In the matter of Stork ICM Australia Pty Ltd; Stork ICM Australia Pty Ltd v Stork Food Systems Australasia Pty Ltd

1. To the extent necessary, the Australian Securities and Investments and Commission is given leave to intervene for the purpose of raising all and any matters relevant to the issues before the Court and to make submissions orally and in writing, without liability as to costs.
2. The plaintiff be granted leave to file in Court the affidavit of David John Finnis sworn 14 September 2006.
3. Orders are made in accordance with orders 1 to 15 of form of order initialled, dated today and placed with the papers.

SHORT MINUTES OF ORDER THE COURT ORDERS THAT:

1. There be convened by the plaintiff a meeting of Stork International BV as the sole member of the plaintiff holding A class shares, to be held on Thursday 14 September at McCullough Robertson Lawyers, Level 57, MLC Centre, 19 Martin Place, Sydney at 3:00pm for the purpose of considering and, if thought fit, agreeing (with or without modification) to the proposed scheme of arrangement (being in the form of the scheme of arrangement set forth in Exhibit A, hereinafter referred to as the 'Scheme') proposed between the plaintiff and its members.
2. There be convened by the plaintiff a meeting of Stork International BV and Stork NV as the members of the plaintiff holding B class shares, to be held on Thursday 14 September at McCullough Robertson Lawyers, Level 57, MLC Centre, 19 Martin Place, Sydney at 3:00pm for the purpose of considering and, if thought fit, agreeing (with or without modification) to the proposed Scheme between the plaintiff and its members.
3. There be convened by the plaintiff a meeting of Stork International BV as the sole member of the plaintiff holding C class shares, to be held on Thursday 14 September at McCullough Robertson Lawyers, Level 57, MLC Centre, 19 Martin Place, Sydney at 3:00pm for the purpose of considering and, if thought fit, agreeing (with or without modification) to the proposed Scheme between the plaintiff and its members.
4. There be convened by the plaintiff a meeting of Stork International BV as the sole member of the plaintiff holding D class shares, to be held on Thursday 14 September at McCullough Robertson Lawyers, Level 57, MLC Centre, 19 Martin Place, Sydney at 3:00pm for the purpose of considering and, if thought fit, agreeing (with or without modification) to the proposed Scheme between the plaintiff and its members.
5. In the case of each meeting, other than the meeting referred to in Order 2 above, one member present by proxy, corporate representative appointed under s 250D of the Corporations Act 2001, or attorney under power, shall constitute a quorum.
6. Service of each notice of meeting and accompanying Explanatory Statement may be effected by hand delivery to a person who is a proxy, corporate representative appointed under s 250D of the Corporations Act 2001, or attorney under power, of Stork International BV and Stork NV at any time before a relevant meeting commences.
7. Karl Heinz Kroger, or in his absence, Mark Andrew Hinschen, act as Chairperson of each of the said meetings, unless any meeting shall otherwise resolve.
8. The Chairperson of each scheme meeting has the power to adjourn such meeting in his absolute discretion.
9. A proxy, appointment of a corporate representative under s 250D of the Corporations Act 2001, or power of attorney to act on behalf of a member of the plaintiff may be delivered to the Chairperson of a meeting at any time up until the vote is cast on a resolution at that meeting.
10. The plaintiff publish a notice of hearing of any application to approve the Scheme on Friday, 15 September 2006 and the plaintiff be otherwise exempted from compliance with the requirement to publish such notices at least five days before the date fixed for hearing of the application pursuant to Rule 3.4(3)(b) of the Federal Court (Corporation) Rules 2000.
11. The Explanatory Statement for the Scheme, a copy of which forms part of Exhibit A, be approved for distribution to the members of the plaintiff.
12. Regulations 5.6.12 to 5.6.36A of the Corporations Regulations 2001 shall not apply to any scheme meeting.
13. The proceedings be stood over to 2.15 pm on Wednesday 20 September 2006 before Lindgren J for the hearing of any application to approve the Scheme.
14. Liberty to restore on two days' notice.
15. These Orders be entered forthwith.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

