd [1966] 1 All ER 1006; 1 WLR 819 - Re PCCW Ltd [2009] HKCA 177; 3 HKC 292 - Re Permanent Trustee Co Ltd [2002] NSWSC 1177; (2002) 43 ACSR 601 - Re Professional Investment Holdings Ltd (No 2) [2010] FCA 1336 - Re Seven Network Ltd (No 3) [2010] FCA 400; (2010) 267 ALR 583; 77 ACSR 701 - Re Stemcor (SEA) Pte Ltd [2014] EWHC 1096 (Ch); 2 BCLC 373 - Re Summit Resources (Aust) Pty Ltd [2012] WASC 125; (2012) 42 WAR 401; 88 ACSR 60 - Re TDG Plc [2008] EWHC 2334 (Ch); [2009] 1 BCLC 445 - Re Telewest Communications Plc (No 1) [2004] EWHC 924 (Ch); [2005] 1 BCLC 752 - Re Telewest Communications Plc (No 2) [2004] EWHC 1466 (Ch); [2005] 1 BCLC 772 - Re V & M Diagnostic Services Pty Ltd (1985) 9 ACLR 663 - Re Wollongong Coal Ltd [2017] NSWSC 201; (2017) 317 FLR 426 - Sovereign Life Assurance Company v Dodd [1892] 2 QB 873 - UDL Argos Engineering and Heavy Industries Co Ltd v Li Oi Lin [2001] HKCFA 19; [2002] 1 HKC 172; [2001] 3 HKLRD 634 - Waters v Mercedes Holdings Pty Ltd [2012] FCAFC 80; (2012) 203 FCR 218; 90 ACSR 45 - Winepros Ltd [2002] ATP 18; (2002) 43 ACSR 566 - Zenyth Therapeutics Ltd v Smith [2006] VSC 436; (2006) 60 ACSR 548
Texts Cited:	- T Damien and A Rich, Schemes, Takeovers and Himalayan Peaks (3rd ed, 2013) - L Gullifer and J Payne, Corporate Finance Law, Principles and Policy (2nd ed, 2015) - G B Parker and M Buckley, Buckley on the Companies Acts (14th ed, 1981)
Category:	Principal judgment
Parties:	Boart Longyear Limited (First Plaintiff) Boart Longyear Management Pty Limited (Second Plaintiff) Boart Longyear Australia Pty Limited (Third Plaintiff) Votraint No. 1609 Pty Limited (Fourth Plaintiff)
Representation:	Counsel: I M Jackman SC/R Higgins/M Izzo/L Rich (Plaintiffs) M Oakes SC (Centerbridge Partners LP) J Gleeson SC/N Bender (First Pacific Advisors LLC) P M Wood (Ares Management LP and Ascribe II Investments LLC) R P Austin/N Mirzai (Snowside Pty Limited as trustee for the Snowside Trust and Maurici Nominees Pty Ltd as trustee for AP Maurici & Associates Pty Ltd Superannuation Fund) D Barnett (Australian Securities & Investments Commission) (amicus curiae)     Solicitors: Ashurst Australia (Plaintiffs) Minter Ellison (Centerbridge Partners LP) Gilbert & Tobin (First Pacific Advisors LLC) Arnold Bloch Leibler (Ares Management LP and Ascribe II Investments LLC) Speed & Stracey (Snowside Pty Limited as trustee for the Snowside Trust and Maurici Nominees Pty Ltd as trustee for AP Maurici & Associates Pty Ltd Superannuation Fund)
File Number(s):	2017/122411

Judgment

The nature of the application and outline

1. By Originating Process filed on 24 April 2017, the Plaintiffs, Boart Longyear Ltd (“BLY”) and several associated companies, initially sought orders approving two interdependent schemes of arrangement between the Plaintiffs and their secured and unsecured creditors. As will emerge below, the Plaintiffs now seek an order that those schemes be approved in an altered form including significant amendments.

2. This judgment addresses matters of some complexity, given the nature of the schemes, the matters in issue and the proposal for the altered schemes, and it will be helpful if I first outline the manner in which I proceed. I first set out the background to and the parties to this application, the circumstances in which the Court ordered a mediation after several days of a second hearing in respect of the schemes and an altered scheme was then proposed by BLY which has the support of all voting secured creditors (which represented 99.63% of debt under the Secured Creditor Scheme) and all voting unsecured creditors (which represented 96.19% of debt under the Unsecured Creditor Scheme) other than one creditor whose attitude is not known, but is opposed by two shareholders in BLY. I then turn to the lay affidavit and expert evidence, which was extensive given the nature of the schemes. Next, I review the case law as to the issues to be determined at a second court hearing in respect of a scheme, the scope of the proposed alterations to the original schemes and the applicable principles in respect of such alterations, and conclude that the Court has power to approve the schemes with those alterations under s 411(6) of the Corporations Act 2001 (Cth).

3. I then consider the questions of procedural requirements and satisfaction of conditions precedent to the schemes and the wide range of issues raised in opposition to the original and altered schemes. I address the relevance of the majorities achieved at the Secured Creditor Scheme meeting to the exercise of the Court’s discretion to approve the schemes, which involves several subissues, and also address issues as to the conduct of the Secured Creditor Scheme meeting, which include a challenge to the adequacy of an expert report contained in the explanatory statements for the schemes. I also deal at that point, for convenience, with criticisms made of another expert report provided to a shareholders’ meeting which approved the issue of shares under the schemes under s 611 item 7 of the Corporations Act, which approval was a condition precedent to the schemes, and the expert evidence led by the objecting shareholders to seek to establish that BLY has substantial equity value, notwithstanding that it is presently unable to pay interest that is past due on its secured debt and is, I will find, insolvent or near insolvency.

4. I then address issues as to substantive fairness of the original schemes, the expert evidence that is led in respect of the proposed alterations to the schemes and the wide range of matters raised by the two shareholders that oppose approval of the schemes as altered in opposition to those schemes. I finally deal with issues as to collateral benefits and ss 411(11) and 411(17) of the Corporations Act.

The background and the parties

5. The background to the application is largely uncontentious and I have drawn on my earlier judgment ([2017] NSWSC 567) (“Earlier Judgment”), by which I ordered that scheme meetings be convened, in describing that background below. The Plaintiffs sell drilling products and provide drilling services and equipment for mining and drilling companies globally, operate in more than 20 countries in respect of drilling services and 40 countries in respect of drilling products, and have more than 4,000 employees globally. There is little doubt that BLY and the Boart Longyear Group (“BLY Group”) are in financial difficulty, having incurred substantial operating losses and substantial losses after tax in 2015 and 2016 and owing principal debt in an amount of nearly US$760 million at the commencement of the restructuring process. The BLY Group borrowed US$35 million under a delayed draw term loan on 4 January 2017 and a Second-Out ABL Facility on 2 April 2017, with that funding having been provided by entities associated with Centerbridge Partners LLP (“Centerbridge”), Ares Management LP (“Ares”) and Ascribe II Investments LLC (“Ascribe”), which support the schemes. A condition precedent to the schemes contemplates a further borrowing by the BLY Group under a new revolving asset-based lending facility (“New Money ABL”) in the amount of US$75 million, less any amount raised pursuant to a share purchase plan, which is to be “backstopped” by Centerbridge, Ares and Ascribe and will be used to replace three existing facilities. That borrowing is to be implemented in a varied form to which I refer below.

6. On 1 April 2017, BLY defaulted on payment of interest due on notes under a 10% Senior Secured Notes Indenture dated 27 September 2013 as amended or amended and restated from time to time (“SSNs”); the cure period for that default has now expired and BLY contends that it is or will be insolvent unless the schemes (as now altered) and a wider restructuring associated with them are implemented, or some other restructuring is implemented. Mr Gleeson, who appears with Mr Bender for First Pacific Advisors LLC (“First Pacific”), which opposed the schemes in their original form but supports the schemes in their altered form, accepted in oral submissions that it was essentially common ground that the BLY Group faced a heavy and unsustainable debt, had a very tight cash position and was near insolvency. Mr Gleeson also submitted, and it appears to be common ground, that the BLY Group’s position at least partly reflects a “cyclical” decline in the resources industry and that the BLY Group is starting to see improvements, consistent with its management’s objectives, but subject to its debt problems (T83).

7. On 2 April 2017, BLY and the Second Plaintiff, Boart Longyear Management Pty Ltd (“BLM”), entered into a Restructuring Support Agreement (“RSA”) with some, but not all, of their major creditors, namely Ares, Ascribe and two Dutch entities which are affiliates of Centerbridge. On 3 April 2017, BLY made an announcement to Australian Securities Exchange Ltd (“ASX”) in respect of the restructuring and the proposed schemes, which referred to their objectives, the matters considered by BLY’s independent directors in developing them and the need to reduce the Plaintiffs’ debt and interest costs and improve their liquidity, extend the maturity of their debt and adjust interest arrangements on the debt. That announcement also referred to additional financing facilities provided to BLY by Centerbridge, Ares and Ascribe outside the schemes and to other steps involved in the restructuring, also outside the schemes, including the issue of shares to entities associated with Centerbridge that are holders of Term Loan A securities under an agreement dated 22 October 2014 as amended or amended and restated from time to time (“TLAs”) and the holders of Term Loan B securities under an agreement also dated 22 October 2014 as amended or amended and restated from time to time (“TLBs”) under a Share Subscription Deed between those entities and BLY (“Subscription Deed”) in exchange for a reduction of the interest rate under those facilities and the entry into Director Nomination Agreements in favour of Centerbridge, Ares and Ascribe. First Pacific was not party to those additional arrangements and it and other holders of the SSNs (other than Centerbridge, Ares and Ascribe) did not obtain any benefits under them, other than any wider benefit from avoiding the Plaintiffs’ insolvency by a successful restructuring.

8. On 4 May 2017, I made orders under s 411(16) of the Corporations Act restraining further proceedings against the Plaintiffs (whether or not such proceedings had already been commenced) except by leave of the Court and subject to such terms as it imposes, to facilitate consideration of the schemes, and those orders were subsequently recognised by the United States Bankruptcy Court.

9. The Plaintiffs subsequently sought orders convening the two scheme meetings. One of those schemes (“Secured Creditor Scheme”) is an arrangement between the Plaintiffs and the SSN holders and the holders of the TLAs and TLBs. Those debts exceeded US$450 million as at 1 April 2017, comprising US$204 million outstanding under the SSN debt, an amount in excess of US$113 million outstanding under the TLA debt and an amount in excess of US$137 million outstanding under the TLB debt (Rasetti 21.4.17 [32]).

10. The SSNs within the scope of the Secured Creditor Scheme are relevantly held by entities or funds associated with Centerbridge, which together hold approximately 8.5% of the SSNs; entities or funds associated with Ares which together hold approximately 18.7% of the SSNs; entities or funds associated with Ascribe which together hold approximately 23.5% of the SSNs; entities or funds associated with First Pacific which together hold approximately 29% of the SSNs; entities or funds associated with Corre Partners Management LLC (“Corre”) which together hold approximately 5.8% of the SSNs; entities or funds associated with HPS Investment Partners LLC (including Watford Re Ltd) (“HPS”) which together hold 7.8% of the SSNs; entities or funds associated with Lonestar Capital Management LLC (“Lonestar”) which together hold approximately 2.4% of the SSNs; and entities or funds associated with Varde Partners Inc (“Varde”) which together hold approximately 7.3% of the SSNs. Unusually, substantially all of the secured creditors voted at the Secured Creditor Scheme meeting and were represented at this hearing or communicated their views to the Court by letters, to which I will refer below. Each of Corre, HPS, Lonestar and Varde opposed approval of the schemes in their original form but supports the schemes with the alterations now proposed by the Plaintiffs.

