Re HIH Casualty and General Insurance Ltd - [2006] NSWSC 485

No judgment structure available for this case.

Reported Decision:
57 ACSR 791
200 FLR 243
(2006) 24 ACLC 545

New South Wales

Supreme Court

CITATION: Re HIH Casualty and General Insurance Limited & Ors [2006] NSWSC 485

HEARING DATE(S): 27/04/06, 22/05/06

JUDGMENT DATE :
26 May 2006

JURISDICTION: Equity Division
Corporations List

JUDGMENT OF: Barrett J

DECISION: Proceedings adjourned

CATCHWORDS: CORPORATIONS - arrangements and reconstructions - companies in liquidation - proposed compromise or arrangement with creditors - meetings of creditors - format of meeting - where several voting constituencies assembled together but each later had opportunity for separate discussion and voted separately - motions moved by chairman of meetings - whether irregular - voting at meeting - whether requirement for decision "on the voices" satisfied by vote by show of hands - taking of poll "before or on the declaration of the result of the voices" - whether preliminary vote "on the voices" thereby made necessary - where court invited to approve scheme as altered by resolution of creditors - whether creditors having claims subject to potential reduction by operation of scheme constitute class distinct from creditors whose claims are not subject to such potential reduction - whether non-disclosure in explanatory statement of potential reduction of some claims was material non-disclosure

LEGISLATION CITED: Companies Act 1947 (Eng), s.40
Corporations Act 2001 (Cth), ss.411(1), 411(4)(a)(i), 411(4)(b), 411(6), 412, 553C, 554
Corporations Regulations 2001 (Cth), reg. 5.6.19
Supreme Court (Corporations) Rules 1999, r.2.13

CASES CITED: Cullen v Galloway Cattle Society of Australia Inc (1998) 27 ACSR 648
Fraser v NRMA Holdings Ltd (1995) 55 FCR 452
Hagenvale Pty Ltd v Depela Pty Ltd (1995) 17 ACSR 139
Health and Life Care Ltd v South Australian Asset Management Corporation (1995) 16 ACSR 453
Holmes v Keyes [1959] Ch 199
Kantfield Pty Ltd v Plastamatic (Aust) Pty Ltd (1994) 14 ACSR 687
Link Agricultural Pty Ltd v Shanahan [1999] 1 VR 466
National Australia Bank Ltd v Market Holdings Pty Ltd (2001) 37 ACSR 629
No 5 Lorac Avenue Pty Ltd v Brooke (1995) 16 ACSR 247
Re Adams International Food Traders Pty Ltd (1988) 13 NSWLR 282 and (1988) 13 ACLR 586
Re Anglo American Insurance Ltd [2001] 1 BCLC 755
Re Australian Consolidated Press Ltd (1994) (1994) 117 FLR 451
Re Citect Corporation Ltd (2006) 56 ACSR 663
Re Dorman Long & Co Ltd [1934] Ch 635
Re Ferro Constructions Pty Ltd (1976) 2 ACLR 18
Re Hastings Deering Ltd (1985) 9 ACLR 755
Re HIH Casualty & General Insurance Ltd (2005) 190 FLR 398
Re Hills Motorway Ltd (2002) 43 ACSR 101
Re Horbury Bridge Coal Iron & Wagon Co (1870) 11 ChD 109
Re Jax Marine Pty Ltd [1967] 1 NSWR 145
Re Landmark Corporation Ltd [1968] 1 NSWR 759
Re Montana Frocks Pty Ltd [1967] 2 NSWR 584
Re NRMA Ltd (2000) 156 FLR 412
Re Pheon Pty Ltd (1986) 11 ACLR 142
Re Ringuet; Ex parte Knight (1986) 11 FCR 45
Re Vector Capital Ltd (1997) 23 ACSR 182
Ryan v South Sydney Junior Rugby League Club Ltd (1974) 3 ACLR 486
Sovereign Life Assurance Co v Dodd [1892] 2 QB 573
The Second Consolidated Trust Ltd v Ceylon Amalgamated Tea & Rubber Estates Ltd [1943] 2 All ER 567
UDL Argos Engineering & Heavy Industries Co Ltd v Li Oi Lin [2001] 3 HKLRD 634

PARTIES: HIH Casualty & General Insurance Limited, FAI General Insurance Company Limited, CIC Insurance Limited, World Marine & General Insurances Pty Limited, FAI Traders Insurance Co Limited, FAI Reinsurances Pty Limited, FAI Insurances Limited, HIH Underwriting and Insurance (Aust) Pty Limited - First Plaintiffs
Anthony Gregory McGrath and Christopher John Honey - Second Plaintiffs
Amaca Pty Limited, Amaba Pty Limited, Gordian Runoff Limited - Entities granted leave under rule 2.13 of the Supreme Court (Corporations) Rules 1999 to be heard without becoming parties

FILE NUMBER(S): SC 6708/04

COUNSEL: Mr M.B. Oakes SC/Mr A.P. Ryan, solicitor - Plaintiffs
Mr J.A.C. Potts - Amaca Pty Limited and Amaba Pty Limited
Ms L.E. Johnson, solicitor - Gordian Runoff Limited

SOLICITORS: Blake Dawson Waldron - Plaintiffs
Eakin McCaffery Cox - Amaca Pty Limited and Amaba Pty Limited
Mallesons Stephen Jaques - Gordian Runoff Limited

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BARRETT J

FRIDAY, 26 MAY 2006

6708/04 RE HIH CASUALTY AND GENERAL INSURANCE LIMITED & ORS

JUDGMENT

Introduction

1 The liquidators of each of HIH Casualty and General Insurance Limited, FAI General Insurance Company Limited, CIC Insurance Limited, World Marine & General Insurances Pty Limited, FAI Traders Insurance Co Limited, FAI Reinsurances Pty Limited, FAI Insurances Limited and HIH Underwriting and Insurance (Aust) Pty Limited seek orders under s.411(4)(b) of the Corporations Act 2001 (Cth) approving a compromise or arrangement between the company and its creditors.

2 Orders under s.411(1) for the convening of meetings of creditors were made by me on 22 November 2005. Those orders also dealt with dissemination of information about the proposed compromise or arrangement.

3 Each of the eight companies I have mentioned is in liquidation as a result of the making of a winding up order by this court under the Corporations Act. Mr McGrath and Mr Honey are the liquidators. In respect of each of four of the companies (HIH Casualty and General Insurance Limited, FAI General Insurance Company Limited, World Marine & General Insurances Pty Limited and FAI Insurances Limited), the High Court of Justice of England and Wales has made an order appointing liquidators provisionally. The provisional liquidators are Mr McMahon, Mr Riddell and Mr Wardrop.

4 The compromise or arrangement now before me (designated “the Australian scheme)” is intended to operate independently in relation to each of the eight companies and its creditors, deriving force and effect, in each case, from s.411 of the Corporations Act and an approving order of this court. In relation to each of the four companies particularly mentioned (and the creditors of each such company), an almost identical compromise or arrangement (designated “the English scheme”) is intended to have operation and force by reason of the analogous provision of the Insolvency Act 1986 (UK) and an approving order of the English court. But there is no element of interdependency between the Australian scheme and the English scheme or as to the operation of either of them among the several companies.

5 The purpose of the Australian scheme, broadly stated, is to substitute for creditors’ rights of participation in the winding up of the debtor company rights of participation in assets created by the scheme itself, with the scheme creating procedures for assessment and quantification considered more efficient than those in a winding up. Those procedures will be administered by scheme administrators. A summary of the method of operation appears at paragraph 4 of the explanatory statement made available to creditors:

“4.1 Under the proposed Australian Schemes, all assets of the Scheme Companies which can be realised by the Liquidators or Scheme Administrators will be progressively distributed to Scheme Creditors by the Scheme Administrators as claims are agreed.

4.2 The proposed Australian Schemes are what are commonly referred to as reserving schemes, converting to estimation schemes at a later date to enable closure of the insolvencies. A reserving scheme is one under which the scheme administrators continue to realise assets and agree claims as those claims are made during a run-off, and periodically pay interim distributions to scheme creditors with agreed claims at the scheme payment percentage, set after allowing (reserving) for future costs and claims expected and future asset realisations expected.

4.3 An estimation scheme is one under which scheme creditors submit claims to the scheme administrators by a certain deadline, covering all claims they have against the company, including present and future claims. The value of future claims is then estimated. The Australian Scheme provides for an automatic conversion to an estimation scheme seven years after commencement, unless on the recommendation of the Scheme Administrators and the Creditors’ Committee, a special resolution of Scheme Creditors is passed approving an earlier or later Estimation Date. No Estimation Date in the proposed Australian Scheme may be less than five years, or more than nine years, after commencement. The Liquidators consider that the period as a reserving scheme is necessary to allow Scheme Creditor claims to develop and reinsurance assets to be collected prior to conversion to an estimation scheme.”

6 Upon the hearing of the application for orders under s.411(4)(b), Mr M.B. Oakes SC appeared with Mr A.P. Ryan, solicitor, for the plaintiffs. Mr J.A.C. Potts of counsel appeared for Amaca Pty Ltd and Amaba Pty Ltd, creditors in respect of which leave to be heard without becoming parties had been granted on 4 March 2005. Mr Potts did not seek to make submissions. Australian Securities and Investments Commission, which had previously briefed counsel to appear as amicus curiae, did not appear upon the present application; nor did any of the other creditors to whom leave to be heard had previously been granted. As will be mentioned presently, however, another creditor, Gordian Runoff Limited, was granted leave to be heard without becoming a party and made submissions opposing the making of orders under s.411(4)(b).