NEW SOUTH WALES DISTRICT REGISTRY NSD 1689 OF 2006

IN THE MATTER OF STORK ICM AUSTRALIA PTY LTD (ACN 004 448 042) between: STORK ICM AUSTRALIA PTY LTD

AND: STORK FOOD SYSTEMS AUSTRALASIA PTY LTD

JUDGE: LINDGREN J DATE OF ORDER: 14 DECEMBER 2006

1. Orders 2 to 5 below be, and the same are made, subject and without prejudice to Order 6 below.
2. Pursuant to ss 411(4)(b) and 411(6) of the Corporations Act 2001 ('the Act'), the scheme of arrangement between the plaintiff and its members, in the form annexed hereto and marked 'A', having been duly agreed to by meetings of members in accordance with s 411(4)(a) of the Act, be approved, subject to Order 6 below and subject to the following alteration, namely the amendment of definition of 'Future Proceedings' to read: Future Proceedings means legal proceedings which have not yet commenced, but for which a cause of action has accrued or the injury or other event that may lead to a cause of action accruing (including, without limitation, exposure to asbestos dust) has occurred, or will occur in the future. so that the scheme of arrangement so approved and altered is in the form annexed hereto and marked 'B' (hereinafter called 'the Scheme'). [Annexures A and B are not included in this copy of the order.]
3. Pursuant to s 411(12) of the Act, the plaintiff be exempted from compliance with subs 411(11) of the Act.
4. Pursuant to s 413(1) of the Act (using definitions in the Scheme), as from the Effective Time, each of the following transactions will occur in the order set out below: (a) first, except for the property referred to in Order 6 below, the property of the plaintiff as defined in the Scheme, will be transferred to and become the property of the defendant; (b) second, except for the liabilities referred to in Order 6 below, all liabilities of the plaintiff, as defined in the Scheme, will be transferred to and become the liabilities of the defendant; and (c) third, the plaintiff will be deregistered without winding up pursuant to section 413(1)(d) of the Act.
5. Pursuant to s 413(1)(c) of the Act, as from the Effective Time (as defined in the Scheme), all legal proceedings pending by or against the plaintiff be continued by or against the defendant.
6. (a) This order relates to: · the property of the plaintiff consisting of its rights of indemnity against Zurich Australia Ltd ('Zurich') and any other insurer that has not consented to either an assignment or a transfer under the Scheme of the plaintiff's interest under any insurance policy which responds to any liability of the plaintiff to persons who have suffered or hereafter suffer injury as a result of exposure at any time to asbestos fibre including, without limitation, any employer's indemnity policy in respect of worker's compensation liability ('Excepted Policy'); and · any liability of the plaintiff to persons who have suffered or hereafter suffer injury as a result of exposure at any time to asbestos fibre, to which an Excepted Policy responds ('Excepted Liability'). (b) An Excepted Policy will not be transferred to or vested in the defendant, and an Excepted Liability will not be transferred to and become a liability of the defendant, unless and until the Court makes a further order pursuant to Order 8 below.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

NEW SOUTH WALES DISTRICT REGISTRY NSD 1689 OF 2006

IN THE MATTER OF STORK ICM AUSTRALIA PTY LTD (ACN 004 448 042) between: STORK ICM AUSTRALIA PTY LTD

INTRODUCTION 1 By its originating process, the plaintiff, Stork ICM Australia Pty Ltd ('Stork ICM') sought: · an order pursuant to s 411(1) of the Corporations Act 2001 (Cth) ('the Act') that Stork ICM convene meetings of its four classes of shareholders ('the Scheme Meetings') to consider, and if thought fit, to agree, with or without modification, to approve a scheme of arrangement proposed between Stork ICM and its shareholders ('the Scheme'); · an order pursuant to s 411(4)(b) of the Act that the Scheme be approved; · such orders pursuant to s 413 of the Act as the circumstances may require; · an order pursuant to s 411(12) of the Act that Stork ICM be exempted from compliance with s 411(11) of the Act. 2 On 14 September 2006, I made the order for the convening of the four Scheme Meetings to be held, for reasons that will appear, on the same day, 14 September 2006. The meetings were held. At each meeting the shareholder or the shareholders of the relevant class (see [14] below), acting through their attorney-appointed representatives, by unanimous vote, agreed to approve the Scheme. 3 In relation to the other orders sought, the proceeding took an unusual course, as referred to below. In the event, I made orders on 14 December 2006 approving the Scheme subject to an alteration which is explained below and appears in the attached orders of that date. 4 The present reasons are my reasons both for the order that the Scheme Meetings be held and for the final orders made on 14 December 2006. 5 The case presents some unusual features - unusual by reference to many applications that come before the Court concerning the acquisition, under Pt 5.1 of the Act, of all the shares in publicly listed companies. The unusual features are that: · Stork ICM and the proposed transferee company, Stork Food Systems Australasia Pty Ltd ('Stork FSA'), and their shareholders are all part of the Stork group of companies based in the Netherlands, Stork ICM and Stork FSA being both ultimately wholly owned by Stork NV; · In 2003, Stork ICM sold its business assets, including shares in its subsidiaries, to an unrelated company, Downer RML Pty Ltd, and since that time Stork ICM has not carried on business; · By the Scheme, the property and liabilities of Stork ICM will be transferred to Stork FSA and Stork ICM will be deregistered without being wound up; · Stork ICM seeks orders under s 413 of the Act directed to ensuring that Stork FSA will have the benefit of insurances held by Stork ICM, in respect of all and any personal injury claims yet to be made by Stork ICM's former employees and contractors arising out of their exposure to asbestos fibres while they were working for, or providing services to, Stork ICM ('potential claimants'). 6 The reason why the Scheme is being propounded is that under Dutch tax law, Stork NV will have the benefit of tax losses attributable to its investment in Stork ICM, upon the deregistration of that company. 7 To adopt insurance terminology, Stork ICM is, and has been for some time, in 'run off', dealing with claims arising out of its earlier business activities. Of particular importance are the incurred but not reported claims of the potential claimants. 8 A key objective of the present application, as originally conceived, was to ensure that, by reason of the making of orders under s 413 of the Act: · Stork ICM's liability to the potential claimants would cease to be a liability of Stork ICM and would become a liability of Stork FSA; and · Stork ICM's right to insurance indemnity in respect to that liability would cease to be a right of Stork ICM and would become a right of Stork FSA. 9 As will appear later, however, there seems to have been an initial misconception that it was necessary that Stork ICM be denuded of all its assets and liabilities before it could be deregistered, and before Stork NV could obtain the benefit of the sought tax deduction. Once it became clear that this was not the case, the present proceeding took a somewhat different course, as will be explained below. 10 Because Stork ICM and its shareholders are within the Stork group, it was a foregone conclusion that the shareholders would agree to the Scheme. The case is therefore not the familiar one in which a key objective of a Pt 5.1 arrangement is to ensure that all shareholders are bound by the arrangement as if they were parties to it. Stork ICM's only two shareholders, Stork International BV and Stork NV, waived the requirement that due notice be given to them of the Scheme Meetings. It was for this reason that the Scheme Meetings were able to be held on the same day as the making of the order for the convening of them. 11 Pursuant to leave, the Australian Securities and Investments Commission ('ASIC') appeared as amicus curiae on the hearing. 12 ASIC properly took an even-handed approach, and drew the Court's attention to a possible concern as to whether the desired result, that the insurers would become liable to indemnify Stork FSA in respect of transferred liabilities of Stork ICM to claimants, could be achieved. I was concerned, however, to ensure that any arguments against the Scheme, or for a variation of it, exclusively in the interests of the potential claimants, should be put to the Court. To this end, I directed that the Registrar approach the New South Wales Bar Association to seek counsel to put any such arguments, and that Stork ICM pay such counsel's reasonable fees. Ms L McCallum SC undertook that role. For her assistance, and that of Mr M B Oakes SC for the parties and Mr P Whiford SC and Ms V McWilliam of counsel for ASIC, I am grateful.

