Bombardier Transportation Australia Pty Ltd v Alstom Transport Australia Pty Limited

Annexure A NOTICE OF HEARING TO APPROVE COMPROMISE OR ARRANGEMENT TO all the creditors and the member of Bombardier Transportation Australia Pty Ltd (BTAPL) TAKE NOTICE that at 2.15 pm (Perth time) on 21 July 2022, the Federal Court of Australia (Western Australia District Registry) at the Commonwealth Law Courts, 1 Victoria Avenue, Perth, Western Australia, will hear an application by BTAPL seeking the approval of a compromise or arrangement between BTAPL and its sole member as proposed by a resolution passed by the meeting of the member held on 14 July 2022. The effect of the compromise or arrangement is a solvent reorganisation within the Alstom Group such that: (a) the property and liabilities of BTAPL will be transferred to Alstom Transport Australia Pty Limited (ATAPL); (b) any legal proceedings pending by or against BTAPL will be transferred to ATAPL; and (c) ATAPL will continue to carry on BTAPL's business. If you wish to oppose the approval of the compromise or arrangement, you must file and serve on BTAPL a notice of appearance, in the prescribed form, together with any affidavit on which you wish to rely at the hearing. The notice of appearance must be served on BTAPL at its address for service at least 1 day before the date fixed for the hearing of the application. The address for service of BTAPL is: James Wang King & Wood Mallesons Level 30, QV1 Building 250 St Georges Terrace Perth WA 6000 Ref: 608-0064863 Email: james.wang@au.kwm.com Bombardier Transportation Australia Ltd

JACKSON J: 1 The plaintiff, Bombardier Transportation Australia Pty Ltd, is proposing a scheme of arrangement (Scheme) that will require the Court's approval under Part 5.1 of the Corporations Act 2001 (Cth) (Act). On 12 July 2022, I made an order for the convening of a meeting of Bombardier's sole shareholder, Alstom Transport Australia Holdings Pty Limited (Alstom Holdings), to consider whether to agree to the Scheme, and an order for the approval of the scheme booklet. These are the reasons for those orders. 2 The effect of the Scheme, if approved and implemented, will be to transfer all the assets and undertaking of Bombardier and all its liabilities to Alstom Transport Australia Ltd, which is also a wholly owned subsidiary of Alstom Holdings. The ultimate holding company of all three of the companies just mentioned is Alstom SA, a company incorporated in France which is listed on the Euronext Paris Stock Exchange. 3 Bombardier's principal business activities are the manufacture and maintenance of railway rolling stock, as well as railway signalling. Alstom Transport's principal activities are similar. The Scheme will effect a reorganisation of the companies' assets and liabilities within the Alstom group of companies. 4 The evidence indicates that the purpose of the Scheme is to enable consolidation of the Alstom group's interests in Australia, to reduce administration costs, complexity and compliance risks associated with the current group structure, and to enable, through a more streamlined structure, better pursuit of the group's business and strategic aims. Alstom SA had earlier acquired the rail business of Bombardier's then holding company in January 2021, and since then Alstom Holdings has engaged in a corporate simplification programme which, in January 2022, led to the acquisition of Bombardier by Alstom Holdings. 5 If the meeting of Bombardier's sole member results in the member's approval of the Scheme, a second hearing of the Court will be held on 21 July 2022 to consider whether to approve the Scheme under s 411(4)(b) of the Act. Bombardier intends to also seek orders under s 413 to facilitate what Bombardier submits is a reconstruction and amalgamation of companies that will be effected by the Scheme. 6 It is proposed that after the reconstruction is implemented, Bombardier will be deregistered by the Australian Securities and Investments Commission (ASIC) without the need for a winding up. Bombardier's present business activities will, in effect, continue to be carried out as part of the activities of Alstom Transport. Bombardier has over 900 employees, who will become employees of Alstom Transport.

