Australian Securities and Investments Commission v Healey

Mr M A Izzo - Australian Securities and Investments Commission as amicus curiae Freehills - Plaintiffs Arnold Bloch Leibler - Signing Senior Lenders Corrs Chambers Westgarth - J P Morgan Chase Bank NA Mallesons Stephen Jaques - PricewaterhouseCoopers Maurice Blackburn Pty Limited - Richard Kirby File Number(s): 2011/00283647

Judgment 1I am dealing with an application by Centro Properties Ltd ("CPL") and CPT Manager Ltd ("CPT") for orders under s 411(1) of the Corporations Act 2001 (Cth) for the convening of meetings of certain of their creditors for the purpose of considering schemes of arrangement. 2CPL and CPT have issued stapled securities each of which consists of a share in the capital of CPL and a unit of a registered managed investment scheme (known as "Centro Property Trust") of which CPT is the responsible entity. Because of this connection between them, CPL and CPT are often referred to together as "CPN" as if they were a single entity - which, of course, they are not. It will nevertheless be convenient sometimes to adopt the "CNP" label when referring to CPL and CPT. 3Of immediate relevance are proposed arrangements under Part 5.1 between CPL and the group of its creditors designated "senior lenders" and between CPT and the same group. Each member of the group is a creditor of both CPL and CPT on a basis that involves joint liability of the two companies. This is a by-product of the stapled security structure under which equity investors hold "stapled securities" of the kind I have mentioned. (I have deliberately refrained form referring here to a "class" of creditors so as not to appear to be pre-judging a possible issue of correct "class" formation that Mr Sullivan QC has flagged on behalf of J P Morgan Chase Bank NA). 4The proposed schemes of arrangement involving the senior lenders represent part only of a very complex re-structure proposal under which assets of a number of Centro entities (extending beyond CPL and CPT) will be, in effect, aggregated in a single entity some 74% of the equity securities of which come to be held by CNP (that is, CPL and CPT together); after which those two companies will transfer those equity securities to the senior lenders by way of what is, in concept, compensation for the extinguishment of their debts by force of the schemes. 5The effect of the schemes, from the point of view of the senior lenders, will be to deprive them of their debts and creditor rights and to cause them to hold instead equity securities of the aggregated entity. 6As part of the wider plan, certain payments will be made by CNP (that is, CPL and CPT) to parties designated the "junior stakeholders", being the "hybrid lenders", the "convertible bondholders" and the "CNP security holders". The moneys proposed to be paid to these "junior stakeholders" constitute the "junior stakeholder amount". The aggregate sum is $100 million. 7The "hybrid lenders" are creditors of CPL and CPT in respect of whom separate schemes of arrangement are to be proposed. Those schemes, if implemented, will see the debts of the hybrid lenders compromised and extinguished in return for an aggregate payment of $20 million to those creditors. 8The "convertible bondholders" hold unsecured debt obligations of CPL and CPT which are convertible into stapled securities in certain circumstances. They are accordingly creditors of CPL and CPT. 9The "CNP security holders" are the holders of the stapled securities each of which consists of a share in the capital of CPL and a unit of the managed investment scheme of which CPT is the responsible entity. They are the equity investors. 10Under the wider proposal, the hybrid lenders will be called upon to vote at court-convened meetings in respect of the separate scheme of arrangement for extinguishment of their debt in return for payment of the $20 million earmarked for that purpose. 11The convertible bondholders will be called upon to vote at a meeting (convened pursuant to provisions of the trust deed under which the convertible bond have been issued) with a view to adopting amendments to the trust deed that will see all the convertible bonds redeemed in consideration of payment to bondholders of the sum of about $21 million set aside for that purpose. 12The CNP security holders will be called upon to vote at a combined general meeting of CPL and CPT convened to consider a resolution approving transfer of all the stapled securities of the new entity received by CPL and CPT as referred to at paragraph [4] above. 13The view has been taken by those companies (and apparently confirmed by Australian Securities Exchange) that that transfer will represent disposal of the companies' "main undertaking", so that a requirement for security holder approval arises from the listing rules of ASX unless ASX chooses to waive the particular requirement. 