GENERAL BACKGROUND FACTS 13 Stork ICM was registered in Victoria, as a proprietary company limited by shares, on 31 August 1959. It was then called 'World Services and Construction Proprietary Limited'. Its name was changed in 1996 and again in 1997, on the latter occasion to its present name. 14 Stork ICM has four classes of shares on issue: 1,000 A class shares all held by Stork International BV

50,000 B class shares one held by Stork NV and the remaining 49,999 held by Stork International BV

6,299,000 C class shares all held by Stork International BV

16,000 D class shares all held by Stork International BV

Stork International BV is a wholly owned subsidiary of Stork NV. 15 The directors of Stork ICM are Mark Andrew Hinschen of Singapore, Karl Heinz Kroeger of Cherrybrook, New South Wales, and Willem Henk Peters of the Netherlands. 16 Before the sale of the business to Downer RML Pty Ltd in 2003, Stork ICM's principal activity was that of mechanical and electrical engineering. Stork ICM was involved in the construction of petro-chemical plants. As a result, it has been named a defendant in legal proceedings in respect of asbestos-related personal injury claims, generally as a co-defendant with other companies for which the claimant may have worked during the relevant period. Most of the claims originated in Victoria. 17 Apart from the potential claimants, Stork ICM has only one other creditor or potential creditor, namely, Cook's Construction Pty Ltd ('Cook'). Stork ICM is currently involved in litigation with Cook in the Supreme Court of Queensland. Cook is suing Stork ICM for $1,398,241.10 plus costs and interest, in relation to alleged breaches of contract in connection with the construction of the Ammonia Nitrate Gas Plant at Moura, Queensland. Stork ICM is defending the claim and counter claiming against Cook for $12,246,466. The proceeding is in its interlocutory stages. Stork ICM has provided security for costs (there is in evidence a bank guarantee for $2,200,000) and has recently undertaken to increase the amount of the security by $800,000. 18 Apart from the potential liability to Cook and the potential claimants, Stork ICM has no creditors. However, it has ongoing expenses in connection with its continued existence as a corporate entity. In an affidavit sworn 19 September 2006, Mr Hinschen identified these as follows: (a) expenses connected with the storage of Stork ICM's business records (for which it had not been invoiced at the date of Mr Hinschen's affidavit); (b) rechargeable courier expenses of $105.66 which Stork ICM had paid by a cheque, that had not been presented for payment at the date of his affidavit; (c) legal expenses associated with the asbestos-related claims referred to below, for some of which Stork ICM had not been invoiced at the date of the affidavit; (d) legal expenses associated with the Cook litigation (Stork ICM received an invoice for $81,773.14 which was paid by a cheque that remained unpresented at the date of Mr Hinschen's affidavit); (e) the legal and other third party expenses associated with the present proceeding (at the date of Mr Hinschen's affidavit, Stork ICM had received invoices totalling $64,250, which it had paid by cheques that remained unpresented at the date of Mr Hinschen's affidavit); and (f) auditing expenses, for which Stork ICM had not been invoiced at the date of Mr Hinschen's affidavit. 19 The proposed transferee, Stork FSA, was registered in Victoria as a company limited by shares on 4 September 1989. Its principal activities are the development, production and maintenance of poultry processing machinery. 20 At the time of ordering the convening of the Scheme Meetings, I made it clear that I was reserving for consideration on the occasion when the issue of the Court's approval of the Scheme arose, the question whether orders should be made under s 413 of the Act.