7 Several matters require attention in connection with the s.411(4)(b) applications. It is convenient to deal with them under separate headings.

Identifying creditors

8 The orders of 22 November 2005 included orders that certain materials there identified be given to each of “the creditors of each Scheme Company known to the Second Plaintiffs [ie, liquidators] according to their names and addresses appearing in the books of each Scheme Company or to their last known address”.

9 Mr McGrath reports in his affidavit the steps taken to identify creditors for this purpose. The liquidators have drawn particular attention to one aspect. It involves persons insured under commercial (as distinct from domestic) policies issued in Australia by scheme companies, being persons from whom no claim has been received and by whom no intended claim has been notified. Steps were taken to identify such persons only in relation to commercial policies issued on or after 1 January 1998. Since the relevant insurance businesses commenced some forty years ago, choice of that date may have had the consequence that some holders of current insurances of the relevant kind were not sent the materials in question.

10 I am satisfied, however, that the risk is so small as to be negligible. Most of the cases in question are cases in which insurance is renewable annually, with the result that persons with relevant rights or claims would be in a position to assert them by reference to policies issued since 1 January 1998. In any event, there were also orders regarding advertising of the meetings and availability of relevant materials on the liquidators’ website, so that alternative means of access were both available and publicised.

11 This matter is accordingly not of such a nature as to cause the court to withhold approval under s.411(4)(b).

The meetings

12 A meeting of creditors was required in respect of each of the eight companies in relation to the Australian scheme. Each company, of course, has a separate and distinct body of creditors.

13 The orders under s.411(1) did not prescribe the way in which any meeting was to be conducted, although relevant and applicable provisions are to be found in regulations 5.6.12 to 5.6.57 of the Corporations Regulations 2001 (Cth). In the events which happened, each person proposing to participate in any of the meetings attended in company with every other such person at the appointed time and place and all of those persons were given an explanation of the background to and purpose of the meetings by Mr McGrath, one of the liquidators and the person designated chairman of each meeting by the earlier orders of this court. The persons in attendance – both creditors and proxies for creditors – were then invited to vote on a proposed resolution that the meetings of the creditors of the eight companies convened in accordance with this court’s orders, as well as meetings of creditors of four of those companies convened in accordance with orders made by the English court, “be held concurrently”. That proposed resolution was put to a vote by show of hands and, there being no vote cast against it, was declared carried.

14 Thereafter, the assembly of persons was given a general presentation on the schemes and the liquidators’ recommendations. Discussion was then invited. Only one matter was raised. It concerned clause 22 of the scheme and will be referred to in greater detail presently. At the conclusion of discussion, Mr McGrath outlined the provisions with respect to voting in relation to the Australian scheme. Mr Riddell, the chairman nominated by the English court, did likewise in relation to the English scheme. The concurrent meetings were then adjourned and the separate meetings were thereafter called to order sequentially. At each of three of those separate meetings there was a motion for the amendment of one provision of the Australian scheme. That motion was, in each case, agreed to without dissent. At all eight meetings relating to the Australian scheme, a motion that the scheme (or, as the case may be, the scheme as amended by the meeting’s earlier decision) be agreed to “with or without modification as approved by the Court” was placed before creditors for discussion and decision.

15 Within each body of creditors, voting favoured this substantive question by the required majority, as to both number of creditors and quantum of debts or claims. I am referring here to the specification in s.411(4)(a)(i) involving “a majority in number of the creditors … present and voting, either in person or by proxy, being a majority whose debts or claims against the company amount in the aggregate to at least 75% of the total amount of the debts and claims of the creditors present and voting in person or by proxy …”. I have omitted from this extract references to a “class” of creditors – although, as will be mentioned presently, provisions dealing with classes are relevant to this case. I shall come back to that matter.

16 The voting results, as disclosed by the evidence before me, were as follows (without distinguishing between votes cast in person and votes cast by proxy) in respect of the substantive resolutions concerning the Australian scheme:

HIH Casualty & General Insurance Limited:

Creditors in favour
341
(98.84%)

Creditors against
4

Value in favour
$2,047,967,487.14
(99.94%)

Value against
$1,195,005.31

FAI General Insurance Company Limited:

Creditors in favour
115
(98.29%)

Creditors against
2

Value in favour
$1,402,302,748.57
(99.84%)

Value against
$ 2,209,691.12

CIC Insurance Limited:

Creditors in favour
88
(98.88%)

Creditors against
1

Value in favour
$ 443,674,107.49
(99.98%)

Value against
$ 110,736.40

World Marine & General Insurances Pty Limited:

Creditors in favour
17
(94.44%)

Creditors against
1

Value in favour
$ 20,320,265.02
(99.72%)

Value against
$ 56,459.54

FAI Traders Insurance Company Pty Limited:

Creditors in favour
7
(100%)

Creditors against
0

Value in favour
$ 43,908,297.35
(100%)

Value against
---

FAI Reinsurances Pty Limited:

Creditors in favour
4
(80%)

Creditors against
1

Value in favour
$ 55,237.48
(88.73%)

Value against
$ 7,013.48

FAI Insurances Limited:

Creditors in favour
25
(100%)

Creditors against
0

Value in favour
$1,059,535,567.81
(100%)

Value against
---

HIH Underwriting & Insurance (Australia) Pty Limited:

Creditors in favour
13
(100%)

Creditors against
0

Value in favour
$ 54,969,804.88
(100%)

Value against
---

17 Against the background just stated, several procedural matters require attention.

Procedural matters – format of meetings

18 The first such matter arises from the fact that each voting constituency (by which I mean the creditors of a particular company attending in person and proxies for creditors of that company) was not physically separated from each other voting constituency. Rather, all persons present in respect of all notified meetings expressed themselves content with the proposition that the several meetings should be held concurrently – although, as I have described, each separate constituency was eventually afforded an opportunity for discrete discussion of the motion for adoption of the scheme affecting it (and, in three cases, the anterior motion for amendment of the scheme). In addition, the members of each constituency voted separately from the members of the others. The evidence shows, however, that the opportunity for discrete discussion and the separate voting by a particular creditor constituency occurred in the physical presence of the members of all the other creditor constituencies.

19 There has been, in some of the decided cases, an emphasis upon the need to keep meetings separate. As McLelland CJ in Eq pointed out in Re Australian Consolidated Press Ltd (1994) 117 FLR 451 at p.452, the court’s jurisdiction to approve a scheme of arrangement depends upon a meeting having been held as contemplated by s.411 itself (see also Re Montana Frocks Pty Ltd [1967] 2 NSWR 584; Re Hastings Deering Ltd (1985) 9 ACLR 755). And as Young J observed in Cullen v Galloway Cattle Society of Australia Inc (1998) 27 ACSR 648 at p.653, the presence of and participation by strangers at a meeting may invalidate its proceedings, at least where it appears that their influence has played a part in the result. I would venture to repeat here what I said in Re Hills Motorway Ltd (2002) 43 ACSR 101 (at p.107):

“There is a need dictated by statute and by good sense for an appropriate degree of separation to be maintained. There must be separate deliberation within each forum on the matters that are the concern of that forum. There must also be independent expression of a decision on each matter for deliberation so that it can be separately recorded and reported to the court. At the same time, because each meeting will, in a commercial sense, cover the same ground because it will deal with one or more of the components of the overall proposal (with each component being essentially meaningless except in combination with all the others), there is merit in avoiding unnecessary repetition and overlap where to do so will not compromise the opportunities for separate deliberation at separate meetings.”

20 In the present case, all constituencies were considering the same proposed scheme. There was no element of distinction, so far as concerned the implications for one body of creditors as opposed to another. Only one matter of contention was aired. It was relevant to the Australian scheme as it affected all companies and their creditors. These factors, coupled with the circumstance that each constituency eventually did consult separately and vote separately, persuade me both that untoward influences of the kind referred to by Young J in the Galloway Cattle case were not at work and that (disregarding the issue of classes of creditors within a particular company) there was, in truth, a meeting of each company’s creditors as required by the orders of 22 November 2005 and contemplated by s.411(1)(a)(i).

Procedural matters – moving of motions

21 The minutes make it clear that each motion considered by creditors was moved by the chairman of the meeting.

22 In Re Vector Capital Ltd (1997) 23 ACSR 182, which concerned a meeting of a company’s members to consider a proposed special resolution to reduce share capital, Young J said (at p.185):

“The final matter of concern is that Mr Lee, who presided at the meeting, did not hold any shares. He moved the relevant motion. In my view, he should not have done so for two reasons: first, it is not appropriate an impartial chairman should move motions; and, second, more importantly, he was not qualified to do so because he was not a shareholder. If a motion is invalidly moved, in my view, it cannot be passed. However, it is quite clear that what happened at that meeting was in accordance with the wish of the company as a whole, the matter is a technicality and the appropriate validating order must be made under s 1322 of the Corporations Law.”

23 Those observations were consistent with what his Honour had earlier said in Re Adams International Food Traders Pty Ltd (1988) 13 NSWLR 282. That was a case concerning a meeting of creditors convened in accordance with an order of the court to consider and, if thought fit, to agree to a scheme of arrangement between a company and its creditors. In accordance with the court’s order, the meeting was chaired by a solicitor. He was not a creditor. Young J’s decision is accurately summarised in the headnote:

Held

24 In National Australia Bank Ltd v Market Holdings Pty Ltd (2001) 37 ACSR 629, however, Young J emphasised that, in Vector Capital, he was speaking of no more than the need for a chairman to be impartial. He said (at pp.643-44):

“

Re Vector Capital Ltd

25 There can be no doubt that a chairman must act impartially. But that is not to say that a chairman must shrink from offering a view for the guidance of those present – particularly where, as is commonplace, the measure before the meeting is one proposed by a board of directors or body of liquidators which includes the chairman. Much less must a chairman shrink from a course of action calculated to ensure that the true sense of the meeting is ascertained upon the matters within its province. A chairman is subject to positive duties in this respect: The Second Consolidated Trust Ltd v Ceylon Amalgamated Tea & Rubber Estates Ltd [1943] 2 All ER 567; Re Ringuet; Ex parte Knight (1986) 11 FCR 45; Link Agricultural Pty Ltd v Shanahan [1999] 1 VR 466.

