BETWEEN : GLENCORE NICKEL PTY LTD (ABN 67 076 513 034)

MATTER : Glenmurrin Pty Ltd (ABN 50 076 684 396)

Corporations - Scheme of arrangement application for meetings of creditors - Factors for consideration - Foreign creditors - Contracts governed by foreign law - Ancillary proceedings in the United States - Power to restrain scheme creditors under s 411(16) of C_orporations Act_ - Abridgement of time - Approval of the Schemes

Corporations Act 2001 (Cth), s 411, s 1322(4)(a)

Corporations Regulations 2001 (Cth), reg 5.1.01(1), reg 5.6.14A, reg 5.6.36

FT Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd (1977) 3 ACLR 69

Re Alabama, New Orleans, Texas & Pacific Junction Railway Company [1891] 1 Ch 213

Re Australian Co-operative Foods Ltd [2001] NSWSC 382; (2001) 38 ACSR 71

Re Central Pacific Minerals NL [2002] FCA 239

Re Chevron (Sydney) Ltd [1963] VicRp 39; [1963] VR 249

Re Mercantile Mutual Insurance (Australia) Ltd [2002] FCA 1278; (2002) 43 ACSR 128

Re NRMA Insurance Ltd [2000] NSWSC 49; (2000) 33 ACSR 523

Re Timor Sea Petroleum NL [2000] VSC 337; (2000) 35 ACSR 186

Sovereign Life Assurance Company v Dodd [1892] 2 QB 573

1 Glencore Nickel Pty Ltd ("Glencore Nickel") and Glenmurrin Pty Ltd ("Glenmurrin") applied for orders pursuant to s 411 of the Corporations Act 2001 (Cth) ("the Act") to convene scheme meetings, to approve an explanatory statement to be dispatched to scheme creditors and for directions as to the convening, advertising, holding and conduct of the scheme meetings.

2 These applications came before me on 18 November 2002. They were heard at the same time as applications by Murrin Murrin Holdings Pty Ltd ("MMH") and Anaconda Nickel Holdings Pty Ltd ("ANH") for similar orders. I granted the applications.

3 Applications for approval of the Schemes came before me on 15 and 17 January 2003. Approval was granted. These are my reasons for granting the various applications.

4 The explanatory statement for which the plaintiffs sought approval ("Explanatory Statement") relates to two separate but dependent schemes of arrangement, being the Glencore Nickel Scheme of Arrangement and the Glenmurrin Scheme of Arrangement, (collectively the "Schemes"). The Schemes are identical. I ordered that the applications be heard together and that the affidavits be read in each application.

5 In broad terms, the Schemes involve the extinguishment of secured debt of each of the plaintiff companies ("Scheme Debt") in return for the affected creditors ("Scheme Creditors") receiving:

(a) a proportionate share of a cash payment funded by Glencore International AG, the ultimate holding company of Glencore Nickel; and

(b) a proportionate beneficial interest in the proceeds of pending arbitration and litigation proceedings against Flour Australia Pty Ltd ("the Fluor proceedings") relating to the construction of the Murrin Murrin nickel and cobalt project ("Project").

6 The Project is operated by a joint venture between Glenmurrin (40 per cent) and MMH (60 per cent). Glencore Nickel owns Glenmurrin. Anaconda Operations Pty Ltd ("AO"), a wholly owned subsidiary of MMH, is the manager of the Project. MMH's parent is ANH. ANH's parent is Anaconda Nickel Ltd ("ANL"). AO is involved in the Fluor proceedings on behalf of MMH and Glenmurrin.

7 MMH and ANH propose to undertake separate financial restructures of their respective secured debts over the Project on terms to be implemented by way of two parallel schemes of arrangement ("MMH/ANH Schemes") proposed at the same time as the Schemes. It is a condition precedent to the Schemes and the MMH/ANH Schemes that each of them is approved by the Court and other regulatory bodies.

(a) US$300 million aggregate principal amount of 9 per cent senior secured bonds issued by Glencore Nickel in 1997 and due in 2014, guaranteed by Glenmurrin ("Bonds"); and

(b) a working capital facility agreement under which Glenmurrin borrowed US$15 million from ABN Amro Bank NV ("ABN Amro"), guaranteed by Glencore Nickel ("Facility Agreement").

9 Thus, the Scheme Creditors are the holders of the Bonds ("Bondholders") and ABN Amro. Glencore Investment AG, the parent of Glencore Nickel, is a secured creditor of Glencore Nickel for a very significant amount. However, by a subordination deed dated 4 November 2002 the debt has been subordinated to all other creditors of Glencore Nickel.

(a) extinguishment of the Scheme Debt and the discharge and release of securities in relation thereto; and

(b) distribution to each Scheme Creditor of its proportionate share of the cash payment and proceeds of the Fluor proceedings ("the Entitlement").

11 It was also originally proposed that Scheme Creditors be given the option of participating in the future funding of the Fluor proceedings by means of group and individual elections to be conducted by postal ballots concurrently with the Schemes (referred to as the "Fluor Funding Elections").