11. The Secured Creditor Scheme (in its original form) would bring about several amendments to the relationship between the Plaintiffs on the one hand and the holders of the SSNs and TLAs and TLBs on the other. In the case of the SSNs, they would be reinstated with accrued interest (at a rate of 12% per annum) paid in kind (“PIK”) from 1 January 2017 to the day before the recapitalisation is completed. The Secured Creditor Scheme would extend the maturity of the SSNs and the TLAs and TLBs to a common date, in the case of the SSNs from 1 October 2018 to 31 December 2022 and in the case of the TLAs and TLBs from 4 January 2021 to 31 December 2022. BLY would be allowed an option, with retrospective effect to January 2017, to pay interest in kind under the SSNs at a rate of 12% per annum until December 2018, rather than to pay cash interest at a rate of 10% per annum. There is no corresponding change in respect of the TLAs or TLBs under the Secured Creditor Scheme, under which interest was already payable in kind to Centerbridge. I observed, in the Earlier Judgment, that it seemed to me that there was a potential practical significance to that difference, once the schemes were implemented in their original form, so far as BLY would potentially then have the capacity to pay interest after its solvency was restored by the schemes, but would not be required to do so in cash in respect of the SSN debt until December 2018. The Secured Creditor Scheme also provides for an amendment to the terms of the SSNs and TLAs and TLBs including a waiver of rights arising from any change of control event, so that an SSN holder will have no right to call in its debt when a substantial number of shares are issued to Centerbridge entities under the Subscription Deed in exchange for a reduction in the interest rate payable under the TLAs and TLBs, with the result that Centerbridge, which already likely has practical control of BLY, would obtain legal control of BLY.

5. The other scheme is an arrangement (“Unsecured Creditor Scheme”) between the Plaintiffs and the holders of notes under a 7% Senior Unsecured Notes Indenture dated 28 March 2011 as amended or amended and restated from time to time (“SUNs”). Those debts total nearly US$294 million, comprising principal of US$284 million and accrued interest of nearly US$9.5 million as at 1 April 2017 (Rasetti 21.4.17 [32]). The unsecured creditors within the scope of the Unsecured Creditor Scheme include entities associated with Ares which holds approximately 42.9% of the SUNs, Ascribe which holds approximately 45.5% of the SUNs and other entities which hold the balance of the SUNs.

6. The Unsecured Creditor Scheme provides for cancellation of approximately US$196 million owing to holders of SUNs in exchange for the issue of ordinary equity which will amount to approximately 42% of BLY’s ordinary equity after the schemes are implemented, such that entities associated with Ares are issued 18% of the equity in BLY, Ascribe is issued 19% of the equity in BLY and other unsecured creditors, including funds affiliated with Corre and HPS, together receive 4.8% of the equity of BLY. (The equity to be issued to Ares and Ascribe under the Unsecured Creditor Scheme is slightly reduced under the proposed alterations to the schemes noted below.) The Unsecured Creditor Scheme also provides for extension of the maturity date of the SUNs from 1 April 2021 to 31 December 2022 and subordination of the priority of SUN holders to unsecured interest accrued on the TLAs and TLBs, so that Centerbridge will take priority over unsecured debts owing under the SUNs in respect of that unsecured interest. The Unsecured Creditor Scheme also releases the claims of subordinate claimants within the meaning of s 563A(2) of the Corporations Act, except to the extent of the net proceeds of any policy of insurance that would respond to such a claim.

7. Other arrangements between the BLY Group and the Centerbridge entities that are partly outside the schemes, but are conditions precedent to it, also confer additional rights on Centerbridge, Ares and Ascribe. The Subscription Deed between BLY and Centerbridge entities, execution of which is a condition precedent to the schemes, provides for BLY to issue shares to Centerbridge or its nominees, as holders of the TLA and TLB debt, so that it will hold 56% of shares in BLY following implementation of the schemes subject to any dilution under the warrants, in exchange for a reduction of the interest rate payable under the TLAs and TLBs. (The equity to be issued to Centerbridge under the Subscription Deed is reduced to 54% in connection with the proposed alterations to the schemes noted below.) Under the Director Nomination Agreements, Centerbridge obtains a once only right to nominate an additional director for election to the board of BLY, in addition to the four directors as to which it already has such a nomination right, and Ares and Ascribe also each obtain a once only right to nominate a director each to BLY’s board, and a third director to be nominated by them jointly. These arrangements were disclosed in the explanatory statements for the schemes, and that disclosure was reinforced by a table which addressed, inter alia, these matters and by an additional paragraph included in the “no” case in the explanatory statements.

8. An application for orders convening the scheme meetings was heard on 4 and 5 May 2017, I delivered the Earlier Judgment on 10 May 2017 and made orders for the relevant scheme meetings to be convened and an appeal from the Earlier Judgment was dismissed by the Court of Appeal on 26 May 2017 ([2017] NSWCA 116). First Pacific brought an application for special leave to appeal from the decision of the Court of Appeal to the High Court of Australia but has agreed to discontinue that application as part of a settlement reached between BLY and the substantial majority of secured and unsecured creditors, in relation to the proposed alterations to the schemes, to which I will refer below.

9. The two scheme meetings were held consecutively in Sydney on 30 May 2017. The result of the vote taken at the Secured Creditor Scheme meeting was declared on the basis that 25 votes, being 56.82% of the number of votes cast, were in favour of the scheme resolution, and 19 votes, being 43.18% of the number of votes cast, were against the scheme resolution; and debt representing $364,232,795.26 or 78.49% of the value of debt owed to secured creditors present and voting was cast in favour of the scheme and debt representing $99,798,658.20 or 21.51% of the value of debts owed to secured creditors present and voting was cast against the scheme resolution (Derwin 10.6.17 [29]). The debt in favour of the scheme included unsecured interest owed to Centerbridge in respect of the TLAs and TLBs, a matter which I will address below.

10. It was common ground that, on the results of the Secured Creditor Scheme meeting declared by the chairperson, the majority of secured creditors present at that meeting, by number and by value, resolved to agree to the Secured Creditor Scheme, with or without alterations or conditions approved by the Court, provided that such alterations or conditions did not change the substance of that scheme including specified steps referred to in the explanatory statement in any material respect. Where the Plaintiffs now seek approval of the Secured Creditor Scheme with alterations, a question arises as to the interaction between a resolution at a scheme meeting that seeks to limit such alterations or conditions, including by reference to particular steps contained in the explanatory statement, and s 411(6) of the Corporations Act which authorises the Court to approve a compromise or arrangement subject to such alterations or conditions as it thinks fit. I will address that question below.

11. At the Unsecured Creditor Scheme meeting, 19 SUN holders comprising 79.17% of unsecured creditors present and voting by number voted in favour of the scheme; five SUN holders comprising 20.83% by number of such holders present and voting voted against that scheme; SUN holders to a value of $261,300,000 comprising 91.83% of SUN holders by value voted in favour of that scheme and SUN holders holding debt of $23,254,400 comprising 8.17% by value of SUN holders present and voting voted against that scheme (Derwin 10.6.17 [51]). It was common ground that, on the results declared by the chairperson, the resolution at the Unsecured Creditor Scheme meeting was passed by the requisite majorities by number and by value.

12. Resolutions to permit the issue of shares to Centerbridge, Ares and Ascribe were passed by significant majorities at BLY’s annual general meeting on 13 June 2017 (Ex FR-3, 577–579), including in respect of one resolution where Centerbridge could not vote its shares.

13. As I noted above, the Plaintiffs sought orders that the Secured Creditor Scheme (in its original form) and the Unsecured Creditor Scheme (in its original form) be approved under s 411(4)(b) of the Corporations Act. The hearing of that application took place over three days and part of a fourth day, on 4–5 and 13–14 July 2017. I should pause here to acknowledge the substantial efforts of Counsel and their instructing solicitors in assembling evidence and submissions in the preparation and conduct of the first and second scheme hearings and the application to alter the schemes that I will address below. That involved leading a substantial amount of evidence and addressing a range of complex issues within a relatively short time. Inevitably, given the nature of the approval process for schemes of arrangement, a particularly heavy burden fell on the Plaintiffs, their solicitors and their Counsel, who had to lead a large volume of evidence to address the formal and substantive requirements of complex schemes as well as addressing the more controversial issues raised in this hearing. All parties’ efforts and efficiency in addressing those issues should be recognised.

14. The application heard at the second court hearing for approval of the schemes (as well as the application at the first court hearing to convene the scheme meetings in the classes proposed by the Plaintiffs) was opposed by First Pacific which holds approximately 29% of the SSNs. The grounds of that opposition were set out in a Statement of Particulars as to why the Court should refuse to approve the schemes of arrangement, filed on 15 June 2017 by First Pacific. First Pacific no longer opposes the schemes in a form incorporating the alterations proposed by the Plaintiffs.

15. Two shareholders of BLY, Snowside Pty Ltd as trustee for the Snowside Trust and Maurici Nominees Pty Ltd as trustee for the AP Maurici & Associates Pty Ltd Superannuation Fund (“Snowside companies”) were also granted leave to be heard in their capacity as contributories of BLY under r 2.13 of the Supreme Court (Corporations) Rules 1999 (NSW) and also opposed the orders approving the schemes. The Snowside companies together hold 26,773,181 shares in BLY, comprising approximately 2.82% of its shares, and are together the third largest shareholding group in BLY, after Centerbridge and another entity (McKenzie 3.7.17 [8]; Ex FR-3, 461). The effect of implementation of the schemes of arrangement would be to reduce their collective shareholding in BLY to approximately 0.1%. The Snowside companies oppose the schemes both in their original form and with the alterations proposed by the Plaintiffs.

16. In June 2017, the Snowside companies commenced separate proceedings against BLY and its directors alleging, inter alia, misleading and deceptive conduct in contravention of the Corporations Act and the Australian Securities and Investments Commission Act 2001 (Cth) in respect of the distribution of the explanatory statement for a notice of meeting of BLY to approve shares issues to Centerbridge, Ares and Ascribe and involvement of the directors in the alleged breach, breaches of an equitable duty of disclosure owed by the directors of BLY to shareholders including the Snowside companies and oppressive conduct within the scope of Ch 2F of the Corporations Act. An application for interlocutory relief to restrain BLY from bringing resolutions before its annual general meeting to approve that issue of shares was dismissed on 13 June 2017 by Brereton J ([2017] NSWSC 756). As I will note below, the interests of the Snowside companies were also potentially affected by the Unsecured Creditor Scheme, so far as it may have an effect upon those claims.

17. Centerbridge was also heard under r 2.13 of the Supreme Court (Corporations) Rules and supported the application for approval of the schemes, although it made only brief submissions where the relevant issues had been fully exposed in submissions for the Plaintiffs on the one hand and First Pacific and the Snowside companies on the other. Centerbridge has several interests in the schemes, as a holder of SSNs, as the holder of all of the TLAs and TLBs, as a holder of substantial equity in BLY and as party to ancillary arrangements to the schemes. Centerbridge presently holds 48.9% of the shares in BLY, although its holding would be substantially reduced to 3.7% by the Unsecured Creditor Scheme and then increased to 56% (under the original terms of the schemes and associated arrangements) or to 54% (under the proposed alterations to the schemes) as the result of the issue of shares contemplated by the Subscription Deed associated with the schemes. Centerbridge would also be allowed the right to nominate five directors for election to the board of BLY under the Director Nomination Agreements associated with the schemes, increasing from the four directors whom it is presently entitled to nominate under 2015 restructuring arrangements.

