Australian Securities Commission v Marlborough Gold Mines Ltd

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 622 of 2013

IN THE MATTER OF LEHMAN BROTHERS AUSTRALIA LIMITED (IN LIQUIDATION) BETWEEN: LEHMAN BROTHERS AUSTRALIA LIMITED (IN LIQUIDATION) ACN 066 797 760

JUDGE: JACOBSON J DATE: 25 SEPTEMBER 2013 PLACE: SYDNEY

Introduction 1 On 22 May 2013 I made orders under s 411(1) of the Corporations Act 2001 (Cth) (the Act) convening meetings of five separate classes of creditors of Lehman Brothers Australia Limited (in liq) (LBA) for the purpose of considering, and if thought fit, approving a scheme of arrangement between LBA and its creditors. 2 The scheme as it then stood is described in my reasons for judgment in Lehman Brothers Australia Ltd, in the matter of Lehman Brothers Australia Ltd (in liq) [2013] FCA 486. It is sufficient by way of introduction to say that the scheme, as then proposed, provided for a compromise of the claims of all unsecured creditors of LBA. 3 The orders which I made on 22 May provided for the scheme meetings to be held on 19 June 2013. However, on 14 June 2013 Mr Ayres and Mr Parbery (the Liquidators) were provided with a notice of assignment of the claims made by Lehman Brothers Asia Holdings Limited (in liq) (LB Asia Holdings) which comprised one of the five classes of scheme creditors. The notice of assignment was from LB Asia Holdings to Lehman Brothers Holdings Inc (LBHI), the parent company of LBA and LB Asia Holdings. 4 LBHI informed the Liquidators that it did not support the scheme and intended to direct LB Asia Holdings to vote against it. The effect of the creation of a separate class of creditors comprising LB Asia Holdings as the sole member was that it had a power of veto over the scheme. 5 Accordingly, the Liquidators determined that it was in the best interests of the creditors of LBA to adjourn the scheme meetings to enable negotiations to continue with LBHI in an effort to resolve the disagreement as to the terms of the scheme. 6 On 19 June 2013 Mr Ayres opened the scheme meetings which were the subject of my orders and adjourned them to a date to be fixed. The scheme meetings have not been reconvened because LBHI remains opposed to the scheme and the Liquidators are of the view that they are unlikely to reach a satisfactory compromise between LBA and LBHI to enable the scheme to proceed in, or to the effect of, the terms that were originally envisaged. 7 However, this has put at risk the completion of settlement agreements that were reached between LBA, the United States insurers and QBE, in May 2012 and May 2013 respectively, to which I referred at [26] ff of my earlier judgment. 8 As a result, the Liquidators now consider it to be in the best interest of LBA's creditors not to pursue the earlier scheme, but instead to propose a new scheme of arrangement (Insurance Scheme). The object of the Insurance Scheme is to secure, for the benefit of creditors under the scheme (Scheme Creditors), the payment of the insurance proceeds from the United States insurers and QBE. 9 The Scheme Creditors under the Insurance Scheme are those creditors who were "Client Creditors" under the earlier scheme. 10 Thus, what is proposed under the Insurance Scheme is a scheme of arrangement between LBA and a class of its creditors which, unlike the earlier scheme does not effect a compromise of the claims of all unsecured creditors of LBA. Nor does it provide for the payments out of the Insurance Scheme fund (Scheme Fund) to be paid to Scheme Creditors in full satisfaction of their claims. 11 I will describe the terms of the Insurance Scheme below and the respects in which it departs from the earlier scheme. 12 The essential question which arises is whether the compromise or arrangement for which the Insurance Scheme provides is one which falls within s 411 of the Act. This is because the substance of the Insurance Scheme is to leave intact the claims of Scheme Creditors against LBA, and to provide for releases by LBA of its claims against the United States insurers (US Insurers) and related parties (US Insurer Parties) and QBE in return for the payment of USD45 million and AUD3 million respectively to the Liquidators and LBA. 13 On one view therefore the Insurance Scheme might be thought not to involve "some element of give and take" between the Scheme Creditors and LBA which would be required in order to constitute an arrangement within s 411 of the Act: see Fowler v Lindholm (2009) 178 FCR 563 at [67].