26 It seems to me, with respect, that there is no general rule that a motion moved by a chairman who is not himself a member of the deliberating body is “invalidly moved” and “cannot be passed”. A dictum of James LJ arguendo in Re Horbury Bridge Coal Iron & Wagon Co (1870) 11 ChD 109 has been quoted by generations of text writers in support of the proposition that a chairman may move a motion (see, for example, Stiebel, “Company Law and Precedents: (1912), p.391; Taggart, “Horsley’s Meeting Procedure, Law and practices” (3rd ed, 1989), p.40). While

Young J did not accept the correctness of that view in the cases to which I have referred, I am not persuaded that a clear and unequivocal expression of the will of voters must be set at nought just because the formal act of proposing which caused the question culminating in that expression of will to be before the meeting was the act of someone who was the meeting’s chairman and was not a member of the deliberating body. How, in a technical and procedural sense, a question comes to be put before a meeting for debate and decision is, to my mind, relatively unimportant. What is important is that the meeting should, under the facilitating yet impartial guidance of its chairman, have adequate opportunity for debate and for decision-making and be seen to have expressed its will on the matter at hand.

27 The circumstance that motions resulting in resolutions were, at all relevant meetings, moved by the chairman does not affect the validity of those resolutions.

Procedural matters – voting by show of hands

28 All questions determined at the meetings, with the exception of the substantive resolutions agreeing to the scheme (or, as the case may be, the scheme as amended by prior decision of the meeting), were determined by show of hands, with the chairman declaring the resolution duly passed, no vote being cast against. Each of the substantive resolutions was determined by a poll, with members of the relevant voting constituency completing and lodging coloured voting cards which were then examined and tallied by representatives of Computershare Investor Services Pty Limited at the request and direction of the chairman who, in due course (and after receipt of a written report from Computershare), announced the result of each poll and declared the substantive resolution passed by the requisite majority in each case.

29 Mr Oakes has very properly pointed out that voting by show of hands is not contemplated by the applicable provision of the Corporations Regulations. Regulation 5.6.19(1) says:

“ 5.6.19 Voting on resolutions

(a) by the chairperson; or

30 It was submitted by Mr Oakes that the voting which took place by show of hands satisfied this requirement. He referred to observations of J.D. Phillips JA, Ormiston JA and Tadgell JA with respect to regulation 5.6.19 in No 5 Lorac Avenue Pty Ltd v Brooke (1995) 16 ACSR 247. Each judge regarded a vote by show of hands as the equivalent of or, at least, an acceptable substitute for a vote “on the voices”, both being recognised methods of obtaining an approximate and preliminary indication of wishes (or, as Holland J put it in Ryan v South Sydney Junior Rugby League Club Ltd (1974) 3 ACLR 486 at p.490, “summary and inaccurate methods” of receiving and counting votes). Those summary and inaccurate methods have regard to head count (as distinct from value) and show whether there is a clear-cut preponderance of opinion or whether, by contrast, there may be a need for the more formal and precise means of determining votes by poll. In this respect, the members of the Court of Appeal of Victoria approved the approach taken by Hayne J in Kantfield Pty Ltd v Plastamatic (Aust) Pty Ltd (1994) 14 ACSR 687 at p.691:

a

b

31 To the same effect are observations of Debelle J in Health and Life Care Ltd v South Australian Asset Management Corporation (1995) 16 ACSR 453 at p.457 and Cohen J in Hagenvale Pty Ltd v Depela Pty Ltd (1995) 17 ACSR 139 at p.149.

32 I accept Mr Oakes’s submissions on this matter. The fact that voting was by show of hands rather than the “outcry of voices” to which Hayne J referred is immaterial.

Procedural matters – demand for poll

33 The poll by which the substantive question of approval of the scheme was in each case determined was, according to the minutes, “requested” by the chairman; and this was apparently in the absence of any preliminary voting “on the voices” (or even by show of hands) on that substantive question. Under regulation 5.6.19(1)(a), the chairperson is one of the persons by whom a poll may be “demanded, before or on the declaration of the result of the voices”.

34 On one construction, this provision means that there may be no demand for a poll unless there has first been a vote on the voices – since, in the absence of a vote on the voices, there can never be, even potentially, “the declaration of the result of the voices”. I do not regard that construction as correct. It is, in my opinion, open to the chairperson (or anyone else referred to in regulation 5.6.19(1)) to demand a poll even though there has been no voting on the voices. An analogous provision in the articles of a company was so interpreted by the English Court of Appeal in Holmes v Keyes [1959] Ch 199. It is sufficient to quote a passage from the judgment of Jenkins LJ (with whom Romer LJ and Ormerod LJ agreed) at p.212:

“What, to my mind, concludes the matter is the circumstance that the article with which we are here concerned, article 65, as adopted by special resolution, provides as follows: ‘At any general meeting of the company a resolution put to the vote of the meeting shall be decided on a show of hands unless before or upon the declaration of the result of the show of hands a poll be demanded …’. It is to be observed that a poll can be demanded before the show of hands as well as upon the declaration of the results of the show of hands. The language is capable of reading: ‘Unless before the declaration of the result of the show of hands or upon the declaration of the result of the show of hands,’ and then it could conceivably be argued that the demand could not be made before the declaration of the result of the show of hands if there was no show of hands at all. That would be an inconvenient construction, which would compel going through the formality of a show of hands, not for the purpose of obtaining the result of that vote, but merely so that a demand for a poll could be made before the declaration of the result. I think the article should read, as suggested by my brother Romer in the course of the argument, in this way: ‘At any general meeting of the company a resolution put to the vote of the meeting shall be decided on a show of hands unless before (comma) or upon the declaration of the result of (comma) the show of hands a poll be demanded.’ That makes it clear that a poll can be demanded without going through the formality of a show of hands. That question, therefore, is, in my judgment, out of the way.”

35 No aspect of the voting at the meetings entailed any irregularity which should cause the court to withhold s.411(4)(b) approval.

Procedural matters - amendment of the schemes at the meetings

36 The creditors present and represented at the meetings of three of the companies saw fit to make a minor modification to the Australian scheme as it affects those companies. The companies in question are HIH Casualty & General Insurance Limited, FAI General Insurance Company Limited and CIC Insurance Limited. The substance of the amendment in each case was to reduce from ten to eight the minimum number of the members of the creditors’ committee to be created in accordance with the scheme.

37 Following the procedure noted in Re Adams International Food Traders Pty Ltd (above – but see the more comprehensive report at (1988) 13 ACLR 586) and Re Citect Corporation Ltd (2006) 56 ACSR 663, the creditors of each such company passed two resolutions, one to the effect that the compromise or arrangement as presented to the meeting should be amended in the particular respect and the other approving that compromise or arrangement as so amended. In each case, the first of those resolutions was passed without dissent.

38 I am satisfied, for reasons stated in the Citect case, that, in the three relevant instances, it is now open to the court to approve the compromise or arrangement in the amended form in which it was ultimately agreed to at the meeting of creditors – subject, of course, to jurisdiction otherwise being established. Section 411(4) works on the basis of correspondence between the terms agreed to by creditors at their meeting and the terms presented to the court for approval (either with or without alteration under s.411(6), that is, alteration by the court). That correspondence exists here, as regards the aspect concerning the minimum membership of the committee of creditors.

Opposition by Gordian Runoff Limited

39 Gordian Runoff Limited (“Gordian”) is a creditor of several of the companies. At the hearing of the application for orders under s.411(4)(b), it sought and was granted leave under rule 2.13 of the Supreme Court (Corporations) Rules 1999 to be heard without becoming a party. Ms L.E. Johnson, solicitor, appeared for Gordian.

40 It was submitted by Ms Johnson that one aspect of the Australian scheme’s operation gives rise to either or both of two obstacles to grant of approval under s.411(4)(b). The first obstacle, it is said, is that the scheme provision in question will have an operation that is prejudicial to certain creditors in a way that should have been the subject of express reference and explanation in the explanatory statement accompanying the scheme but was not, with the result that, broadly speaking, there was non-compliance in a material respect by the plaintiffs with an important disclosure requirement and creditors were denied information material to properly informed decision-making. The second point made on behalf of Gordian is that the effect of the provision in question will be such that those creditors of a particular company affected by it will, under the scheme, be treated in a discriminatory way that causes them to be, for the purposes of s.411, a class of creditors of that company distinct and separate from the remainder of the company’s creditors.

41 Each of these shortcomings is said by Gordian to be of such a nature and quality that it should cause the court to decline to approve the compromise or arrangement. Indeed, the second shortcoming, if established, would leave the court in a position where it had no jurisdiction to make orders under s.411(4)(b).

Clause 22

42 The provision of the Australian scheme said by Gordian to be the source of both shortcomings is clause 22:

Notice of Determination of Common Liability

22.1 In relation to any Common Liability, a Scheme Creditor shall give a Notice of Determination of Common Liability to a Scheme Company, giving the Scheme Company notice of:

(a) the giving of an order, judgment, decision or award of a court or tribunal of competent jurisdiction, which is final and conclusive in relation to the merits of a Common Liability (and which is not subject to any appeal, request for reargument, rehearing, reconsideration, or similar relief) in respect of;

(b) a Final Settlement being reached with; or

(c) all proceedings:

(i) being stayed or restrained by operation of law in respect of; or

(ii) having resulted in a default judgment in favour of the Scheme Creditor against such Co-Insurers, in respect of;

a Co-Insurer, or where there is more than one Co-Insurer, the majority in value of Co-Insurers.