18. Ares and Ascribe were also heard under r 2.13 of the Supreme Court (Corporations) Rules and supported the application for approval of the schemes, although they also made only brief submissions where, as I noted above, the relevant issues had been fully exposed in submissions for the Plaintiffs on the one hand and First Pacific and the Snowside companies on the other.

19. The Australian Securities and Investments Commission (“ASIC”) also appeared at the second court hearing as amicus curiae and made helpful submissions as to the applicable legal principles although it did not express a view as to whether the schemes should be approved.

20. After completion of submissions on the fourth day of the second court hearing, on 14 July 2017, I adjourned that hearing to 27 July 2017 to allow the opportunity for satisfaction of an important condition precedent relating to the New Money ABL, which had not then been satisfied. I also then took the somewhat unusual step, at least in a scheme hearing, of ordering a mediation between the parties, in the unusual circumstances that the parties to the Secured Creditor Scheme and the Unsecured Creditor Scheme were highly sophisticated entities and had largely either been represented at the hearing or had advised the parties and the Court of their attitude to the schemes. I took that course because, as I noted in my ex tempore judgment as to that matter delivered on 14 July 2017, interests other than those of the entities before the Court, including employees of the Plaintiffs and the communities in which they operated, both in Australia and internationally, could be adversely affected if the schemes were ultimately not approved and the Plaintiffs were placed in external insolvency administration. I also noted that, if the parties were able to reach agreement as to a potential variation of the schemes, it may be open to the Court to amend the schemes by order made after the creditors’ meetings.

21. The Plaintiffs and the parties to the Secured Creditor Scheme and the Unsecured Creditor Scheme reached agreement as to alterations to the schemes following the mediation, as set out in a Settlement Terms Sheet Proposal (“Terms Sheet”), a subsequent Deed of Settlement and Release dated 9 August 2017 (“Settlement Deed”) between BLY, several other entities in the BLY Group and entities associated with Centerbridge, Ares, Ascribe and First Pacific (Ex P-3) and amended terms for the Secured Creditor Scheme and the Unsecured Creditor Scheme. By Interlocutory Application dated 9 August 2017, the Plaintiffs now seek orders that Secured Creditor Scheme and the Unsecured Creditor Scheme should be approved with alterations under s 411(6) of the Corporations Act. The Secured Creditor Scheme and the Unsecured Creditor Scheme, as altered, are set out in an exhibit to the affidavit of Ms Camilla Clemente, who is a solicitor with the Plaintiffs’ solicitors, sworn 5 August 2017 (Ex CC-2), and with successive further variations in an exhibit to the affidavit of Ms Clemente sworn 9 August 2017 (Ex CC-3) and, in the form tendered on 14 August 2017, as Exhibits P6 and P7. That application is now supported by First Pacific, Centerbridge, Ares and Ascribe and several other SUN and SSN holders but is opposed by the Snowside companies.

Affidavit evidence

29. I now turn to address the affidavit evidence, the legal principles in respect of approval of the schemes, the issues as to the alterations that the Plaintiffs seek to the schemes and then the issues as to approval of the Secured Creditor Scheme and the Unsecured Creditor Scheme in turn. In identifying and addressing these matters, I have had regard to summaries of key issues served by the Plaintiffs (and adopted by Centerbridge, Ares and Ascribe), First Pacific, the Snowside companies and ASIC, which identified the key propositions which they respectively advanced. I will address evidence led and submissions made, primarily by the Plaintiffs, First Pacific and the Snowside companies, in respect of the original form of the schemes, which were not abandoned although First Pacific supports the schemes with the alterations to which I have referred above. These matters were also adopted, in large part, by the Snowside companies. I will also address evidence led and submissions made in respect of the altered schemes below. As I noted above, the Plaintiffs necessarily had to lead a substantial volume of evidence to describe the schemes and their background and to establish the formal requirements for approval of the schemes. The satisfaction of the majority of those requirements was uncontroversial and what remains in issue are substantial disputes as to valuation and the substantive fairness of the schemes in both their original and altered forms that I will address below.

30. The Plaintiffs rely on several affidavits of Mr Fabrizio Rasetti, who is the company secretary of BLY, a director and company secretary of BLM and other entities within the BLY Group and Senior Vice President and General Counsel of BLY. Several of those affidavits were also read in respect of the first court hearing. Mr Rasetti’s first affidavit dated 21 April 2017, with an exhibit in three volumes, refers to the structure of the proposed schemes of arrangement, the background to the schemes and correspondence between the legal representatives of First Pacific and BLY in respect of the schemes. Mr Rasetti’s second affidavit dated 4 May 2017, with an exhibit in two volumes, provides further information as to the directors and officers of the scheme companies and shares on issue by BLY and refers to the steps which were taken to verify the explanatory statements for the Unsecured Creditor Scheme and the Secured Creditor Scheme. That affidavit also elaborates on the background to the schemes, the terms of the RSA, the Plaintiffs’ financial position and the views reached by KordaMentha in their independent expert’s report included in the explanatory statements for the schemes. I will address issues as to that report which received substantial focus at the second court hearing below. That affidavit also refers to the implementation steps which would be required for the schemes.

31. The Plaintiffs also rely on an affidavit of Mr Rasetti dated 21 June 2017, which addresses amounts drawn down by BLY under a Revolving Credit and Security Agreement as at 4 May 2017, amounts outstanding under the TLAs and TLBs as at 4 May 2017 and amounts outstanding under the SSNs and SUNs as at the voting entitlement record date for the schemes. An affidavit dated 28 June 2017 of Mr Rasetti addresses the terms of a Recapitalisation Implementation Agreement between entities within the BLY Group, including BLY, and an entity associated with Centerbridge, dated 23 October 2014; existing legal proceedings against BLY, including the oppression proceedings brought by the Snowside companies against, inter alia, BLY, which were commenced in June 2017; the result of BLY’s shareholder meeting held on 13 June 2017, which included resolutions relating to the approval and implementation of the issue of shares to Centerbridge, Ares and Ascribe under the Subscription Deed associated with the schemes; and evidence of satisfaction of several conditions precedent to the schemes.

32. The Plaintiffs relied on a further affidavit of Mr Rasetti dated 3 July 2017 which indicated that, as at that date, the Plaintiffs’ negotiations with potential third party providers had not resulted in an offer to provide a New Money ABL in the amount of US$75 million, as contemplated by one of the conditions precedent to the schemes, and that a third party funder with which the Plaintiffs currently intended to enter into the finance agreement was only willing to fund a portion of the New Money ABL. The Plaintiffs were then negotiating the terms on which the remaining amount would be provided by Centerbridge, Ares and Ascribe.

33. The Plaintiffs relied on a further affidavit of Mr Rasetti dated 26 July 2017 which addressed the satisfaction of several remaining conditions precedent to the schemes. Mr Rasetti’s evidence was that he was not aware, at the time he swore his affidavit on 27 July 2017 (Sydney time), of any fact or circumstance which would mean that the Obligors Deeds Poll (as defined in respect of the Secured Creditor Scheme and the Unsecured Creditor Scheme) had been terminated or did not continue to benefit their beneficiaries; that Delaware Trust Company had been appointed as new trustee under the SUNs in place of US Bank National Association, in accordance with cl 7.08 of the SUN Indenture which permitted the replacement of a trustee that resigned, and had executed the Undertaking (as defined) in respect of the Unsecured Creditor Scheme; and that KPMG Financial Advisory Services (Australia) Pty Ltd (“KPMG”) had confirmed that the withdrawal of a resolution in respect of an election of Centerbridge’s nominee as a director of BLY, at the annual general meeting of BLY, did not affect its expert report. I will address Mr Rasetti’s evidence as to the satisfaction of other conditions precedent below. Mr Rasetti also gave evidence of execution of finance facilities comprising the New Money ABL, by way of an Amended and Restated Revolving Credit and Security Facility in respect of US$50 million (“PNC ABL”) and a Term Loan Securities Agreement in respect of specified amounts (“Backstop ABL”) to which I refer below.

29. The Plaintiffs also relied on the affidavit of Mr Paul Denaro who is an experienced United States legal practitioner. By his affidavit dated 2 May 2017, read at both the first scheme hearing and this hearing, Mr Denaro sets out the structure for the issue of the SSNs and the SUNs and the manner in which they are held by a nominee for the clearing system, the Depository Trust Company (US) (“DTC”) although beneficial owners of the notes are treated as persons entitled to vote in respect of a reorganisation plan under the United States Bankruptcy Code. I adopted the same approach to voting entitlements in the Earlier Judgment.

30. The Plaintiffs also relied on several affidavits in respect of the convening and conduct of the scheme meetings. By his first affidavit dated 2 May 2017, Mr James Daloia, who is director of solicitation and disbursements at Prime Clerk LLC, a United States information agent, set out the way in which scheme creditors hold the relevant debt, the manner in which records are maintained by the DTC and registered participants under United States practice, and the process which would be adopted for distribution of documents and information to scheme creditors under United States practice, so that the ultimate beneficial owners of the secured and unsecured notes would receive the documents relating to the schemes and would be afforded the opportunity to vote at scheme meetings. Mr Daloia also set out the role which would be played by Prime Clerk in tabulating votes submitted in respect of the scheme meetings. A second affidavit of Mr Daloia dated 9 June 2017, read at the second court hearing, dealt with service of materials relating to the scheme meetings and publication of information concerning those meetings, the collation of voting forms in respect of the scheme meetings and the calculation of interest which was admitted to vote at the scheme meetings. A third affidavit of Mr Daloia dated 21 June 2017 amended the information previously provided as to the result of voting to include additional information and addressed the calculation of interest in respect of the TLAs and TLBs and the total amounts voted at the scheme meetings.

31. By his affidavit dated 4 May 2017, Mr Marcus Derwin, who is a senior managing director of FTI Consulting and has substantial experience in corporate financing and restructuring, consented to act as chairperson of the proposed meetings of creditors in respect of the Secured Creditor Scheme and the Unsecured Creditor Scheme. By his affidavit dated 2 May 2017, Mr Michael McCreadie, who is also an experienced restructuring practitioner, consented to his proposed appointment as alternate chairperson of the two scheme meetings. The Plaintiffs also relied, at the second court hearing, on an affidavit dated 10 June 2017 of Mr Derwin, who had acted as the chairperson of the scheme meetings, who addressed matters relating to the convening of, the tabulation and adjudication of proof of debt forms at, questions raised at, voting at and the results of the poll at, each of the Secured Creditor Scheme meeting and the Unsecured Creditor Scheme meeting.

32. The Plaintiffs also relied on several affidavits of partners and employees of their legal representatives in respect of formal aspects of the schemes, including the satisfaction of conditions precedent. By her first affidavit dated 3 May 2017, Ms Clemente refers to consultation with ASIC and correspondence with First Pacific’s legal advisers in respect of the schemes. By her second affidavit dated 4 May 2017, Ms Clemente refers to further correspondence with ASIC and to several minor amendments made to the draft explanatory statements to the schemes. By her affidavit also dated 4 May 2017, Ms Sarah Dulhunty, a partner with the Plaintiffs’ solicitors, exhibited, subject to a non-publication order which was not continued at this hearing, an independent expert’s report prepared by KPMG in respect of whether the proposed recapitalisation, including the schemes, was fair and reasonable for the shareholders of BLY. By an affidavit dated 5 May 2017, Mr Dennis Dunne, who is a partner in the firm that is United States counsel for the Plaintiffs, referred to a number of amendments to be made to the Fourth Supplemental Indenture, which is relevant to the Unsecured Creditor Scheme, and the First Supplemental Indenture which is relevant to the Secured Creditor Scheme.