The Insurance Scheme 14 The Scheme Creditors under the Insurance Scheme are the creditors of LBA who were defined as the Client Creditors under the earlier scheme. The Client Creditors constituted the first of the five classes of creditors under the earlier scheme. It is unnecessary to repeat the definition which is set out at [44(a)] of my earlier judgment. 15 Thus, the Scheme Creditors under the Insurance Scheme comprise group members in the Wingecarribee Shire Council & Ors v Lehman Brothers Australia Ltd (in liq) proceeding NSD 2492 of 2007 (Wingecarribee Action), as well as other persons having claims against LBA arising from the provision by LBA of investment advice, the making by LBA of representations in relation to investment products or investment management services provided by LBA, or the sale by LBA of investment products. 16 The key commercial terms of the Insurance Scheme are set out in the draft Explanatory Statement as follows: the payment by the US Insurers of USD45 million to LBA for distribution to Scheme Creditors in accordance with the provisions of the Insurance Scheme; the Scheme Creditors, LBA and the Liquidators will provide releases in favour of the US Insurer Parties; the payment by QBE of AUD3 million to LBA for distribution to Scheme Creditors in accordance with the provisions of the Insurance Scheme; and the Scheme Creditors and LBA will provide releases in favour of QBE.

Similarities and differences between the Insurance Scheme and the superseded scheme 17 The similarities and differences between the Insurance Scheme and the earlier scheme are conveniently summarised in Section 1.5 of the Explanatory Statement. 18 Similarly to the earlier scheme, under the Insurance Scheme the US Insurers and QBE are to pay the insurance proceeds to LBA and the Liquidators, in exchange for releases by the Scheme Creditors of the US Insurer Parties and QBE. 19 The releases to be given to the US Insurer Parties and QBE by the Liquidators and LBA are provided for in the agreement and release documents executed by those parties in May 2012 and May 2013 respectively. 20 The differences between the Insurance Scheme and the earlier scheme are as follows: Scheme Creditors will be bound by the terms of the Insurance Scheme but other creditors of LBA will not be bound and will not be entitled to vote on or receive a distribution under the Insurance Scheme; the claims resolution process (CRP) which formed an essential part of the earlier scheme will not form part of the Insurance Scheme; the Scheme Fund will consist solely of the insurance proceeds and the other assets of LBA will remain under the control of the Liquidators. Any distribution of those assets (that is to say, the non-insurance assets) to LBA's creditors will not be made under the Insurance Scheme but in the ordinary course of the winding up of LBA; Scheme Creditors will receive their entitlements under the Insurance Scheme in partial satisfaction of their claims against LBA, not in full satisfaction of those claims. They will be entitled to prove for the balance in the liquidation of LBA; the payment of AUD3.535m to the applicants in the Wingecarribee Action, to which I referred at [57] in my earlier judgment, is to be paid out of the Scheme Fund which consists only of the insurance proceeds; the appeal in the Wingecarribee Action will continue, unless it is compromised, any such compromise being subject to the approval of the Court under s 33V of the Federal Court of Australia Act 1976 (Cth); no releases will be given by Scheme Creditors to LB Asia Holdings. 21 Based upon the assumptions set out in the draft Explanatory Statement, the Liquidators estimate that the Insurance Scheme will result in the payment to each Scheme Creditor of 44.3 to 53.8 cents in the dollar. This estimate is based upon a distribution to Scheme Creditors from the Scheme Fund and a dividend payable in the liquidation of LBA on the balance of the claim outstanding after distribution from the Scheme Fund. 22 If the Insurance Scheme does not become effective, the Liquidators estimate that the persons who constitute the Scheme Creditors will receive a dividend of 36.0 to 44.7 cents in the dollar on their claims. 23 The dividends which were estimated to be payable under the earlier scheme were 40.7 to 49.9 cents in the dollar for Client Creditors, or 33.2 to 41.6 cents in the dollar if the scheme did not proceed.