FINANCIAL POSITIONS OF STORK ICM, STORK FSA, AND STORK NV

Stork ICM 21 Stork ICM's financial report for the year ended 31 December 2005 is in evidence. It must be remembered that during that year, Stork ICM was not trading. The income statement for the year showed a profit of $316,334, which decreased the deficiency in shareholders' equity from $9,652,469 as at 31 December 2004 to $9,336,135 as at 31 December 2005. 22 Of greater importance for present purposes are the figures in Stork ICM's balance sheet as at 31 December 2005. The balance sheet shows a 'provision' of $5,800,000 and a 'receivable' of the same amount. The provision was for 'non-pending asbestos related disease claims' and the receivable represented an indemnity from Stork NV. Notes 13(b) and (c) to the balance sheet explain: '(b) Asbestos related disease claims In prior years the Company was an engineering Company which specialized in shut down work particularly in the petrochemical industry. The Company's historic involvement with asbestos took place during occupational activities of its employees in the 1960's and 70's. As a result of these activities, the Company has been named as a defendant in litigation in Australia. At the date of this report the Company has been involved in a total of 16 claims of which 4 are pending. A provision for non-pending asbestos related disease claims of $5.8 million … has been recorded in 31 December 2005, being the Directors' central estimate based on independent actuarial expert advice, in relation to possible future incidence and value of asbestos related disease claims. The Directors' central estimate is the discounted central value of a range of potential outcomes obtained from sensitivity testing. The undiscounted value of the Directors' central estimate, based on independent actuarial advice, is $10.2 million. A prudential margin is not included in the measurement of the provision, as the small volume of claims data is an insufficient basis in quantifying the additional amount of provision that would achieve certain specified probabilities of sufficiency. Estimates of asbestos related disease claims are subject to considerable uncertainty and actual liabilities for such claims could vary, perhaps materially, from the Directors' central estimate. The assessment made of the central estimate value of these claims is based on various techniques and assumptions to project a range of potential outcomes. The Company will use the Directors' central estimate, based on independent actuarial expert advice and calculated in accordance with Australian Actuarial Standards, as a benchmark for the ongoing monitoring of the liability. (c) Ultimate holding company indemnity in respect of the asbestos related disease claims Included in the Company's 31 December 2005 balance sheet is a corresponding non-current receivable of $5.8 million … being an indemnity provided by the Company's ultimate holding company, Stork NV, in respect of the Company's exposure to non-pending asbestos related disease claims. The indemnity is conditional on certain events taking place. The Directors emphasise that whilst they expect the conditions attached to the indemnity will be met, enabling the Company to meet its obligations in respect of the asbestos related disease claims, it is not virtually certain the conditions will be met and therefore uncertainty exists regarding the eventual receipt of proceeds from the indemnity resulting in an uncertainty as to whether the non-current receivable will be recovered at the amount recorded in the 31 December 2005 balance sheet.'

Deeds of Indemnity 23 The particular indemnity referred to in the above extract from the 2005 financial statements of Stork ICM is not in evidence. However, there are in evidence a Deed of Indemnity dated 29 June 2006, between Stork NV and Stork ICM and a Deed of Amendment of it dated 11 December 2006 (together, 'the Stork ICM Deed of Indemnity'), which was entered into in contemplation of the Scheme. This indemnity has a higher ceiling - $12,300,000 rather than the $5,800,000 referred to in the 2005 financial statements. 24 The limit of $12,300,000 fixed in the Stork ICM Deed of Indemnity is based on a report of KPMG Actuaries Pty Ltd. The KPMG report is dated 28 July 2006, and is described as being 'effective as at 30 April 2006'. The report is verified by Neil Francis Donlevy, who is a Fellow of the Institute of Actuaries (London) and a Fellow of the Institute of Actuaries of Australia. The report contains an estimate of the likely amount of Stork ICM's liability to the potential claimants. The estimate is heavily qualified, however, by warnings as to the uncertainty affecting any attempt to quantify such a liability. 25 The following table from Mr Donlevy's report gives a summary of his central estimate liability assessment, excluding pending claims: Undiscounted Discounted ($m) ($m) Gross Liability 38.3 18.8 Workers Compensation Insurance Recoveries -12.8 -6.5 Recoveries from Workcover schemes -13.2 -5.6 Subtotal 12.3 6.7 Abnormal loss allowance 3.0 1.5 XL Re protection -5.1 -2.4 Retained Liability 10.2 5.8