14Drafts of a notice of meeting and explanatory statement in relation to the CNP security holders proposal are in evidence. It is there made clear that if all relevant conditions are met (including the passing of the relevant resolution by the CNP security holders themselves) money "will be made available ... to be shared among stakeholders who are junior to the senior lenders (including CNP Securityholders ...)". It is then stated: "The CNP Board has determined that CNP Securityholders will be entitled to a distribution of $48,925,082 in total or 5.03 cents per CNP Security if all conditions are met." 15These aspects concerning payments to the hybrid lenders, the convertible bondholders and the CNP security holders (being the "junior stakeholders") have aroused some concern on the part of Mr Richard Kirby and PricewaterhouseCoopers ("PWC"), each of whom was granted leave to be heard on the hearing of the s 411(1) applications of CPL and CPT without becoming a party. Mr Edwards of counsel appeared for Mr Kirby. Mr McHugh SC and Mr Thomas of counsel appeared for PwC. Submissions were made principally by Mr McHugh. Supplementary submissions were made by Mr Edwards. 16In each case, it was submitted that the court should decline to make orders convening the scheme meetings of the senior lenders. I shall come to the basis of that submission presently. First, I should explain the interests of Mr Kirby and PwC. 17Mr Kirby has initiated class action litigation in the Federal Court of Australia against CPL, CPT, their directors and others, including PwC. PwC, in turn, has cross-claimed against CPL, CPT, the directors and others. The allegations are, in substance, that CPL, CPT and others were guilty of statutory misconduct in and about the formulation of financial statements released to investors and the market and that investors in the class represented by Mr Kirby were misled and acted to their detriment on the faith of misleading or deceptive information, thereby suffering loss. PwC, which was the auditor of CPL and CPT at relevant times, is sued on a like basis by the class action litigants and, in turn, cross-claims against parties which include the companies. 18The factual basis for the Federal Court litigation is said to be the same as or similar to that considered in Australian Securities and Investments Commission v Healey [2011] FCA 717; (2011) 278 ALR 618, a case in which ASIC was successful in an application for declarations of contravention of s 180(1) and s 601FD(3) of the Corporations Act by directors of Centro companies. 19Mr Kirby and PwC have an obvious interest in the preservation of the asset base of CNP. They say that if they are successful in the litigation they have commenced, they expect to recover as much as $300 million (I have no way of assessing the reliability of this figure). To the extent that the CNP asset base is diminished, their prospects of recovering upon any judgment they are successful in obtaining is also diminished. CNP did not dispute that they are persons from whom it was appropriate to receive submissions. 20Mr Kirby and PwC advance several general propositions. They say that the proposal to make payments to the CNP security holders involves an unlawful reduction of capital (this may relate mainly to CPL rather than CPT which administers a trust fund). Further, the allocation of funds to the junior stakeholders is said to be at odds with the order of application of assets that would apply in a winding up and that this represents an impermissible use of the Part 5.1 scheme of arrangement procedure. The class action litigants claim unliquidated damages and, if successful in their claims, would be unsecured creditors ranking ahead of the CNP security holders and equally with, at least, the convertible bondholders. 21A third but related objection is that the directors of CPL and CPT cannot, consistently with the duties they owe to the companies, divert to equity holders funds that would otherwise be available for creditors. 22For these reasons, Mr Kirby and PwC contend that there is inconsistency with the principles that a scheme of arrangement may not be allowed to be a means of achieving a result that statutory provisions prohibit and that the court will not approve a scheme that is contrary to public policy. That, coupled with the further principle that the court should not exercise its discretion to convene scheme meetings if it is clear that the particular scheme is one that will not, in due course qualify for the court's approval if the requisite voting majority is obtained, means, it is said, that the court should not exercise the discretion to convene in this case. 23These submissions are made in a context where CNP has accepted that, if the overall re-structure proposal (including the element under the proposed schemes of arrangement that sees the senior lenders' debts extinguished) is not achieved, CNP (that is, CPL and CPL) will be insolvent, with the result that some form of external administration is