12 Glencore Nickel and Glenmurrin are in default under the Indenture which governs the Bonds and under various related security documents. The US$15 million advanced under the Facility Agreement is also outstanding. The Indenture is between Glencore Nickel, Glenmurrin and Chase Manhattan Bank (as the Bond Trustee). By a deed entitled "Bond Collateral Trust Deed" between Glencore Nickel, Glenmurrin and Chase Securities Australia Limited (now known as J P Morgan Australia Limited), Chase Securities was appointed as the Australian Collateral Trustee and holds the security granted by Glencore Nickel and Glenmurrin on trust for the Bondholders and ABN Amro. The securities include fixed and floating charges over the assets and undertaking of the plaintiffs. Under the Schemes, the financing and security documents are to be "terminated released and discharged".

13 If the Schemes do not come into effect, the plaintiffs' directors believe that the most likely outcome will be the appointment of an administrator to each company. However, if the Schemes do come into effect, there is evidence that the plaintiffs will be able to pay their debts as and when they fall due after the financial reconstruction effected under the Schemes.

14 Section 9 of the Explanatory Statement sets out several wide ranging releases, waivers, discharges, exculpations, enjoinders and covenants not to sue in relation to Glencore International AG, Glencore Nickel, Glenmurrin, the Collateral Trustees, the Bond Trustee, the Scheme Administrator, the Fluor Trustee, and each of their servants and agents.

15 The debt obligations of Glencore Nickel and Glenmurrin under the Bonds and the Facility Agreement are collectively referred to as the "Glencore Obligations". Holders of the Glencore Obligations representing in excess of 75 per cent of the aggregate principal amount and accrued interest outstanding of the Scheme Debt ("Consenting Glencore Holders") agreed not to take enforcement action with respect to specified events of default under the Indenture before 15 February 2003, or another date not later than 28 February 2003.

16 Under an agreement dated 30 September 2002 between Glencore Nickel, Glenmurrin and the Consenting Glencore Holders ("Voting Agreement"), the Consenting Glencore Holders agreed to vote in favour of the financial restructuring of Glencore Nickel and Glenmurrin as described in the Voting Agreement and the Explanatory Statement. Approximately 86 per cent of Secured Creditors by value had executed the Voting Agreement.

(a) sections 2, 6, 7, 8 and 9 of the Explanatory Statement; and

(b) an Implementation Deed, other than clauses 9 and 10. The Implementation Deed includes the "Glenmurrin Fluor Trust Documents" which comprise the Fluor Proceeds Trust Agreement, the Fluor Litigation Deed, the Glenmurrin Fluor Fixed Charge and the Glenmurrin Fluor Deed of Priority.

18 Thus, the terms of the Schemes are contained in, inter alia, the agreements referred to in (b), some of the parties to which are strangers to the Schemes. For example, the parties to the Implementation Deed include Glencore International AG, Glencore Investment AG, the Bond Trustee (who is also the Fluor Trustee) and the Australian Collateral Trustee. A scheme under Pt 5.1 of the Act may bind the company the subject of the arrangement or reconstruction and its members and creditors but not outsiders (although there may be room for debate as to who is an outsider). There seems to be no reason why, as a matter of form, the terms of the Schemes cannot be recorded in agreements involving outsiders who are required to act to facilitate the implementation of the Schemes: see Re Amcor Ltd (2000) VSC 157; (2000) 34 ACSR 199; Bulong Nickel Pty Ltd [2002] WASC 126.

19 The Scheme Creditors and the creditors of the MMH/ANH Schemes are collectively referred to as the "Collective Scheme Creditors". Collective Scheme Creditors who possess security interests against the Project would have been entitled, on enforcement, to the proceeds of any award in favour of AO as agent for Glenmurrin and MMH. Under the Implementation Deed and the other agreements which form part of the Schemes, Glenmurrin, MMH and third parties on whom obligations are placed have agreed:

(a) that the Fluor Trustee will hold the rights to all the allocations to the Collective Scheme Creditors of any specified recoveries from the Fluor proceedings (described as the Phase 1 Net Recovery and any Phase 2 Net Recovery less any adjustments or deductions) on trust for the Collective Scheme Creditors as set out in the Fluor Proceeds Trust Agreement;

(b) to grant to the Fluor Trustee a fixed charge on each of their respective interests in the Fluor Claims to secure payments due by AO to the Fluor Trustee on behalf of the Collective Scheme Creditors;

(c) to enter into a deed of priority giving these charges priority over property already charged in favour of MMH and AO and Glenmurrin and AO under certain cross-charges;

(d) to the division of the Phase 1 Net Recovery and Phase 2 Net Recovery among the Collective Scheme Creditors, Glenmurrin and MMH as described in the Fluor Proceeds Trust Agreement and the Fluor Litigation Deed; and

(e) that the Collective Scheme Creditors will fund the costs of prosecuting, appealing or collecting any amounts awarded in connection with the Fluor Claims in accordance with the Fluor Litigation Deed.

20 As stated above, if the Schemes become effective, part of the Entitlement to be received by Scheme Creditors is a beneficial interest in the Phase 1 Net Recovery and Phase 2 Net Recovery. The Phase 1 Fluor Claims were heard between January and March 2002 and an interim award was handed down on 7 September 2002 resulting in a net amount in favour of AO of A$39,811,750. Following a direction by the Arbitration Tribunal, the interim award was increased to A$42,219,774. Each of AO and Fluor have filed an application in the Supreme Court of Victoria for leave to appeal the Arbitration Tribunal's findings.

