By a Third Further Amended Interlocutory Process filed in November 2016 the Plaintiff, The Dominion Insurance Company of Australia Limited (subject to scheme of arrangement) ("Company") initially sought orders convening a meeting of creditors of the Company to approve a modified scheme of arrangement between the Company and its creditors, orders providing for the dispatch of information to those creditors, and orders in a common form for the conduct of a meeting. I outlined the background to that application in my judgment delivered on 16 February 2017 ([2017] NSWSC 637), and there indicated that I would order that the Company convene a meeting of creditors for the purpose of considering and, if thought fit, agreeing to the proposed scheme, subject to notice of the application first being given to the Australian Prudential Regulation Authority ("APRA"). That notice was given, APRA did not seek to intervene in the matter and orders were subsequently made convening a meeting of the Company's creditors.
By a Further Amended Interlocutory Process filed today, by leave, the Company applies for an order under s 411(4)(b) of the Corporations Act 2001 (Cth) that a scheme of arrangement between the Company and its creditors in a form exhibited to the affidavit of Mr Weston sworn 22 May 2017 be approved. The Company also seeks ancillary orders to give effect to that approval, including an order dispensing with a requirement for publication of notice of the application that would otherwise arise pursuant to r 3.4(2) of the Supreme Court (Corporations) Rules 1999 (NSW) or, alternatively, orders providing for publication by newspaper.
The application is supported by an affidavit of Mr Weston dated 15 February 2017, previously read in support of the application to convene the scheme meeting, which sets out the issues which have arisen in respect of the earlier scheme and the steps that had been taken to identify the Company's creditors. By an affidavit dated 19 May 2017, Ms El-Haddad, who is an accountant in Mr Weston's firm, indicates the steps which had been taken to publish an advertisement of the meeting of creditors of the Company, including publication in the newspapers specified in the order providing for the scheme meeting to be convened.
By a further affidavit dated 22 May 2017, Mr Weston indicates the steps which were taken to give notice of the meeting to the Company's creditors, and also to make available documents specified in the orders convening the scheme meeting for inspection at the offices of Mr Weston's firm. Mr Weston notes that, not surprisingly given the long period for which the earlier scheme had been in place, a number of the letters sent to creditors had been returned to sender. Mr Glasson, who appears for the Company, notes that that reinforces the view previously expressed by Mr Weston that there will be sufficient monies to pay out remaining creditors in full under the scheme, since those creditors who cannot now be contacted will not participate under the terms of the scheme. Again, that matter is not surprising, given the long period for which the earlier scheme had been in place.
Mr Weston gives evidence of the conduct of a scheme meeting on 9 May 2016. He notes that no creditors attended the meeting in person, but 26 creditors attended by proxy, and that those creditors present by proxy unanimously voted in favour of the scheme.
A further affidavit of Mr Colin Brown, who is the solicitor acting for the Company in the application, dated 31 May 2017, indicates that the Interlocutory Process and supporting affidavits have been served upon a number of reinsurers who are affected by the conduct of the scheme, and also refers to his instructions from Mr Weston that no creditors have notified Mr Weston, or any member of his staff, that they have any objection to the scheme and that there has been no substantive change to the position set out in Mr Weston's earlier affidavit dated 15 February 2017, so far as it addressed the adequacy of the scheme fund to meet the claims of creditors under the scheme.
Mr Brown also refers to issues which have arisen in respect of publication of an advertisement, so far as the Supreme Court (Corporations) Rules now contemplate publication of such an advertisement on the insolvency website of the Australian Securities and Investments Commission ("ASIC"), rather than by newspaper, but ASIC's insolvency website does not readily accommodate the publication of a notice in respect of a scheme of this character. That matter in turn underlies the application for dispensation from publication. Mr Brown also refers to his instructions from Mr Weston as to the costs which would be involved in a further newspaper publication, and to the fact that no responses have been received by Mr Weston or his staff to earlier advertisements in respect of the scheme. Mr Brown also refers to communications with ASIC which indicate that it has identified no concerns concerning the new scheme, and ASIC has not sought to appear at the hearing today. I should also note that APRA has been given notice of the relevant matters, and has taken no active role, although that may reflect a view that it has no jurisdiction in respect of the matter where the Company is not conducting an ongoing insurance business. Finally, a further affidavit of Mr Brown dated 2 June 2017 refers to service of the Amended Interlocutory Process on reinsurers which have an interest in the scheme.
Mr Glasson draws attention to the fact that, other than for the lack of publication of a notice of the second court hearing on ASIC's insolvency website, as contemplated by r 3.4 of the Supreme Court (Corporations) Rules, the procedural requirements in respect of the second meeting have been satisfied. It seems to me that it is appropriate to dispense with an order for publication of notice of the second court hearing in the particular circumstances, although it would ordinarily be preferable, or necessary, that such publication take place. The matters which support such an order in this case, by contrast with most cases are, first, the age of the previous scheme, which has the consequence that it is unlikely that any persons affected by the matter would not already be aware of it by Mr Weston's communications to creditors, reinforced by the fact that there has been earlier publication of notices in respect of the scheme meeting to which there has been no response. It seems to me that, by contrast with most schemes of arrangement, those affected by this scheme are a closed class, such that members of the public or other creditors of the Company are not affected by it, where the Company is not conducting an ongoing business. In these circumstances, it seems to me that the publication of a further advertisement at this point would put the Company to further costs which would potentially be at the expense of creditors and further delay for little useful benefit. For that reason, I will make the order sought dispensing with the requirement for publication.
Mr Glasson points out that the voting at the scheme meeting complies with the requirements of s 411(4) of the Corporations Act, so far as all of those who voted in proxy were in favour of the scheme, and there has been no opposition to the scheme either at the meeting or, indeed, when the matter was listed today. Mr Glasson fairly draws attention to the fact that ASIC has not given a no objection letter under s 411(17) of the Corporations Act, because this is a creditors' scheme and there are no implications under Ch 6 of the Corporations Act in the scheme. As Mr Glasson points out, that is no impediment to approval of the scheme under s 411(17) of the Corporations Act, because a creditors' scheme of this nature has no purpose of enabling any person to avoid the operation of any provision of Ch 6 of the Corporations Act. Mr Glasson also points out that, as the evidence to which I have referred above indicates, reinsurers and APRA have been served with the relevant documents and have also not expressed any opposition to the scheme.
Mr Glasson points out, and I accept, that there are no discretionary reasons to decline the approval sought. It is, of course, implicit in a court's order to convene a scheme meeting that the scheme is in a form that would be capable of being approved at a second court hearing, if it obtains the requisite majorities at the scheme meeting, and it has here obtained those majorities. For the reasons indicated in my earlier judgment, the scheme reflects a practical resolution of the difficulties which have arisen in respect of the earlier scheme, and it appears that creditors have themselves formed the view that it is in their interests to approve it. There is no reason for the Court not to respect that decision and to give effect to the scheme.
Finally, the Company seeks an order in a common form exempting it from compliance with s 411(11) of the Act, such that the Court's orders need not be annexed to the Company's constitution. That order is commonly made, and there is good reason to make it here, where the Company has not been actively trading for many years and will not do so under the new scheme.
For these reasons, I make orders in the form containing six paragraphs as initialled by me and placed in the file.
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Decision last updated: 22 June 2017