virtually inevitable - probably either Part 5.3A administration imposed by the directors or receivership imposed by secured creditors. The payments to the junior stakeholders appear to be put forward as an indispensable part of the result necessary to avoid external administration. The schemes of arrangement in fact contain a set of alternative provisions that will come into play upon non-occurrence of any events necessary to allow the payments to the junior stakeholders to be made. 24The circumstance that CNP is likely to become insolvent is said by Mr Kirby and PwC to require the directors to have regard predominately to the interests of creditors (and, they would no doubt add, claimants for unliquidated damages) and to relegate consideration of the interests of equity owners when assessing what is in the interests of the company as a whole: Walker v Wimborne [1976] HCA 7; (1976) 137 CLR 1. 25The submissions made by counsel for Mr Kirby and PwC must be assessed against the background of a fuller explanation of the proposal involving the junior stakeholders. 26Under financing agreements as they now stand, moneys received or recovered for the senior lenders by their agent is subject to provisions in a senior facilities continuation agreement as to its allocation and distribution to those lenders. By a separate agreement (called the junior stakeholder allowance agreement) entered into by so-called "signing senior lenders" and CPL and CPT, those lenders have agreed that the agent for the senior lenders might retain certain moneys coming into the agent's hands and pay it into an escrow account in accordance with an escrow agreement. These are moneys that would otherwise have been allocated and distributed to senior lenders. The amount that may be so diverted into the escrow account is $100 million. It is designated the "escrow amount". 27The escrow agreement contains an express acknowledgment that the escrow amount "is derived from" moneys that would have gone to the senior lenders had it not been diverted pursuant to the junior stakeholder allowance agreement. There is also an acknowledgment that the escrow amount "will be held by the escrow agent on behalf of CNP and remains subject to the Headstock Charges", that is, certain securities given by CNP the precise terms of which do not seem to be in evidence but are described in such a way as to suggest that they are (or include) floating charges over assets generally. 28The escrow agreement makes particular provision as to what is to happen to the escrow amount of $100 million if and when the "junior stakeholder approvals" are obtained. In that event (and subject to certain notices being given), the escrow agent must, on the "Aggregate Implementation Date", release the $100 million "from the Escrow Account to CNP to be held on trust to be applied in accordance with clause 12.3 of the Implementation Agreement". Clause 12.3 of the implementation agreement refers to "CNP's proposed allocation to be made available under the Escrow Deed" as follows: (a) $20 million for payment of consideration under the hybrid debt scheme; (b) $21,074,918 for payment of consideration under the convertible bond scheme; (c) $48,925,082 for payment to the CNP security holders; (d) $10,000,000 to be set aside for contingent creditors (these would presumably include the class action plaintiffs and PwC, if successful). 29It is also acknowledged in clause 12.3 of the implementation agreement, however, that CNP may vary these allocations but: (a) CNP may not reduce the allocation to the hybrid lenders; (b) CNP may not depart from any commitment made under a creditors scheme or a deed in relation to such a scheme; (c) there must be consultation with the signing senior lenders before any variation is adopted; (d) the payment of the junior stakeholder amount must be consistent with the escrow deed. 30The release of the $100 million from the escrow account to CNP is to occur only if the "Aggregation Implementation Date" arrives - that is, when the aggregation of the assets of all the relevant Centro entities has been achieved. That will be after the senior lenders' scheme of arrangement has become binding and taken effect. 31A provision of the senior lenders' scheme is relevant to the present discussion. That provision operates if the junior stakeholder approvals are obtained and the several lender schemes and hybrid lender schemes have come into effect. Under the provision in question, each senior lender directs each security trustee to release from the security given in the security trustee's favour amounts released to CNP under the escrow deed as and when those amounts are applied by CNP in accordance with the escrow deed. As I have said, alternative provisions of the scheme take effect if the junior stakeholder claims are not obtained. 