Catholic Church Insurance Limited, in the matter of Catholic Church Insurance Limited (No 2) [2023] FCA 1352

JACKMAN J: 1 On 27 September 2023, I made orders (Convening Orders) for the convening of a meeting of certain of the plaintiff's (CCI) creditors, being those with claims under Insurance Contracts other than workers' compensation policies (Scheme Creditors), to consider and, if thought fit, approve the proposed Scheme at Annexure A to the Convening Orders: Re Catholic Church Insurance Limited [2023] FCA 1197 (Reasons). Capitalised terms not defined in this judgment have the meaning given to them in the Scheme and in the Reasons. 2 The Scheme Meeting was held on 31 October 2023 and the Scheme was unanimously approved, thus achieving the requisite statutory majorities of Scheme Creditors present and voting. Accordingly, CCI now seeks orders: (a) pursuant to s 411(4)(b) of the Corporations Act 2001 (Cth) (Corporations Act), that the Scheme be approved; and (b) pursuant to s 411(12) of the Corporations Act, that CCI be exempt from complying with s 411(11) of the Corporations Act in relation to the orders approving the Scheme. 3 CCI relies on the following evidence in support of its application for approval of the Scheme: (a) affidavit of Katherine Louise Nikolaou, solicitor at King & Wood Mallesons (CCI's solicitors), affirmed 27 October 2023 (Nikolaou Affidavit). The Nikolaou Affidavit addresses: (i) the advertisement of the convening of the Scheme Meeting in The Australian newspaper on 28 September 2023 as required by the Convening Orders, as well as in various state and territory-based newspapers on 29 September 2023 and 2 October 2023; (ii) the advertisement of the convening of the Scheme Meeting on ASIC's published notices website on 28 September 2023; and (iii) the publication of notice of the second Court hearing in The Australian newspaper on 26 October 2023 as required by the Convening Orders; (b) affidavit of Timothy John Farren, General Manager of Underwriting and Product of CCI and Returning Officer for the Scheme Meeting, sworn 30 October 2023 (Second Farren Affidavit). The Second Farren Affidavit addresses: (i) the process of dispatch of meeting materials to Scheme Creditors, via publication on CCI's website, as well as by email or post to identified Scheme Creditors; (ii) the engagement of Scheme Creditors with the Creditor Portal, including: the number of Scheme Creditors identified and contacted by CCI (2,206) and the number ultimately determined to be Scheme Creditors (2,183); the receipt and adjudication of Validation Forms by prospective Scheme Creditors; the completion of Module 1 (Creditor Registration) by Scheme Creditors; the completion of Module 2 (Proof of Debt) by Scheme Creditors and the adjudication of Proofs of Debt of Scheme Creditors who disputed their Claims Estimates; and the completion of Module 3 (Confirmation of Attendance or Appointment of Proxy); (iii) communications with Scheme Creditors from 28 September 2023 onwards; and (iv) communications with ASIC since the first Court hearing; (c) affidavit of Sarah Jane Gibson, Managing Director in the Digital and Data team of PwC, sworn 31 October 2023 (Gibson Affidavit). The Gibson Affidavit addresses: (i) the creation of Portal Profiles for Scheme Creditors in the Creditor Portal; (ii) the distribution of emails to Scheme Creditors for the purposes of their accessing the Creditor Portal; (iii) the uploading of Claims Estimates data to the Creditor Portal in respect of Scheme Creditors who completed Module 1 (Creditor Registration); and (iv) the distribution of emails to Scheme Creditors in respect of the completion of each of the Modules of the Creditor Portal; and (d) affidavit of Mr Farren, sworn 1 November 2023 (Third Farren Affidavit). The Third Farren Affidavit addresses: (i) the conduct of the Scheme Meeting and Scheme Creditor attendance; (ii) the voting results with respect to the Scheme resolution; (iii) the conditions precedent certificate concerning the execution by the Scheme Advisers of the Scheme Adviser Deed Polls (as well as noting the execution by the Creditors' Committee Members of Committee Member Deed Polls); and (iv) further communications with ASIC. 4 A detailed exposition of the relevant principles applicable to Court approval in the context of a creditors' scheme appears in Re Boart Longyear Limited (No 2) [2017] NSWSC 1105; (2017) 122 ACSR 437 at [55]-[84] (Black J); see also Re Opes Prime Stockbroking Limited (No 2) [2009] FCA 864; (2009) 73 ACSR 411 at [8]-[9] (Finkelstein J). The Court's role in approving a scheme entails the following: (a) determining whether there has been compliance with the statutory and procedural requirements; and (b) determining whether to approve the scheme as a matter of discretion, having regard to: (i) whether the class was fairly represented by those who attended the meeting; (ii) whether the statutory majority is acting bona fide and not coercing the minority in order to promote interests adverse to those of the class whom they purport to represent; (iii) whether the arrangement is such as an intelligent and honest member of the class concerned, acting in respect of his or her interest, might reasonably approve; and (iv) the fact that the Court does not sit merely to see that the majority are acting bona fide and thereupon to register the decision of the meeting, but at the same time, the Court will be slow to differ from the meeting, unless either the class has not been properly consulted, or the meeting has not considered the matter with a view to the interests of the class which it is empowered to bind, or some defect is found in the scheme.