The legislation governing schemes of arrangement 7 Section 411(4) of the Act provides for a scheme of arrangement to be binding on, relevantly, members of a company with share capital if: (a) a resolution in favour of it is passed by a majority in number of members (unless the Court otherwise orders) and by 75% of the votes cast on the resolution; and (b) it is approved by order of the Court. 8 Section 411 of the Act envisages three procedural steps in the process of approving a scheme and making orders under s 413: first, (in this case) the calling of a meeting of members; second, a vote by those persons; and third, a further application to the Court for approval of the arrangement: see Re CSR Ltd [2010] FCAFC 34; (2010) 183 FCR 358 at [7] (Keane CJ and Jacobson J, Finkelstein J agreeing). The orders of 12 July 2022 provided for the first of those steps. That was done under s 411(1) of the Act, which provides: Where a compromise or arrangement is proposed between a Part 5.1 body and its creditors or any class of them or between a Part 5.1 body and its members or any class of them, the Court may, on the application in a summary way of the body or of any creditor or member of the body, or, in the case of a body being wound up, of the liquidator, order a meeting or meetings of the creditors or class of creditors or of the members of the body or class of members to be convened in such manner, and to be held in such place or places (in this jurisdiction or elsewhere), as the Court directs and, where the Court makes such an order, the Court may approve the explanatory statement required by paragraph 412(1)(a) to accompany notices of the meeting or meetings. Relevantly here, a Part 5.1 body includes a company: s 9. 9 Section 411(2) prohibits the Court from making an order to convene a meeting to approve the scheme unless 14 days' notice of the first hearing has been given to ASIC (or such lesser period as the Court or ASIC permits) and the Court is satisfied that ASIC has had a reasonable opportunity to examine the terms of the proposed compromise or arrangement and a draft of the explanatory statement and to make submissions to the Court. 10 Section 412(1)(a) provides that where a meeting is convened under s 411, the Part 5.1 body must: with every notice convening the meeting that is sent to a creditor or member, send a statement (in this section called the explanatory statement): (i) explaining the effect of the compromise or arrangement and, in particular, stating any material interests of the directors, whether as directors, as members or creditors of the body or otherwise, and the effect on those interests of the compromise or arrangement in so far as that effect is different from the effect on the like interests of other persons; and (ii) setting out such information as is prescribed and any other information that is material to the making of a decision by a creditor or member whether or not to agree to the compromise or arrangement, being information that is within the knowledge of the directors and has not previously been disclosed to the creditors or members[.] 11 As has been said, Bombardier also proposes to seek orders under s 413 of the Act to facilitate the scheme of arrangement. Section 413(1) provides: Where an application is made to the Court under this Part for the approval of a compromise or arrangement and it is shown to the Court that the compromise or arrangement has been proposed for the purposes of, or in connection with, a scheme for the reconstruction of a Part 5.1 body or Part 5.1 bodies or the amalgamation of 2 or more Part 5.1 bodies and that, under the scheme, the whole or any part of the undertaking or of the property of a body concerned in the scheme (in this section called the transferor body) is to be transferred to a company (in this section called the transferee company), the Court may, either by the order approving the compromise or arrangement or by a later order, provide for all or any of the following matters: (a) the transfer to the transferee company of the whole or a part of the undertaking and of the property or liabilities of the transferor body; (b) the allotting or appropriation by the transferee company of shares, debentures, policies or other interests in that company that, under the compromise or arrangement, are to be allotted or appropriated by that company to or for any person; (c) the continuation by or against the transferee company of any legal proceedings pending by or against the transferor body; (d) if the transferor body is a company - the deregistration by ASIC, without winding up, of the transferor body; (e) the provision to be made for any persons who, within such time and in such manner as the Court directs, dissent from the compromise or arrangement; (f) the transfer or allotment of any interest in property to any person concerned in the compromise or arrangement; (g) such incidental, consequential and supplemental matters as are necessary to ensure that the reconstruction or amalgamation is fully and effectively carried out. 12 So if the requirements of s 413 of the Act are satisfied here, the Court may make further orders, including orders with the effect of transferring property and vesting it in the transferee company (i.e. Alstom Transport), and transferring liabilities to that company so that they become its liabilities: see s 413(1) and s 413(2).