21 The Explanatory Statement approved on 18 November 2002 and the Fluor Litigation Deed were prepared without any expectation that Fluor would make a part payment pending the determination of the proposed appeals. However, on 5 December 2002 Fluor caused to be paid to the Scheme Administrator the undisputed portion of the corrected interim award including interest, being the sum of A$27,632,623.39 ("Payment"). As a result of the Payment, the plaintiffs applied to amend the Explanatory Statement which application was heard and approved by me on 17 December 2002 ("the December amendment"). The Consenting Bondholders were represented at the hearing. They supported the application to amend and confirmed that in their assessment, the proposed amendments to the Schemes were to the financial benefit of Scheme Creditors. There was evidence that there was adequate time for the amendments to be brought to the attention of the Scheme Creditors before the voting deadline. I informed the parties that I would give careful attention to the evidence on that issue when they sought approval of the Schemes.

22 Before the December amendment, the Explanatory Statement provided that the expenses incurred by AO in pursuing the Fluor proceedings (called the "Phase 1 Fluor expenses" and "Phase 2 Fluor expenses") would be funded from, inter alia, moneys deducted from the cash payment due to the Scheme Creditors, being A$720,000 for the funding of the Phase 1 Fluor expenses and A$4.8 million for the Phase 2 Fluor expenses, and from moneys provided by Scheme Creditors under the Fluor Funding Elections. As a result of the December amendment, the deductions from the cash payment would not be made and the expectation was that the dividend to Scheme Creditors would increase.

23 Further, before the December amendment the Collective Scheme Creditors were entitled to make elections as to whether to participate in funding the Phase 1 or Phase 2 Fluor expenses, both as a group and individually. Individual Scheme Creditors could elect whether or not to participate in funding the Phase 1 Fluor expenses or the Phase 2 Fluor expenses. The December amendment deleted the individual elections. It is unnecessary to refer to them further.

24 After the December amendment, there is only one Fluor Funding Election and that is a group election as to whether or not to fund on the Effective Date A$7.5 million, representing 75 per cent of the first A$10 million of the Phase 2 Fluor expenses in excess of $A16 million, out of the Phase 1 Net Recovery. It is a term of the Schemes that the group election be binding on the Collective Scheme Creditors if, on or before the Effective Date:

• the Scheme Creditors holding at least 75 per cent of the aggregate principal amount of the Scheme Debt agreed to such election; and
• the MMH and ANH Scheme Creditors holding at least 75 per cent of the aggregate principal amount of the debt the subject of the MMH/ANH Schemes agreed to a similar election.

25 Garry Trevor and Andrew Love of Ferrier Hodgson were appointed as the Scheme Administrator to administer the Schemes and were also appointed Scheme Administrator under the MMH/ANH Schemes. The Scheme Administrator appointed a voting agent in the United States, Innisfree M&A Incorporated ("Voting Agent"). The Voting Agent was to assist with the voting procedures in connection with the Schemes.

26 A schematic representation of the Scheme Creditors is contained in Annexure 1 to these reasons. The Depository Trust Company ("DTC") is the registered holder of the Bonds. DTC holds the Bonds on behalf of Custodians being a broker, bank or other nominee acting as a custodian for one or more of the beneficial owners of the Bonds. The beneficial owners are defined as the beneficial owner of the relevant Bonds or other persons entitled to exercise the voting rights in respect of those Bonds ("Beneficial Owners").

27 The detail of the voting and election arrangements provided for in the Explanatory Statement are shown in the schematic representation at Annexure 2 to these reasons.

28 In summary, it was proposed that the Scheme Administrator or Voting Agent would send a copy of the Explanatory Statement to ABN Amro, DTC and each Custodian listed in the register of participants maintained by DTC as at the close of business New York time on 18 November 2002 (the Record Date). Each Custodian would be asked to specify to the Voting Agent the number of Beneficial Owners on whose behalf it holds Bonds. The Voting Agent would provide each Custodian with sufficient copies of the Explanatory Statement for distribution to those Beneficial Owners. All Beneficial Owners as of the Record Date and ABN Amro are entitled to vote on the Schemes and participate in the Fluor Funding Election.

29 The Scheme Meeting for each of the Schemes was scheduled for 11.00 am on 8 January 2003 in Perth, Western Australia. Scheme Creditors could attend and vote at the Scheme Meetings in person or vote by proxy. To vote by proxy, Scheme Creditors had to complete and execute the proxy forms attached to the Explanatory Statement.

30 In the case of the Bonds, the Beneficial Owners entitled to vote had to complete the proxy form and return it to their Custodian who would record the Beneficial Owner's proxy instructions in a master proxy form and forward it to the Voting Agent. In the case of ABN Amro, it could vote by proxy by completing and executing the relevant proxy form and returning it to the Scheme Administrator.

31 Scheme Creditors eligible to vote on the Schemes could also make the Fluor Funding Election by completing the appropriate postal ballot attached to the Explanatory Statement and returning the postal ballot to, in the case of ABN Amro, the Scheme Administrator and in the case of a Beneficial Owner, to its Custodian. The Custodian was required to complete and forward a master postal ballot form to the Voting Agent.

