Liabilities to be transferred (s 413(1)(a))
76 The protection of creditors was to be considered at the second court hearing and by the orders made at the second court hearing under s 413: Re AGL Sydney Ltd (1994) 13 ACSR 597, 598 (Young J).
77 For a reconstruction or amalgamation scheme which proceeds as a members' scheme, a protection for creditors is their ability to appear at the second court hearing: SGIC Insurance Ltd v Insurance Australia Ltd (2004) 51 ACSR 470, 471 [10]-[11]; [2004] FCA 1492.
78 In the present case, there are no objectors and at the time of these submissions no creditors (or contingent or potential creditors) have come forward since the advertisement of the second court hearing to raise any concerns about the proposed Schemes.
79 Further, the evidence of the accountant and director of the plaintiffs is that the liabilities of the plaintiffs should be adequately covered by assets of the defendant following implementation of the Schemes and the cross-guarantee - which were addressed at the first court hearing.
80 Further, no additional evidence has been put forward since the first court hearing as to previously unknown liabilities (other than the misdescription in the balance sheets for GSM and Granny Smith noted above) nor any contact made by third parties or objectors to suggest there are any "long tail liabilities" or known or foreshadowed contingent liabilities other than as already disclosed.
81 The advertisement approved by the Court in a form which would alert potential creditors was published in two newspapers.
82 In any event, it is not intended by the Schemes that liabilities of the plaintiffs disappear upon the Schemes becoming effective. It is intended that the liabilities will transfer to the defendant, BPDA.
83 By clauses 1.1, 4.1, 4.2, 4.3, 4.4, 4.5, 4.6 and 4.7 of the proposed Schemes, "all liabilities" of the plaintiffs will transfer to BPDA once orders under section 413 are made by the Court.
84 The definition of "liabilities" contained in the proposed Schemes at clause 1.1 is very broad; it:
means all liabilities howsoever arising and whether present, unascertained, immediate, future or contingent, including (without limitation):
(a) any liabilities within the meaning of sub-section 413(4) of the Corporations Act;
(b) any liability subject to a Security Interest (as that term is defined in the Personal Property Securities Act 2009 (Cth)); and
(c) any liability under potential future proceedings (whether civil, regulatory or otherwise).
85 The definition of liabilities addressed at the first court hearing includes the statutory broad definition in s 413(4) which also covers liabilities "incapable under the general law of being assigned or performed vicariously" (emphasis added).
86 The evident purpose of s 411 and s 413 is to provide broad jurisdiction and powers to the Court for compromises, arrangements, reconstructions and amalgamations of companies in a diversity of circumstances with curial supervision of the process for those corporate changes rather than the merits of them. That purpose is furthered by giving the plain words of s 413(4) their ordinary meaning, and thereby providing a broad variety of potential uses for orders under s 413(1) where liabilities otherwise not transferrable are concerned.
87 Arguably, the definition in s 413(4) could cover obligations otherwise incapable of assignment at law in the absence of a novation (Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd (2006) 149 FCR 395, 404 [32]; [2006] FCAFC 40).
88 It is expected that all liabilities of the plaintiffs will thereby transfer.
89 As BPDA (the defendant) is a party to these proceedings and it is a party to the proposed Scheme, BPDA will be bound to the terms of the Scheme once effective and the orders made by the Court pursuant to s 413 of the Corporations Act.
90 Section 413(1)(a) is cast in broad terms so as to cover future or contingent liabilities of the scheme company: Stork ICM Australia Pty Ltd v Stork Food Systems Australasia Pty Ltd (2007) 25 ACLC 208, 222 [91]-[92] (Lindgren J); [2006] FCA 1849; Achieve Foundation Ltd v ACNewCo Ltd (2010) 77 ACSR 673, 682 [58]-[61] (Foster J); [2010] FCA 382.
91 As indicated at the first court hearing, by reason of the activities of the plaintiffs (conducting mining operations, exploration or associated services), it is not impossible that some future liability, currently unknown, may arise.
92 The types of potential future liabilities were addressed at the first court hearing and it is intended that these will transfer to BPDA.
93 The notification of two worker's compensation claims made against Granny Smith is noted specifically in the explanatory statement. These claims, even if not commenced and within the ambit of the transfer of legal proceedings order, will constitute liabilities within the broad definition, as contingent or future liabilities, for which BPDA would become liable.
94 The potential liability to ASIC for alleged Corporations Act contraventions concerning group reporting by the plaintiffs in 2006 to 2011 and the extant failure to lodge compliant documents during the period, was explained at the first court hearing. In that regard:
(1) while it is not clear as a matter of law whether a statutory penalty not yet issued against one entity could be issued against another entity after the former is deregistered, it has not been the subject of any further action by ASIC since raised in 2012 and 2013, and appears unlikely to be raised;
(2) it is not a matter ASIC has raised as sufficient to justify refusal to approve the Schemes or to make the orders sought under s 413;
(3) it is not a matter, which under any express provision of the Corporations Act, prohibits the approval of the schemes or the making of orders sought under section 413; and
(4) it has not otherwise been continued from 2012 onwards (that is for the last 5 years), when otherwise compliant reporting has occurred.
95 As to the potential liability to the Office of State Revenue for pay-roll tax, also addressed at the first court hearing, any statutory tax liability (upon issue of the relevant assessment notice with any penalties or interest sums) may be considered transferred to BPDA pursuant to the orders under s 413(1)(a).
96 In Millennium, at Annexure A (the Scheme), the "Liabilities" as defined in clause 1 were defined to include Tax whether assessed or to be assessed ( "Tax" is further defined in clause 1). There, Stone J was content to approve the Scheme in terms that transferred such tax liabilities. I accept counsel's proposition that such tax liabilities would likely amount to existent or future statutory debts (Pape v Commissioner of Taxation of the Commonwealth of Australia (2009) 238 CLR 1 at 31 [38] (French CJ), 65-66 [140] (Gummow, Crennan and Bell JJ), 155 [452] (Heydon J); [2009] HCA 23).
97 Any liability of Granny Smith in the extant District Court proceedings would also transfer. As explained in the Third Butler affidavit, the solicitors for the plaintiff in those proceedings confirmed receipt of the explanatory statement and provided the quantum of damages sought in those proceedings, which sum does not exceed the net assets of the amalgamated BPDA post implementation of the schemes.
98 By reason of the orders to be sought pursuant to s 413(1)(a) and cll 4.2.2, 4.3.2, 4.4.2, 4.5.2, 4.6.2 and 4.7.2 of the proposed Schemes, contingent environmental, statutory, contractual or tortious liabilities of the plaintiffs that could arise in the future, including workers compensation liabilities of Granny Smith, will be liabilities of BPDA.
99 The orders for transfer of liabilities are in similar terms as in the Legrand, Millennium and All Star schemes above.