33. An affidavit dated 20 June 2017 of Ms Bianca Newton dealt with service of the explanatory statements for the schemes on the legal representatives of First Pacific and ASIC. An affidavit dated 21 June 2017 of Mr Gerard Kane, a solicitor with the Plaintiffs’ solicitors, dealt with amendments made to the explanatory statements that formed part of the Secured Creditor Scheme meeting materials and the Unsecured Creditor Scheme meeting materials, made following the first court hearing. An affidavit dated 30 June 2017 of Mr Eftim Ancev, a solicitor employed by the Plaintiffs’ solicitors, addressed publication of notices in respect of this hearing. An affidavit dated 3 July 2017 of Mr James Marshall, a partner with the Plaintiffs’ solicitors, related to the service of notices of appearance by the Snowside companies and ASIC and indicated that Mr Marshall was not aware of any other notices of appearance served in connection with the proceedings, and also addressed a notice to produce served by First Pacific and the Plaintiffs’ response to that notice to produce. Mr Marshall’s further affidavit dated 4 July 2017 exhibited undertakings executed by the agent in respect of the Agent Deed Poll relating to the Secured Creditor Scheme, the trustee and the scheme companies in respect of the Trustee Deed Poll for the Secured Creditor Scheme, and the trustee and the scheme companies in respect of the Trustee Deed Poll for the Unsecured Creditor Scheme. An issue later arose by reason of the resignation of and need to replace that trustee.

34. An affidavit dated 13 July 2017 of Ms Lucienne Cassidy, a solicitor with the Plaintiffs’ solicitors, provided an update as to the position in respect of the New Money ABL and backstop facility contemplated by the RSA, enclosing a preliminary memorandum of terms and conditions in respect of the New Money ABL and a draft Backstop Credit Agreement between the scheme companies and Centerbridge, Ares and Ascribe. Ms Cassidy’s further affidavit dated 14 July 2017 addressed an aspect of satisfaction of a remaining condition precedent of the schemes, namely clearance of the transaction by the Federal Anti-Monopoly Service of Russia.

35. Turning now to the proposed alterations to the schemes, the Plaintiffs relied (as I noted above) on Ms Clemente’s affidavit dated 5 August 2017 which exhibited (Ex CC-2) an amended Secured Creditor Scheme, including two schedules to that scheme that were proposed to be amended, being an amended Scheme Administrator’s Steps Register and an amended First Supplemental Indenture. That affidavit also exhibited an amended Unsecured Creditor Scheme and two amended schedules, an amended Scheme Administrator’s Steps Register and an amended Fourth Supplemental Indenture. Ms Clemente’s affidavit also referred to, and exhibited, proposed amendments to the Subscription Deed and the Backstop ABL, which are part of the commercial context for the scheme, and a waiver letter signed by PNC Bank in respect of cl 8.2(q) of the PNC ABL addressing a matter which had been raised at the hearing on 27 July 2017.

36. By a further affidavit dated 9 August 2017, Ms Clemente exhibited a bundle of documents (Ex CC-3) containing further amendments to the Secured Creditor Scheme and the Unsecured Creditor Scheme. The amendments to the Secured Creditor Scheme (MFI 2) largely dealt with the possibility of a potential redomiciliation of BLY, which had been disclosed in the explanatory statements for the schemes. The amendments to the Unsecured Creditor Scheme (MFI 1) were of a similar character. By a further affidavit dated 14 August 2017, Ms Clemente referred to proposed further amendments to the Secured Creditor Scheme dealing with the implementation date for the scheme and the identification of participants in the scheme, to the extent that they had not voted at the Secured Creditor Scheme meeting, and the amount of their debts, and corresponding amendments to the Unsecured Creditor Scheme, and an amendment to the Fourth Supplemental Indenture to make a change which had previously been identified in the First Supplemental Indenture. The Snowside companies did not seek to be heard in respect of those further amendments. The Plaintiffs now seek approval of the Unsecured Creditor Scheme incorporating those amendments (Ex P6) and the Secured Creditor Scheme incorporating those amendments (Ex P7).

37. First Pacific relied, by way of lay evidence at the first court hearing and this hearing, on an affidavit of Mr Abhijeet Patwardhan dated 2 May 2017. Mr Patwardhan referred to First Pacific’s communications with the restructuring advisers to the Plaintiffs and to its unsuccessful attempts to be included in negotiations with other major creditors when a restructuring proposal for the BLY Group was formulated, to its receipt of a balance sheet restructuring proposal from BLY on 13 February 2017 and to subsequent counterproposals put by First Pacific to Centerbridge and to BLY’s financial advisers, Houlihan Lokey, but not accepted by BLY. Mr Patwardhan also indicated that, if the Court convened the meetings sought by the Plaintiffs in connection with the proposed schemes, First Pacific did not intend to vote in favour of the Secured Creditor Scheme. In the event, First Pacific voted against that scheme at the relevant scheme meeting, opposed the approval of the schemes in their original form and now supports approval of the schemes as altered.

38. First Pacific also relied on an affidavit dated 2 May 2017 of Mr David Clee, a partner in the firm of solicitors representing it in Australia, which exhibited, subject to a confidentiality order, a presentation prepared by BLY’s financial advisers dated 20 January 2017 which referred to base case, upside and downside forecast financial results for the BLY Group to 2021. That evidence is directed, broadly, to the question whether equity in BLY may have value, at least by 2021, to which I will refer below. First Pacific also relied on the affidavit of its solicitor, Ms Colleen Platford, dated 26 June 2017 and the exhibits to that affidavit which included, inter alia, copies of relevant transaction documents and the RSA. Ms Platford also referred to correspondence with the legal representatives for the Plaintiffs in respect of the conduct of the scheme meetings. First Pacific also relied, at the second court hearing, on a tender bundle (Ex FPTB) which included documents by way of background to the schemes, including the Third Supplemental Indenture dated 2 April 2017, the slides presented by BLY at its 2017 annual general meeting presentation and ASX announcements made by BLY on 26 June 2017 and 3 July 2017.

39. First Pacific also tendered letters from several other creditors, Lonestar, Corre and HPS, indicating their opposition to the schemes (in their original form) which were admitted with a limiting order under s 136 of the Evidence Act 1995 (NSW) that they established the attitude of those entities, and not as proof of the asserted facts. It will be convenient to refer to those creditors’ views before turning to the expert evidence led at the hearing. By its letter dated 21 June 2017, Lonestar advised the Court that it, as a holder of SSNs, had voted against the Secured Creditor Scheme (in its original form). It expressed its disapproval of that scheme (in that form) in strong terms, primarily by reference to the proposition that the treatment of secured creditors other than Centerbridge was different, as between members of the same voting class, by reason of the allocation of equity control of BLY to Centerbridge. Lonestar indicated its view that the allocation of equity in BLY was significant because of the potential enterprise value of BLY on an improvement in the mining cycle and that “the option to capture that value” represented by that equity had material value. Lonestar expressed the conclusion that the schemes (in their original form) were oppressive to and unfairly prejudicial to minority senior secured creditors and should not be approved by the Court.

40. Corre, by its letter dated 21 June 2017, identified a divergence of economic interest between Centerbridge and other secured creditors by reason of Centerbridge’s holding of secured debt and equity. Corre also expressed the view that the schemes (in their original form) allowed Centerbridge “extremely favourable and unfair” treatment by contrast with other secured creditors. Corre pointed to the sacrifice made by SSN holders of extending the maturity of the SSNs and to its belief that equity would have substantial value, implicitly on the basis that BLY’s performance improved. Corre also expressed the view that the waiver of the put option on change of control by holders of SSNs was a valuable concession for which they receive no compensation under the schemes (in their original form). By letter dated 22 June 2017, HPS set out its reasons for voting against the Secured Creditor Scheme (in its original form), which emphasised that it, as a secured creditor, was not given an opportunity to receive equity in return for interest concessions contemplated by the Secured Creditor Scheme. It also expressed the view that the valuation put on BLY’s equity did not have regard to its potential future value, and submitted that the value (or potential value) of equity was demonstrated by Centerbridge’s, Ares’ and Ascribe’s wish to obtain it. It also referred to the significance of a waiver of the change of control put option under the SSNs and that it received no benefit for that waiver.

41. As I noted above, Lonestar, Corre, Varde and HPS now support the schemes incorporating the alterations now proposed by the Plaintiffs, as confirmed by letters dated 3 August 2017 (Ex P4).

42. The Snowside companies relied on an affidavit of their solicitor, Mr Grae McKenzie, dated 3 July 2017 which indicated that the Snowside Trust owned 18,960,439 ordinary shares in BLY, comprising approximately 2% of its issued ordinary shares, and the A P Maurici & Associates Pty Ltd Superannuation Fund owned 7,812,742 ordinary shares in BLY, comprising approximately 0.82% of BLY’s issued ordinary shares, prior to implementation of the schemes.

Expert evidence

48. The parties led substantial affidavit evidence in respect of the independent experts’ reports contained in the explanatory statements for the schemes (in their original form) and for a shareholder meeting to approve the issue of equity to Centerbridge, Ares and Ascribe. A controversy arose at the second court hearing as to the views expressed in those reports, which I will address below. A question also arose as to whether the expert evidence, so far as it addressed questions of the enterprise value of the BLY group and its solvency, was potentially affected by the alterations of the terms of the SSNs proposed by the Plaintiffs and that question was addressed by further expert evidence to which I refer below.

49. By his affidavit dated 3 May 2017, Mr Scott Kershaw of KordaMentha confirms that he holds the opinions set out in KordaMentha’s independent expert’s report which was included in the explanatory statements for the schemes in their original form. I will refer to the substance of that report below. By her affidavit dated 3 May 2017, Ms Jenny Nettleton of KordaMentha confirms that she was also involved in the preparation of KordaMentha’s independent expert’s report and also confirms her consent to act as scheme administrator.

50. First Pacific relied on Mr Wayne Lonergan’s affidavit dated 26 July 2017, which exhibited his report (Ex WL-1) in respect of the schemes, which addressed the approach of the expert reports prepared by KordaMentha in respect of the schemes in their original form and by KPMG in respect of shareholders’ resolutions to approve the issue of equity to Centerbridge, Ares and Ascribe, a presentation dated January 2017 made by BLY’s financial advisers to First Pacific and the value of BLY’s equity following implementation of the proposed recapitalisation of BLY.

51. The Snowside companies relied on the affidavits of Mr Jeffrey Hall affirmed 28 June 2017, 29 June 2017 and 3 July 2017. Mr Hall’s first affidavit annexed his expert report dated 2 June 2017 and his supplementary expert report dated 28 June 2017, which set out the reasons he considered the KPMG valuation of BLY was too low. Dr Austin, who appears with Mr Mirzai for the Snowside companies, placed limited weight on Mr Hall’s first report dated 2 June 2017 in oral submissions, and treated that report as background to the other reports of Mr Hall on which he placed primary reliance. Mr Hall’s second affidavit dated 29 June 2017 and his report dated 29 June 2017 set out the reasons he considered the KordaMentha valuation of BLY was also too low. Mr Hall’s third affidavit dated 3 July 2017 and his third supplementary expert report dated 30 June 2017 elaborated his reasons as to the cyclical nature of the BLY business, the comparability of several companies in order to determine an earnings multiple and the limitations as to KordaMentha’s work, beyond those set out in his report dated 29 June 2017.