What needs to be established to make an order convening a scheme meeting 13 In Chevron (TAPL) Pty Ltd v Chevron Australia Pty Ltd, in the matter of Chevron (TAPL) Pty Ltd [2022] FCA 220 at [17], Banks-Smith J provided a summary of the threshold matters to be established before making an order convening a scheme meeting which I gratefully adopt: Section 411 does not set out the criteria that must be satisfied before a meeting is ordered. However, the authorities establish that the Court should order the convening of a scheme meeting and approve the dispatch of an explanatory statement if satisfied of the following matters: (a) the scheme is an arrangement in respect of which the Court may order a meeting of the members or creditors; (b) the explanatory statement (that is, the scheme booklet) provides adequate disclosure and contains the prescribed information; (c) the proposed scheme is bona fide and properly proposed; (d) that there is no apparent reason why the scheme should not, in due course, receive the Court's approval if the necessary majority of members' votes is achieved; and (e) any other procedural requirements have been met. I need not repeat the extensive citation of authority at [18]. To (b) may be added the requirements in s 411(2) summarised above for adequate notice to ASIC, including a draft of the explanatory statement. 14 In Chevron at [20] Banks-Smith J said of the review of the proposed scheme to be conducted at the first Court hearing: In summary, the standard of review is whether the proposed scheme is not inappropriate and is one that sensible business people might consider is of benefit to its members. It is not necessary for the Court to descend into the commercial merits of the proposed scheme. If the proposed arrangement is one that seems fit for consideration by a meeting of members and is a commercial proposition likely to gain the Court's approval if passed by the necessary majority, then leave should be given to convene the meeting.

Materials relied on 15 In support of its application for orders under s 411(1), Bombardier has relied on the following affidavits: (a) the affidavit of Tabitha Marjorie Winton affirmed 24 June 2022; (b) the affidavit of Mark Alan Coxon sworn 22 June 2022; (c) the affidavit of Pascal Guy Georges Dupond affirmed 17 June 2022; (d) the affidavit of David Craig Pearson affirmed 24 June 2022; (e) the affidavit of Nigel Rodney Hunt sworn 27 June 2022; (f) the second affidavit of Tabitha Marjorie Winton affirmed 6 July 2022; (g) the affidavit of Rentian Zheng affirmed 8 July 2022; and (h) the affidavit of Ana Brenda McWilliam Valdez sworn 11 July 2022. 16 I will now turn to address why, on the basis of that evidence, I considered that the threshold requirements for the convening of the meeting and approval of the explanatory statement were satisfied here.

Scheme is within scope of Part 5.1 17 It was first necessary to be satisfied that Bombardier is a Part 5.1 body, and that the proposed Scheme is an arrangement to which s 411 applies. 18 As has been said, a Part 5.1 body is, relevantly, a company. The historical records of Bombardier, evidenced by a company extract from ASIC's register, establish that it is an Australian proprietary company and therefore a Part 5.1 body. 19 As to whether the proposed Scheme is an arrangement to which s 411 applies, in AGL Energy Services (Queensland) Pty Limited v AGL Energy Services Pty Limited [2010] FCA 452 at [15], Emmett J said: The element of compromise or arrangement that is necessary to satisfy s 411 need not be of any great magnitude or significance, so long as what is proposed can fairly be characterised as a compromise or arrangement between a company, on the one hand, and its members, on the other. That will suffice to enliven the Court's powers under s 413, so long as the compromise or arrangement is proposed for the purposes of, or in connection with, a scheme for the reconstruction or amalgamation. 20 In Chevron at [23], Banks-Smith J considered a scheme which, in substance, involved a transfer of the whole of the property and liabilities of one wholly owned subsidiary of the member company to another wholly owned subsidiary of that company. Her Honour observed that the member company's rights in its capacity as a member of the transferor company were thereby affected, and that the member company consented to the diminution in the value of its interest in the transferor company. Her Honour held that such transactions had 'long been recognised as within the broad ambit of the meaning of "arrangement" for the purpose of s 411'. See also the further examples cited in Chevron at [26]. 21 The present proposed Scheme will effect a transaction of a similar kind. It will have the result that all of the assets and liabilities of Bombardier will be transferred to Alstom Transport. Alstom Holdings is the sole member of each of the transferor and the transferee company. As will be seen, at the moment the shareholder's equity in Bombardier is positive. So the transaction will mean that the value of Alstom Holding's interest in Bombardier as its sole member will be diminished. Alstom Holdings consents to this. That is within the meaning of the term 'arrangement' in s 411. 22 Section 411(1) of the Act allows for an arrangement to be between a company and its members or creditors, or a class of members or creditors. The proposed Scheme is an arrangement with members, not creditors. Bombardier only has a single member, Alstom Holdings, so no question of classes of members arises. A court-ordered meeting for the purpose of a reconstruction or amalgamation scheme of arrangement can be constituted by only one person: Chevron at [28] and the authorities cited there. 23 For those reasons, the proposed Scheme will effect an arrangement in respect of which the Court may make an order under s 411(1) of the Act for a meeting of Bombardier's sole member to be convened.