26 David John Finnis, a principal actuary employed by Professional Financial Solutions Pty Ltd, has provided a report entitled 'External Peer Review of KPMG Actuaries' Work in Assessing Potential Asbestos Claim Exposures of Stork ICM', in which Mr Finnis concludes that the methodology and choice of assumptions used by Mr Donlevy are appropriate, as is his use of the 'central estimate' as the accounting entry for the liability. 27 Of course, Mr Finnis's opinion does not overcome the warnings sounded in Mr Donlevy's report. 28 By the Stork ICM Deed of Indemnity, Stork NV indemnifies Stork ICM for any amounts paid or payable by Stork ICM on account of any asbestos-related claim to the extent of an aggregate limit of $12,300,000. As can be seen from the above table, this is the undiscounted subtotal referred to in the table. The notion of an asbestos-related claim is defined to mean a claim concerning asbestos exposure resulting from a claimant's employment by Stork ICM, the provision of services to Stork ICM (each, an 'Exposed Person'), any indirect exposure to asbestos resulting from the Exposed Person's exposure. Stork NV acknowledges and agrees that the benefit of the Stork ICM Deed of Indemnity transfers to Stork FSA on the implementation of the Scheme. Stork NV undertakes to honour its indemnity within 30 days of receipt by it from Stork ICM or Stork FSA, as the case may be, of a statement of costs and charges for an asbestos-related claim, supported by documentation. The indemnity is to have effect from the date on which the Court approves the Scheme, and to cease to have effect on 31 December 2037. 29 By a Deed Poll dated 7 September 2006, Stork FSA has covenanted in favour of all 'asbestos related claimants' not to do various things which would have the effect of terminating, amending, varying or assigning the (transferred) benefit of the Stork ICM Deed of Indemnity. The expression 'asbestos related claimant' is defined to mean any person who has or may have an asbestos-related claim. The expression 'asbestos related claim' is defined to mean a claim concerning asbestos exposure resulting from the claimant's employment by Stork ICM, the provision of services to Stork ICM (each, an 'Exposed Person'), or any indirect exposure of a person to an Exposed Person. Stork FSA does not, however, promise the potential claimants that it will enforce the Stork ICM Deed of Indemnity if and when requested to do so by any of them. 30 Stork NV has entered into a further Deed of Indemnity dated 19 September 2006 with Stork FSA ('the Stork FSA Deed of Indemnity'). It is generally similar to the Stork ICM Deed of Indemnity but is subject to the slightly higher aggregate ceiling of $12,800,000. Its definition of 'asbestos-related claim' is a little different. The expression is defined to mean a claim concerning asbestos exposure resulting from the claimant's employment by Stork ICM or the provision of services to Stork ICM, that would, but for the Scheme, have been recoverable (at least in part) under statutory workers' compensation scheme insurance. 31 Stork NV has released $200,000 of a debt of $1,600,000, and the whole of a debt of $8,800,000, owed to it by Stork ICM, by a deed of release dated 20 July 2006. Accordingly, these amounts are not liabilities that will be transferred to Stork FSA under the Scheme. 32 There are in evidence letters of comfort from Stork NV to the directors of both Stork ICM and Stork FSA, undertaking to provide necessary financial support to enable the relevant company to pay all its debts as and when they become due. However, the promise is revocable by Stork NV, and is, in any event, enforceable at the will of the directors. I place no weight on the letters of comfort as a protection for the potential claimants. 33 While the Stork ICM and Stork FSA Deeds of Indemnity may be seen to afford to the potential claimants an indirect benefit that they do not have at present, they are problematical from the viewpoint of the potential claimants. First, and obviously, the limit of $12,300,000 may prove to be too low. Second, they are enforceable by Stork ICM and Stork FSA respectively - both wholly owned subsidiaries of Stork NV, the indemnifier. Third, I do not know whether Stork NV has realisable assets in Australia, and, even if it does, there is no assurance that it would have assets here at any time when any question of enforcement arose. In effect, Stork FSA may have to enforce the indemnity against its parent in the Netherlands. 34 It may be that Stork NV would honour its obligations under the Deeds of Indemnity, but I do not rely on them, when considering the position of the potential claimants.

Stork FSA 35 Stork FSA's audited financial statements for the year ended 31 December 2005, and its management accounts for the six months to 30 June 2006, are both in evidence. The balance sheet shows, as at 31 December 2005, total assets of $1,956,532, and total liabilities of $1,222,783, giving net assets of $733,749 (being also the 'total shareholders' equity'). The income statement for the year ended 31 December 2005 shows a net profit from ordinary activities, after income tax expenses, of $84,803. 36 Stork FSA appears to be in a more sound financial position than does Stork ICM, but I do not place great weight on this fact. Circumstances can change, particularly in the case of a trading company over such a lengthy period as that during which asbestos related injury can reveal itself.

Stork NV 37 The annual report for 2005 of Stork NV describes Stork NV as having 'a history of 179 years, making it one of the oldest companies in the Netherlands'. Its consolidated balance sheet shows it as having assets of €1,343,661,000, current and non-current liabilities of €797,111,000, and shareholders' equity of €546,550,000.

CLAIMS MADE TO DATE 38 At September 2006, 11 claims have been made against Stork ICM arising out of asbestos-related injury. All have been resolved. In some cases, Stork ICM has cross-claims outstanding against other entities that it alleges are liable to contribute. The 11 claims may be summarised as follows:

Stork ICM ats Crnjak 39 Estate and Dependency proceedings were resolved on 15 May 2006 for $300,000 including costs. Stork ICM has cross claims pending against Orica, Shell and Caltex entities. Corporate Management Services (Australia) Pty Ltd ('CMS'), in respect of workers' compensation policies, has offered partial indemnity of $100,000, which Stork ICM has decided to accept (as to CMS see below).