32 The voting procedures utilised in the Schemes are said to be the same as those used in a scheme of reorganisation involving an English company in administration (RSL Communications plc) where most of the company's bonds were issued in the United States. It seems the cumbersome procedure is necessitated by the confidentiality attaching to the identity of the Beneficial Owners of the Bonds.

33 The task of the Court in deciding whether to make orders under s 411 of the Act convening a meeting a creditors is to see, on the material placed before it, that:

(a) the proposal fits within the statutory concept of arrangement or compromise;

(b) all the main facts relevant to the exercise of their judgment will be available to creditors;

(c) ASIC has had a reasonable opportunity to examine the proposal;

(d) the scheme is so conceived and presented as to its structure, purpose and effect that there is no apparent reason, so far as can be foreseen, why it should not in due course receive the Court's approval if the necessary majority of creditors is achieved.

34 Re Ranger Minerals Ltd; Ex parte Ranger Minerals Ltd [2002] WASC 207; (2002) 42 ACSR 582; Re Hills Motorway Ltd [2002] NSWSC 897; (2002) 43 ACSR 101 at 103; Re Foundation Healthcare Ltd [2002] FCA 742; (2002) 42 ACSR 252.

35 Due regard must be given to the statutory requirement that creditors be afforded the opportunity to consider and assess the Schemes. As stated by Hayne J in Re Sonodyne International Ltd (1994) 15 ACSR 494 at 497:

"The role of the court at this stage of the process of a company propounding and implementing a scheme of arrangement is not to pass finally on whether the scheme should be approved. That decision must await the expression of the will of the members at the meeting and any argument that may be advanced on behalf of the dissenting members or other interested parties at the time of the application for approval."

36 However, a court should decline to order a meeting if there exists some feature in the scheme which makes it unlikely that the court will ultimately approve it: Re Bond Corporation Holdings Ltd (1991) 5 ACSR 304 at 316; Re Stockbridge Ltd (1993) 9 ACSR 637 at 646.

37 The plaintiffs are corporations incorporated in New South Wales with their registered offices and principal assets in Western Australia. In particular, the Murrin Murrin joint venture nickel and cobalt project which they are developing and operating is located in Western Australia.

38 The Scheme Creditors include the Bondholders. The Bondholders are individuals or entities resident outside Australia and the Bonds are regulated by documents governed by the law of the State of New York.

39 The Court would not order a meeting of creditors if it did not have jurisdiction to approve the Schemes. The question of jurisdiction was considered by Heenan J in Bulong Nickel Pty Ltd (supra) and Bulong Nickel Pty Ltd [2002] WASC 226 with the benefit of detailed submissions by ASIC. The Bulong Scheme considered by Heenan J had the effect of modifying the rights of bond or note holders resident outside Australia which were also governed by the law of the State of New York. Heenan J said (at par 15):

"I am satisfied that a proper characterisation of Pt 5.1 and s 411 of the Act is to treat it as a law relating to insolvency of corporations and, as such, to recognise that it accommodates the rights and interests not only of the company concerned, its members and creditors but also the interests of the community in which it has been conducting business and incurring obligations. This characterisation leads to the conclusion that the compulsory variation of the rights between the company and some of its creditors or members, if so approved in accordance with the legislation, is a discharge or variation of those contractual rights in accordance with the law of the forum which, because of its association with insolvency, will be effective notwithstanding that some, or even all, of the obligations between the company debtor and its creditors are governed by a foreign system of law ... It follows that I am satisfied that s 411 confers on this Court a power to approve a compromise or arrangement even if the effect of the scheme of arrangement will be to modify or discharge obligations existing between the company concerned and third parties under a contract which stipulates that it is to be governed by a foreign system of law."

40 I agree with Heenan J's statement of the law. Further, there was no suggestion in this case that the Court does not have jurisdiction in relation to the Scheme Creditors' other contractual or property rights affected by the Schemes (as to which, see Collins L, "Dicey and Morris on the Conflict of Laws", 13th ed, Sweet & Maxwell, London, 2000, Vol 2 Rules 111 and 112; Sykes E I and Pryles M C, "Australia Private International Law", 3rd ed, The Law Book Company Limited, Sydney, 1991, Ch 21).

41 However, it is possible that the Schemes, if approved, may not be binding upon a dissentient or non-participating Bondholder who sought to enforce rights under the Bonds or the securities in the United States. For that reason, it is a term of the Schemes that, on or before the Effective Date, applications are to be made in the United States under s 304 of the United States Bankruptcy Code ("304 proceedings") to enjoin Scheme Creditors from taking action in the United States in relation to any property or rights dealt with under the Schemes.

42 The plaintiffs relied on evidence from United States' lawyers describing 304 proceedings as follows:

"Section 304(a) of the Bankruptcy Code provides that a foreign representative may commence in the United States a proceeding that is ancillary to a pending foreign proceeding ...

An ancillary case serves as a jurisdictional aid for a foreign representative to facilitate the administration of a foreign proceeding ... The purpose of section 304 is to provide a statutory mechanism through which United States' courts may defer to and facilitate foreign insolvency proceedings."

43 It is not a condition precedent to the operation of the Schemes or a ground for their termination that the plaintiffs be successful in the 304 proceedings. At the hearing I expressed some reservation about the failure of the Schemes to address the risk of the Schemes not binding all Bondholders in actions taken in the United States. The evidence of the plaintiffs' solvency after the restructure is on the assumption that all Scheme Creditors will be bound.