The content of the scheme booklet 24 The scheme booklet must provide proper disclosure and contain the information prescribed to be included by the Act and the Corporations Regulations 2001 (Cth) (Regulations). The Court must be prima facie satisfied that there has been proper disclosure with nothing misleading or deceptive in any material sense; the extent of disclosure required is a question of fact and degree dependent on the nature of the scheme and the context in which it is advanced for consideration, which must be considered in a practical and commercially realistic way having regard to the complexity of the proposed scheme: Re Wesfarmers Ltd; Ex Parte Wesfarmers Ltd [2018] WASC 308 at [54]-[55] (Vaughan J). 25 Specifically, the draft explanatory statement must comply with s 411(3) and s 412 of the Act; and reg 5.1.01(1)(b) and Part 3 of Schedule 8 of the Regulations. The requirements of s 412(1)(a) for the content of the explanatory statement are set out above. It must include an explanation of the effect of the compromise or arrangement and any other information that is material to the making of a decision by the member as to whether or not to agree to the compromise or arrangement (if within the knowledge of the directors and not previously disclosed to the member). 26 I have read the draft scheme booklet. It is a detailed document which describes the effect of the Scheme, identifies the impact on the value of Alstom Holdings' shares in Bombardier, refers to the financial information, including annual consolidated financial statements to which Alstom Holdings has access, and describes the effect of the Scheme on Bombardier's creditors and employees. It annexes an independent expert report in relation to the effect on creditors, issued by Leadenhall Corporate Advisory Pty Ltd on 6 July 2022, which concludes that the interests of creditors of both Bombardier and Alstom Transport are not likely to be materially prejudiced. It includes voting information for the member and sets out 'key considerations', including the recommendations of Bombardier's directors. The scheme booklet also touches on taxation consequences and numerous other relevant matters. It annexes the terms of the Scheme itself, an Implementation Agreement dated 15 June 2022 between Alstom Transport and Bombardier in respect of the Scheme, and the proposed notice of meeting. 27 Part 3 (in the Regulations) sets out a number of categories of information that must be included in an explanatory statement, some of which are only required in certain circumstances. Subject to the following comments about ASIC waivers, I was satisfied that the draft explanatory statement included the necessary prescribed information. 28 The ASIC waivers relate to requirements to be found in cl 8302(h) and cl 8303 in Part 3. Clause 8302(h) requires a statement about whether, within the knowledge of the directors of Bombardier, the financial position of the company has materially changed since the date of the last balance sheet laid before the company in general meeting or sent to shareholders in accordance with s 314 or s 317 of the Act and, if so, full particulars of any change. Bombardier cannot comply with this because Alstom Holdings lodges consolidated financial statements and Bombardier has been exempted from the requirement to prepare its own financial statements. Clause 8303 requires, relevantly, that where the subject company (Bombardier) and the other party to the proposed Scheme (Alstom Transport) have directors in common, the explanatory statement must be accompanied by an independent expert report stating whether, in the expert's opinion, the proposed Scheme is in the best interest of the members of the subject company. A waiver of this requirement by ASIC has been found to be an acceptable substitute for such a report in other cases: see Chevron at [37]. 29 Regulation 5.1.01 empowers ASIC to allow a company not to comply with the requirements of Part 3. Bombardier sought waivers from ASIC from both of the requirements it had not satisfied and ASIC provided letters confirming those waivers. 30 As for the veracity of the information in the scheme booklet, Bombardier has provided affidavit evidence as to detailed processes that employees and external solicitors of Bombardier, Alstom Transport and Alstom Holdings undertook to verify the relevant details to ensure that they were accurate and not misleading or deceptive, and that there had been no material omission. The directors of Bombardier have reviewed an earlier draft of the scheme booklet and confirmed the veracity of the statements made in it that are attributed to them. The directors of Alstom Transport have also confirmed the statements that are attributed to them. 31 Having regard to all of the above matters, I was satisfied to a prima facie level that the scheme booklet, when dispatched, would provide adequate disclosure to Alstom Holdings as the sole member of Bombardier. I reached that conclusion with regard to the practical reality that this is an internal corporate reconstruction between three entities in the same corporate group. I was also satisfied that the scheme booklet contains each of the matters required to be disclosed by the Act and the prescribed information required to be disclosed by the Regulations.