52. The Snowside companies also relied on the affidavit of Mr Antony Samuel affirmed 3 July 2017 and an associated report, which addressed the extent of inquires as to the BLY Group’s solvency made by KordaMentha; and the affidavit of Mr Brian Silvia sworn 3 July 2017, annexing his report of the same date, which addressed the question of the adequacy of the investigation of the BLY Group’s solvency in the KordaMentha report. I will address these matters below.

53. Turning now to expert evidence led by the Plaintiffs in reply, by his further affidavit dated 30 June 2017, Mr Kershaw responded to Mr Lonergan’s report dated 26 June 2017, addressed the manner in which the analysis of KordaMentha would be affected if interest on the TLA in an amount of US$18.5 million formed part of the secured claim amount against the relevant obligors, and also addressed a question raised by a legal representative of First Pacific at a scheme meeting in respect of the valuation of intellectual property of BLY. The Plaintiffs also relied on an affidavit of Mr Ian Jedlin, a partner of KPMG, dated 29 June 2017 which confirmed the views held by Mr Jedlin and expressed in an independent expert’s report dated 29 June 2017 (Ex IJ-1) which also responded to Mr Lonergan’s report. Mr Jedlin also responded to Mr Hall’s first report by his letter dated 8 June 2017 (Ex IJ-3) and to Mr Hall’s supplementary report by his letter dated 30 June 2017 (Ex IJ-2).

54. The parties also led expert evidence as to the effect of the proposed alterations to the schemes which I will address below.

The issues to be determined at a second court hearing in respect of a scheme

55. At a second court hearing, the court must ordinarily be satisfied that the relevant procedural requirements have been satisfied, including that the resolutions agreeing to the schemes have been passed by the required majority by number and value of properly informed creditors at meetings that were duly convened and held and that the other procedural requirements of Part 5.1 of the Corporations Act, including in respect of class composition, have been satisfied. The parties proceeded on the basis that there was no further issue at the second court hearing as to the constitution of the class in the Secured Creditor Scheme, where that matter was determined by the Earlier Judgment and the appeal from it, subject to First Pacific’s application for special leave to appeal to the High Court of Australia.

55. Both the Plaintiffs and First Pacific referred to Barrett J’s helpful summary of the applicable principles in Re Permanent Trustee Co Ltd [2002] NSWSC 1177; (2002) 43 ACSR 601 at [8]–[10], where his Honour observed that the Court’s role in an application to approve a scheme at a second court hearing is to assess the scheme as a whole, having regard to the totality of the give and take that is the compromise or arrangement between the Plaintiffs and their creditors, and determine whether it is satisfied of the reasonableness of the schemes. I recognise that, as Barrett J there noted (at [8]):

“There is no exhaustive statement of the matters as to which the court must be satisfied before granting approval. Indeed, courts have been reluctant to attempt any comprehensive or compendious statement of relevant criteria.”

Nonetheless, the Court will exercise its discretion whether to approve the scheme in accordance with well-established principles: Re Seven Network Ltd (No 3) [2010] FCA 400; (2010) 267 ALR 583; 77 ACSR 701.

57. I must have regard, in determining whether to approve the schemes, to the fact that a scheme of arrangement may have a compulsive effect upon minority shareholders and creditors. In Re Alabama, New Orleans, Texas and Pacific Junction Railway Co [1891] 1 Ch 213 at 238–239, Lindley LJ observed that, in sanctioning a scheme, the Court must consider whether “the majority has been acting bona fide” and that:

“The Court also has to see that the minority is not being overridden by a majority having interests of its own clashing with those of the minority whom they seek to coerce. Further than that, the Court has to look at the scheme and see whether it is one as to which persons acting honestly, and viewing the scheme laid before them in the interests of those whom they represent, take a view which can reasonably be taken by business men. The Court must look at the scheme, and see whether the Act has been complied with, whether the majority are acting bona fide, and whether they are coercing the minority in order to promote interests adverse to those of the class whom they purport to represent; and then see whether the scheme is a reasonable one or whether there is any reasonable objection to it, or such an objection to it as that any reasonable man might say that he could not approve of it.”

58. Bowen LJ there emphasised (at 243) that the object of a scheme of arrangement is “not confiscation” and not “that one person should be a victim, and that the rest of the body should feast upon his rights”. Fry LJ also observed (at 247) that the Court is

“bound to be satisfied that the proposition was made in good faith; and, further, it must be satisfied that the proposal was at least so far fair and reasonable, as that an intelligent and honest man, who is a member of that class, and acting alone in respect of his interest as such a member, might approve of it”.

59. The Plaintiffs refer to Re BRL Hardy Ltd [2003] SASC 97; (2003) 45 ACSR 397 at [21] as an example of the application of the test derived from the observation of Fry LJ in Re Alabama, New Orleans, Texas and Pacific Junction Railway Co above. Dr Austin accepts that that decision applied that test although he also points out that that decision involved an uncontested members’ scheme and it is, in that sense, not closely comparable with the contested creditors’ scheme at issue in this application. However, that decision is one of many which have treated Fry LJ’s observations as applicable to the question whether a scheme should be approved, including the decisions in Re Application of NRMA Ltd (No 2) [2000] NSWSC 408; (2000) 156 FLR 412; Fowler v Lindholm [2009] FCAFC 125; (2009) 178 FCR 563 at [79]; Re Permanent Trustee Co Ltd above at [9] and Re Centro Properties Ltd (in its capacity as responsible entity of Centro Property Trust) [2011] NSWSC 1465; (2011) 86 ACSR 584 at [37].

60. In Sovereign Life Assurance Company v Dodd [1892] 2 QB 573 at 583, to which I referred in the Earlier Judgment at [32], Bowen LJ also observed that the statutory mechanism in respect of schemes:

“exercises a most formidable compulsion upon dissentient, or would-be dissentient, creditors; and it therefore requires to be construed with care, so as not to place in the hands of some of the creditors the means and opportunity of forcing dissentients to do that which it is unreasonable to require them to do, or of making a mere jest of the interests of the minority.”

61. As the Plaintiffs point out, the Court will recognise that properly informed creditors are generally the best judges of their own commercial interests and will give substantial weight to their views expressed at a scheme meeting, although the Court must nonetheless also be satisfied that the proposed arrangement is fair and reasonable and that creditors have voted in good faith and for proper purposes: Re Central Pacific Minerals NL [2002] FCA 239; Re Seven Network Ltd (No 3) above at [35]–[36]; Re Centro Properties Ltd (in its capacity as responsible entity of Centro Property Trust) above at [35]–[37]. The Court will also have regard to the adequacy of disclosure made to securityholders and whether the proposed arrangement is contrary to public policy: Re Seven Network Ltd (No 3) above at [38]–[40]; Re Centro Properties Ltd (in its capacity as responsible entity of Centro Property Trust) above at [38]–[44].

62. The Plaintiffs rightly accept that, although the Court will have regard to the wishes of the majority of creditors, it must nonetheless be satisfied as to the fairness of the scheme proposal, although they also submit that proof that the statutory majority of creditors has agreed to the scheme is prima facie evidence of fairness and that, beyond the test of fairness that involves assessing whether intelligent and honest creditors, acting in respect of their interests as creditors, might approve of the scheme, the Court will not substitute its own commercial judgement for that of creditors. The Plaintiffs also submit, and I accept, that the Court will not decline to approve a scheme merely because one or more creditors have reasonable objections to that scheme and that the Court will be cautious in upholding an objection from a creditor on the basis that the consideration under the scheme was unfair: Re Linton Park Plc [2005] EWHC 3545 (Ch); [2008] BCC 17 at [20]–[21]; Re British Aviation Insurance Co Ltd [2005] EWHC 1621 (Ch); [2006] 1 BCLC 665 at 684–685; Re Stemcor (SEA) Pte Ltd [2014] EWHC 1096 (Ch); 2 BCLC 373 at [29]–[37].

63. It is also necessary to have regard to the authorities that address the position where some or a majority of the persons who approve a scheme have interests that differ from other participants in the scheme. That case law should be understood in the context of the principles concerning the duties of creditors voting at a class meeting and the potential discounting of votes of creditors with special interests at a class meeting. In British America Nickel Corporation Ltd v M J O’Brien Ltd [1927] AC 369, the Privy Council observed that, in the context of a power under a trust deed, a class member was generally entitled to consider his own interests in exercising his vote, but, where a vote was exercised as a member of a class, it was “bound to exercise it with the interests of the class itself kept in view as dominant” (at 378) and pointed to two principles which co-exist, namely that:

“[U]sually a holder of shares or debentures may vote as his interest directs, [but] he is subject to the further principle that where his vote is conferred on him as a member of a class he must conform to the interest of the class itself when seeking to exercise the power conferred on him in his capacity of being a member. The second principle is a negative one, one which puts a restriction on the completeness of freedom under the first, without excluding such freedom wholly.”

64. The Plaintiffs acknowledge that the Court can, in a proper case, take into account the extraneous interest of creditors or members in the outcome of a scheme in determining whether to approve the scheme and will assess whether a scheme meeting fairly represented the relevant class; that the Court must give particular care to the consideration of the fairness of a scheme that confers benefits on some members of a class; and that the Court will be more cautious in accepting that creditors are better judges of their commercial interests where a significant number of them have extraneous interests. The Plaintiffs also point to relevant factors identified in the authorities, including whether voting rights have been exercised in good faith; whether votes have been cast for the purpose of benefiting or promoting the interest of the class as a whole and not merely the interests of individual creditors; and whether the majority has unfairly coerced the minority in such a way as to promote special interests that are adverse to the interests of, or not shared by, the class as a whole: Re Aldridge Uranium Ltd (No 2) [2010] FCA 1424 at [5]; Primacon Holding GmbH v Credit Agricole [2011] EWHC 3746 (Ch); [2013] BCC 201 at [49].

65. These propositions emerge from a substantial body of case law. In Re English Scottish and Australian Chartered Bank [1893] 3 Ch 385 at 409, in a passage noted in G B Parker and M Buckley, Buckley on the Companies Acts (14th ed, 1981, vol 1, pp 473–474) and approved in several later English cases to which I refer below, Lindley LJ observed that:

“[T]he Court does not simply register the resolution come to by the creditors or the shareholders, as the case may be. If the creditors are acting on sufficient information and with time to consider what they are about, and are acting honestly, they are, I apprehend, much better judges of what is to their commercial advantage than the Court can be. I do not say it is conclusive, because there might be some blot in a scheme which had passed that had been unobserved and which was pointed out later.

While, therefore, I protest that we are not to register their decisions, but to see that they have been properly convened and have been properly consulted, and have considered the matter from a proper point of view, that is, with a view to the interests of the class to which they belong and are empowered to bind, the Court ought to be slow to differ from them. It should do so without hesitation if there is anything wrong; but it ought not to do so, in my judgment, unless something is brought to the attention of the Court to show that there has been some material oversight or miscarriage.”

66. In Goodfellow v Nelson Line (Liverpool) Ltd [1912] 2 Ch 324 at 333–334, Parker J observed that, where there are diverse interests between participants in a scheme and those diverse interests are specially provided for, then “the Court ought to consider carefully the fairness of any scheme by which a majority … seeks to bind a minority”.

67. In Carruth v Imperial Chemical Industries Ltd [1937] AC 707, in a decision of the House of Lords relating to a reduction of capital, Lord Russell of Killowen observed that the Court should decide the question of fairness or unfairness of the scheme on the evidence before it where the large number of votes in favour of a scheme, at a meeting of deferred shareholders, was exercised by persons who also held ordinary shares. Lord Maugham similarly observed that, while it is generally the case that shareholders acting honestly were usually better judges of their commercial advantage than the Court, the vote of the majority is not a valuable guide in considering whether a scheme is fair where it is proved that the majority of a class may have voted in the way they did because of their interests as shareholders in another class.