44 In practical terms, the issue only concerns the Bondholders who are not Consenting Glencore Holders. They hold around 19 per cent by value of the Scheme Debt represented by the Bonds. Further, there may not be a practical problem because the plaintiffs' principal assets are in Australia and a foreign judgment inconsistent with the Schemes, if approved, would not be enforceable in Australia: Vervaeke v Smith [1983] 1 AC 145; Bulong Nickel Pty Ltd (supra).

45 Heenan J in Bulong Nickel was of the view that such practical matters were not a reason to approve the Scheme. So much may be accepted. However, in my view it is relevant to take into account the potential risks and consequences of successful claims in the United States after the Schemes come into effect, particularly on the plaintiffs' solvency, and to consider whether alterations or conditions could or should be made or imposed under s 411(6) to address the potential consequences. However, it was not a ground for refusing to convene the Scheme Meetings.

46 The plaintiffs consulted ASIC on the Schemes and provided it with copies of the Explanatory Statement and earlier drafts thereof. ASIC advised, which was the case, that it would not appear at the hearing to make submissions or intervene to oppose the Schemes at the first hearing.

47 Owen J in Re Bond Corporation Holdings Ltd (supra) said (at 315) that:

"The task of the court is to ensure that a meeting is constituted by persons having a similarity of interest so that there is a reasonable likelihood that the result, whatever the result might be, will be fairly representative of the views of those concerned."

48 The relevant interests must arise from the legal character of the rights and obligations of the creditors against the company which requires consideration of how the rights and obligations will be affected by the implementation of the scheme: Ford H A J, "Fords Principles of Corporations Law", 9th ed, Butterworths, Sydney, 1999, par 24.110.

49 I concluded that there was no need to divide the creditors into different classes for the purposes of meeting to consider and vote on the Schemes. The Beneficial Owners of the Bonds and ABN Amro hold security under the same trust document and are ranked pari passu. Further, they are to receive the same proportionate Entitlements under the Schemes.

50 There is no definition of "creditor" for the purposes of Pt 5.1 of the Act. There is ample authority for the proposition that it is to be given a wide meaning for the purposes of s 411: Re Glendale Land Development Ltd (in liq) (1982) 7 ACLR 171; Bond Corporation Holdings Ltd v Western Australia (No 2) (1992) 7 ACSR 472.

51 Senior counsel for the plaintiffs relied on the decision of Anderson J in Bond Corporation Holdings Ltd (supra) to the effect that once a scheme has been approved by the Court, it is the definition of "creditor" in the scheme that is the relevant definition rather than the definition of "creditor" in the Act. That is so in the context of an approved scheme because, as the scheme is or has the effect of an order of the court, it is binding until set aside by some appropriate procedure. In my view, it is not an appropriate test to apply when considering an application to convene a scheme meeting of creditors.

52 However, the issue in this case is not whether the Scheme Creditors are "creditors" for the purposes of Pt 5.1 of the Act but whether the Beneficial Owners can and should have the entitlement to vote. My understanding of the intention and effect of the Schemes is that they will bind the owners, legal and equitable, of the Bonds. In this jurisdiction the entitlement to vote is usually vested in the legal owner of property.

53 There was evidence from a director of the Voting Agent, Ms Jane Sullivan, who has considerable experience in bankruptcy plan solicitations in the United States involving public securities such as bonds, that DTC was formed by brokerage firms and banks in conjunction with the New York Stock Exchange to hold securities controlled by brokers and banks in a single place, and to facilitate the electronic transfer of securities between member firms. The Custodians are the banks and brokerage firms that are members of DTC. Only the Custodian maintains a record of the Beneficial Owners of the Bonds. The Custodians are described as the "gatekeeper" for voting election purposes including disseminating voting information to Beneficial Owners and processing all votes cast by them. The evidence is to the effect that in the United States, the Beneficial Owners exercise the voting rights and that DTC and the Custodians are equivalent to a bare trustee (or nominee) in this jurisdiction (as to which, see Corumo Holdings Pty Ltd v C Itoh Ltd (1991) 24 NSWLR 370 at 398; Thorpe v Bristile Ltd (1996) 16 WAR 500 at 505-506).

54 On that basis, the Beneficial Owners are the persons entitled to consider and vote on the Schemes.

55 The plaintiffs sought orders pursuant to s 1322(4)(a) of the Act that their applications under s 411 and the inclusion of Form 507 pursuant to reg 5.1.01(1) and Item 8203(a) of Sch 8 to the Corporations Regulations 2001 (Cth) not be invalidated by the failure to provide in the Explanatory Statement reports as to their affairs strictly in accordance with Form 507. In particular the Form 507s omitted:

(a) in the case of Glencore Nickel, particulars of and amounts owed to individual "other creditors" in sch H of the forms;

(i) the names and addresses and individual entitlements of employees in sch E of the Form; and

(ii) particulars of and amounts owed to individual "other creditors" in sch H of the Form.

56 There was nothing in the identity of the creditors or the extent of their individual indebtedness that was likely to be material to the Scheme Creditors. Further, the Form 507 is not specifically designed for the provision of information to creditors in the context of a scheme of arrangement under Pt 5.1 of the Act. Accordingly, I was satisfied that the omission should not invalidate the applications.