Stork ICM ats Dyst 40 The Dyst proceeding was resolved on 1 June 2006 for $240,000 including costs, Stork ICM's contribution being $120,000 including costs. The remaining $120,000 was paid by Shell and the suppliers of materials, Amaca and Wallaby Grip. Allianz Australia Limited ('Allianz') denied workers' compensation indemnity on the basis that Stork ICM did not employ the plaintiff, her alleged exposure having been due to the laundering of her husband's dusty work clothes.

Stork ICM ats Stines 41 This proceeding was resolved on 27 January 2006 for $200,000 including costs. Stork ICM has not pursued any cross claim. CMS denied indemnity on the basis that National Employers' Mutual General Insurance Association Limited ('NEM') was not the last workers' compensation insurer on risk (see below). Stork ICM has not been able to identify the last insurer on risk.

Stork ICM ats Cash 42 This proceeding was resolved in April 2005 for $180,000 plus costs, the costs of $185,000 having been agreed upon in December 2005 (making a total of $365,000, including costs). Contribution to the settlement, including costs, was divided equally between Stork ICM, Shell, and the suppliers, Amaca and Wallaby Grip. There will be no cross claim by Stork ICM, which is, however, pursuing its claim for indemnity against Allianz.

Stork ICM ats Orr 43 This proceeding was resolved in February 2005 for $100,000, of which Stork ICM contributed $40,000. Cross claims have not been pursued. CMS has offered indemnity of $50,000 including costs, 'which equates to the then statutory common law indemnity limit'. Stork ICM has decided to accept CMS's offer.

Stork ICM ats Boyle 44 This proceeding was resolved with Mr Boyle's estate in February 2005 for $140,000 including costs. Stork ICM's contribution was $71,998. There is, and will be, no cross claim by Stork ICM. Stork ICM continues to press Allianz for indemnity.

Stork ICM at Tovenati 45 This proceeding was resolved on 28 July 2006 for $180,000 including costs. Stork ICM's uninsured contribution was $16,800 (28 percent of its overall contribution of $60,000). Stork ICM is also liable for 28 percent of the costs of defending the proceeding, and the amount of those costs is estimated to be $5,000. There are no cross claims to be pursued by Stork ICM. Absent further evidence that Stork ICM held workers' compensation insurance with the former CGA Fire and Accident Insurance Co Ltd ('CGA'), Zurich Australia Ltd ('Zurich') (on account of workers' compensation policies held with CGA) has denied Stork ICM indemnity for the period from approximately 1959 until 29 June 1963.

11. Stork ICM ats Stembridge 46 These four proceedings were resolved for: (8) $85,000, Stork ICM's contribution being $42,000; (9) $500,000, Stork ICM's contribution being $70,000; (10) $90,000, Stork ICM's contribution being $10,000; and (11) $280,000, Stork ICM's contribution being $21,672. In each case, Allianz fully indemnified Stork ICM.