Statutory and procedural requirements 5 The evidence establishes that the statutory and procedural requirements have been satisfied. 6 In particular, advertisement of the convening of the Scheme Meeting was undertaken on 28 September 2023 in The Australian newspaper in accordance with the Convening Orders: Nikolaou Affidavit at [11]. While the advertisement was substantially in the form prescribed by Annexure B of the Convening Orders, it was necessary to make a minor amendment to the form of that advertisement, namely the removal of the words "(including the Independent Expert's report)": Nikolaou Affidavit at [10]. This was due to the fact that the Explanatory Statement approved for distribution to Scheme Creditors did not ultimately contain an independent expert's report, and instead contained the FTI Consulting Report provided to CCI and its directors. This followed consultation with ASIC, as was outlined at [103] of the Reasons. 7 Further, addressing a concern which had been raised by ASIC at the first Court hearing (Reasons at [25]), CCI also advertised the convening of the Scheme Meeting in various state and territory-based newspapers throughout Australia on 29 September and 2 October 2023, with the split of those dates ensuring that such advertising did not take place on a public holiday in the relevant state or territory: Nikolaou Affidavit at [14]-[17]. In addition, CCI advertised the convening of the Scheme Meeting on ASIC's published notices website on 28 September 2023: Nikolaou Affidavit at [18]-[19]. 8 In terms of the dispatch of meeting materials, the Second Farren Affidavit addresses the process of dispatch to identified Scheme Creditors via email or post, as well as the publication of relevant materials on CCI's website, in each case as directed by paras 9-11 of the Convening Orders: Second Farren Affidavit at [9]-[12]. Relevantly, the Second Farren Affidavit explains that the number of identified Scheme Creditors as at dispatch on 28 September 2023 was 2,206, down from the approximate figure of 3,250 to 3,300 given in the First Farren Affidavit. This is explained in the Second Farren Affidavit at [22]-[23] as being due to: (a) the receipt of further information revealing that certain "Clients" in CCI's systems who had previously been identified as Scheme Creditors were not legal persons and therefore not Scheme Creditors; and (b) the consequent reallocation of their Scheme Claims to the legal person considered to be the policyholder, consistent with the process described in the First Farren Affidavit at [26]. 9 The Second Farren Affidavit also explains that between the dispatch of meeting materials to identified Scheme Creditors on 28 September 2023 and 26 October 2023, the number of identified Scheme Creditors reduced further from 2,206 to 2,183. This reduction in identified Scheme Creditors by a further 23 is explained in the Second Farren Affidavit at [24]-[26] as being due to those previously identified Scheme Creditors: (a) being subsidiaries of another Scheme Creditor in whose name the policy was issued; (b) no longer having any actual or potential Scheme Claims; or (c) not being legal persons and therefore not Scheme Creditors. Each of these 23 previously identified Scheme Creditors was contacted by a representative of CCI to notify them of this fact. Further, save for the circumstance where the person no longer had any actual or potential Scheme Claims, each was advised of the body which had been determined to be the Scheme Creditor in respect of their Scheme Claims, so that they could discuss voting on the Scheme with the applicable Scheme Creditor if they so wished: Second Farren Affidavit at [26]. 10 A further matter addressed in the Second Farren Affidavit is the deadline for unknown Scheme Creditors to contact CCI, as directed by para 12 of the Convening Orders. As to this, Mr Farren exercised his discretion as Returning Officer to extend the deadline for unknown Scheme Creditors to contact CCI from 9 October to 13 October 2023: Second Farren Affidavit at [27]-[30]. The reason for this was that by 9 October 2023, Mr Farren had not received any requests for Validation Forms (requests to be considered as a Scheme Creditor), and he believed the proposed extension would not cause any substantive difficulty with the indicative timetable. As a result of the extension, Mr Farren received three completed Validation Forms (each of which concerned persons who had previously been considered by CCI as part of its process of identification of Scheme Creditors), with two such persons being determined on the provision of further information to be Scheme Creditors and one being determined not to be a legal person: Second Farren Affidavit at [31]-[32]. The Second Farren Affidavit also records that as at the date of swearing that affidavit, Mr Farren had not received any further requests from prospective Scheme Creditors to be included as Scheme Creditors, nor any further completed Validation Forms: Second Farren Affidavit at [32]. 11 The Second Farren Affidavit also addresses the completion of Module 1 (Creditor Registration), Module 2 (Proof of Debt) and Module 3 (Confirmation of Attendance or Appointment of Proxy) of the Creditor Portal (paras 13-14 of the Convening Orders). Relevantly, Mr Farren explains that two Scheme Creditors were permitted to complete Modules 1-3 after the deadline for completion of those steps had expired, in essence where their failure to complete those steps on time was the result of administrative error on the part of others: Second Farren Affidavit at [33]-[36]. The Second Farren Affidavit also sets out data concerning the number of Scheme Creditors who completed each of Modules 1 to 3: Second Farren Affidavit at [37]-[51]. Notably, a total of 288 Scheme Creditors progressed through to completion of Module 3, with a total Scheme Claims value ($479,155,952) representing some 76% of the Scheme Claims value of Scheme Creditors contacted at dispatch ($627,495,501): Second Farren Affidavit at [51]. 