57 Regulation 5.6.36 of the Corporations Regulations states that a proxy must not be required to be received more than 48 hours before the meeting. The Explanatory Statement provides that the deadline for the receipt of proxy and ballot instruments ("voting instruments") in Australia is within that 48 hour period. However, the deadline for the receipt of voting instruments and master voting instruments in the United States is the close of business on the previous business day in New York. As the Scheme Meetings were scheduled for 8 January 2003, the deadline in Australia was 5.00 pm Australian Western Standard Time on 6 January 2003 and the deadline in the United States was 5.00 pm New York time on the previous business day, being 3 January 2003.

58 Having regard to the number of foreign creditors affected by the Schemes and the necessarily complicated voting collection and recording procedures, I was satisfied that it was appropriate to dispense with the requirement.

59 At the hearing of the applications I queried the reasonableness of the proposed schedule culminating in Scheme Meetings on 8 January 2003 having regard to the considerable size and complexity of the Explanatory Statement, the complications involved in the distribution of the relevant information to the Beneficial Owners of the Bonds and the intervening holiday period. Of course, the concern only related to the approximately 19 per cent of Beneficial Owners who were not Consenting Glencore Holders.

60 The timetable was in effect dictated by the forbearance agreement with the Consenting Glencore Holders. The forbearance applied until 28 February 2003 in which time the approval of the Schemes had to be secured as well as ANL's rights issue which forms part of the MMH/ANH Schemes. Ms Sullivan deposed to the practice adopted in the United States for analogous proceedings and concluded that the solicitation period in this case of approximately 45 days (from mail date to voting deadline) was ample to ensure that 100 per cent of the Bondholders were reached and provided with a proper opportunity to vote. In the circumstances, I was satisfied that the proposed timetable was acceptable.

61 I was satisfied that the Schemes fit within the statutory concept of an arrangement or compromise. Further, following minor amendments to the Explanatory Statement I was satisfied that all of the main facts relevant to the exercise of their judgment was available to the Scheme Creditors. Having regard to all relevant considerations, I exercised the discretion to convene the Scheme Meetings and approve the Explanatory Statement. In doing so I had regard to, inter alia, the following additional matters:

(a) a very significant proportion of Scheme Creditors had already voted in favour of the compromise reflected in the Schemes by having executed the Voting Agreements;

(b) ASIC had given consideration to the proposed Schemes and the Explanatory Statement and had identified nothing that caused it to appear and make submissions opposing the convening of the first meeting or the making of the other orders sought by the plaintiffs;

(c) if the Schemes did not take effect, the most likely result would be the appointment of administrators under the Act which in turn would be likely to result in the Collateral Trustees enforcing their security interests. Further, based on the assumptions contained in the Explanatory Statement, it appeared that the Scheme Creditors would be financially better off under the Schemes than if the plaintiffs were to be wound up;

(d) the Schemes did not prejudice the interests of unsecured creditors;

(e) there was no evidence or suggestion of the Schemes being contrary to public policy because of bad faith, improper purpose, oppression or commercial immorality;

(f) there was no apparent reason which had been brought to my attention or which I could foresee why the Schemes would not in due course receive the Court's approval.

62 The plaintiffs also sought ancillary orders to which I now turn.

Advertisement - Dispensation from Regulation

63 Regulation 5.6.14A requires that the convenor of a meeting must advertise it in each State, Territory and excluded Territory in which the company carries on business or has carried on business in the proceeding two years. In this case it was proposed to advertise the Schemes in the national edition of the Wall Street Journal, The Australian and the West Australian and an order was sought in those terms. For the avoidance of doubt as to whether the regulation applies to a meeting convened by the Court, dispensation was given from reg 5.6.14A.

64 The plaintiffs also sought an order pursuant to s 411(16) of the Act that any proceedings in any action or other civil proceeding by any Scheme Creditor against the plaintiffs be restrained until the earlier of the Effective Date, 28 February 2003 or further order, except by leave of the Court and subject to such terms as the Court may impose.

65 In Re Reid Murray Acceptance Ltd [1964] VicRp 12; [1964] VR 82 Adam J declined to make an order under a predecessor provision of s 411(16) on the grounds that the section did not permit a stay of future, as distinct from pending proceedings. Although initially attracted to the construction favoured by Adam J, I was persuaded that the Court does have the power to make the orders sought.

66 Section 411(16) materially provides:

"When no order has been made or resolution passed for the winding up of a Part 5.1 body and a compromise or arrangement has been proposed between the body and its creditors or any class of them, the Court may, in addition to exercising any of its other powers, on the application in a summary way of the body or of any member or creditor of the body, restrain further proceedings in any action or other civil proceeding against the body except by leave of the Court and subject to such terms as the Court imposes."

67 Adam J interpreted the words "further proceedings in any action or other civil proceeding" to mean that the restraint can only apply to proceedings that have already commenced. However, in my view, the subsection contemplates the commencement of proceedings for approval of a scheme of arrangement under Pt 5.1 of the Act and the reference to "further proceedings" is to any proceedings whether by action or other civil proceeding (other than the approval proceedings) and whether pending or not. Such a construction is consistent with the purpose of s 411 and is conducive to the orderly and efficient consideration of the proposed Schemes. I see nothing in the language or purpose of the provision that requires the words "further proceedings" to mean a further step in an existing action or civil proceeding.