22.2 The majority in value of Co-Insurers shall be calculated by reference to the amount of the total of the percentile participation of the Co-Insurers in respect of the Common Liability and shall mean more than 50% of the amount of the total percentile participation of the Co-Insurers in respect of the Common Liability.

22.3 The Notice of Determination of Common Liability shall give details of the quantum of the liability of each of the Co-Insurers the subject of any occurrence referred to in clause 22.1.

22.4 Notwithstanding any other provision of The Australian Scheme, a Scheme Creditor shall not be entitled to claim as against a Scheme Company any amount in respect of a Liability which is a Common Liability in excess of the amount calculated by reference to the percentile participation of a Scheme Company in relation to the Common Liability of the amount as follows:

(a) divide the total of the amounts (if any) of the Final Co-Insurer Judgments and the amounts (if any) of the Final Settlements in respect of the Common Liability by the percentile participation of the Co-Insurers the subject of any occurrence referred to in clause 22.1 in relation to the Common Liability; and

(b) multiply the amount calculated in clause 22.4(a) by the percentile participation of a Scheme Company, giving the maximum amount the Scheme Creditor is entitled to claim against a Scheme Company.”

43 Several of the definitions in clause 1.1 should also be set out:

“Co-Insurer” : any insurer or reinsurer other than a Scheme Company;

“Common Liability”

“Final Co-Insurer Judgment”

an order, judgment, decision or award of a court or tribunal of competent jurisdiction referred to in clause 22.1(a);

“Final Settlement” : a binding agreement, evidenced in writing, which of itself determines the obligations of a Co-Insurer under the contract in question (either as to liability or as to quantum);

“Notice of Determination of Common Liability”

notice given in accordance with clause 22.1.

Gordian’s concerns about the operation and effect of clause 22

44 It is the contention of Gordian that clause 22 prejudicially affects scheme creditors of a particular scheme company having claims under policies of insurance involving co-ordinate liabilities of that scheme company and some other insurer or insurers. The prejudice is said to arise in several ways.

45 The primary concern was explained by Ms Johnson by way of an example. Assume that a particular risk is insured by four co-insurers, being a scheme company (say, FAI), A, B and C, with each bearing separately 25% of the liability. From the perspective of FAI, that insurance gives rise to a “Common Liability”. Assume the insured incurs a loss of $16 million to which the policy is responsive and that the insured accordingly claims against all four insurers. Assume further that the insured obtains a judgment against A for $4 million and settles the claims against B and C for $1 million each. The first step in applying clause 22 is to note that the “percentile participation” of the three co-insurers (A, B and C) is 75%. The total of “Final Co-Insurer Judgments” and “Final Settlements” is the aggregate of the insured’s recoveries from A, B and C, that is, $6 million. Pursuant to clause 22.4(a), one divides the $6 million by 75%. The result is $8 million. Pursuant to clause 22.4(b), one then multiplies that result by FAI’s percentile participation (which is 25%) to produce a result of $2 million. By force of clause 22.4, $2 million is then the maximum that the scheme creditor in question is entitled to claim against FAI for the purpose of the regime of proof and distribution provided for under the scheme. In the winding up of FAI, however, that insured would have had a provable claim for the full $4 million.

46 The second point Ms Johnson made is that clause 22.4 does not reduce claims only because of future events referable to co-insurers. It also effects reduction, immediately upon the scheme’s becoming effective, by reason of judgments, settlements and other events pre-dating the scheme. Thus, in the example already quoted, the particular creditor (insured) has today a claim against FAI in the amount of $4 million even though the events involving A, B and C have already occurred; but immediately the Australian scheme takes effect that claim will be reduced to $2 million by operation of clause 22.4.

47 A third matter upon which discussion of clause 22.4 focussed attention (and about which Gordian complains) is the operation of the scheme provisions concerning set-off in a case within clause 22. There were submissions on behalf of Gordian that statutory provisions with respect to set-off may have pre-empted the scheme provisions. Those scheme provisions are contained in clause 13:

Set-off

13.1 A Scheme Creditor may rely on any right of set-off of a Liability owed by a Scheme Company upon which it could have relied if that Scheme Company were being wound up in Australia and the order that the Scheme Company be wound up had been made on the Record Date.

13.2 A Scheme Company may rely on any right of set-off against a Liability upon which it could have relied if that Scheme Company were being wound up in Australia and the order that the Scheme Company be wound up had been made on the Record Date.

13.3 Furthermore, in determining the amount of an Established Scheme Claim after the Estimation Date, the Scheme Administrators or Scheme Adjudicator (as the case may be) shall allow a reduction for an estimate made by the Scheme Administrators or the Scheme Adjudicator (as the case may be) of the value of any amounts to which the Scheme Company may be or become entitled from the Scheme Creditor, which for any reason do not bear a certain value.

13.4 For the avoidance of doubt:

(a) no Liability which has been assigned to a person after the Record Date or which was assigned to a person prior to that date but after the person had notice of the fact that the Scheme Company is insolvent may be applied in extinguishing or reducing any liability of that person to a Scheme Company; and

(b) no liability of a Scheme Creditor to a Scheme Company which arises out of an obligation incurred by such Scheme Creditor after the Record Date may be extinguished or reduced by any Liability which such Scheme Creditor has against a Scheme Company.

13.5 In determining any Set-off in relation to a Liability, where the amount set-off is expressed in a currency other than that of the relevant Liability, the amount set-off shall, in the absence of agreement otherwise between the Scheme Creditor and a Scheme Company, be converted, for the purpose of Set-off, into the currency in which the relevant Liability was incurred using the Relevant Rate of Exchange as the Record Date. If the Liability is extinguished by Set-off leaving a balance payable to a Scheme Company, the balance shall be payable to a Scheme Company in the currency in which the amount set-off was incurred.”

48 It may be accepted that clause 13 has the same effect as s.553C of the Corporations Act. Section 553C operates, in a case to which it applies, to fix the amount for which a creditor may prove in a winding up (or to eliminate the right to prove). It does so by reference to the claims by and against the creditor as at the date made relevant by s.554, that is, the date which is, under Division 1A of Part 5.6, the date on which the winding up is taken to have begun. The approach the scheme will implement, if it becomes effective, is to cause the rights created by the scheme to replace creditors’ rights to prove in and receive a dividend from the winding up. This is expressly provided in clause 6.2.

49 It follows that, if the Australian scheme becomes effective, s.553C will never operate to define a net amount for which a creditor may prove in the winding up (or a net amount owed by the scheme company to the creditor). This is because the creditor’s rights in respect of the creditor’s debt or claim will have become the rights created by the scheme; and those rights will prevail to the exclusion of rights of proof and dividend rights under the winding up. Ascertainment of the sum for which the creditor may prove in the winding up will therefore never become a live issue, so far as actual participation in available assets is concerned. Gordian’s concern that the scheme will bind creditors “to the extent they remain a creditor after the automatic set off in s.553C was applied” (to quote the words in Ms Johnson’s outline of submissions) is therefore not well placed.

50 What might be termed the “gross amount” of the respective claims in the case of a person with a claim against a scheme company which also has a claim against the person will accordingly be taken into account under clause 13. And that clause will have effect, according to its terms, to produce a net amount either cognisable as a liability of the scheme company under the scheme or representing a debt to the scheme company.

51 The set-off issue arose in the course of submissions on clause 22.4 because of an apprehension that set-off may have affected a claim of the clause 22.4 kind before the scheme became operative. For the reasons stated, I am satisfied that this cannot be so and that, in the example quoted at paragraph [45] above, the unreduced claim of $4 million would be subjected to clause 22.4 even though the creditor in question was also indebted to the company. It is the amount produced by clause 22.4 (i.e, the amount of $2 million in Ms Johnson’s example) that would be taken into account when the set-off provisions in clause 13.1 were applied.

52 The correctness of the position I have just outlined is reinforced by the opening words of clause 22.4, “Notwithstanding any other provision of The Australian Scheme …”. These make it clear that the operation of clauses 13 is subordinate to that of clause 22.4, so that, when set-off under clause 13 is effected, it is any reduced amount produced by clause 22.4 that is taken into account in the set-off, rather than the “gross” amount. Again, an example was given in Ms Johnson’s submissions. Let it be assumed that there is a claim for “Common Liability” of $10 against the relevant company and that company has a claim of $5 against the creditor. Apart from the scheme and having regard to s.553C, the creditor could prove for $5. But if clause 22.4 reduces the $10 claim to $8, the extent of participation under the scheme is only $3, being the reduced claim of $8 against which is set-off the company’s claim of $5.

53 This, in Ms Johnson’s submission, again illustrates the prejudicial effect of clause 22.4 upon creditors whose claims are such as to attract the operation of the clause.

54 A fourth concern voiced on behalf of Gordian in relation to clause 22 is that a stay of proceedings against a co-insurer reduces the amount claimable by a scheme creditor within the contemplation of the clause. The outline of submissions says:

“This is because the numerator in the formula in clause 22.4 adds up the amounts of settlements and final judgments against the co-insureds but the denominator includes the percentage participation of those co-insurers plus the co-insurer against whom a claim was stayed. This means that the formula treats the scheme creditor as having a settlement of zero with the co-insurer against whom the proceedings were stayed.”

