Spark Infrastructure Holdings No 1 Ltd - [2010] NSWSC 1497

Reported Decision:
81 ACSR 511

New South Wales

Supreme Court

CITATION: Spark Infrastructure Holdings No 1 Ltd [2010] NSWSC 1497

HEARING DATE(S): 03/11/10, 26/11/10, 17/12/10

JUDGMENT DATE :
21 December 2010

JURISDICTION: Equity Division
Corporations List

JUDGMENT OF: Barrett J

DECISION: Orders under Corporations Act, s 411(4)(b).

CATCHWORDS: CORPORATIONS - arrangements and reconstructions - Part 5.1 schemes of arrangements - method of counting votes for creditors schemes and members schemes - whether creditor can vote part of debt in favour and part against - held: no - a creditor who purports to do so must be regarded as having not voted - whether member can vote part of shareholding in favour and part against - held: yes - but the fact that some votes are negative means that the resolution was not "passed by" that member

LEGISLATION CITED: Company Law Review Act 1998 (Cth)
Corporations Act 2001 (Cth), Part 5.1, ss 250H, 411(1), 411(4)
Corporations Amendment (Insolvency) Act 2007 (Cth)

CATEGORY: Principal judgment

TEXTS CITED: Corporations and Securities Advisory Committee, December 2009 report “Members’ Schemes of Arrangement”

PARTIES: Spark Infrastructure Holdings No 1 Limited - First Plaintiff
Spark Infrastructure Holdings No 2 Limited - Second Plaintiff
Spark Infrastructure RE Limited as responsible entity of The Spark Infrastructure Trust - Third Plaintiff

FILE NUMBER(S): SC 2010/315728

COUNSEL: Mr T F Bathurst SC/Mr D F C Thomas - Plaintiffs

SOLICITORS: Mallesons Stephen Jaques - Plaintiffs

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

BARRETT J

TUESDAY, 21 DECEMBER 2010

2010/315728 SPARK INFRASTRUCTURE HOLDINGS NO 1 LIMITED & ORS

JUDGMENT

1 On 17 December 2010, I made a number of orders in these and related proceedings to facilitate a complex restructure of Spark Infrastructure stapled securities. The orders in these proceedings were made under s 411(4)(b) of the Corporations Act 2001 (Cth).

2 I indicated that I would (as I now do) deliver reasons in relation to one issue that arose upon the hearing. It concerns aspects of the way in which the outcome of voting should be determined under s 411(4)(a).

3 Each Spark Infrastructure stapled security consisted of five components none of which was transferable or tradeable except in company with all the others. Among the five components were an unsecured note issued by Spark Infrastructure RE Ltd (“Spark RE”), an ordinary share in the capital of Spark Infrastructure Holdings No 1 Ltd (“Spark No 1”) and an ordinary share in the capital of Spark Infrastructure Holdings No 2 Ltd (“Spark No 2”).

4 The restructure machinery included a compromise or arrangement between Spark RE and the class of its creditors consisting of holders of unsecured notes, a compromise or arrangement between Spark No 1 and the class of its members consisting of the holders of ordinary shares and a compromise or arrangement between Spark No 2 and the class of its members consisting of the holders of ordinary shares (each of the latter companies also had on issue one share of a different class). Of…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2010] NSWSC 1497
Decision Date: 21 December 2010

CaseChat Overview and Summary

Spark Infrastructure Holdings No 1 Ltd was involved in a legal dispute concerning the interpretation of voting rules in corporate schemes of arrangement. The case was heard and determined by the Federal Court of Australia. The primary issue before the court was whether a creditor or a member could vote part of their debt or shareholding in favour of, and part against, a proposed scheme of arrangement. This raised questions about how such votes should be counted and whether a creditor or member who attempted to vote in a split manner could be considered to have effectively voted at all.

The court addressed these issues by first examining the statutory framework governing voting in schemes of arrangement, particularly under the Corporations Act 2001. The court determined that a creditor who attempts to vote part of their debt in favour and part against a scheme must be regarded as having not voted at all. This was based on the principle that a vote must be unequivocal and cannot be split between opposing outcomes. Conversely, the court held that a member could vote part of their shareholding in favour and part against the scheme, but if any votes were cast against the scheme, the resolution would not be considered to have been "passed by" that member. This nuanced interpretation aimed to balance the rights of members and creditors while ensuring clarity in the voting process.

The court's reasoning was grounded in the statutory language and the legislative intent behind the Corporations Act. By clarifying these voting rules, the court provided certainty to parties involved in future schemes of arrangement, ensuring that their voting rights were exercised in a manner consistent with the law. The outcome of the case had significant implications for how votes are counted and interpreted in corporate restructuring processes. The final orders of the court reinforced the statutory requirements and clarified the voting rules for creditors and members in the context of schemes of arrangement.

Orders