68 As agreements had been reached with Scheme Creditors in excess of 75 per cent of the Scheme Debt and having regard to the considerable time and cost involved in bringing the application to that stage and the desirability of securing the orderly progress of the application, I concluded that it was appropriate to make the stay order.

69 In accordance with the orders I made on 18 November 2002, the applications to approve the Schemes were heard by me on 15 January 2003. On that date the hearing was adjourned to 17 January 2003. The plaintiffs sought orders that:

(a) pursuant to s 411(4)(b) and s 411(6) of the Act, the Schemes be approved;

(b) pursuant to s 411(12) of the Act, the plaintiffs be exempted from compliance with the requirements of s 411(11) of the Act (which would otherwise require that the orders of this Court be annexed to every copy of the plaintiffs' constitutions issued after the order is made).

70 In determining the applications for approval, I considered whether:

(a) the applicants had complied with the orders made on 18 November and 17 December 2002;

(c) there had been compliance with s 411(17) of the Act.

71 Once satisfied that jurisdiction exists, the Court has a discretion as to whether or not to approve the Schemes, although the power is supervisory: Re Amcor Ltd (supra) at 208. However, where there is no opposition to the order for approval and there are no public policy grounds for withholding approval, very considerable weight should be given to the commercial judgment of the secured creditors who have voted to approve the Schemes: Re Bond Corporation Holdings Ltd (supra) at 316; Re Hudson Conway Ltd [2000] VSC 21; (2000) 33 ACSR 657 at 662, 665 and 667.

72 I was satisfied on the evidence that the plaintiffs had, with minor exceptions of such a nature as not to invalidate the meetings, complied with the orders made on 18 November and 17 December 2002 relating to the dispatch of the approved Explanatory Statement and amendments thereto to the Scheme Creditors and the other directions concerning the convening, advertising, holding and conduct of the Scheme Meetings.

73 The Glencore Nickel Scheme Meeting and the Glenmurrin Scheme Meeting were held on 8 January 2003. A quorum of creditors was present at both meetings.

74 No Scheme Creditors were present in person at either meeting. The Scheme Creditors voting by proxy at the Glencore Nickel Scheme Meeting represented 82.09 per cent of the total value of the Scheme Debt as at the date of the meeting. The Scheme Creditors voting by proxy at the Glenmurrin Scheme Meeting represented 80.12 per cent of the total value of the Scheme Debt as at the date of the meeting.

75 The resolutions put to each of the Scheme Meetings were:

"That the Scheme of Arrangement proposed between [relevant company] and the Scheme Creditors, as described in the Explanatory Statement accompanying the notice convening the Meeting, is agreed to (with or without modification as approved by the Court)."

76 The resolutions were passed by the majority required under s 411(4)(a)(i) of the Act. In particular, the results of the vote on the resolution considered at the Glencore Nickel Scheme Meeting were that:

(a) the number of Scheme Creditors who voted in favour of the resolution was 127 and those against nil, being 100 per cent and nil per cent respectively of the number of Scheme Creditors present and voting in person or by proxy; and

(b) the amount of debts and claims of the Scheme Creditors present and voting in favour of the resolution in person or proxy was US$272,353,461.47 and of those against US$ nil, being 100 per cent and nil per cent respectively of the total amount of the debts and claims of the Scheme Creditors present and voting in person or by proxy.

77 The results of the vote on the resolution considered at the Glenmurrin Scheme Meeting were that:

(a) the number of Scheme Creditors who voted in favour of the resolution was 101 and those against nil, being 100 per cent and nil per cent respectively of the number of Scheme Creditors present and voting in person or by proxy; and

(b) the amount of debts and claims of the Scheme Creditors present and voting in favour of the resolution in person or by proxy was US$265,820,833.97 and of those against US$ nil, being 100 per cent and nil per cent respectively of the total amount of the debts and claims of the Scheme Creditors present and voting in person or by proxy.

78 The Voting Agent exercised its power to accept as valid voting instruments or master voting instruments submitted after the proxy and ballot deadline. The exercise of the power did not make any difference to the achievement of the statutory majorities in favour of the resolutions nor did it make any difference to the result of the Fluor Funding Election. However, it enabled the votes of Scheme Creditors received in New York up to 7 January 2003 to be taken into account. Further, in the course of exercising its discretion, the Voting Agent permitted certain Custodians to submit rectified master voting instruments. No objection is taken by anyone to this action.

79 The requisite majority for the approval of the Fluor Funding Election was not obtained. Thus, the Election did not become effective. As explained in s 2.7(b) of the Explanatory Statement the consequences are that AO is not therefore bound to fund the Phase 2 Fluor expenses. If AO elects to continue funding the Phase 2 Fluor expenses, the rights of the Collective Scheme Creditors to the Phase 2 Fluor Claims and their allocation of the Phase 2 Net Recovery is extinguished except for a limited right of recovery of costs. However, the expected dividend that would be paid to Scheme Creditors if the Schemes were put into effect was calculated on the assumption that there would be no Phase 2 Net Recovery.

80 At the adjourned hearing on 17 January 2003, counsel on behalf of the Consenting Bondholders applied for relief in relation to the result of the Fluor Funding Election.