The insurance claims 24 The insurance claims and the settlements are described in Section 3 of the Explanatory Statement. I referred to the relevant details at [26] ff of my earlier judgment. 25 The only outstanding condition for the payment of the US insurance proceeds by the US Insurers is the approval of a scheme of arrangement which provides for releases of the US Insurers and the US Insurer Parties. 26 The Liquidators have obtained confirmation from the US Insurer Parties that they agree to waive or vary LBA's compliance with that condition which, previously, contemplated the approval of all creditors under the original scheme. Thus, if the Insurance Scheme is approved, it would satisfy the necessary condition in the US Insurers' Agreement and Release. 27 The releases to be given by Scheme Creditors to the US Insurer Parties under the Insurance Scheme are in the same terms as the releases that were to have been given by Client Creditors to those parties under the earlier scheme. 28 Similarly, the only outstanding condition for the payment of the QBE insurance proceeds by QBE is the approval of a scheme which provides for releases in favour of QBE. 29 The Liquidators have obtained QBE's confirmation in similar terms to that which they obtained from the US Insurers, in relation to the condition which contemplated a scheme of arrangement between LBA and all its creditors. Thus, approval of the Insurance Scheme will satisfy the necessary condition in the QBE Deed of Release. 30 The releases to be given by the Scheme Creditors to QBE under the Insurance Scheme are in the same terms as the releases that were to have been given by Client Creditors to QBE under the earlier scheme. 31 An issue which arose in relation to the claims made against the US Insurers was that those insurers disputed liability in respect of certain policy years on the ground that Willis of New York Inc (the US Broker) failed to notify them of the extension of cover to LBA for those years. 32 The US Insurers' Agreement and Release provides that upon payment to LBA of the US insurance proceeds (which can only occur after approval of the Insurance Scheme), LBA will release the US Broker and its affiliates from all causes of action under the relevant policies in respect of claims related to the Wingecarribee Action and other CDO related claims. 33 The release of the US Broker is given by LBA and not by the Scheme Creditors. It occurs outside the Insurance Scheme as a result of an agreement entered into in May 2012. The claim which is released against the US Broker is a claim in negligence which was not available to the Scheme Creditors.

"Compromise" or "arrangement" 34 The power of the Court to order a meeting of creditors under s 411(1) arises where a compromise or arrangement is proposed between a corporation and its creditors or any class of them. The existence of a proposed "compromise" or "arrangement" is therefore a threshold jurisdictional question. 35 The expressions "compromise" or "arrangement" are not defined in the Act but a number of well established principles emerge from the authorities. 36 First, s 411 is to be construed liberally and the words "compromise" or "arrangement" are not to be given a narrow or pedantic interpretation: Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485 at 501; Re Sonodyne International Ltd (1994) 15 ACSR 494 at 497 (Hayne J); Re NRMA Ltd (2000) 33 ACSR 595 at [20] (Santow J); Re Opes Prime Stockbroking Ltd (2009) 73 ACSR 385 at [29] (Finkelstein J). 37 Second, a compromise and an arrangement are separate concepts. Unlike a compromise, an arrangement does not involve the resolution of an existing dispute: Mercantile Investment & General Trust Co v International Company of Mexico [1893] 1 Ch 484,n at 489 (Lindley LJ); Re Guardian Insurance Company (1917) 1 Ch 431 at 450 (A.T Lawrence J); Re NRMA at [140]; Re T&N Ltd (No 3) [2006] EWHC 1447 (Ch) (David Richards J) at [47]; Re Opes Prime at [29]. 38 Third, almost any arrangement within the power of the company, and not contrary to law, which touches or concerns the rights of the company or creditors, may come within s 411: Re NRMA at [20], [140], citing Re International Harvester Co of Aust Pty Ltd [1953] VLR 669 at 672 (Lowe ACJ); Re Opes Prime at [29]. 39 Fourth, there are some limitations on the meaning of an arrangement. It would not extend to a scheme under which a creditor abandons its claims without a compensating advantage, or under which a creditor's rights are confiscated: Re Alabama, New Orleans, Texas and Pacific Junction Railway Co [1891] 1 Ch 213 at 243 (Bowen LJ); Re NFU Development Trust Ltd [1972] 1 WLR 1548 at 1555 (Brightman J); Re Opes Prime at [29]-[31]. 40 Fifth, a compromise or arrangement to be sanctioned by the Court must be reasonable. It cannot be reasonable if "you can get nothing and give up everything". A reasonable compromise or arrangement must be one which is regarded by reasonable people conversant with the subject as beneficial to those on both sides of the bargain: Re Alabama at 243. 41 Sixth, the fifth proposition, which is drawn from the seminal authority of Re Alabama, may go to discretion rather than power but it is the source of the commonly stated principle that a compromise or arrangement implies some element of give and take, and a benefit to members or creditors: Re NFU at 1555; Re Sonodyne at 498-499; Fowler v Lindholm at [67]. 42 Seventh, the "give and take" need not be between the creditors and the company but may be between the creditors and a third party: Re T&N at [50]; approved in In the matter of Lehman Brothers International (Europe) (in admin) [2009] EWCA Civ 1161 at [47]-[48].