12 In terms of the adjudication of Proofs of Debt, the Second Farren Affidavit records that 91% of Scheme Creditors who completed Module 2 accepted the Claims Estimate prepared by CCI (300 Scheme Creditors), while 29 Scheme Creditors rejected their Claims Estimate and submitted Proofs of Debt: Second Farren Affidavit at [42]. Of the latter, 21 indicated they would vote at the Scheme Meeting, and the difference between the total amount of their Proofs of Debt as adjudicated, compared to the total amount claimed in their Proofs of Debt, represented some 13% ($64,152,052.65) of the total value of admitted Scheme Claims for the purpose of voting ($479,155,952): Second Farren Affidavit at [43]-[45]; Third Farren Affidavit at [35]. 13 A further matter covered in the Second Farren Affidavit is the topic of communications with Scheme Creditors ahead of the Scheme Meeting, principally the receipt of and response to specific queries by Scheme Creditors submitted via the CCI email address designated for the Scheme. Mr Farren describes in general terms the nature of those queries and the process CCI adopted to respond to them: Second Farren Affidavit at [52]-[53]. Separately, Mr Farren notes at [54] that between 27 September 2023 and the date of the Second Farren Affidavit: (a) CCI did not hold any further briefing sessions with policyholders; and (b) three Creditors' Committee meetings took place. 14 The final matter covered in the Second Farren Affidavit is the provision of the Explanatory Statement to ASIC on 27 September 2023, to the extent required to ensure compliance with s 412(7) of the Corporations Act, as well as CCI's correspondence with ASIC between the first Court hearing and the date of the Second Farren Affidavit: Second Farren Affidavit [55]. 15 The Third Farren Affidavit addresses the conduct of the Scheme Meeting. In terms of attendance, 193 Scheme Creditors attended and voted (of some 232 who completed Module 3 and indicated an intention to attend and vote), with an aggregate value of Scheme Claims for voting purposes of $442,270,118: Third Farren Affidavit at [13]. Thirty-six of those 193 Scheme Creditors (19%) are shareholders of CCI, and the aggregate value of their Scheme Claims for voting purposes was $374,627,922 (85% by value of the total aggregate value of Scheme Creditors who attended and voted): Third Farren Affidavit at [14]. 16 The Third Farren Affidavit also outlines how the meeting proceeded, including the receipt of and response to questions, and the conduct of voting: Third Farren Affidavit [15]-[23]. Notably, while nine Scheme Creditors raised questions about voting who were ineligible to vote by reason of the manner in which they had previously recorded their preferences in the Creditor Portal, all but two of these Scheme Creditors indicated an intention to vote in favour of the proposal, while the other two neither voted (because their appointed proxy did not vote) nor indicated an intention to vote: Third Farren Affidavit [24]-[26]. In addition, a representative of two Scheme Creditors who failed to attend the Scheme Meeting subsequently advised CCI of an intention to vote for the proposal: Third Farren Affidavit at [27]. 17 In terms of voting at the Scheme Meeting, the Third Farren Affidavit at [31]-[32] records that the Scheme resolution was passed by the requisite statutory majorities outlined in s 411(4)(a)(i) of the Corporations Act, with: (a) 100% of Scheme Creditors (193 in total) present and voting (either in person or by proxy), voting in favour of the resolution (ie a majority in number of Scheme Creditors present and voting); (b) being a majority of Scheme Creditors whose Scheme Claims amount to 100% of the total amount ($442,270,118) of Scheme Claims of Scheme Creditors present and voting at the Scheme Meeting (ie 75% or more of the total value of Scheme Claims of all Scheme Creditors voting at the Scheme Meeting). 18 The Third Farren Affidavit at [38]-[41] also: (a) annexes a copy of the certificate signed by CCI confirming satisfaction of the condition precedent in cl 4.1(a) of the Scheme (Scheme Adviser Deed Poll); (b) notes the receipt of Committee Member Deeds Poll from all of the Creditors' Committee Members; and (c) annexes further correspondence between KWM (on behalf of CCI) and ASIC. 19 Notice of the second Court hearing, in the form prescribed by Annexure C of the Convening Orders, was published in The Australian newspaper on 26 October 2023: Nikolaou Affidavit at [20]-[22]. CCI did not receive notice from any person, other than ASIC and APRA, of an intention to appear at the second Court hearing, including to oppose the approval of the Scheme, and no such person appeared at the second Court hearing. 20 Finally, as the Scheme is a creditors' scheme, there can be no suggestion it is being proposed for the purpose of enabling any person to avoid the takeovers provisions of the Ch 6 of the Corporations Act, such that s 411(17)(a) is satisfied and a statement from ASIC under s 411(17)(b) is not required.

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