81 The precise relief sought was not clearly articulated, either orally or in writing. However, in substance, the Consenting Bondholders sought to have the Fluor Funding Election deemed effective. The application was supported by an affidavit sworn by a lawyer representing the applicants in the United States. She deposed to the intentions of a number of Scheme Creditors who wished to change their vote or vote for the first time in favour of the Fluor Funding Election.

82 The declared result of the Fluor Funding Election was that less than the required 75 per cent was achieved in the MMH/ANH Schemes and the Glencore Nickel/Glenmurrin Schemes. Prior to the hearing on 17 January 2003, there had been an announcement to the Australian Stock Exchange and the market of the declared result.

83 The Consenting Bondholders had not given notice of their application to all affected Scheme Creditors or at least there was no evidence that such notice had been given. The relief sought by the Consenting Bondholders was contrary in a number of respects with what was advised to Scheme Creditors in the approved Explanatory Statement.

84 Leaving to one side the question of power to grant the relief sought, I concluded that I would not, in the exercise of my discretion, accede to the Consenting Bondholders' application. In order to achieve the requisite 75 per cent majorities referred to in the Explanatory Statement, the Consenting Bondholders had to rely on either or both of, Scheme Creditors who did not vote on the Fluor Funding Election but who wanted to vote (in favour) for the first time, and Scheme Creditors who voted against the Fluor Funding Election and who wanted to change their vote.

85 It would only be in exceptional circumstances that the result of a ballot or vote under Pt 5.1 of the Act would be adjusted after it has been declared. It is generally undesirable to undermine the finality associated with the declaration of the result. It may be appropriate to do so where a vote cast before the deadline or the Scheme Meetings had been ignored as a result of an administrative error. However, it is difficult to envisage circumstances in which it would be appropriate to allow a person to change their vote or, alternatively, vote for the first time after the declaration of the poll. Further, the generalised nature of the affidavit in support of the application provided no, or no adequate, explanation for the change of heart or failure to vote by the relevant Scheme Creditors.

86 Other relevant factors against the grant of relief included the fact that the Fluor Funding Election result had been announced to the market and there was no satisfactory evidence that notice of the application had been given to all Scheme Creditors.

Section 411(17) of the Act

87 Under s 411(17) of the Act, the Court must not approve a compromise or arrangement unless it is satisfied that the compromise or arrangement has not been proposed for the purpose of enabling any person to avoid the operation of any part of the provisions of Ch 6 or there is produced to the Court a statement in writing by ASIC that it has no objection to the arrangement. Based on the evidence before me at the hearings and having regard to the nature of the Schemes, I was satisfied that the Schemes had not been proposed for the purpose of enabling any person to avoid the operation of any of the provisions of Ch 6 of the Act. In any event, the plaintiffs produced to the Court a statement in writing by ASIC that it had no objection to the Schemes.

88 I had reached the conclusion in ordering the Scheme Meetings that there was no apparent reason which had been brought to my attention or which I could foresee why the Schemes would not in due course receive the Court's approval. Nothing changed in that regard. There are only two issues on which I propose to comment.

89 The first relates to the adequacy of the notice given to the Bondholders of the Schemes contained in the Explanatory Statement as amended pursuant to the orders made on 17 December 2001. The evidence adduced at the hearing satisfied me that the documents the subject of the orders in November and December 2002 were promptly served on the Bondholders. Further, there is no evidence that any Custodian or Beneficial Owner complained of any inability to vote on the Schemes or the Fluor Funding Election in the time available.

90 The second issue relates to the question whether the Schemes, if approved, will bind dissentient or non-participating Bondholders who seek to enforce rights under the Bonds or the securities in the United States. As already noted, the Schemes make no express provision for that contingency which has the theoretical potential to impact on the plaintiffs' solvency. However, the extent of the risk is affected by:

(a) the likelihood of success of the 304 proceedings, and if they are unsuccessful, whether a United States court would give effect to the orders of this Court on grounds of comity; and,

(b) on a worse case scenario, whether an order made in the United States which is inconsistent with the Schemes would have any practical financial effect on the plaintiffs.

91 The evidence at the final hearing was that the 304 proceedings had commenced and a preliminary injunction was granted on 10 January 2003. An application for a permanent injunction would be made if the Schemes were approved by this Court. Further, there was expert opinion evidence before the Court that it was likely that permanent injunctive relief would be granted in the 304 proceedings and that in any event, it was probable that United States courts would give effect to this Court's orders under the comity principle on a case by case basis.

92 Having regard to all the circumstances, I concluded that it is unnecessary for the Court to make the grant of its approval subject to alterations or conditions. The Scheme Creditors were provided with relevant information on this subject and they made their commercial judgment. Accordingly, I approved the Schemes.

93 I also granted an exemption from s 411(11) of the Act. The Court may grant an exemption under s 411(12) from the requirement in s 411(11) that a copy of every order of the Court made for the purposes of s 411(4)(b) be annexed to every copy of the company's constitution issued after the order was made. As the court order approving the Schemes effects no alteration to the constitution of the plaintiffs, who are unlisted wholly owned subsidiaries, I concluded that there is no need to have the Court order annexed to the plaintiffs' constitutions: see Re Victorian Grain Service Ltd [2000] VSC 334; (2000) 35 ACSR 198; Re Amcor (supra) at 208.