32A central component of the objections of Mr Kirby and PwC is that implementation of the provisions regarding the $100 million escrow amount will involve actions by CNP which are, as it were, voluntary actions with respect to CNP's own money - partly in accordance with contracts already in place and partly pursuant to actions and decisions of the future. That being so, they say, several things follow. In particular, CNP is bound not to effect a reduction of share capital in the absence of compliance with statutory conditions; CNP's directors are bound to ensure that moneys are not expended otherwise than in the interests of the company as a whole (with creditors' interests predominating, as I have said, in any assessment of where the company's interests lie); and, as a corollary, moneys should not be allowed to be diverted into channels that are inconsistent with priorities that would be applied in a winding up. 33The riposte of CNP is, in effect, that the escrow amount is not - and has not been for some time - money of CNP; it is money of the senior lenders and it is they who are committing that money and making it available to be applied by way of payments to the junior stakeholders. 34As far as I am aware, the evidence does not disclose the basis on which moneys received or recovered by the senior lenders by their agent (see paragraph [26] above) came to be so received or recovered - at all events, I am not aware of any counsel having taken me to any part of the many lever arch folders of evidence that explains or elucidates that matter, although Mr F Gleeson SC, leading counsel for CNP, did say in the course of oral submissions: "[T]he money effectively came from the sale of the US assets over which the lenders had security and instead of the lenders taking the money in reduction of their debt at that time the lenders agreed to an escrow arrangement whereby the money was then put into an escrow account, held in the name for the benefit of CNP but always subject to the security of the senior lenders". 35At a conceptual level, two possibilities present themselves: that moneys so received or recovered by the senior lenders were an asset of CNP in respect of which the secured lenders exercised some security right so as have possession of it and an ability to deal with it independently of CNP and without any decision-making by CNP; or that those moneys were an asset of CNP that continued subject to a floating charge and was therefore available to be used in the ordinary course of business free from the charge and as CNP (and its directors) chose. 36The latter possibility probably suggests a basis on which it may be the former possibility that is stronger: that, in accordance with some forbearance arrangement, the moneys were applied otherwise than in the ordinary course of business so that the floating charge affecting them crystallised - although, that said, it is not clear how the maxim "once a mortgage always a mortgage" is accommodated by the first possibility. 37I was not taken clause-by-clause and line-by-line to the relevant documents in this respect, nor were fully formulated submissions addressed to me. That being so, I am in no position to reach a concluded view about these matters. 38What I do know, however, is that there is an express acknowledgement in the escrow agreement that the escrow amount remains subject to the "Headstock Charges". That plus the fact that the particular fund has been created and earmarked in the way that it has tends to suggest that the senior lenders, as chargees under the Headstock Charges, have a specific charge over the fund so that, contrary to the position put by counsel for PwC, the fund is not money of CNP that CNP can apply as it chooses. Rather, if that is the correct position, it is money of CNP that it is not at liberty to apply except as the senior lenders allow. 39Mr Gleeson SC, who appeared with Mr J Williams of counsel for CNP, put particular store by the fact that the escrow amount is subject to a trust. That, he said, removed the application of the escrow amount from the field of discretionary decision-making, the situation being one where interests of beneficiaries subsist in relation to an established fund. If that were the true position, the question of application in accordance with decisions of the directors of CNP would appear not to arise, so that the further question of the duties of directors in a situation of threatened or impending insolvency would not need to be addressed. 40In arguing that the payment to the CNP security holders represents an unlawful reduction of capital, PwC and Mr Kirby invoke what Kitto J in Davis Investments Pty Ltd v Commissioner of Stamp Duties [1958] HCA 22; (1958) 100 CLR 392 at 413 referred to as "the fundamental principle of company law that the whole of the subscribed capital of a company with limited liability, unless diminished by expenditure upon the company's objects (or, of course, by means sanctioned by statute) shall remain available for the discharge of its liabilities". A corollary was that dividends must not be paid except out of profits. That principle attained the status of a statutory prohibition in the uniform companies legislation of 1961-2. 