55 The submissions add that this is a real and substantial concern particularly in light of the fact that not only HIH companies but also NewCap companies are in liquidation, so that a statutory stay operates in relation to proceedings against them.

56 The plaintiffs seek to address this last matter by asking the court to allow, pursuant to s.411(6), an amendment of the scheme. Under the foreshadowed amendment, clause 22.4 would be altered so that the category of scheme creditor to which it applied was confined to “a Scheme Creditor which has obtained a Final Co-Insurer Judgment or a Final Settlement”. The italicised words would be added. In addition, clause 22.4(a) would be changed so that, instead of referring to “any occurrence referred to in clause 22.1”, it referred to “any occurrence referred to in clause 22.1(a) and/or (b)”.

57 Gordian’s position is that this would not solve the problem. My own view is that, in its amended form, clause 22.4 would not operate in the perceived detrimental way where a relevant judgment affecting a co-insurer was a default judgment.

58 I come next to a fifth concern expressed by Gordian in relation to clause 22, namely, that its notification regime requires disclosure of matters (ie, the details of settlements of litigation) which are, as a commercial matter, very often made the subject of contractual obligations of confidentiality. Two situations are again relevant: first, where a settlement has already been agreed by and implemented by means of a contract imposing obligations of non-disclosure; and, second, where settlement negotiations arise in the future in circumstances in which acceptance of such obligations might, as a commercial matter, be expected as an unexceptionable incident of the contract. In the first case, the concern is that the scheme will purport to require acts constituting breach of the antecedent contract. In the second, the existence of the requirement under the scheme might prejudice the ability to achieve a settlement that would otherwise be attainable.

59 The sixth and final matter raised by Gordian concerns a situation where a particular settlement relates to both Common Liabilities and claims that are not Common Liabilities and entails an agreed overall sum which is not apportioned or allocated in such a way as to make it possible to say how much of it relates to the Common Liability. In that situation, it is said, the way in which the clause 22.4 formula is to be applied is uncertain.

Assessment of Gordian’s concerns

60 Although, for reasons stated, I am not satisfied that all of Gordian’s expressed concerns about clause 22 are well-placed, it is clear that a creditor within the purview of that clause may, under the scheme, come to occupy a position less advantageous to the creditor than that which the creditor would have occupied under the statutory provisions with respect to winding up. The matters referred to at paragraphs [45], [46] and [52] above seem to me to leave no doubt about that. Nor did the plaintiffs seek to make any submission to the contrary.

61 The regime the scheme will create is one under which all creditors’ debts and claims will be recognised at their nominal or face value in the alternative administration, unless they are debts or claims affected by clause 22.4. Even with the amendments proposed by the plaintiffs (see paragraph [56] above), creditors having debts or claims of the kind with which clause 22.4 deals may, depending entirely on events over which neither they nor the relevant scheme company have any control or influence, suffer diminution of those debts and claims so that they participate on a reduced basis in the alternative administration.

62 As I have said, this raises two questions: first, as to the sufficiency of disclosure and information in relation to clause 22 and its effect; and, second, as to whether creditors with claims of the kind with which that clause is concerned constitute, for the purposes of the scheme, a class of creditors distinct from all other creditors. I shall consider these questions in reverse order, before turning to the separate question concerning confidentiality obligations.

The class question

63 A compromise or arrangement cannot become binding on a class of a company’s creditors unless it has been agreed to by the requisite majority of creditors included in that class present and voting (either in person or by proxy). This is the effect of s.411(4)(a)(i). It follows that if, in the present case, creditors having claims of the kind dealt with by clause 22 constitute a class of creditors, the absence of any separate resolution passed at a meeting of that class agreeing to the scheme will cause the court to lack jurisdiction to approve of the compromise or arrangement under s.411(4)(b).

64 The question whether classes of creditors exist is to be addressed by reference to community of interest or lack of it. In Sovereign Life Assurance Co v Dodd [1892] 2 QB 573, Lord Esher MR said (at pp.579-80):

“The Act says that the persons to be summoned to the meeting (all of whom, be it said in passing, are creditors) are persons who can be divided into different classes — classes which the Act of Parliament recognises, though it does not define them. This, therefore, must be done: they must be divided into different classes. What is the reason for such a course? It is because the creditors composing the different classes have different interests; and, therefore, if we find a different state of facts existing among different creditors which may differently affect their minds and their judgment, they must be divided into different classes.’

65 To similar effect was the observation of Bowen LJ (at p.583) that “class”:

“… must be confined to those persons whose rights are not so dissimilar as to make it impossible for them to consult together with a view to their common interest.’”

66 These observations caused me to say in Re Hills Motorway Ltd (above) at p.104:

“The test is thus not one of identical treatment. It is one of community of interest. The court must ask itself whether the rights and entitlements of the different groups, viewed in the totality of the scheme's context, are so dissimilar as to make it impossible for them to consult together with a view to their common interest. The focus is not on the fact of differentiation but on its effects. The extent and nature of the differentiation must be measured in terms of the effect on the ability to consult together in a common interest or, in other words, the ability to come together in a single meeting and to debate the question of what is good or bad for the constituency as a whole and where the common good lies. Only if the differentiation destroys that ability — the word used by Bowen LJ is ‘impossible’ — does class distinction come to prevail.”

67 A valuable analysis of the class issue is found in the judgment of Lord Millett, sitting as a Non-Permanent Judge of the Court of Final Appeal of the Hong Kong Special Administrative Region, in UDL Argos Engineering & Heavy Industries Co Ltd v Li Oi Lin [2001] 3 HKLRD 634. In that case, the judge at first instance had made an order under s.166 of the Companies Ordinance, Cap 32 (corresponding with s.411(4)(b)) approving schemes of arrangement between several related companies and their respective creditors. The question agitated upon appeal was whether certain preferential creditors constituted a separate class. The appeal court held that they did not. Lord Millett NPJ (with whom Li CJ, Bokhary PJ, Chan PJ and Ribeiro PJ agreed) stated the basic principles as follows (at [15] to [17]):

“[15] Section 166 provides for a company to enter into a Scheme of Arrangement with its creditors or any class of them, or with its members or any class of them, and requires meetings to be summoned of the creditors or members concerned, but provides no indication as to the manner in which such classes are to be constituted. As Chadwick LJ observed in Re Hawk Insurance Company Ltd (supra) , the question whether a single meeting is sufficient or separate class meetings must be held depends on whether it can be said that the company is entering into a single composite arrangement with all the creditors or members affected by the Scheme or whether it is in reality entering into separate but interdependent arrangements with different classes of its creditors or members. While this provides the rationale for the summoning of one or more meetings, however, it does not provide a test by which the question can be determined.

[16] The principles upon which the creditors or members should be grouped into classes for the purpose of a Scheme of Arrangement under s.166 or its equivalent have been considered by numerous courts in a number of different common law jurisdictions over more than a century: in England, see Re Alabama, New Orleans, Texas and Pacific Junction Railway Co. [1891] 1 Ch 213 CA; Sovereign Life Assurance Company v. Dodd [1892] 2 QB 573 CA at pp.579-80 (per Lord Esher MR) and 582-3 (per Bowen LJ); Re United Provident Assurance Company Limited [1910] 2 Ch 477; Re Hellenic & General Trust Ltd [1976] 1 WLR 123; Re BTR plc [2000] 1 BCLC 740 CA at pp.745-748 (per Chadwick LJ); Re Hawk Insurance Company Limited [2001] EWCA Civ 241 CA at paras 13-33 (per Chadwick LJ); in Hong Kong, see Re Industrial Equity (Pacific) Limited [1991] 2 HKLR 614 at pp.620-625 (per Nazareth J); in Australia, see Re Chevron (Sydney) Ltd [1963] VR 249; Re Jax Marine Pty Ltd [1967] 1 NSWR 145 at 148-149; Re Landmark Corporation Ltd [1968] 1 NSWR 759 at p.766; Nordic Bank plc v. International Harvester Australia Ltd [1983] 2 VR 298 at p.303; Re Linter Textiles Corporation Ltd [1991] 2 VR 561 at p.565; Re Bond Corporation Holdings Ltd (1991) 5 ACSR 304 at pp.313-317; Re NRMA Ltd (1999-2000) 33 ACSR 595 at pp.616-617; and in South Africa, see Rosen v. Bruyns, N.O. [1973] 1 SALR 815 at pp.820-821; and Borgelt v. Millman NO [1983] 1 SALR 757 at p.769.

68 His Lordship then referred to the Sovereign Life Assurance case (above) and pointed out that the crucial and class-creating factor there was that the holder of an endowment policy which had matured was in a different position from the holders of continuing policies because, under the particular scheme, he suffered an additional variation of rights not suffered by the others, in that his rights under the matured policy were replaced by the rights he would have had on death if his policy had not matured.

69 Lord Millett NPJ summarised matters as follows (at [27]):

The following principles can be derived from this consistent line of authority:

(1) It is the responsibility of the company putting forward the Scheme to decide whether to summon a single meeting or more than one meeting. If the meeting or meetings are improperly constituted, objection should be taken on the application for sanction and the company bears the risk that the application will be dismissed.
(2) Persons whose rights are so dissimilar that they cannot sensibly consult together with a view to their common interest must be given separate meetings. Persons whose rights are sufficiently similar that they can consult together with a view to their common interest should be summoned to a single meeting.
(3) The test is based on similarity or dissimilarity of legal rights against the company, not on similarity or dissimilarity of interests not derived from such legal rights. The fact that individuals may hold divergent views based on their private interests not derived from their legal rights against the company is not a ground for calling separate meetings.
(4) The question is whether the rights which are to be released or varied under the Scheme or the new rights which the Scheme gives in their place are so different that the Scheme must be treated as a compromise or arrangement with more than one class.