Whether the Insurance Scheme is a compromise 43 In my opinion, the Insurance Scheme is a compromise within the meaning of s 411 as construed in the authorities to which I have referred above. 44 There is an antecedent dispute between some of the Scheme Creditors, namely the Applicants in the Wingecarribee Action, and LBA as to their ability to enforce the orders made by Rares J at first instance by proceeding directly against the US Insurers to recover the amount of their judgment in priority to the claims of other Scheme Creditors who are not Group Members. 45 Similarly, those Applicants have asserted a charge over the proceeds of the QBE insurance policies under s 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) and may seek to recover those moneys in priority to the claims of other Scheme Creditors. 46 The existence of those disputes is set out in Section 5 of the draft Explanatory Statement under the heading "Implications of the Scheme not proceeding". It is pointed out in that section that, if the Insurance Scheme does not proceed, there are likely to be priority disputes regarding the proceeds of both the US insurance policies and the QBE insurance policies between the Applicants/Group Members in the Wingecarribee Action and other Scheme Creditors, and those disputes would be likely to involve LBA as a necessary party. 47 The effect of the Insurance Scheme is that the Applicants will forego any possibility of a priority claim to the proceeds of the Policies. The Insurance Scheme will resolve all issues as to priority to the insurance proceeds both as between LBA and the Scheme Creditors, and as between the Scheme Creditors inter se. This is because the US insurance proceeds and the QBE insurance proceeds will be placed in, and comprise, the Scheme Fund under which the claims of Scheme Creditors will be met on a pari passu basis: see Section 11.2 of the draft Explanatory Statement and cl 7(a)(v) of the draft Insurance Scheme. 48 It follows in my view that the Insurance Scheme is a "compromise" which attracts the jurisdiction of the Court to make orders under s 411.

Whether the Insurance Scheme is an arrangement 49 The Insurance Scheme is similar in its structure to the scheme considered by David Richards J in Re T&N. There, the scheme was proposed between T&N and a number of associated companies and their employees and former employees who had claims for personal injury arising out of their exposure to asbestos. The insurers disputed liability but agreed to pay a sum of money to the administrators of the T&N companies subject to the approval of a scheme of arrangement under which actual and potential claimants would receive payment out of the scheme fund in return for giving up their claims against the insurers. 50 In T&N David Richards J rejected a submission that the word "arrangement" in the English equivalent of s 411 was not broad enough to apply to the scheme. This issue arose because the claimants did not give up their claims against T&N, and, it was submitted that an arrangement must be between a company and its creditors. A scheme which leaves the relationship between the company and its creditors intact cannot, so it was submitted, fall within the section. 51 In rejecting that submission, David Richards J observed at [51] that the rights of the claimants against the insurers which were compromised under the scheme were in no sense unconnected with T&N or their rights against T&N. The claims arose out of T&N's obligations to its employees and its insurance cover was purchased for its protection against those claims. If the claimants were unable to enforce their claims against the insurers, the claims would remain against T&N and its assets would be diminished accordingly. 52 David Richards J went on to say at [52] that the settlement of the litigation was therefore a tripartite arrangement involving T&N, the insurers and the claimants. If a claimant established a claim under the distribution procedure in the scheme, this would diminish the amount which T&N would otherwise be required to pay in respect of the claim. 53 His Honour went on to say at [53]: In my judgment it is not a necessary element of an arrangement for the purposes of section 425 that it should alter the rights existing between the company and the creditors or members with whom it is made. … To insist on an alteration of rights, or a termination of rights as in the case of schemes to effect takeovers or mergers, is to impose a restriction which is neither warranted by the statutory language nor justified by the courts' approach over many years to give the term its widest meaning. Nor is an arrangement necessarily outside the section, because its effect is to alter the rights of creditors against another party or because such alteration could be achieved by a scheme of arrangement with that other party. 54 The reasoning of David Richards J in T&N on this issue was referred to with apparent approval by Finkelstein J in Re Opes Prime at [40]. 55 Similarly to the scheme in T&N, if a Scheme Creditor establishes a claim against LBA and receives payment from the Scheme Fund established by the payment of the US insurance proceeds and the QBE proceeds, the payment to the Scheme Creditor pursuant to the Insurance Scheme will diminish the amount which LBA would otherwise be required to pay in respect of the claim if the US Insurers and QBE were successful in avoiding the policies or limiting the amount of the cover. 56 Thus, although the Insurance Scheme does not terminate the rights of the Scheme Creditors against LBA, it affects the way in which their rights may be exercised in precisely the same manner as the scheme in T&N. The Insurance Scheme is therefore an arrangement within s 411 for the reasons given by David Richards J in that case. 57 The necessary "give and take" can be seen in the Insurance Scheme in the following ways: The Scheme Creditors give up rights against the US Insurers and QBE but they take the consequent benefit flowing from the receipt by LBA of the US insurance proceeds and the QBE insurance proceeds; LBA obtains a benefit because it receives the US insurance proceeds and the QBE insurance proceeds (which it passes on to the Scheme Creditors) thereby avoiding the risks and uncertainties of proceedings against those insurers; Each Scheme Creditor gives up, against LBA, and against each other Scheme Creditor, the potential right to assert a priority claim to the US and QBE insurance proceeds, thereby conferring benefits to the parties on both sides of the Insurance Scheme; There is also give and take in respect of the payment of AUD3.535m, described as the IMF Payment, to three of the Scheme Creditors, namely the Applicants in the Wingecarribbee Action. They take from LBA the benefit of that payment, which LBA was not otherwise obliged to make, whilst the other Scheme Creditors give up a rateable portion of their claims against LBA in respect of the amount of that payment. As part of that bargain, all Scheme Creditors and LBA receive the benefits referred to above.