41The rule that dividends not be paid except out of profits has now been abandoned in Australia. To that extent, there has been a significant modification of the principle of maintenance of capital. The rule stated by Kitto J probably no longer applies in the form in which he stated it. Section 256B(1) concerning reduction of share capital is in these terms: "A company may reduce its share capital in a way that is not otherwise authorised by law if the reduction: (a) is fair and reasonable to the company's shareholders as a whole; and (b) does not materially prejudice the company's ability to pay its creditors; and (c) is approved by shareholders under section 256C" 42Section 254T(1) provides: "A company must not pay a dividend unless: (a) the company's assets exceed its liabilities immediately before the dividend is declared and the excess is sufficient for the payment of the dividend; and (b) the payment of the dividend is fair and reasonable to the company's shareholders as a whole; and (c) the payment of the dividend does not materially prejudice the company's ability to pay its creditors." 43A "dividend" is " prima facie a payment made to the shareholders while the company is a going concern" ( Re Critchin's Oil Co [1902] 2 Ch 86 at 95) and thus, in concept, a return on shareholding investment. The corollary of the prohibition in s 254T is that such a return to shareholders is permitted if the several specified conditions are satisfied. 44Section 256B(1), dealing with a reduction of capital, imposes a requirement for shareholder approval. The conditions that the particular matter be fair and reasonable to the shareholders as a whole and that there be no material prejudice to the company's ability to pay its creditors are common to both s 256B(1) and s 254T. 45Submissions were addressed by both Mr McHugh and Mr Gleeson to the question whether the claims in the Federal Court litigation are relevant to the question of the solvency of CPL and CPT. Reference was made to the decision of the Court of Appeal in Box Valley Pty Ltd v Kidd [2006] NSWCA 26; (2006) 24 ACLC 471 where it was held that, in determining whether a company was unable to pay its debts as and when they became due and payable and therefore "insolvent" within the meaning of s 95A of the Corporations Act , regard could not be had to a potential, but highly probable, liability to pay damages which the company would incur under an existing contract. There was no doubt that the company had a contingent liability to pay damages that would have been admissible to proof in its winding-up. However, it was held that such a liability was not a "debt" for the purposes of s 95A. 46Mr Gleeson submitted that the claims of the class action claimants and PwC are, at their highest, of this character and therefore irrelevant to any assessment of solvency in the s 95A sense. Reservations about the correctness of Box Valley expressed by White J in New Cap Reinsurance Corporation Ltd (in liq) v A E Grant [2008] NSWSC 1015; (2008) 221 FLR 164 on the basis of inconsistency with the High Court's decision in Bank of Australasia v Hall [1907] HCA 78; (1907) 4 CLR 1514 were said by Mr Gleeson to be beside the point since the claims with which White J was concerned were held by him to be contingent debts, not unliquidated claims; and the claims of Mr Kirby and PwC are clearly unliquidated in nature. 47If the payments to be made to the CNP security holders are not correctly characterised as, in effect, trust distributions over which CNP has no control, s 254T(1) will be relevant. It will then be necessary to address the question whether the class action claimants and PwC are "creditors" within the meaning of s 254T(1)(c), not the question whether their claims are "debts". 48Section 254T has been in its present form only since 2010. There do not appear to be any decided cases about it. There is, however, at least a possibility that the reference in s 254T(1)(c) to a company's "creditors" is a reference to the persons who would be entitled to prove in a hypothetical winding up. Since the enactment of the Corporate Law Review Act 1992 (Cth), all claims against the company (present or future, certain or contingent, ascertained or sounding only in damages) have been provable in a winding up. The class action claimants in the present case, although claiming only unliquidated damages, would be held to be within this class for the purpose of proving in a winding up, as would PwC: see Brash Holdings Ltd v Katile Pty Ltd [1996] 1 VR 24 . 49On the other hand, the affording of "creditor" status, for the purposes of proof in a winding up, to persons having claims merely sounding in damages may not be something that should be taken into account in construing the term "creditors" in a quite different part of the legislation. The Act contains no general definition of "creditor", with the result that the meaning of the term in a particular provision will be very much influenced by context. 50The submissions on this general subject were high-level submissions advanced by reference to the principle of maintenance of capital. There was, for example, no reference to s 254T(1) or to the particular condition laid down by s 254T(1)(c). 51The nature of the claims of Mr Kirby and PwC was central to another submission advanced by Mr Gleeson, namely, that because they have merely undetermined and untested claims for unliquidated damages, Mr Kirby and PwC have no economic interest in the companies that would support any claim to object to the schemes the terms of which will, in any event, not impinge upon such rights, if any, as they actually have. Mr Gleeson referred, in that connection, to Re Tea Corporation Ltd [1903] 1 Ch 12 and Re Bluebrook Ltd [2010] EWHC 2114 (Ch); [2010] 1 BCLC 338. 52Mr Gleeson's clients did not object to Mr Kirby and PwC being heard as non-parties on the present s 411(1) application, the hearing of which has concluded. Any contention that they have no interest and that their views should be ignored to the point of not being received should therefore be left until the hearing of any application for approval of schemes under s 411(4)(b) - although I do note the observations of Mann J at paragraphs [25] and [26] of the Bluebrook judgment about the need for the court to exercise its discretion at the s 411(4)(b) stage by reference to broad notions of fairness. 53I refer next to another matter that, on my present view of matters, is unlikely to be of particular relevance. There was debate before me as to whether CNP, if it attempted to do so, would be successful in obtaining a waiver by ASX of the listing rule by reference to which it has decided to seek the passing of an approving resolution of the CNP security holders (see paragraphs [12] and [13] above). Mr McHugh did not lead any evidence but nevertheless said that there have been many occasions on which ASX has granted such a waiver where the entity concerned has been in financial difficulties (he pointed to correspondence in which CNP's solicitors had accepted this). That may or may not be true. For present purposes, the evidence suggests that the rule does apply to require the approval of security holders and that no waiver has been sought by CNP or given by ASX. No basis on which it might be said that CNP has a duty to seek such a waiver has been articulated; and it seems strange, as an abstract matter, to say that an entity bound to comply with a particular listing rule has some kind of duty to try to obtain dispensation from the rule rather than to obey it. 54I turn now to the objection that the proposed schemes will alter in an impermissible way the order of application of assets that would apply in the winding up of CPL and CPT. 55Mr McHugh referred to the following passage in my judgment in Re HIH Casualty & General Insurance Ltd [2005] NSWSC 240; (2005) 190 FLR 398: "Case law contains expressions of disapproval of the use of a s.411 scheme to impose a regime of creditor rights different from that which would apply in a winding up: see, for example, Re Brian Cassidy Electrical Industries Pty Ltd (1984) 9 ACLR 140 . Those reservations do not arise here. They have been expressed in contexts where the company was not already in the course of being wound up and the aim of the scheme was to forestall winding up. The concern centres on the undesirability of using a s.411 scheme to maintain in operation (and to avoid winding up of) companies that are insolvent. The situation is clearly distinguishable from the present case where winding up on the grounds of insolvency has already been ordered by the court and is in progress. 56It cannot be said that the policy of the law stands against the approval of every Part 5.1 scheme that will have the effect that a company that is insolvent or approaching insolvency avoids winding up. There could, I think, be no objection, on policy grounds, to a Part 5.1 scheme that had the same effect as the commonly encountered Part 5.3A deed of company arrangement. I refer to the case where debts are compromised on the basis that creditors are to receive less than 100 cents in the dollar and the company is to continue in operation. It is true that a fund from external sources is often introduced to fund such a compromise in whole or in part; but there is no reason why the extinguishment of senior debt as contemplated in this case should not be viewed in a similar way. The real point is that there should not be, as a matter of policy, side-stepping of a regime entailing investigative mechanisms where there is good reason to think that they should be deployed in creditors' interests. That was the real point in Re Brian Cassidy Electrical Industries Pty Ltd (1984) 9 ACLR 140. Safeguards in that respect are built into the Part 5.3A deed of company arrangement provisions. 57There is, as a matter of abstract principle, no objection to the use of Part 5.1 in relation to a company facing insolvency. In Re Uniq plc [2011] EWHC 749 (Ch), a case under corresponding English provisions, David Richards J said (at [3]): "The proposal is further evidence of the utility of schemes of arrangement as a means of achieving a wide range of purposes including, as in this case, securing the long-term future of a company or group which would otherwise in due course face insolvency: cf. Re Cape plc [2006] 3 All ER 1222." 58At the heart of the objections raised on behalf of Mr Kirby and PwC are questions of public policy. This brings to the fore the nature of the discretion conferred by s 411(1). 59That matter received authoritative attention in In Re CSR Ltd [2010] FCAFC 34; (2010) 183 FCR 358. Keane CJ, Finkelstein J and Jacobson J there endorsed the following description of the court's s 411(1)function by French J in Re Foundation Healthcare Ltd [2002] FCA 742; (2002) 42 ACSR 252 at [36]: "It is however important to bear in mind that, by granting leave to convene the meeting, the Court does not give its imprimatur to the proposed scheme. If the arrangement is one that seems fit for consideration by the meeting of members or creditors and is a commercial proposition likely to gain the Court's approval if passed by the necessary majorities, then leave should be given: Re ACM Gold Ltd [1992] FCA 89; (1992) 34 FCR 530; 107 ALR 359; 7 ACSR 231; 10 ACLC 573 (O'Loughlin J). The court is not required to give close consideration to the effects of the scheme upon individual members of the classes of members or creditors affected. So to do would be to 'introduce burdensome and to a large extent ineffectual consideration at this interlocutory stage': Re Jax Marine Pty Ltd [1967] 1 NSWR 145 at 148 (Street J). The Court at the stage of ordering a meeting to approve a scheme does not ordinarily go very far into the question of whether the arrangement is one which warrants the approval of the Court. ... That question is to be answered when the scheme returns to the Court for final approval. That is not to exclude the possibility that a scheme may appear on its face so blatantly unfair or otherwise inappropriate that it should be stopped in its tracks before going any further." 60After quoting those observations, the members of the Full Court said (at [59]): "This reference does not attempt to distil an accurate statement of the content of what is "unfair" or "contrary to public policy" so far as the discretionary considerations which inform the exercise of the power conferred by s 411(1) of the Act are concerned. Adverbs such as "blatantly" to modify "unfair" or "contrary to public policy", do serve, however, to emphasise that the inquiry under s 411(1) is not intended to resolve difficult questions on which reasonable minds may differ." 61Their Honours also said (at [64] - [65]): "In our respectful opinion, the discretion to make an order under s 411(1) of the Act may properly be exercised in the negative where the making of the order would be futile because the scheme as proposed is unlikely to be finally approved. The Court should not promote the waste of resources and the raising of false hopes or the creation of unnecessary concern and anxiety by promoting a process which will clearly not proceed to consummation under s 411(4)(b). But that having been said it must be recognised that there are other procedural opportunities which are more appropriate for the resolution of the issues which the learned primary judge held to be fatal to CSR's attempt to put the s 411 process in train in this case. At the hearing of the appeal, counsel for CSR and the Fund pressed the Court with arguments calculated to persuade the Court to make findings of fact on difficult issues in circumstances where the learned primary judge had not been pressed to make such findings and where the absence of cross-examination of the proponents of competing views denied the Court a full opportunity to make such findings. The hearing before the learned primary judge was an interlocutory hearing ill-suited to the kind of in-depth investigation which both sides sought to press on this Court. We are respectfully of the opinion that the key to the determination of the appeal lies in understanding that whether or not the scheme should ultimately be approved by the Court is a question not amenable to resolution in the negative on an application for an order concerning a meeting of shareholders." 62All of the matters raised by Mr Kirby and PwC are matters of complexity and difficulty. Full consideration of them would require precise delineation of issues and very focussed submissions by reference to those issues and clearly identified parts of the voluminous documentary evidence. Without in any way wishing to criticise the efforts of any counsel or their instructing solicitors, I have a clear impression that the level of generality at which potential objections were identified, raised and dealt with does not represent any firm foundation for refusing to allow the meetings of creditors to be convened. Both Mr McHugh and Mr Edwards made it clear that they and their clients had had some of the relevant documents for only a very short time and their submissions were based on a necessarily hasty consideration of matters. 63As the members of the Full Federal Court observed in the CSR case, an interlocutory hearing of the kind that has been completed at this stage of the present proceeding is "ill-suited to the kind of in-depth investigation" that would be necessary to come to a concluded view on the objections Mr Kirby and PwC seek to raise (see also the observations of E M Heenan J in Re Bulong Nickel Pty Ltd [2002] WASC 126; (2002) 42 ACSR 52 at [54]). There can be no doubt that issues of potentially great significance are identified. But argument in relation to them has taken place at a level of generality that would be inconsistent with stopping the proposal in its tracks unless some obvious and clearly objectionable feature were seen to be such as to remove altogether the possibility of sanction of the scheme if and when it was brought back to court after receiving the necessary approval by votes of relevant creditors. 64I am not persuaded that that is the position here. The particular matters raised may well have a bearing on the court's ultimate decision whether to approve the schemes, if and when meetings of relevant creditors agree to them and an application for the court's approval is made. At this point, however, the objections, as presented to the court, do not represent the kind of "knock-out blow" that would warrant the court's terminating the matter now. Whether they later assume that status is a question for the future. 65The appropriate course is to allow the meetings to be convened and then to return to the particular objections if and when the meeting of relevant creditors has made a positive decision and the objections are pressed upon an application for the court's approval under s 411(4)(b) -assuming always that the fact that a great deal of the substance of the objections arises otherwise than from the terms of the schemes themselves does not result in CNP being enjoined in quite separate proceedings from proceeding with some aspect of the much wider plan of which the Part 5.1 schemes from but a part. 66The s 411(1) applications were brought before the court in circumstances where, as I have said, the objectors apparently had little time to appreciate the full impact of all the complex documents (I myself was not given the core scheme documents until just before the hearing). With greater opportunity to absorb the significance of the documents as a whole, the objectors will no doubt be better able to formulate fuller arguments on the matters they have raised - they may even see, on mature reflection, that there are matters that need not be pursued. It is to be hoped that the proponents of the overall plan will assist the objectors in obtaining a full appreciation of relevant matters. I say this because it will be in the interests of those proponents to see matters of objection dealt with efficiently if and when the schemes come back to court for s 411(4)(b) approval. 67Apart from the matters raised on behalf of Mr Kirby and PwC, no particular issue has been flagged by CNP that might make the court hesitate in exercising the s 411(1) power. Although objectors were represented and made submissions on matters of interest to them, the application remained an ex parte application giving rise to a responsibility of the applicants to bring to the court's attention all matters that could be considered relevant to the exercise of its discretion: Thomas A Edison Ltd v Bullock [1912] HCA 72: (1912) 15 CLR 679. I am therefore entitled to be confident that all relevant matters have been aired. No matter was raised by ASIC which appeared by counsel as amicus curiae . 68The court has been made aware that there is, in commercial terms, a deadline of 15 December 2011 for a decision on the question whether s 411(4)(b) approval, if sought, should be granted. Whether any such deadline is met will depend on the promptness and efficiency with which the application is made and submissions in favour of approval (and any against) are presented to the court and the degree of difficulty those submissions entail for the judge. It should not be assumed that the judge will be able to come to an immediate decision in a matter of this apparent complexity. 69I note that the proceedings have been placed in the list for 24 November 2011 with a view to any s 411(4)(b) application being pursued at that time. 70I shall make the orders that CNP seeks under s 411(1) with respect to the convening of meetings of senior lenders.

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