Notice to ASIC 32 Notice of the hearing of the application was given to ASIC on 24 June 2022, so the requirement in s 411(2)(a) for 14 days' notice had been satisfied. 33 The draft scheme booklet containing the terms of the proposed arrangement and a draft of the explanatory statement were also given to ASIC on 24 June 2022. An updated version of the explanatory statement was provided to ASIC on 8 July 2022. On 11 July 2022, ASIC sent a letter to Bombardier's solicitors stating its then current intention not to appear to make submissions or to intervene to oppose the Scheme at the first court hearing, and ASIC did not appear at the hearing. 34 The letter also said that ASIC was of the view that it had had a reasonable opportunity to examine the proposed Scheme and explanatory statement and a reasonable opportunity to make submissions to the Court in relation to them. I too was satisfied of those things for the purposes of s 411(2)(b). So the prohibition in s 411(2) did not apply so as to prevent the Court from making the orders on 12 July 2022.

Proper purpose 35 The Scheme must be bona fide and properly proposed. On the evidence, it is proposed for an intelligible commercial purpose of consolidating and simplifying the commercial structure of Alstom Holdings and its subsidiaries. There is an independent expert report saying that neither Bombardier's present creditors that will become creditors of Alstom Transport, nor the present creditors of Alstom Transport that will remain creditors of Alstom Transport, are likely to be materially prejudiced by implementation of the Scheme. The directors of Bombardier have recommended that Alstom Holdings vote in favour of the Scheme and, as said above, it is the type of restructure or amalgamation that the courts have recognised can be facilitated by a scheme of arrangement pursuant to s 411. There was no reason to think that it has been proposed otherwise than in good faith and properly and I was satisfied as to this threshold criterion.

No apparent reason not to give court approval if members approve Scheme 36 The Court will not ordinarily make orders for the convening of a meeting of members or creditors unless the scheme is of such a nature and cast in such terms that, if it achieves the necessary majority at the meeting, the Court would be likely to approve it at a hearing at which it is unopposed. At the s 411(1) stage the Court should be alive to any difficulties that may arise subsequently when it is called upon to decide whether the arrangement should be approved: Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485 at 504 (Mason CJ, Brennan, Dawson, Toohey and Gaudron JJ). 37 In Re Foundation Healthcare Limited [2002] FCA 742 French J (as he then was) stated the standard of review of the likelihood of ultimate approval that is to be performed at the first hearing (citations omitted): 36 … If [the Court] be of the view that the scheme would be unlikely to receive approval, then the Court should not give leave to convene the meeting. 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. … 44 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. The Court is not required to be satisfied either at the convening or approval stage that no better scheme could have been devised. The Scheme, on the face of it, is not obviously unfair or otherwise inappropriate. If there are interests adversely and unfairly affected then the probability is that the question will arise at either or both the Scheme meetings or the final approval stage. 38 There is no suggestion in the evidence as it presently stands that the proposed Scheme contains anything that is unfair or otherwise inappropriate. It is one that sensible business people might consider is of benefit to its members and appears fit for consideration by the meeting of Bombardier's sole member. However in an essentially ex parte hearing, as the hearing on 12 July 2022 was, it was necessary to consider certain specific matters that counsel for Bombardier appropriately drew to the Court's attention.

Orders under s 413 39 Bombardier foreshadowed that it intends to seek a range of orders pursuant to s 413 at the second hearing, assuming the Scheme is approved by Alstom Holdings. It was therefore appropriate, at the first hearing, to identify whether those orders are capable of being made at or after the second hearing: Chevron at [46]. It is convenient to consider this first. 40 In Chevron at [47]-[49] Banks-Smith J said (citations removed): Orders under s 413(1) may be made if the pre-conditions set out in that section are met, namely: that there is a compromise or arrangement; the compromise or arrangement must be proposed 'for the purposes of, or in connection with a scheme for the reconstruction of a Part 5.1 body or Part 5.1 bodies or the amalgamation of 2 or more Part 5.1 bodies'; and under the scheme 'the whole or any part of the undertaking or of the property of a body concerned in the scheme … is to be transferred to a company' … The terms 'reconstruction' and 'amalgamation' have the meaning given in commerce and a restrictive interpretation is not placed upon them. A reconstruction occurs where, after transfer, substantially the same undertaking is carried on by the same members or, if in an intragroup situation, the ultimate holding company remains the same. An amalgamation involves the combination of two separate share capital structures into one and it does not matter if the structure of the new capital (that is, classes and numbers of shares) does not reflect the structures of the predecessors. 41 As has already been said, the present proposed Scheme involves a compromise or arrangement. And it is clear that it is proposed for the purposes of (at least) a 'reconstruction' within the meaning of s 413. This is because the whole of the undertaking and property of Bombardier, a body concerned in the Scheme, is to be transferred to another company, Alstom Transport. The preconditions in s 413(1) will be met. 42 Broadly speaking, the orders under s 413 that Bombardier will seek at the second hearing will transfer all the company's assets and liabilities, including contractual rights and obligations, to Alstom Transport. They will also transfer all pending legal proceedings to which Bombardier is a party. Subject to consideration of the following matters, there was no reason apparent at the first hearing why such orders should not be made at the second hearing.