68. In Re Chevron (Sydney) Ltd [1963] VR 249 at 255, in an observation approved by Street J in Re Landmark Corporation Ltd [1968] 1 NSWR 759 at 766, Adam J observed that:

“The true position appears to be that where the members of a class have divergent interests because some have and others have not interests in a company other than as members of the class the Court may treat the result of the voting at the meeting of the class as not necessarily representing the views of the class as such, and thus should apply with more reserve in such a case the proposition that the members of the class are better judges of what is to their commercial advantage than the Court can be. In so far as members of a class have in fact voted for a scheme not because it benefits them as members of the class but because it gives them benefits in some other capacity, their votes would of course, in a sense, not reflect the views of the class as such although they are counted for the purposes of determining whether the statutory majority has been obtained at the meeting of the class.” [emphasis in original]

His Honour also there held that, where it did not appear from the evidence whether members of the class had voted in that case for the scheme for other reasons, it was necessary that he be satisfied as to the benefits that might reasonably be considered to accrue to members of the class from the scheme “without paying too much regard to the majority obtained at the meeting”.

69. A passage in Buckley on the Companies Acts (14th ed, 1981, vol 1, pp 473–474), approved in Re National Bank Ltd [1966] 1 All ER 1006 at 1012; 1 WLR 819 at 829 and in Re Equitable Life Assurance Society [2002] EWHC 140 (Ch); All ER (D) 109; 2 BCLC 510 at 520, noted that, in exercising its power of sanction of a scheme:

“The court does not sit merely to see that the majority are acting bona fide and thereupon to register the decision of the meeting, but, at the same time, the court will be slow to differ from the meeting, unless either the class has not been properly consulted, or the meeting has not considered the matter with a view to the interests of the class which it is empowered to bind, or some blot is found in the scheme.”

70. In Re Jax Marine Pty Ltd [1967] 1 NSWR 145 at 148, Street J observed that, when an application for approval of a scheme comes before the Court:

“…there is ample room within the Court’s statutory discretion to decide the petition in accordance with the requirements of justice and equity as those requirements appear to affect the rights of the class and its members. Quite frequently it is necessary to discount, even to the point of discarding from consideration, the vote of a creditor who, although a member of a class, may have such a personal or special interest as to render his view a self-centred view rather than a class-promoting view. … This Court is accustomed on the hearing of petitions under s 181 (that is to say at the second stage of the proceedings) to recognizing and taking appropriately into account any special motives or factors affecting particular creditors.”

71. In Re Holders Investment Trust Ltd [1971] 2 All ER 289; 1 WLR 583 at 586, Megarry J emphasised the importance of an examination of the evidence to determine:

“whether the majority was honestly endeavouring to decide and act for the benefit of the class as a whole, rather than with a view to the interests of some of the class and against that of others”.

His Honour held there (at 590) that a resolution for the modification of class rights was not effective, where the majority shareholders had voted with regard to their own interests as equityholders without asking themselves what was best for majority shareholders as a class, and the company had not then established the fairness of the transaction, since the advantages of an exchange for preference shares into unsecured stock did not compensate for its disadvantages.

72. In Re Direct Acceptance Corporation Ltd (1987) 5 ACLC 1037, McLelland J declined to approve a scheme on its merits, where a significant number of shareholders had voted against the scheme, and his Honour found that the scheme was capable of having a substantial deleterious effect on their investments in the company. His Honour reached that result, notwithstanding he recognised the well-established principle that a majority of members are generally better judges of their commercial advantage than the Court.

73. In Re BTR Plc [2000] 1 BCLC 740 at 747, Chadwick LJ observed, in a passage approved by Lewison J in Re British Aviation Insurance Co Ltd above at 682, that:

“…the court is not bound by the decision of the meeting. A favourable resolution at the meeting represents a threshold which must be surmounted before the sanction of the court can be sought. But if the court is satisfied that the meeting is unrepresentative, or that those voting in favour at the meeting have done so with a special interest to promote which differs from the interest of the ordinary independent and objective shareholder, then the vote in favour of the resolution is not to be given effect by the sanction of the court”.

74. The authorities also indicate that the role of the Court includes to be satisfied as to whether the statutory majority reflects a true and fair representation of the class summoned to the meeting and as to the objective reasonableness of the compromise: Re Application of NRMA Ltd (No 1) [2000] NSWSC 82; (2000) 156 FLR 349 at [41]; Re Application of NRMA Ltd (No 2) above at [22].

75. Mr Gleeson also refers to observations of Lord Millett in UDL Argos Engineering and Heavy Industries Co Ltd v Li Oi Lin [2001] HKCFA 19; [2002] 1 HKC 172 at 182–183; [2001] 3 HKLRD 634 at 645 where his Lordship approved the observations of Street J in Re Jax Marine Pty Ltd which I have quoted above. In a passage in that decision that was applied by Lewison J in Re British Aviation Insurance Co Ltd above and by Barrett J in Re HIH Casualty and General Insurance Ltd [2006] NSWSC 485; (2006) 57 ACSR 791 at [69], and which was also quoted with approval in the Earlier Judgment (at [34]) and in the Court of Appeal’s judgment (at [79]), his Lordship also observed (at 185) that:

“The Court will decline to sanction a scheme unless it is satisfied, not only that the meetings were properly constituted and that the proposals were approved by the requisite majorities, but that the result of each meeting fairly reflected the views of the creditors concerned. To this end it may discount or disregard altogether the votes of those who, though entitled to vote at a meeting as a member of the class concerned, have such personal or special interests in supporting the proposals that their views cannot be regarded as fairly representative of the class in question”.

76. In Re Telewest Communications Plc (No 2) [2004] EWHC 1466 (Ch); [2005] 1 BCLC 772, David Richards J had to consider an application for approval of two interrelated schemes of arrangement providing for the cancellation of unsecured bonds issued by the scheme companies in exchange for new shares denominated in dollars in a new holding company. Several sterling bondholders opposed the application for approval of the schemes, on the basis that the exchange rate adopted was adverse to them. David Richards J approved those schemes, having regard, inter alia, to the sophistication of the participants in them and the fact that the scheme was supported by a number of substantial holders of bonds which were in a similar position to the bondholders that opposed the schemes. As will emerge below, the participants in the schemes at issue in this case are similarly sophisticated, but secured creditors other than Centerbridge, Ares and Ascribe do not support the Secured Creditor Scheme. David Richards J also held there was no inherent unfairness in the schemes such as to require the Court to refuse its sanction, where a formula directed to limit the risks of volatility of currency markets was not inherently unfair.

77. David Richards J there referred to the passage in Buckley on the Companies Act, quoted in Re National Bank Ltd above, which he noted (at [20]) had been approved and applied on many occasions, and noted that that test required that the scheme be such that “an intelligent and honest man, a member of the class concerned and acting in respect of his interest, might reasonably approve”, although it need not be the only fair scheme or the best scheme, and that “in commercial matters members or creditors are much better judges of their own interests other than the courts”, but with the qualifications there set out (at [21]–[22]). David Richards J also there gave weight to the fact that the choice of the average exchange rate had there been made by a bondholders’ committee, followed detailed negotiations involving the company, the bondholders committee and others, and pointed to the evidence that established the reasons for the adoption of the average exchange rate. I will refer below to a distinguishing feature of this application, namely the absence of any clear evidentiary justification for the number of shares to be issued to Centerbridge, Ares and Ascribe.

The Snowside companies’ claim that the schemes are unlawful

313. The Snowside companies submit that the Court should not approve the schemes, as altered, because they would be unlawful so far as they contemplated an issue of shares to First Pacific which has not been approved by BLY’s shareholders for the purposes of Ch 2E or s 606 of the Corporations Act or the ASX Listing Rules. That proposition is based, first, on a suggested contravention of s 208 of the Corporations Act and, second, on a suggested contravention of s 606 of the Corporations Act if shares are issued to First Pacific, in circumstances that it is contended that it is an associate of Centerbridge, although Dr Austin recognises the possibility that an applicable exception may exist so far as shares are issued pursuant to a scheme in each case.

314. Dr Austin submits, and I accept, that the Court would not generally sanction a scheme that is inconsistent with other statutory requirements under the Corporations Act: Re Glendale Land Development Ltd (in liq) [1982] 2 NSWLR 563; (1982) 7 ACLR 171 at 178; 1 ACLC 562; Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485 at 501–2; 10 ACSR 230 at 238–239; Re HIH Casualty and General Insurance Ltd [2005] NSWSC 240; (2005) 190 FLR 398; 53 ACSR 12 at [124]. Dr Austin goes further to submit that the Court would not approve a scheme where it was reasonably arguable that the scheme was unlawful. It is not necessary to determine whether this principle extends to the position where it is merely reasonably arguable that a scheme would be unlawful or inconsistent with the Corporations Act, because it does not seem to me that the Snowside companies have established either that the relevant schemes are unlawful or that it is reasonably arguable that they are unlawful.

315. Dr Austin submits, first, that the issue of shares to First Pacific under the altered schemes would contravene Ch 2E of the Corporations Act. There are several steps in that submission to which I refer below. The Plaintiffs respond that the application of Ch 2E of the Corporations Act would properly be determined in adversarial proceedings, in which a shareholder is party, rather than in an application for approval of the schemes in which the Snowside companies are being heard, by leave, without being party to the proceedings. I accept that I should not determine any question as to any application of Ch 2E of the Corporations Act in these proceedings on any final basis, where that would need to be determined in substantive proceedings and by reference to adequate evidence to support any allegation of acting in concert against Centerbridge and First Pacific. However, I must address the question whether this issue, having been raised, provides a reason not to exercise the Court’s discretion under s 411 of the Corporations Act in favour of approval of the altered schemes.

316. Turning now to the relevant statutory provisions, s 208 of the Corporations Act prohibits a public company (relevantly, BLY) or an entity that the public company controls giving a financial benefit to a related party of the public company unless it has obtained approval from the public company's members in the way set out in ss 217–227, and gives the benefit within 15 months after that approval, or the giving of the benefit falls within an exception set out in ss 210–216. The persons who are related parties of a public company are set out in s 228 of the Corporations Act, and include, relevantly, Centerbridge as an entity that has practical control of BLY. The issue of shares to Centerbridge under the schemes was previously approved by BLY shareholders in that regard. The related parties of a public company also include, in s 228(7), an entity which acts in concert with a related party of a public company on the understanding that the related party will receive a financial benefit if the public company gives that entity the financial benefit. Dr Austin submits, and I accept, that First Pacific and Centerbridge would each receive financial benefits within the meaning of s 229 of the Corporations Act from BLY under the altered schemes and associated arrangements, including the issue of BLY shares, the possible receipt of redemption premiums under a Call Schedule and, in the case of First Pacific, a payment by way of reimbursement of costs and expenses.

317. The first step in Dr Austin’s submission is that First Pacific is a related party of BLY, within the meaning of s 228(7) of the Corporations Act. First Pacific would be a related party of BLY under that subsection if, relevantly, it acts in concert with a related party (Centerbridge) of the public company (BLY) on the understanding that the related party (Centerbridge) will receive a financial benefit if the public company (BLY) gives the entity (First Pacific) a financial benefit. Dr Austin contends that First Pacific is acting in concert with Centerbridge on that understanding and is a related party of BLY on that basis.