(5) The Court has no jurisdiction to sanction a Scheme which does not have the approval of the requisite majority of creditors voting at meetings properly constituted in accordance with these principles. Even if it has jurisdiction to sanction a Scheme, however, the Court is not bound to do so.
(6) 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.”

70 In cases such as Re Jax Marine Pty Ltd [1967] 1 NSWR 145 and Re Landmark Corporation Ltd [1968] 1 NSWR 759, it was argued that the existence of an interest on the part of some creditors not shared by the others was sufficient to create a class. That suggestion was not accepted. Its non-acceptance is reflected in the second sentence of Lord Millett’s proposition (3). The real question is as to the effect of the scheme on legal rights and whether the scheme creates differences in rights such as to make consultation in the common interest impossible. This concentration on legal rights – or, as Lord Millett put it, on “the similarity or dissimilarity of their rights against the company and the way in which those rights are affected by the Scheme” – is fundamental.

71 In the present case, there is differential treatment under the scheme as between creditors with claims of the kind dealt with by clause 22 and creditors with claims not affected by that clause. The question is whether the differential treatment is of such a kind and will have such an effect, as regards creditors’ rights, that affected creditors cannot view their interests as coinciding with the interests of other creditors in such a way as to cause both groups to be capable of deliberating together as a single and cohesive body.

72 At one level, the two groups were and are able to deliberate together in the way I have described. The perceived advantages of the scheme in putting into place an alternative form of insolvent administration of a more streamlined and efficient kind will be enjoyed by both groups alike. At another and more immediate level, however, the affected group is compelled, in effect, to cede to the unaffected group (potentially, at least) part of the available fund that the affected group would have enjoyed in the absence of the scheme. This is because clause 22.4 impinges upon the rights of the affected group but does not in any way touch the rights of the unaffected group.

73 The effects of the compulsion to which I have just referred may be appreciated by considering an enlarged version of the example given at paragraph [45] above. The creditor of FAI there postulated would, in the circumstances outlined, participate under the scheme by reference to a debt of $2 million, whereas the creditor’s participation under a winding up would be by reference to a debt of $4 million. Call that creditor “Creditor 1” and assume that the body of creditors consists of Creditor 1 and four others (Creditor 2, Creditor 3, Creditor 4 and Creditor 5), none of whom is affected by clause 22 and whose debts are $10 million, $12 million, $6 million and $8 million respectively. The comparative bases of participation under the scheme and under a winding up, expressed in percentage terms, would be:

Scheme Winding up

Creditor 1 5.6% 10%

Creditor 2 26.2% 25%

Creditor 3 31.5% 30%

Creditor 4 15.7% 15%

Creditor 5 21.0% 21.0%

74 This example illustrates the unavoidable reality that, when it came to a decision whether to accept the scheme’s regime of administration of claims and assets rather than continue with the statutory regime applicable to winding up, creditors with claims of the kind contemplated by clause 22 could not have seen their interests as coinciding with the interests of creditors whose claims were not so affected. Creditors of the first kind are, quite simply, subjected by the scheme to a risk of discriminatory diminution that is not visited upon creditors of the second kind. Their rights are changed and their position prejudiced accordingly. The effect of the Australian scheme will be to create a mechanism by which, as a matter of rights, the second group may be enriched at the expense of the first, at least when the winding up regime is viewed as the norm or default position.

75 I am satisfied that the differential treatment provided for in clause 22 of the scheme – or, more precisely, the mechanism for reduction of recognisable claims created by clause 22.4 – is such as to destroy community of interest between the two groups of creditors in such a way that, having regard to their respective rights, each could not, in company with the other so as to make up a like-minded whole, consult together to decide whether the scheme promoted their common good.

76 Gordian’s submission that the court has no jurisdiction to grant approval under s.411(4)(b) because there was no separate assent of the class of creditors contemplated by clause 22 is therefore accepted.

77 I should add that I have not overlooked the decision of Neuberger J in Re Anglo American Insurance Ltd [2001] 1 BCLC 755 to which Mr Oakes referred me. It was there held that a provision in some respects similar to clause 22 did not cause a class of creditors to be created. But that provision did not affect substantive rights or the measure of participation in assets. It merely created what was described as “an extra hurdle” before common liability creditors could make their claim. The effect was purely procedural. Mr Oakes accepted that point of distinction. I would add that the Anglo American case would support a finding that the notification provisions in clauses 22.1 to 22.3 are not class-creating.

The non-disclosure question

78 In view of the conclusion reached on the matter of classes, there is, strictly speaking, no need to address the non-disclosure question. I proceed nevertheless to do so.

79 Section 412 of the Corporations Act requires dissemination of a statement “explaining the effect of the compromise or arrangement”. A corresponding requirement was recognised even before a provision in terms of the present s.412 was enacted as s.40 of the Companies Act 1947 (Eng). In Re Dorman Long & Co Ltd [1934] Ch 635, Maugham J held that approval of a compromise or arrangement should be refused where the accompanying circular was insufficient and misleading on the topic of approval by the trustee for debenture holders. The circular failed to mention that the trustee was also the company’s bank which stood to gain, in that capacity, substantial benefits from the scheme. Maugham J observed, however, that in “a case of great complexity … not every relevant fact can be stated”. What is required is that creditors be given “a statement of all the main facts as will enable them to exercise their judgment on the proposed scheme”.

80 The way in which the general law principle is now reflected in the legislation was explained by White J in Re Pheon Pty Ltd (1986) 11 ACLR 142 at p.156:

Dorman Long

81 At the heart of the disclosure requirement is a concept of materiality. In other words, anything which, if known and appreciated, has the capacity to influence a creditor’s decision and judgment whether to vote one way rather than the other (and, indeed, whether to participate at all) must be made known as part of the explanation called for by s.412.

82 As Maugham J observed in Dorman Long (above), the task of striking the right balance of disclosure may be difficult in complex cases. In Re NRMA Ltd (2000) 156 FLR 412, Santow J rejected an argument that a scheme may be so complex that adequate explanation of it is impossible. It could not be the case, he reasoned, that no organisation could ever put a complex scheme to its members (or creditors). His Honour regarded as relevant to contexts such as the present observations of the Full Federal Court (with respect to s.52 of the Trade Practices Act 1974 (Cth) and prospectus content) in Fraser v NRMA Holdings Ltd (1995) 55 FCR 452 at p.468:

“The need to make full and fair disclosure must be tempered by the need to present a document that is intelligible to reasonable members of the class to whom it is directed, and is likely to assist rather than confuse ... In complex cases it may be necessary to be selective in the information provided, confining it to that which is realistically useful.

....

83 As Santow J also pointed out, the Full Federal Court had earlier said that members must be provided with:

“... such material information as will fully and fairly inform member of what is to be considered at the meeting and for which their proxy may be sought. The information is to be such as will enable members to judge for themselves whether to attend the meeting and vote for or against the proposal or whether to leave the matter to be determined by the majority attending and voting at the meeting.”

84 There are cases suggesting that shortcomings in the explanations proffered in accordance with s.412 may be cured – or, at least, mitigated – by disclosure at the meeting itself. In Re Ferro Constructions Pty Ltd (1976) 2 ACLR 18, for example, W.B. Campbell J approved a scheme in circumstances where, looked at alone, the explanatory statement did not explain fully the scheme’s nature and effect but creditors had, both before and at the meeting, received warnings from opponents of the scheme as to its supposedly undesirable features.

85 With these principles of law in mind, I turn to the circumstances of this case. The explanatory statement accompanying the Australian scheme and the notice of meeting contained no explicit reference to clause 22 of the scheme. There is, however, a paragraph which describes, in part, the operation of that clause. The paragraph in question is the first paragraph of clause 6.4.1. In order to put the paragraph into context, I quote clause 6.4 in full:

Enforcement by Scheme Creditors during the Run-Off Period

In a liquidation and a provisional liquidation, there is a stay of proceedings which prohibits creditors from taking any step or proceeding against the company or its property to enforce payment of a claim. It can only be lifted by application of a creditor to the court. The Australian Scheme follows a similar approach, with a stay prohibiting enforcement action by Scheme Creditors. However, under the Australian Scheme the Liquidators and the Scheme Administrators will not object to any application to the Court to lift the stay if, within six months of a Scheme Creditor lodging a Notice of Litigation with the Scheme Administrators, the Scheme Administrators and the Scheme Creditor have not reached agreement on the appropriate treatment of the claim. The Scheme Creditor will then be entitled to pursue its contractual rights, subject to obtaining a Court order lifting the stay. Provided the Australian Scheme requirements have been met the Scheme Administrators will not oppose any necessary application by a Scheme Creditor to the court under section 471B of the Corporations Act. Any costs order resulting from the Scheme Creditor pursing proceedings will be a Liability under the Australian Scheme, but will not be a Priority Claim unless the relevant court or tribunal with power and jurisdiction to do so orders otherwise. Under the Australian Scheme there is no stay at any time preventing a Scheme Creditor making an appeal to court under section 1321 of the Corporations Act regarding any act or omission or decision of any person administering the Australian Scheme, and there is no stay preventing any creditor from making an application to the court under section 562A(4) of the Corporations Act.

6.4.1 In instances where the Scheme Company is one of two or more Co-Insurers on the same policy, the Australian Scheme provides that a Scheme Creditor must first agree their claim with, or achieve judgment against, a majority by percentage participation in the policy by the other co-insurers, and then advise the Scheme Company of that settlement or judgment value. The stay against litigation or enforcement will then not be lifted until six months after the Scheme Creditor has notified the Scheme Company with a Notice of Determination of Common Liability and lodged its Notice of Litigation.

A diagram setting out the process for dealing with disputed Scheme Claims during the Run-off Period is set out at Appendix 8 to this Explanatory Statement.”

86 Appendix 8 contains a flow-chart at the second stage of which there appears the question, “Is the claim a Common Liability?” If the answer is in the affirmative, an arrow points to, “Serve Notice of Determination of Common Liability on Scheme Administrators”. From that point, the affirmative branch of the chart re-joins the negative branch and indicates a procedure common to both in which the next step is, “Claim not agreed by Scheme Administrators – Scheme Administrators’ decision not accepted by Scheme Creditor”; and so the sequence of events common to all cases goes on.

87 Some of the matters about which Gordian now complains were aired at the concurrent meetings. The minutes show that Ms Johnson initiated discussion about them. The minutes record the following:

“MS JOHNSON: Thank you, Tony. My name is Linda Johnson and I am from Mallesons. I am making this comment on behalf of Gordian Run Off Limited, GIO Reinsurance Limited, and I think you wanted the names of the companies. We are a creditor of several companies inside the Australian and English schemes, but if you want the details -

AUSTRALIAN CHAIRMAN: That's fine. Thank you, Linda.

MS JOHNSON: - we can give that later. My question, and I think I notified you previously, was in relation to your common liability and co-insurance provisions in the proposed scheme. One of the concerns that we actually have is that, if you are a creditor of a scheme company and also a number of other co-insurers, your rights of proof seem to be affected in a number of ways in a detrimental way, including things like you get reduced by - or FAI gets the benefit of all the defences of the co-insurers whether it would have had that right at law or not; secondly, it gets the benefit of commercial settlements that may have been effected with co-insurers whether it would or not at law and certainly would not have in liquidation.

In some cases, it seems in extreme examples you could be prejudicially affected if you are stayed in bringing proceedings against your co-insurers who is not one of the scheme companies, or you get a default judgment rather than a meritorious judgment, basically. And I just would like you to comment on why creditors, if that's your view of the scheme, and also why creditors in those circumstances should support the scheme.

AUSTRALIAN CHAIRMAN: Thank you. We have actually had some notice of that question and Tom Riddell has undertaken to answer it.

ENGLISH CHAIRMAN: Yes, the clause that Linda is referring to is clause 22 of the Australian and the English schemes. What they are designed to cover is the situation where a policy holder has an insurance policy with a number of different companies, at least one of which is a HIH company and the others, or at least some of the others, are non-HIH companies. And what it is designed to do is to provide that when a claim is made under the policy, the policy holder, in other words, the creditor of the HIH companies, is first required to determine the outcome of that claim with the solvent or non-HIH companies, or a majority of those, before making the claim against HIH. Now, all of the different co-insurers may have a different percentage coverage on the slip so they won't necessarily be equal, but the average outcome with the other co-insurers is then applied to the creditors' claim against the HIH company.

So basically it is an interference with contractual rights, there's no doubt about that, as is a lot of the scheme an interference with contractual rights. It is designed to just be a pragmatic cost-effective solution to the problem that quite often litigation to resolve claims with insolvent insurers is not cost-effective for either side, so there is a benefit to both sides in having a provision like this which provides for the outcome against HIH to be the same as the outcome against the average of the majority of the non-HIH coinsurers.

So that is the intention of it. We believe that it is a sensible and practical interference with contractual rights and that is basically really the end of it. I think that your comments, Linda, about there will be circumstances when the creditor would prefer to actually sue HE for a greater amount than it is able to achieve from the co-insurers, well, this scheme does prevent that, that is true.

MS JOHNSON: I understand that it gives a pragmatic advantage to the HE scheme companies. I don't see that there is the same advantage to the creditor who is forced to actually bring resolution against the co-insurers anyway so it is subject to litigation in any event. But my question really is, just to follow up, is it not the case that in some circumstances you may actually pursue all your rights against your co-insurers and you will still nonetheless be prejudicially affected because you can't pursue some people that are stayed or those people don't defend it. You will be reduced in your proof rights because you may have a second insolvent company that's outside the scheme or you’ll have another company for which there wasn't a meritorious judgment granted or a settlement. I gave you examples yesterday and it did seem to me there are circumstances where your proving rights could in fact be reduced to zero.

ENGLISH CHAIRMAN: Well, the position for non-HIH companies where you would say, well, I'm stayed from actually establishing what my debt is, I imagine that is only going to happen when they are also insolvent. Is that what you are thinking of?

MS JOHNSON: It is the clause which basically says that in working out your maximum right of proof, I think it's 22.4, you actually add together the judgments, plus the settlements and you divide by the percentage of those persons that are subject to all the events in 22.1, which includes 22.1(c), that is, people for which you are stayed against or which you have obtained default judgment against. So you may find, in working out the percentage amount, you are reduced by the fact that you can't pursue one particular claimant or that particular claimant is subject of a default judgment, a non-contested judgment. That means you've actually pursued all the remedies you lawfully can and you are still disadvantaged.

ENGLISH CHAIRMAN: But if you have a default judgment, then you will have won.

MS JOHNSON: No, but these are percentage contributions, not 100 per cent contributions.

ENGLISH CHAIRMAN: But any of the co-insurers who you have a default judgment against, they are then liable to you and that amount counts in calculating the average of the co-insurers.

MS JOHNSON: In the default judgment scenario, I would ask you if that's correct, because your definition of "judgments" actually refers to judgments in the circumstances in 22.1(a), not (c), and, secondly, at least that's my recollection - and I will pull out the scheme - but ignoring the judgment scenario, my question of the stay still operates, doesn't it?

ENGLISH CHAIRMAN: If there's a stay against a co-insurer?

MS JOHNSON: Yes.

ENGLISH CHAIRMAN: Yes, a stay doesn't mean you can't reach a result with them.

MS JOHNSON: No, but you don't reach a resolution or a judgment, you have a contest. You will actually not be able to prove, in those circumstances, or, rather, you'll proof will be reduced as if they actually got zero from that person.

ENGLISH CHAIRMAN: Well, if you don’t have a resolution against them, then they won't be in the majority of the ones who you do have a resolution against.

MS JOHNSON: But their percentage is taken into account in working out majority because they're subject to an event in 22.1(c).

ENGLISH CHAIRMAN: I don't believe that's right, no.

88 The submissions made on behalf of Gordian before me are threefold: first, that the effects of clause 22 prejudicial (or potentially prejudicial) to creditors with debts or claims of the kind dealt with by that clause were not mentioned in the explanatory statement produced in purported conformity with s.412; second, that the discussion at the meeting did not remedy the deficiency in any relevant way; and, third, that creditors were accordingly not given information of very real importance to those of them with debts or claims of the relevant kind.

89 The first submission must be accepted. I have mentioned at paragraphs [85] and [86] above the totality of the references in the explanatory statement to the purpose and effect of clause 22. Its capacity to reduce the basis of participation by relevant creditors is simply not mentioned.

90 The second submission must also be accepted. Ms Johnson says that the last part of the exchange set out at paragraph [87] above shows that a misconception was conveyed to those present by Mr Riddell. That may be so. Indeed, it is that matter that the plaintiffs would wish to see adjusted by an alteration of the scheme pursuant to s.411(6): see paragraph [56] above. But the difficulty is, in my view, more fundamental. It may be accepted that, in some circumstances, supplementary explanation given at the meeting (or otherwise outside the explanatory statement) may, in a sense, remedy a deficiency in the statement itself. I have mentioned, in that connection, Re Ferro Construction Pty Ltd (above). A significant point in that case, however, was that the matters necessary to remedy deficiencies in the explanatory statement had been communicated by opponents of the scheme not only to persons present at the meeting of creditors but also to the creditors generally by means of circulars sent to them by the opponents before the meeting.

91 The content of a notice of meeting and documents accompanying it (whether or not called for by statutory provisions) is the means by which persons entitled to attend are enabled not only to form views as to how they may eventually vote but also to decide whether they should take steps to attend at all, whether in person or by proxy. That function of such documents is referred to in the extract from the judgment in Fraser v NRMA Holdings Ltd at paragraph [83] above. The ability to make an informed decision whether to participate by attending (either in person or by proxy) is just as important as the ability to make an informed decision on voting.

92 The supplementary explanation provided by the exchange between Ms Johnson and Mr Riddell at the concurrent meetings was received only by those persons then and there present. It was not available to assist those who, on the basis of the materials disseminated earlier, had decided not to attend. It is quite conceivable – indeed, likely – that had the supplementary explanation been available to all creditors in advance, some at least of those affected by clause 22 who did not attend would have decided to attend or to appoint proxies with directions to oppose the substantive resolution. It is likewise probable that a proper explanation of the workings of clause 22 would have prompted such decisions.

93 It follows from what I have just said that I also accept the third of Gordian’s submissions. Information about the operation of clause 22 and its potentially deleterious effect on creditors’ claims arising from “Common Liabilities” was material to decision making by creditors. Having regard to the circumstances shown by the example at paragraphs [45], [46] and [52] above, that information had the capacity to engender opposition to the scheme by affected creditors and to engender support for it by unaffected creditors. The classic test of materiality is therefore satisfied.

94 Mr Oakes emphasised that the scheme is of some complexity and that it was simply not possible for every facet of its operation to be covered in the explanatory statement. He referred to the case law in that respect. What Mr Oakes says is no doubt true, but complexity can never operate to sanction non-disclosure of material matters. I am satisfied that, for the reasons I have stated, the non-disclosure here was of the relevant material quality.