An arrangement with a class of creditors 58 Section 411(1) contemplates, in express terms, the possibility of a compromise or arrangement between a corporation and its creditors or members "or any class of them". 59 A compromise or arrangement with a class of creditors fell within the terms of s 2 of the Joint Stock Companies Arrangement Act 1870 (UK) upon which the present Australian legislation is based. Bowen LJ described the object of the section over 120 years ago in Re Alabama at 243 as: … to enable compromises to be made which are for the common benefit of the creditors as creditors, or for the common benefit of some class of creditors as such. 60 T&N illustrates the power of the Court to make orders in respect of a proposed scheme between a company in administration and a class of its creditors, namely those creditors who have claims against the company to which particular policies of insurance may respond. In that respect it is, as was submitted by counsel for LBA, on all fours with the Insurance Scheme. 61 A further example is NRG London Reinsurance Company Ltd, in the matter of NRG Victory Aust Ltd and the Corporations Act 2001 [2006] FCA 872. In that case, Lindgren J remarked at [55] that s 411(1) of the Act empowers the Court to order a meeting of creditors or class of creditors to be convened. 62 The scheme in NRG was a scheme of arrangement with a class of creditors because the scheme creditors were persons in respect of whom the scheme company had a liability under contracts of reinsurance.

Exclusion of non-scheme creditors from voting 63 As Santow J observed in Re CMPS & F Pty Ltd (1997) 24 ACSR 728 at 734, some English authorities, principally from the 19th century, dealt with cases where a particular class of members could be excluded from voting on a scheme. The test which has been derived from those authorities is whether the shareholders are "concerned in the arrangement". 64 Santow J went on to describe the test as "not a precise one" but as indicating the broad approach a court should take. His Honour said at 734 that the Court will have to determine: … whether a group of shareholders are in reality concerned in the scheme, or whether their interests are compromised thereby, so as to have a vote at all. 65 The same approach seems to be applicable to schemes proposed with a class of creditors. 66 Here, not only will the Insurance Scheme not adversely affect the rights or interests of the non-Scheme Creditors, it will indirectly benefit them. 67 The effect of the proposed Insurance Scheme is that, in accordance with s 562 of the Act, the proceeds of the US insurance policies and the QBE policy, will, after deduction out of the Scheme Fund of the expenses of, and incidental to the getting in of those moneys, be paid by the Liquidators out of the Scheme Fund. The proceeds will be paid to the Scheme Creditors in respect of the liability to them against which LBA was insured under contracts of insurance with the US Insurers and QBE. 68 This has the result, as stated above, that if a Scheme Creditor receives a payment out of the Scheme Fund, it will diminish the amount that LBA would otherwise be required to pay out of LBA's assets. This of course leaves a correspondingly larger amount available for non-Scheme Creditors whose rights or interests are not adversely affected by the Insurance Scheme. 69 The reasons why non-Scheme Creditors are not entitled to vote on the Insurance Scheme are adequately explained in the "Frequently asked questions" section on pages 11-12 of the draft Explanatory Statement under the question, "Why is there only one class of Scheme Creditors".