Conditions precedent 43 The proposed Scheme provides that it cannot come into effect until the conditions precedent as set out in the Implementation Agreement are met: Scheme of Arrangement cl 3.1(a). There are several such conditions in cl 3.1 of the Implementation Agreement. On the evidence as adduced at the first hearing, there was no reason to think that any of these conditions will not be achieved, and Tabitha Winton, Legal Director and company secretary of Alstom Transport, deposed that she is not aware of any reason why they will not be satisfied or waived. 44 Bombardier has, however, drawn the Court's attention to the condition that requires that all government agency consents, approvals, etc which Bombardier and Alstom Transport agree are necessary or desirable to implement the Scheme are obtained before the second hearing (other than ASIC approvals). In particular, each of Bombardier and Alstom Transport have a Rail Safety Accreditation issued by the Office of the National Rail Safety Regulator in accordance with the Rail Safety National Law. That office has issued a varied notice of accreditation to Alstom Transport which amalgamates Bombardier's Rail Infrastructure Manager and Rolling Stock Operator accreditations into Alstom Transport's accreditation. 45 I was satisfied as things stood at the time of the first hearing that the conditions precedent are unlikely to stand in the way of approval of the Scheme at the second hearing.

Creditors 46 In a members' scheme for a restructure within a corporate group the position of creditors 'is appropriately addressed on the second court hearing as a consideration relevant to the discretion whether to approve the Scheme': Re Stork ICM Australia Pty Ltd [2006] FCA 1849 at [69] (Lindgren J). It is not necessary to put the proposed Scheme to a meeting of creditors because they have the right to attend the second court hearing: Chevron at [53]. It is necessary to advertise the approval of the Scheme by the member such that creditors may become aware of the purpose of the Court's second hearing and effect that orders sought may have if made by the Court: All Star Funds Management Limited v Ventura Investment Management Ltd [2012] FCA 527 at [7] (Jagot J). The orders made on 12 July 2022 included an order requiring the proposed Scheme to be advertised in a national newspaper. 47 It was nevertheless appropriate to consider the position of creditors in a preliminary way, because the effect of the Scheme on them is one way in which unfairness could conceivably arise. Here, on the evidence, the proposed Scheme is designed so as not to prejudice the interests of creditors of Bombardier or Alstom Transport. I have already mentioned the conclusion of Leadenhall's independent expert report in that regard. That conclusion is supported by unaudited statements of financial position prepared by management which show substantial surpluses of assets over liabilities, that is positive shareholders equity, for both Bombardier and Alstom Transport. Leadenhall also projects a substantial surplus when the balance sheets of the companies are combined. Also, there are cross-guarantees in place under which creditors of Bombardier can have recourse to the assets of Alstom Transport (and Alstom Holdings): see Chevron at [53]. 48 There was nothing on the evidence before me to suggest that the interests of creditors would be unfairly affected if the Scheme were to be approved and implemented.

Secured creditors 49 There are a number of entities with security interests over assets of Bombardier which are registered under the Personal Property Securities Act 2009 (Cth) (PPSA). Section 413(2) of the Act contemplates that transfers of assets pursuant to orders made under s 413(1) will take effect subject to security interests, unless the order directs that those interests cease to have effect. Bombardier does not seek any such direction. 50 The PPSA contains provisions which protect the interests of the holders of such registered security interests when the secured property (which the PPSA calls 'collateral') is transferred. However after (or before) the transfer, registration of a financing statement reflecting the change in the identity of the company granting the collateral may be required: see PPSA s 34, s 55, s 66, s 67, s 151, s 162. 51 Bombardier has given notices of the Scheme and the Court hearings to each holder of a PPSA registered security interest. One of the notices has informed those security holders that the transfer of their collateral may occur and suggests that they may wish to register a financing statement on the Personal Property Securities Register before the Scheme is implemented. 52 This is another matter that may be addressed in more detail at the second hearing. For the purpose of the first hearing, it appeared that secured creditors had been given notice of the proposed Scheme to permit them to take steps to protect their positions, and there was no reason to think that their interests will be affected in a way that makes it unlikely the Court will approve the Scheme after the second hearing.