318. Mr Wood, in response, draws attention to the Explanatory Memorandum for the Corporate Law Reform Bill 1992, which described the operation of the predecessor provision to s 228(7) as follows:

“Where a financial benefit is provided to an associate of a related party, in the expectation that a person will give a corresponding financial benefit to a related party of the public company, the associate will be a related party for the purposes of the proposed Part 3.2A. This provision is intended to address the situation where the public company enters into an uncommercial transaction with a ‘friendly’ third party on the understanding that a corresponding benefit will be given to a related party.”

It seems to me that s 228(7) is apt to address that situation but also has potentially wider application. That section is capable of applying where, first, the entity (relevantly First Pacific) is acting in concert with the related party (relevantly Centerbridge) and, second, that occurs on an understanding of the relevant kind, which requires at least a linkage or conditionality between the receipt of a financial benefit by the related party (relevantly, Centerbridge) and the giving by the public company (BLY) of the financial benefit to the relevant entity (First Pacific).

319. The concept of “acting in concert” used in s 228(7) of the Corporations Act is also used in s 12(2)(c) of the Corporations Act and its predecessors and has been considered in the case law. In Bank of Western Australia Ltd v Ocean Trawlers Pty Ltd (1995) 13 WAR 407; 16 ACSR 501 at 524–525 (to which Dr Austin draws attention), Owen J observed that:

“'Acting in concert' [in s 15(1)(a) of the Corporations Law] involves at least an understanding as between the parties as to a common purpose or object ... It is necessary that the understanding should be consensual and that there should be some adoption of it. However, it is not essential that the parties are committed to it or bound to support it. An arrangement or understanding can be informal as well as unenforceable and the parties may be free to withdraw from it or to act inconsistently with it notwithstanding their adoption of it. ... Such an understanding may be proved by inference from the circumstances surrounding the impugned transaction and from what the parties have done as well as by direct evidence.” (Citations omitted)

320. That concept is directed to “having an understanding as to some common purpose or object — not simply two persons separately and coincidentally acting in the same manner”: Mount Gibson Iron Ltd [2008] ATP 4 at [12]. Acting in concert will only be established where there exists a real understanding, common purpose or combination or aggregation: Bank of Western Australia Ltd v Ocean Trawlers Pty Ltd above; IPT Systems Ltd v MTIC Corporate Pty Ltd [2000] WASC 316; (2000) 158 FLR 349; 36 ACSR 454; Bateman v Newhaven Park Stud Ltd [2004] NSWSC 566; (2004) 207 ALR 406; 49 ACSR 597 at [16]ff. Acting in concert is not established simply because parties have common views as to the merits of a particular resolution proposed by another person: Winepros Ltd [2002] ATP 18; (2002) 43 ACSR 566; at [33].

321. As Dr Austin acknowledges, there is authority that the entry into and a common purpose of executing a transaction is also not sufficient to establish acting in concert: IPT Systems Ltd v MTIC Corporate Pty Ltd above at [26]; Buzzle Operations Pty Ltd (in liq) v Apple Computer Australia Pty Ltd [2010] NSWSC 233; (2010) 238 FLR 384; 77 ACSR 410 at [133]–[134]. In oral submissions, Dr Austin seeks to distinguish those decisions on the basis that former s 15 of the Corporations Law is different from s 228(7) of the Corporations Act. While that proposition is correct, there is no reason to think that the concept of “acting in concert” is used differently between those provisions. Dr Austin also submits that the agreements at issue in those cases resulted from the outcome of arm’s length negotiations, but, as I will note below, the limited cooperation between BLY, First Pacific, Centerbridge and others contemplated by the Settlement Deed here has the same character. The Court of Appeal took the same view in Perpetual Custodians Ltd (as custodian for Tamoran Pty Ltd as trustee for Crivelli) v IOOF Investment Management Ltd [2013] NSWCA 231; (2013) 304 ALR 436 at [114]–[115], and also there approved the observations of Gray J in Australasian Meat Industry Employees Union v Meat and Allied Trades Federation of Australia [1991] FCA 672; (1991) 32 FCR 318 at 329 as to the difficulties in applying the concept of “in concert” too broadly, and of French J in that case (at 334) that that concept:

“does not apply to groups of employees of different employers who, as the result of requests by a common union, engage in similar conduct for their own respective purposes”.

The Court of Appeal there applied that approach to the votes of voting members in respect of a scheme of arrangement.

322. As I noted above, Dr Austin submits that First Pacific has become a related party of BLY because it is acting in concert with Centerbridge in respect of the amendments to the schemes and the Settlement Deed, and relies on cl 2.1 of the Settlement Deed to establish the relevant “acting in concert”. Clause 2.1(a) of the Settlement Deed records that the Supporting Creditors (defined to include the Centerbridge, Ares and Ascribe and First Pacific entities) have

“agreed to support the BLY Creditors’ Schemes and have agreed to implement the Transaction [as defined] on and subject to the terms of this deed”.

323. Clause 2.1(b) requires each party to take actions reasonably required in accordance with the Settlement Deed or requested by the Supporting Creditors or BLY in connection with the Transaction, to the extent that such action is not inconsistent with the terms of the Settlement Deed, including specified steps which, broadly, relate to the support and implementation of the Transaction (as defined). Clause 2.1(e) records the parties’ acknowledgment that nothing in the Settlement Deed requires First Pacific not to press or to withdraw its grounds of objection to the original Secured Creditor Scheme or to support or facilitate steps to implement the original Secured Creditor Scheme or not to object to any further amendment to the Secured Creditor Scheme which affects the commercial terms of that scheme in any commercially significant respect.

324. Dr Austin submits that First Pacific has become and remains a related party of BLY because it is acting in concert with Centerbridge, not during the negotiations which led to the Settlement Deed, but after a Settlement Deed was executed and in respect of the implementation of the altered schemes. Dr Austin also submits (T309) that it is sufficient for First Pacific and Centerbridge to be acting in concert for the purposes of s 228(7) of the Corporations Act if they are acting together in the limited sense that they presently support the altered schemes, as a result of negotiations between them and others, notwithstanding that they would again be in opposition if the altered schemes were rejected and the original schemes were again propounded.

325. The Plaintiffs respond that the suggestion that Centerbridge and First Pacific are acting in concert is inconsistent with the history of these proceedings, and First Pacific responds that there is no basis for a finding that First Pacific and Centerbridge are acting in concert, merely because they are party to a transaction, where it is not established that they are taking concerted action with a common purpose or object. First Pacific also submits, with obvious force, that First Pacific and Centerbridge have throughout been in opposite negotiating positions in relation to the proposed restructuring of the BLY Group, and remain in contest in respect of First Pacific’s continued objection to the schemes in their original form.

326. It seems to me that the first difficulty with the Snowside companies’ submission that First Pacific and Centerbridge are acting in concert and that First Pacific is a related party of BLY for the purposes of s 228(7) of the Corporations Act is that that submission depends upon isolating a particular step, the point at which they support and seek to advance the altered schemes in accordance with the Settlement Deed, from all other aspects of the relationship between First Pacific and Centerbridge in determining whether they are acting in concert. The second difficulty with that submission is that, although both First Pacific and Centerbridge support the altered schemes, they do not in fact share a common purpose, because First Pacific does so in order to advance its interests as an SSN holder whereas Centerbridge does so in order to advance its wider and different interests as an SSN holder, a holder of TLAs and TLBs, and a significant shareholder in BLY which will again be a significant shareholder in BLY after the schemes are implemented. It seems to me that, consistent with the reasoning in Australasian Meat Industry Employees Union v Meat and Allied Trades Federation of Australia above and Perpetual Custodians Ltd (as custodian for Tamoran Pty Ltd as trustee for Crivelli) v IOOF Investment Management Ltd above, that that limited cooperation, or the agreement for it within a limited area, is not sufficient to establish “acting in concert” in this context.

327. A third difficulty with the Snowside companies’ submission is that, in my view, it has not been established, for the purposes of s 228(7) of the Corporations Act, that the related party (Centerbridge) will receive a financial benefit if the public company (BLY) gives the entity (First Pacific) a financial benefit. As I noted above, that concept contemplates a linkage between the giving of the relevant financial benefits. Here, the condition to Centerbridge’s receipt of benefits under the altered schemes is not that BLY gives a financial benefit to First Pacific but instead that the Court approves the altered schemes and they are implemented. Centerbridge would receive such benefits if the Court approves the schemes and they are implemented, even if, for whatever reason, BLY ultimately could not or did not give such benefits to First Pacific under the altered schemes. Centerbridge’s and First Pacific’s rights under the altered schemes are in parallel rather than in an interconnected series.

328. For these reasons, I am not persuaded that First Pacific and Centerbridge are acting in concert, or that First Pacific is a related party of BLY, for the purposes of s 228(7) of the Corporations Act. That is sufficient to have the result that the Snowside companies’ contention that the altered schemes are unlawful under Ch 2E of the Corporations Act cannot be accepted, although it also cannot be accepted for other reasons noted below.

329. There are several exceptions to the prohibition under s 208 of the Corporations Act. Dr Austin submitted that the onus would be on First Pacific to establish a relevant exception under s 210 or s 216 of the Corporations Act. Earlier cases suggested that the onus was on a party alleging a contravention of Ch 2E to establish that none of the exceptions available under that Chapter applied. The contrary view was taken in Orrong Strategies Pty Ltd v Village Roadshow Ltd [2007] VSC 1; (2007) 207 FLR 245 at [713]–[715] and Mercedes Holdings Pty Ltd v Waters (No 2) [2010] FCA 472; (2010) 186 FCR 450; 78 ACSR 118 at [74], aff’d Waters v Mercedes Holdings Pty Ltd [2012] FCAFC 80; (2012) 203 FCR 218; 90 ACSR 45, holding that the onus of establishing the relevant exception falls upon the person claiming it. Mr Bender accepted that the onus to establish an exception would be on the party asserting it in a substantive proceeding alleging a contravention of s 208 of the Corporations Act, but contended that that was not the case where the Snowside companies sought to establish the unlawfulness of the altered schemes. It is not necessary for me to determine where the onus of proof lies because, in this case, even if the onus of proof lay on BLY or First Pacific, I would readily draw the inference that the arm’s length exception was satisfied in the relevant circumstances.

330. The Plaintiffs submit that the terms of the altered schemes are on arm’s length terms, for the purposes of the exception in s 210 of the Corporations Act, where they have been negotiated between parties to strongly contested litigation which were represented by external advisers acting in their opposed interests. That section relevantly provides that member approval is not required for a public company or an entity which it controls to give a financial benefit on terms that would be reasonable in the circumstances, if the public company or entity and the related party were dealing at arm's length, or the terms are less favourable to the related party than arm's length terms. The concept of “arm’s length” terms in this section involves “the relationship which exists between parties who are strangers to each other, and who bear no special duty, obligation, or relation to each other” or “the standard under which unrelated parties, each acting in his or her own best interest, would carry out a particular transaction”: Australian Trade Commission v WA Meat Exports Pty Ltd (1987) 14 ALD 314; 75 ALR 287 at 291; 7 AAR 248; Orrong Strategies Pty Ltd v Village Roadshow Ltd above at [717]ff.

331. Dr Austin responds that the question is not whether the negotiations which led to the alterations to the schemes were conducted at arm’s length but whether the result was terms that would be reasonable if BLY and First Pacific were dealing at arm’s length. While that proposition accurately reflects the statutory test, it seems to me to neglect the practical reality that, all things being equal, parties that are in fact dealing at arm’s length are likely to reach arrangements on arm’s length terms. If s 208 of the Corporations Act were otherwise capable of applying in these circumstances, then I readily infer, as a matter of fact, that a negotiation between First Pacific on the one hand and the BLY Group and Centerbridge on the other generated a resolution on arm’s length terms where those entities plainly had different commercial interests and have been in an adversarial relationship throughout the proceedings.