Subdivision into further classes 70 An issue arose in the earlier scheme as to whether the Client Creditor class should be further subdivided into a number of sub-classes. I dealt with this in my earlier judgment at [52] ff. 71 The possibility of a further subdivision in the earlier scheme arose principally by reason of the CRP under which the applicants in the Wingecarribee Action were to be admitted without the need to prove the quantum of their claims. The claims of IMP Client Creditors and non-IMP Client Creditors were also to be treated differently. 72 Unlike the earlier scheme, the Insurance Scheme provides no procedure for the proof, determination or adjudication of the claims of Scheme Creditors and the CRP will not form part of the Insurance Scheme. 73 It is likely that the Liquidators will establish a process analogous to the CRP for proofs of debt and distributions to Scheme Creditors when they come to prove in the liquidation of LBA. However, that does not affect the conclusion in relation to the Insurance Scheme that there is only one class of creditor and further subdivision is not required. 74 The only difference of treatment of Scheme Creditors under the Insurance Scheme is that the applicants in the Wingecarribee Action are to receive the IMF payment of AUD3.535m which will be directed to be paid to IMF. 75 For the reasons given at [59] ff, which were drawn largely from the reasoning of Finkelstein J in Re Opes Prime and the Full Court in Fowler v Lindholm, I do not consider this to be a class creating provision of the Insurance Scheme. 76 The IMF payment will not have a material impact on the amount of the dividends payable to Scheme Creditors. The Liquidators' view as to the appropriateness of the IMF payment and its impact on dividends is explained at pages 36-37 of the Explanatory Statement. The position mirrors that which applied under the earlier scheme but the expected dilution is 0.8 cents in the dollar for Scheme Creditors other than the Applicants in the Wingecarribee Action. 77 The expected dilution is marginally higher than the 0.7 cents in the dollar figure that was anticipated under the earlier scheme. However, non-Scheme Creditors obtain a benefit because the IMF payment will come solely out of the Scheme Fund established under the Insurance Scheme. Accordingly, there will be no dilution of the dividend payable to non-Scheme Creditors.

The releases 78 The releases by Scheme Creditors of the US Insurer Parties and QBE are in the same terms as the releases that were to be given by Client Creditors to those entities under the terms of the earlier scheme. 79 As I said in my earlier judgment, the releases are covered by what was said by the Full Court in Fowler v Lindholm. The observations made by their Honours in that case at [69], [72] and [73] are authority for the proposition that a scheme of arrangement under s 411 of the Act may include a provision affecting the rights of a creditor as against a third party. 80 For the reasons mentioned above, there is an adequate nexus between the release of the US Insurer Parties and QBE, and the Insurance Scheme itself. The claims of the Scheme Creditors against LBA and the claims against the US Insurer Parties and QBE are significantly interrelated. The claims which are to be released arise from and correspond to the claims made against LBA. 81 Further, for reasons explained above, the requisite element of give and take exists because the Scheme Creditors receive payment in return for a benefit conferred on the US Insurer Parties and QBE in the form of the releases of insurers who had denied liability and had articulated grounds for doing so. The Liquidators consider those grounds to be plausible.

Dissolution of the Original Scheme Meetings 82 The plaintiffs seek orders under s 1319 of the Act that the original scheme meetings convened by way of orders dated 22 May 2013 be dissolved and not resumed. 83 The power to make such orders has been exercised by the Court in a number of cases, including cases where the scheme meetings had been opened and then adjourned. I referred to the relevant authorities in my decision in Ross Human Directions Ltd, in the matter of Ross Human Directions Ltd (No 3) [2010] FCA 1400 at [8]-[10]. 84 The principle which emerges from the authorities is that it will be appropriate to exercise the power where there is no utility in proceeding with the meetings, and to do so would result in wasted costs. 85 That is the position in the present case because LBHI has stated that it does not support the earlier scheme. It has the power to direct LB Asia Holdings to vote against the scheme. That company was the sole member of one of the classes of creditors for the purposes of the earlier scheme. LBHI therefore has, through LB Asia Holdings, the power to veto the earlier scheme. 86 It follows that there is no utility in proceeding with the meetings which I ordered on 22 May 2013 and it would merely waste costs to proceed with them. 87 Accordingly, I will exercise the power under s 1319 of the Act to order that the original scheme meetings be dissolved and not be resumed.

Other Matters 88 The other matters which I have taken into account are set out in the comprehensive outline of submissions for the hearing on 18 September 2013 prepared by Mr Sheahan SC and Mr Nixon. I have marked the submissions as MFI 2 and they will be placed with the Court papers. 89 For the reasons set out above, I will make orders in terms of the draft orders submitted by the plaintiffs. I certify that the preceding eighty-nine (89) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson.