Re Opes Prime Stockbroking Ltd

Case [2009] FCA 813


FEDERAL COURT OF AUSTRALIA

In the matter of Opes Prime Stockbroking Limited [2009] FCA 813

CONSTITUTIONAL LAW – extinguishment of claims in scheme of arrangement - whether scheme amounts to an acquisition on unjust terms

CORPORATIONS - scheme of arrangement - compromise with creditors - scheme to bar claims against third parties - whether scheme effective as an arrangement – classes - whether creditors whose claims are barred constitute a separate class – procedure - determination of jurisdictional issues at convening hearing – amalgamation - whether creditors must approve – panel established to assess claims by creditors - whether right to appeal under s 1321 - whether liquidators are disqualified from acting as scheme administrators

WORDS AND PHRASES – arrangement – compromise – amalgamation - reconstruction

Commonwealth of Australia Constitution Act ss 51 (xxxi), 51(xxxvii)

Corporations Act 2001 (Cth) ss 411, 412, 413, 556, 1321; Pt 2B.1

A Hudson Pty Ltd v Legal & General Life of Australia Ltd (1986) 66 ALR 70

Alabama, New Orleans, Texas and Pacific Junction Railway Company, Re [1891] 1 Ch 213

American Hardwoods Inc v Deutsche Credit Corporation (In re American Hardwoods) 885 F2d 621 (9th Cir 1989)

Anglo American Insurance Ltd, Re [2001] 1 BCLC 755

Australian Securities Commission v Marlborough Gold Mines Limited (1993) 177 CLR 485

Beconwood Securities Pty Ltd v Australia and New Zealand Banking Group Limited (2008) 66 ACSR 116

Bridges v Hershon [1968] 3 NSWR 47

Buildmat (Australia) Pty Ltd and the Companies Act, Re (1981) 5 ACLR 689

Canadian Airlines Corp, Re (2000) 265 AR 201

Commercial Bank Corporation of India and the East, Re (1869) 20 LT NS 839

Commonwealth v Tasmania (1983) 158 CLR 1

Cooper, Cooper & Johnson, Limited, Re [1902] WN 199

Daewoo Singapore Pte Ltd v CEL Tractors Pte Ltd [2002] 2 LRC 66 

Derwinto Pty Ltd (in liq) v Lewis (2002) 42 ACSR 645

Georgiadis v Australian and Overseas Telecommunications Corporation (1994) 179 CLR 297

Guardian Assurance Company, Re [1917] 1 Ch 431

Hawk Insurance Co Ltd, Re [2001] 2 BCLC 480

Hill v Anderson Meat Industries Ltd [1972] 2 NSWLR 704

HIH Casualty and General Insurance Ltd, Re (2005) 56 ACSR 295

Hooper v Western and Counties and South Wales Telephone Co (Limited) (1892) 41 WR 84

International Harvester Co of Australia Pty Ltd, Re [1953] VLR 669

In the Application of United Medical Protection Limited [2007] FCA 631

Isles v The Daily Mail Newspaper Limited (1912) 14 CLR 193

Landsing Diversified Properties-II v The First National Bank and Trust Company of Tulsa (In re Western Real Estate Fund Inc) 922 F2d 592 (10th Cir 1990) 

Legal & General Life of Australia Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314

MacArthur Company v Johns-Manville Corp 837 F2d 89 (2d Cir 1988)

Master Mortgage Investment Fund Inc, Re 168 BR 930 (Bkrtcy WDMo 1994)

McGrath v Gray [1874] LR 9 CP 216

Menard-Stanford v Mabey(In re A H Robins Company Incorporated) 880 F2d 694 (4th

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AGLC
Re Opes Prime Stockbroking Ltd [2009] FCA 813
Case
[2009] FCA 813
Decision Date

CaseChat Overview and Summary

- **Parties, Dispute, and Court**
The case involves the liquidators of Opes Prime Stockbroking Limited and three related companies seeking to convene meetings of creditors to consider proposed schemes of arrangement. The dispute revolves around the validity and fairness of these schemes, which include provisions for releasing claims against third parties and pooling assets. The Federal Court of Australia was the forum for this hearing.

- **Legal Issues**
Several legal issues were at stake: the jurisdiction of the court to approve the schemes, the necessity of multiple meetings for creditors, the classification of creditors for voting purposes, the existence of an appeal right under s 1321, the fairness of the schemes, and the eligibility of liquidators to act as scheme administrators. Additionally, the court had to consider whether the proposed schemes could validly bar claims against third parties and if such provisions could contravene constitutional requirements for just terms.

- **Court's Reasoning and Outcome**
The court found that the proposed schemes could validly incorporate third-party releases if there was a sufficient nexus between the release and the relationship between the creditor and the scheme company. It was determined that the schemes were not acquisitions on unjust terms, as they were aimed at facilitating the reorganisation of the companies. The court also concluded that the creditors should not be divided into separate classes for voting purposes, as their rights were not dissimilar enough to warrant separate meetings. Furthermore, the court held that the right of appeal under s 1321 could not be excluded by the schemes, and the liquidators were eligible to act as scheme administrators despite their potential financial interest in the outcome. The court granted leave for the meetings to be convened, subject to certain conditions and directions.

- **Final Orders**
The final orders included directions for the publication of the proposed schemes, the draft explanatory statement, and the liquidators’ outline of argument on Ferrier Hodgson’s website. The court also directed that the explanatory statement be provided to creditors upon request rather than individually. Additionally, the court ordered that the liquidators prepare a short summary of the key features of the schemes to be sent to creditors. The court reserved the right to consider the merits of the schemes at the approval hearing if the requisite majorities approved the schemes. The costs of the proceedings were also addressed, with specific directions on how they would be borne by the parties.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

FINKELSTEIN J

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Ratio Decidendi

Legal Principle Established

Established by: FINKELSTEIN J

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