332. Dr Austin also refers to Australian Securities & Investments Commission v Australian Investors Forum Pty Ltd (No 2) [2005] NSWSC 267; (2005) 53 ACSR 305 at [455]–[458], where Palmer J observed that s 210 required the Court to assess the terms of the subject transaction against objective standards and that the parties' understanding as to the reasonableness of the terms was not decisive as to whether the terms were reasonable for the purposes of that section. His Honour noted that, in applying that test, the Court would assume that the comparator transaction was entered into by a public company which was unrelated to the other party to the transaction in any way, financially or through ties of family, affection or dependence; free from any undue influence or pressure; through its relevant decision-makers, sufficiently knowledgeable about the circumstances of the transactions, sufficiently experienced in business and sufficiently well advised to be able to form a sound judgement as to what was in its interests; and concerned only to achieve the best available commercial result for itself in all of the circumstances. His Honour observed that the terms of the transaction in question would then be tested against the terms of a transaction which would reasonably be achieved by a hypothetical public company in that position.

323. Dr Austin accepts that BLY may have satisfied the first three of the factors identified by Palmer J in Australian Securities & Investments Commission v Australian Investors Forum Pty Ltd (No 2) above in this case but submits (T313) that the arm’s length test cannot be satisfied because it has failed to satisfy the fourth factor, by achieving the best available commercial result for itself, because the best available commercial result for it would not damage shareholders’ interests without giving them the opportunity to consider the proposal. I do not accept that submission, since it seems to me that the best commercial result for BLY, and for its shareholders, is to avoid the insolvency which I have held is the likely result of a failure to approve the schemes. So far as this submission also relied, in part, on the expert evidence led by the Snowside companies in support of that submission, it has the difficulty that I have not been persuaded by that evidence in preference to the expert reports of KordaMentha and KPMG.

324. I also do not accept Dr Austin’s further submission that the arm’s length exception under s 210 of the Corporations Act would not be available, because the redemption premiums negotiated under the Call Schedule for the benefit of SSN holders including First Pacific would not be reasonable if the parties were dealing at arm’s length. While I have accepted above that the altered schemes are less advantageous to BLY shareholders than the original schemes, I do not see anything in that proposition that is inconsistent with arm’s length bargaining between BLY, the SSN holders, the SUN holders and Centerbridge, where any compensation to the SSN holders for the detriments which they would suffer under the Secured Creditor Scheme would likely come at the expense of BLY and, ultimately, at the expense of lower ranking creditors and shareholders. That submission is also undermined by the lack of any apparent alternative to BLY, other than the likelihood of an external insolvency administration, a matter to which I have referred above. For these reasons, it seems to me that the exception under s 210 of the Corporations Act would permit the transactions contemplated by the altered schemes.

325. Dr Austin also recognised in submissions that the Court’s approval of the schemes may give rise to an applicable exception to the prohibition on related party transactions under s 216 of the Corporations Act, so far as any financial benefit given by or to parties to the schemes would arguably be given under an order of the Court. Dr Austin also put detailed oral submissions as to the effect of the Court’s approval of a scheme, for the purposes of s 216 of the Corporations Act (T314ff). Dr Austin submits, and I accept, that that section does not confer a general jurisdiction on the Court to make orders excluding the operation of s 208: Re Summit Resources (Aust) Pty Ltd [2012] WASC 125; (2012) 42 WAR 401; 88 ACSR 60 at [43]–[48]. Dr Austin also referred to my decision in Re Wollongong Coal Ltd [2017] NSWSC 201; (2017) 317 FLR 426, in which I referred to that decision and took a similar approach in addressing the different question whether s 259A(c) of the Corporations Act, which provides an exemption to the prohibition on a company acquiring shares or units of shares in itself “under a Court order”, allows an exception from the statutory regime for buy-backs under Pt 2J.1 of the Corporations Act. Dr Austin also submitted that several factors supported declining to exercise the power under s 411 in a manner that would exclude the operation of Ch 2E of the Corporations Act in the relevant circumstances. It is not necessary to determine whether s 216 of the Corporations Act will apply in the particular circumstances, given the conclusions that I have reached above. If that section was applicable, that would be a consequence of the Court’s exercise of the powers conferred on it under s 411 of the Corporations Act and does not give rise to any reason not to exercise those powers in the present circumstances.

326. Dr Austin also submitted that the implementation of the altered schemes would give rise to a contravention of s 606 of the Corporations Act, because Centerbridge and First Pacific are acting in concert and are associates for that purpose. That section prohibits, relevantly, a person (on the Snowside companies’ case, First Pacific) acquiring a relevant interest (as defined) in issued voting shares in a listed company (BLY) by a transaction (as defined) in relation to securities entered into by or on behalf of that person (First Pacific) which increases, relevantly, someone else’s (on the Snowside companies’ case, Centerbridge’s) voting power from 20% or below to more than 20% or from a starting point that is above 20% and below 90%. The term “voting power” is defined in s 610 and extends to voting power of the relevant person (Centerbridge) and its associates.

327. Dr Austin submitted that First Pacific is an associate of Centerbridge because those entities are acting in concert for the purposes of ss 12 and 53 of the Corporations Act, in respect of BLY’s affairs. Dr Austin submitted (T316) that First Pacific is an associate of Centerbridge under s 12(2)(c) of the Corporations Act because it is acting or proposing to act in concert with Centerbridge in relation to BLY’s affairs; and that the issue of shares to First Pacific would increase Centerbridge’s voting power in BLY, because the calculation of voting power in s 610 requires that the votes of its associate, First Pacific, be added. I am satisfied that acting in concert for the purposes of s 12(2)(c) of the Corporations Act is not established for the same reason that acting in concert is not established for the purposes of s 228(7) of the Corporations Act. That is sufficient to have the result that the Snowside companies’ contention that the altered schemes are unlawful under s 606 of the Corporations Act also cannot be accepted.

328. Dr Austin also drew attention (T316) to my finding in Re Wollongong Coal Ltd above that implementation of a transaction under s 259A(c) of the Corporations Act would not have avoided any liability arising in that case in respect of a contravention of Ch 6 of the Corporations Act. The position here is distinguishable, as Dr Austin recognised, by reason of the exception from s 606 that is available under s 611 item 17 of the Corporations Act for an acquisition that results from a compromise or arrangement approved by the Court under Pt 5.1 of the Corporations Act. I should have regard to that consequence in determining whether to approve the schemes. I am satisfied, for the reasons set out above, that the schemes should be approved, as altered, notwithstanding that that exception would permit the issue of shares to First Pacific if, contrary to my view, that issue would otherwise be prohibited under s 606 of the Corporations Act.

329. Dr Austin also refers to several Listing Rules which the Snowside companies contend may be applicable to the transactions contemplated by the schemes, unless waivers are granted by ASX. The Plaintiffs also made submissions as to the application of the ASX Listing Rules, which I do not consider it necessary to address, where ASX would have the capacity to waive the application of those rules if it considered it appropriate to do so. I need not, and should not, address those matters, where it will be a matter for ASX to form any view as to the application of its rules and whether they should be waived in the particular circumstances.

330. For completeness, I note that Dr Austin also advanced an oral submission, which he fairly characterised as technical, as to possible differences in the number of shares referred to in the KPMG report and the explanatory materials for the schemes. It did not seem to me that that issue was material and I need not address it further.

331. I am satisfied that these matters do not provide any reason not to approve the schemes in their altered form.

Collateral benefits

342. I observed in the Earlier Judgment, and the Plaintiffs and First Pacific accepted in submissions, that the fact that Centerbridge will obtain a controlling shareholding in BLY under the arrangements associated with the schemes, and that Centerbridge, Ares and Ascribe will obtain a right to nominate directors to BLY’s board, also raises questions as to whether those entities are receiving a collateral benefit as a result of the overall recapitalisation of the BLY Group, and that is a matter to be taken into account at the second court hearing: Re Aston Resources Ltd [2012] FCA 229 at [35]; Re David Jones Ltd (No 2) [2014] FCA 720; (2014) 101 ACSR 381 at [33]. In its submissions as amicus curiae, ASIC submits that the issue of equity to Centerbridge, Ares and Ascribe should not be treated as a “collateral” interest, where it is an essential and inseverable feature of the compromise, although implemented by agreements outside the scheme.

343. The position in respect of any collateral benefit in these schemes is not directly analogous with that which arises in acquisition schemes of arrangement, where the Courts have reference by way of analogy to the prohibition on a takeover bidder’s offering a collateral benefit to induce a shareholder to accept a takeover bid under s 625(1) of the Corporations Act: see Takeovers Panel Guidance Note 21, Collateral Benefits; Re David Jones Ltd (No 2) above at [18]; ASIC Regulatory Guide 60, Schemes of Arrangement. There seems to me to be substantial force in ASIC’s submission that an intrinsic feature of the schemes, or an arrangement which is closely connected with the schemes by way of conditions precedent, is different in character from an apparently separate transaction which may nonetheless induce a party to support a scheme. However, it does not seem to me that the characterisation of the equity issued to Centerbridge, Ares or Ascribe as a “collateral” interest, as distinct from an essential aspect of the schemes and their associated arrangements, would alter the substantive result of the exercise of the Court’s discretion.

344. This matter provides no reason not to approve the schemes, as altered in the manner proposed by the Plaintiffs, where they treat secured and relevant unsecured creditors fairly inter se and given the other findings that I have reached above.

Sections 411(11) and 411(17) of the Corporations Act

345. I am satisfied that I should make an order under s 411(11) of the Corporations Act dispensing with any requirement that the Court order be annexed to BLY’s constitution. I also note that the Plaintiffs intend to rely on the Court’s approval for the purpose of qualifying for an exemption from the registration requirements of the Securities Act 1933 (US), as provided by s 3(a)(10) of the Act. That course is consistent with that which has been adopted in the case law: Re Atlantic Gold NL (No 2) [2014] FCA 869; Re Atlassian Corporation Pty Ltd [2013] FCA 1451.

346. Section 411(17) of the Corporations Act provides that the Court must not approve a compromise or arrangement under the section unless 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 Ch 6, or there is produced to the Court a statement in writing by ASIC stating that ASIC has no objection to the compromise or arrangement. In its submissions as amicus curiae, ASIC notes that it ordinarily does not provide a statement under s 411(17) in respect of a creditors’ scheme; compare Re Dominion Insurance Company of Australia Ltd (subject to scheme of arrangement) [2017] NSWSC 730 at [9]. I recognise that the outcome of the schemes and associated arrangements will be that Centerbridge and its affiliates would move from a position where it likely already has practical control of the BLY Group, prior to implementation of the schemes, to legal control of the BLY Group after their implementation, although Ares and Ascribe and their affiliates will also have significant interests in BLY. I am satisfied that the schemes were not proposed for the purpose of enabling any person to avoid the operation of provisions of Ch 6, where the necessary approval for share issues contemplated by the schemes and associated arrangements have been obtained under s 611 item 7 of the Corporations Act.

Orders and costs

347. In the result, I will make orders as proposed by the Plaintiffs approving the schemes as altered, in the form of Exhibits P6 (Unsecured Creditor Scheme) and P7 (Secured Creditor Scheme). The order previously made by the Court under s 411(16) of the Corporations Act restraining further proceedings against the Plaintiffs (whether or not such proceedings had already been

commenced) except by leave of the Court and subject to such terms as it imposes, to facilitate consideration of the schemes, will need to be discharged once the schemes take effect. I will hear the parties as to costs.

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