95 It is to be emphasised that not only “Common Liability” creditors but also other creditors are affected by clause 22, in that the second group may, through the clause’s operation, benefit at the expense of the first. Each group was denied relevant explanation. Just as the members of the first group were not made aware of the disadvantage they might suffer, so the members of the second group were not made aware of the concomitant advantage that they might enjoy. It may safely be inferred, in my view, that the second group has shown itself to be content with a regime that does not produce the advantage to it which is the concomitant of the prejudicial effect of clause 22.4 on creditors in respect of “Common Liabilities”.

96 In summary, the deficiency in the explanatory statement under s.412 by way of entire omission of explanation of the effects of clause 22 upon creditors’ participation rights would, of itself, be sufficient to cause the court to decline to approve the Australian scheme in its current form.

The confidentiality problem

97 I have mentioned the concern of Gordian that the notification requirements imposed by clause 22 may conflict with pre-existing contractual promises to maintain confidentiality. Gordian does not refer to any concrete instance. It raises the matter in a somewhat theoretical way.

98 When this proceeding was first before me in March 2005, I had occasion to comment on the nature of the binding force of a s.411 scheme. I quote from paragraph [131] of my judgment of 29 March 2005 (Re HIH Casualty & General Insurance Ltd (2005) 190 FLR 398):

Caratti v Hillman

Kempe v Ambassador Insurance Co

Ray Brooks Pty Ltd v New South Wales Grains Board (No 2)

99 Nor is it necessary here to come to a conclusion as to the precise source of the binding force of a s.411 scheme. It is sufficient to note that, once an order is made under s.411(4)(b) in respect of a compromise or arrangement between a company and its creditors (or any class of them), the compromise or arrangement is binding upon the creditors (or class of creditors), the liquidators and the contributories (see paragraphs [115] to [118] of the judgment of 29 March 2005). All such persons must then observe and perform the provisions of the compromise or arrangement.

100 It may be that a court would decline to make an approving order under s.411(4)(b) if it were shown that performance and observance of a scheme provision by persons bound would expose those persons, or some of them, to prejudice or liability by reason of some pre-existing position occupied by them. That is not demonstrated here. Ms Johnson, in her submissions on behalf of Gordian, has not pointed to any existing contractual promise of Gordian inconsistent with due implementation of the notification requirements of clause 22 of the scheme. The court will, of course, not withhold approval by reference to abstract possibilities.

101 If the scheme were in force, its provisions and the requirements they impose would no doubt shape the conduct of creditors minded to enter into compromises of a kind which might be expected to be attended by contractual assurances of confidentiality.

102 The expressed confidentiality concern is accordingly not something that would cause the court to withhold approval under s.411(4)(b) in this case.

Disposition

103 For the reasons related to the existence of a class of creditors affected prejudicially by clause 22 and the associated deficiency in the explanatory statement, the court will not make orders under s.411(4)(b) in respect of the Australian scheme as it applies to the eight companies. In all other respects, however, I am satisfied that it would have been appropriate to proceed to grant approval.

104 The plaintiffs made it clear that, if this position were reached, they would wish to consider their position rather than have the court simply dismiss their application. Gordian is content with such a course. For my own part, I would not wish to bring the proceedings to a negative conclusion while the plaintiffs hold any hope of salvaging some positive result for creditors from what has been a complex, protracted and no doubt very costly exercise.

105 The plaintiffs may be minded to make an application to amend. In those circumstances, I direct that this proceeding be listed before me for mention at 9.30 am on 2 June 2006, with liberty for the plaintiffs to have it restored to the list on two days notice in the meantime should they so wish.

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Citations

Re HIH Casualty and General Insurance Ltd [2006] NSWSC 485

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CITATION:	Re HIH Casualty and General Insurance Limited & Ors [2006] NSWSC 485
HEARING DATE(S):	27/04/06, 22/05/06
JUDGMENT DATE :	26 May 2006
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Barrett J
DECISION:	Proceedings adjourned
CATCHWORDS:	CORPORATIONS - arrangements and reconstructions - companies in liquidation - proposed compromise or arrangement with creditors - meetings of creditors - format of meeting - where several voting constituencies assembled together but each later had opportunity for separate discussion and voted separately - motions moved by chairman of meetings - whether irregular - voting at meeting - whether requirement for decision "on the voices" satisfied by vote by show of hands - taking of poll "before or on the declaration of the result of the voices" - whether preliminary vote "on the voices" thereby made necessary - where court invited to approve scheme as altered by resolution of creditors - whether creditors having claims subject to potential reduction by operation of scheme constitute class distinct from creditors whose claims are not subject to such potential reduction - whether non-disclosure in explanatory statement of potential reduction of some claims was material non-disclosure
LEGISLATION CITED:	Companies Act 1947 (Eng), s.40 Corporations Act 2001 (Cth), ss.411(1), 411(4)(a)(i), 411(4)(b), 411(6), 412, 553C, 554 Corporations Regulations 2001 (Cth), reg. 5.6.19 Supreme Court (Corporations) Rules 1999, r.2.13
CASES CITED:	Cullen v Galloway Cattle Society of Australia Inc (1998) 27 ACSR 648 Fraser v NRMA Holdings Ltd (1995) 55 FCR 452 Hagenvale Pty Ltd v Depela Pty Ltd (1995) 17 ACSR 139 Health and Life Care Ltd v South Australian Asset Management Corporation (1995) 16 ACSR 453 Holmes v Keyes [1959] Ch 199 Kantfield Pty Ltd v Plastamatic (Aust) Pty Ltd (1994) 14 ACSR 687 Link Agricultural Pty Ltd v Shanahan [1999] 1 VR 466 National Australia Bank Ltd v Market Holdings Pty Ltd (2001) 37 ACSR 629 No 5 Lorac Avenue Pty Ltd v Brooke (1995) 16 ACSR 247 Re Adams International Food Traders Pty Ltd (1988) 13 NSWLR 282 and (1988) 13 ACLR 586 Re Anglo American Insurance Ltd [2001] 1 BCLC 755 Re Australian Consolidated Press Ltd (1994) (1994) 117 FLR 451 Re Citect Corporation Ltd (2006) 56 ACSR 663 Re Dorman Long & Co Ltd [1934] Ch 635 Re Ferro Constructions Pty Ltd (1976) 2 ACLR 18 Re Hastings Deering Ltd (1985) 9 ACLR 755 Re HIH Casualty & General Insurance Ltd (2005) 190 FLR 398 Re Hills Motorway Ltd (2002) 43 ACSR 101 Re Horbury Bridge Coal Iron & Wagon Co (1870) 11 ChD 109 Re Jax Marine Pty Ltd [1967] 1 NSWR 145 Re Landmark Corporation Ltd [1968] 1 NSWR 759 Re Montana Frocks Pty Ltd [1967] 2 NSWR 584 Re NRMA Ltd (2000) 156 FLR 412 Re Pheon Pty Ltd (1986) 11 ACLR 142 Re Ringuet; Ex parte Knight (1986) 11 FCR 45 Re Vector Capital Ltd (1997) 23 ACSR 182 Ryan v South Sydney Junior Rugby League Club Ltd (1974) 3 ACLR 486 Sovereign Life Assurance Co v Dodd [1892] 2 QB 573 The Second Consolidated Trust Ltd v Ceylon Amalgamated Tea & Rubber Estates Ltd [1943] 2 All ER 567 UDL Argos Engineering & Heavy Industries Co Ltd v Li Oi Lin [2001] 3 HKLRD 634
PARTIES:	HIH Casualty & General Insurance Limited, FAI General Insurance Company Limited, CIC Insurance Limited, World Marine & General Insurances Pty Limited, FAI Traders Insurance Co Limited, FAI Reinsurances Pty Limited, FAI Insurances Limited, HIH Underwriting and Insurance (Aust) Pty Limited - First Plaintiffs Anthony Gregory McGrath and Christopher John Honey - Second Plaintiffs Amaca Pty Limited, Amaba Pty Limited, Gordian Runoff Limited - Entities granted leave under rule 2.13 of the Supreme Court (Corporations) Rules 1999 to be heard without becoming parties
FILE NUMBER(S):	SC 6708/04
COUNSEL:	Mr M.B. Oakes SC/Mr A.P. Ryan, solicitor - Plaintiffs Mr J.A.C. Potts - Amaca Pty Limited and Amaba Pty Limited Ms L.E. Johnson, solicitor - Gordian Runoff Limited
SOLICITORS:	Blake Dawson Waldron - Plaintiffs Eakin McCaffery Cox - Amaca Pty Limited and Amaba Pty Limited Mallesons Stephen Jaques - Gordian Runoff Limited

Creditors in favour	341	(98.84%)
Creditors against	4
Value in favour	$2,047,967,487.14	(99.94%)
Value against	$1,195,005.31

Creditors in favour	115	(98.29%)
Creditors against	2
Value in favour	$1,402,302,748.57	(99.84%)
Value against	$ 2,209,691.12

Creditors in favour	88	(98.88%)
Creditors against	1
Value in favour	$ 443,674,107.49	(99.98%)
Value against	$ 110,736.40

Creditors in favour	17	(94.44%)
Creditors against	1
Value in favour	$ 20,320,265.02	(99.72%)
Value against	$ 56,459.54

Creditors in favour	7	(100%)
Creditors against	0
Value in favour	$ 43,908,297.35	(100%)
Value against	---

Creditors in favour	4	(80%)
Creditors against	1
Value in favour	$ 55,237.48	(88.73%)
Value against	$ 7,013.48

Scheme	Winding up
Creditor 1	5.6%	10%
Creditor 2	26.2%	25%
Creditor 3	31.5%	30%
Creditor 4	15.7%	15%
Creditor 5	21.0%	21.0%