Insurances 47 The general liability insurer of Stork ICM is the Dutch insurer, XL Insurance Company Ltd ('XL'). On 13 March 2006, XL provided to Stork NV a letter confirming that, if the Scheme was implemented, the benefit of the general liability insurance policy, according to its terms and conditions, would be available to Stork FSA, for so long as it remained an affiliate of Stork NV. 48 There are in evidence the terms of the 'employers' indemnity policy' under the Workers' Compensation Act 1958 (Vic) and the Workers' Compensation Act 1926 (NSW) and Regulations under those respective Acts. In each case, there is the following provision: 'No assignment of interest under this Policy shall bind the Insurer unless the written consent of the Insurer is endorsed hereon.' The relationship between this 'no assignment without consent' provision and s 413 was debated at some length on the hearing (see below). 49 Two workers' compensation insurers in respect of New South Wales employees call for special comment: Bishopsgate Insurance Co Ltd ('Bishopsgate') (1 December 1971 to 30 November 1972), and NEM (1 December 1972 to 28 February 1980). Both are in liquidation. 50 As a result of these two collapses, the New South Wales Parliament passed legislation, the effect of which may be generally stated as being that neither an employer nor an employee should be left without remedy as the result of the collapse of a workers' compensation insurer. The remedy was to create a statutory fund and to provide a discretion to make payments from the fund where the insurer was in liquidation. 51 The Bishopsgate collapse was addressed by Bishopsgate Insurance Australia Limited Act 1983 (NSW). However, the remedy provided by that Act was later incorporated into Division 7 of the Workers Compensation Act 1987 (NSW) ('the 1987 Act'). By s 281 and Sch 5 of the 1987 Act, the Workers Compensation Act 1926 was repealed, but certain transitional and savings provisions were made by s 282 and Sch 6. Claims are now made under the 1987 Act in respect of injuries received prior to its commencement. 52 Division 7 of Pt 7 of the 1987 Act provides for the establishment of an Insurers' Guarantee Fund ('IGF'). In order for Div 7 to be enlivened, the Minister may declare under s 226 an insurer to be an 'insolvent insurer' for the purposes of the Division. On 2 May 1990, NEM was so declared, provisional liquidators having been appointed in respect of NEM on 1 May 1990: see NSW Government Gazette No 57, 4 May 1990, p 3617. The IGF is under the control of the WorkCover Authority of New South Wales ('the Authority'), which is constituted under the Workplace Injury Management and Workers Compensation Act 1998 (NSW). Section 229 of the 1987 Act requires a liquidator of an insolvent insurer to send claims on to the Authority. Section 231 vests in the Authority, as agent and attorney, certain powers to operate on behalf of the employer and the worker in relation to a policy of insurance, and s 232 empowers the Authority to pay, from the IGF, an employer or liquidator who has paid a claim. Payment is, however, discretionary: s 232(4). Section 236 provides that where an insolvent insurer is dissolved, an insured employer has direct access to the IGF. The IGF is not an insurer, but is a statutory fund that operates on its own principles established by the legislation. 53 The evidence shows that numerous searches have been conducted on behalf of Stork ICM into its current and past insurance records, with a view to identifying its insurers from time to time in relation to asbestos-related liabilities. These searches have identified only GIO General Limited ('GIO'), Allianz, Zurich, and, in respect of Bishopsgate and NEM, CMS as appointee of the Authority. Stork ICM's solicitors wrote to those four companies requesting copies of any policies held. All four replied to the effect they could not locate any policy. Mr Hinschen states that, to the best of his knowledge, Stork ICM did not carry on business other than in Victoria, New South Wales and South Australia. 54 On 6 September 2006, Stork ICM wrote to GIO, Allianz, Zurich, and CMS. The letter advised them that Stork ICM's records indicated that the addressee company had, in the past, granted indemnity to Stork ICM in respect of workers' compensation claims made against it by former employees. The letter advised of the proposed Scheme, and expressed Stork ICM's opinion that its right of indemnity was capable of being transferred to Stork FSA under the Scheme, so that, upon implementation of the Scheme Stork FSA would have the right of indemnity that Stork ICM currently enjoyed. The letter concluded by inviting the addressee company to indicate if it would like to be informed of the date of the second court hearing. None asked to be advised. 55 Subsequently, Stork ICM's solicitors, McCullough Robertson, sent to the same four companies a form of 'Consent and Acknowledgment' and invited them to sign and return it. By this document, an insurer consents to a transfer of all insurance policies which Stork ICM (described as being formerly 'World Services and Construction Pty Ltd') held or holds with the insurer, and all insurance policies which it held with other parties for which the insurer is now responsible, to Stork FSA in accordance with the Scheme. 56 The form of Consent and Acknowledgment contains a statement that, upon the Scheme being effective, Stork FSA will be entitled to all rights and benefits under the policies as if it was, and always had been, named as the insured in place of Stork ICM. The document confirms, however, that the insurer's liability to Stork FSA will be no greater than its liability to Stork ICM would have been if the transfer under the Scheme had not taken place, and that any defences that would have been available against Stork ICM will be available against Stork FSA. 57 Finally, the document contains an acknowledgment by the insurer that the validity of the policies is not affected by the transfer from Stork ICM to Stork FSA, or otherwise affected by the Scheme. 58 GIO and Allianz signed and returned the form of Consent and Acknowledgment. 59 Zurich responded orally, through Ms Margaret Farag, to the effect that Zurich had no record of ever having been an insurer of Stork ICM (or World Services and Construction Proprietary Limited) and therefore did not intend to respond in writing to the letter. 60 CMS replied on 31 October 2006, confirming that the Authority had appointed it to administer claims arising from the policies issued by NEM. 61 Stork ICM's solicitors asked CMS to confirm that each decision whether to indemnify is primarily based on an assessment of the facts and circumstances of the person who is seeking damages from an insured, and whether that person had been employed in the relevant jurisdiction during the relevant period, rather than on an assessment of whether the particular insured (for example, Stork ICM) was entitled to indemnity from CMS. CMS's reply was: 'In determining whether to accept a claim under the IGF, [these] criteria ... are taken into account'. CMS also pointed out, however, that it reserved the right to decline indemnity if, for example, a breach of a policy condition occurred, such as non-cooperation in the administration of a claim. 62 On 8 November 2006, CMS wrote a further letter to McCullough Robertson stating expressly that it would not, as a result of the transfer, deny Stork FSA any right to insurance, or payment pursuant to workers' compensation insurance, as would have been due to Stork ICM had the transfer not occurred.

Cook 63 Pursuant to directions, Stork ICM notified Cook of the proceeding and provided it with background documents. On 23 November 2006, Cook's solicitors, Macpherson & Kelley Lawyers, advised that their client did not seek to become a party to the proceeding and was content to abide by the orders of the Court.