Employees 53 As has been said, Bombardier has over 900 employees. The effect of a Scheme on employees of a company being restructured or amalgamated is as important as the effect on creditors: Mercedes-Benz Financial Services Australia Pty Limited v Daimler Truck Financial Services Australia Pty Limited [2021] FCA 1279 at [44] (McKerracher J). 54 If the Scheme is approved and implemented, the employees of Bombardier will become employees of Alstom Transport. On the evidence before the Court, those employees will be transferred on the same terms and conditions as apply to them in their employment with Bombardier and their accrued entitlements will also be recognised. 55 Some of the employees are employed under enterprise agreements made under the Fair Work Act 2009 (Cth). Part 2-8 of that Act contains provisions to facilitate the transfer of enterprise agreements when there is a transfer of business and at least some of the enterprise agreements themselves contain provisions to facilitate their application on the transmission of the employer's business. 56 At the time of the first hearing, there was no reason to think that the interests of employees will be adversely affected if the proposed Scheme proceeds. However at the second hearing it may be necessary to consider issues such as the interaction between orders made under s 413 of the Act and the legislative character of enterprise agreements made under the Fair Work Act: as to which see Toyota Motor Corporation Australia Ltd v Marmara [2014] FCAFC 84; (2014) 222 FCR 152 at [88]-[90] (Jessup, Tracey and Perram JJ).

Material contracts 57 Bombardier has reviewed all relevant agreements, of which it says it has 940, and has put them into three categories: those that do not contain provisions triggered by the Scheme; those in which there are provisions that will be triggered by the Scheme; and those where there is no contractual requirement for consent but the counterparty is a key customer or bank. Bombardier has sent notice of the Scheme to counterparties who hold contracts in the first category. In relation to the second category, it has obtained the necessary consents. In relation to the third category, it has conferred with the relevant counterparties and does not expect there will be any objections. 58 There is one contractual counterparty, Transport for Victoria, with which Bombardier asserts that contractual consent is not required, but the counterparty takes a different view. Regardless of that difference of opinion, there is evidence of conferral with that counterparty which has indicated that it will give consent, subject to conditions. Some of those conditions have already been satisfied and Bombardier and Alstom Transport intend to satisfy those that remain. 59 In any event, it is likely that the Scheme, if approved, will effect a transfer of the rights and liabilities under the contracts regardless of whether they contain restrictions on assignment: see Stork at [98]-[99]. It may be appropriate to deal with this issue more fully for the purposes of the second hearing. At the time of the first hearing, nothing in the evidence suggested that the effect of the Scheme on material contracts would make it unlikely that the Scheme is ultimately approved at or after the second hearing.

Conclusion as to likelihood of approval 60 None of the matters discussed above presented a basis for refusing to make orders for the convening of the scheme meeting. The proposed arrangement seemed to be fit for consideration by Bombardier's member at a duly convened meeting and, at the time the orders were made, appeared likely to gain the Court's approval if passed by the necessary majority, assuming that the orders for approval are unopposed.

Procedural requirements - scheme meeting 61 Bombardier sought to hold the relevant meeting on short notice. Given the essentially in-house nature of the reconstruction, that was appropriate: see Equatorial Mining Pty Limited v Antofagasta Investment Company Limited [2013] FCA 1452 at [33] (Yates J). 62 As required by r 3.2 of the Federal Court (Corporations) Rules 2000 (Cth), Bombardier filed affidavits nominating a chairperson and alternate chairperson of the proposed meeting, which were also affidavits of those persons (Mark Coxon and Pascal Dupond) disclosing their interests in and relationships with Bombardier and other relevant bodies as required by the rule.

Conclusion 63 For the above reasons, orders for the convening of the meeting of the member of Bombardier, for the approval of the draft explanatory statement, and for the holding of the second hearing of the Court on 21 July 2022 were made. I certify that the preceding sixty-three (63) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jackson.