Legislation 64 Section 411(1) of the Act provides, relevantly, that where an arrangement is proposed between a Pt 5.1 body and its members or any class of them, the Court may order meetings of the members or class of members. Section 411(4) provides, relevantly, that an arrangement is binding on the members or class of members and on the Pt 5.1 body, if, at a meeting convened in accordance with the Court's order under s 411(1), the arrangement is agreed to by the members or class of members by a resolution in favour of it passed by a stipulated majority, and the arrangement is approved by an order of the Court. Section 411(6) provides that the Court may grant its approval to an arrangement subject to such alterations or conditions as it thinks fit. 65 Sections 413(1) and (2) of the Act provide, relevantly, as follows: '(1) 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; ... (2) Where an order made under this section provides for the transfer of property or liabilities, then, by virtue of the order, that property is transferred to and vests in, and those liabilities are transferred to and become the liabilities of, the transferee company, free, in the case of any particular property if the order so directs, from any charge that is, by virtue of the compromise or arrangement, to cease to have effect.' 66 The definitions in s 413(4) assume some importance. That subsection is as follows: 'In this section: liabilities includes duties of any description, including duties that are of a personal character or are incapable under the general law of being assigned or performed vicariously. property includes rights and powers of any description, including rights and powers that are of a personal character and are incapable under the general law of being assigned or performed vicariously.' 67 Several questions now arise: (1) For the purposes of s 411, is the Scheme properly to be regarded only as an arrangement between Stork ICM and its members, or does it also involve an arrangement between Stork ICM and its creditors? (2) For the purposes of s 413, is the proposed arrangement one for the purposes of, or in connection with, a scheme for the 'reconstruction' of Stork ICM? (3) Does s 413 authorise the making of an order that will have the effect of making Stork FSA, in place of Stork ICM, liable to the potential claimants? (4) If, 'yes' to (3), does s 413 authorise the making of an order that will have the effect of vesting in Stork FSA, in place of Stork ICM, the contractual right to enforce a right of insurance indemnity in favour of Stork ICM in respect of such claims? (5) Should the Court, in the exercise of its discretion, approve the Scheme, and, in particular, should the Court be satisfied that the potential claimants are adequately protected?

(1) For the purposes of s 411, is the Scheme properly to be regarded only as an arrangement between Stork ICM and its members, or does it also involve an arrangement between Stork ICM and its creditors? 68 Stork International BV, the Stork NV subsidiary that intervenes between Stork NV and Stork ICM, can be put to one side: in substance, the Scheme involves a transfer of the whole of the property and liabilities of one wholly owned subsidiary of Stork NV to another wholly owned subsidiary of Stork NV, without any consideration passing from the latter to the former, and without any change in the shareholdings in the two companies. (Although I will be approving the Scheme subject to a minor alteration, I am addressing here the Scheme as proposed, and, in any event, it makes no difference that as a result of the alteration only 'virtually the whole of' Stork ICM's property and liabilities will be transferred at this stage.) 69 It is settled that in such circumstances, the Scheme is a members' scheme only: In re Sandwell Park Colliery Co Ltd [1914] 1 Ch 589; In re Star Tea Co Ltd [1930] WN 4; Re Clydesdale Bank Ltd [1950] SC 30; Re AGL Sydney Ltd (1994) 13 ACSR 597; Royal Victorian Institute for the Blind Ltd v RBS.RVIB.VAF Ltd (2004) 206 ALR 581 ('RVIB'); SGIC Insurance Ltd v Insurance Australia Ltd (2004) 51 ACSR 470. The position of creditors is appropriately addressed on the second court hearing as a consideration relevant to the discretion whether to approve the Scheme. 70 It is not necessary that Stork FSA be a party to the Scheme or propose a scheme, but it has been appropriately joined as a defendant: RVIB, esp at [17].

(2) For the purposes of s 413, is the proposed arrangement one for the purposes of, or in connection with, a scheme for the 'reconstruction' of Stork ICM? 71 The arrangement is proposed for the purposes of, and in connection with, a scheme by which, generally speaking, one wholly owned subsidiary is to be denuded of its property and liabilities, which are to be vested in another wholly owned subsidiary. 72 The expressions 'reconstruction' and 'amalgamation' were considered in In re South African Supply and Cold Storage Co [1904] 2 Ch 268 ('South African Supply'). In that case, the words occurred in the memoranda of association of two companies. The questions before the Court related to the rights of preference shareholders and debenture stockholders on the winding up of the two companies, and the issue was whether, in each case, the winding up was 'for the purpose of reconstruction or amalgamation'. 73 Buckley J observed that neither word had any definite legal meaning; that each was a commercial and not a legal term; and that even as a commercial term neither bore an exact definite meaning. His Lordship said that it was necessary, in each case, to determine whether, in the minds of commercial people, the transaction was comprehended by the term 'reconstruction' or 'amalgamation' (at 281-2). I need not relate the facts. His Lordship stated (at 286-7): 'What does "reconstruction" mean? To my mind it means this. An undertaking of some definite kind is being carried on, and the conclusion is arrived at that it is not desirable to kill that undertaking, but that it is desirable to preserve it in some form, and to do so, not by selling it to an outsider who shall carry it on - that would be a mere sale - but in some altered form to continue the undertaking in such a manner as that the persons now carrying it on will substantially continue to carry it on. It involves, I think, that substantially the same business shall be carried on and substantially the same persons shall carry it on. But it does not involve that all the assets shall pass to the new company or resuscitated company, or that all the shareholders of the old company shall be shareholders in the new company or resuscitated company. Substantially the business and the persons interested must be the same. ... Now what is an amalgamation? An amalgamation involves, I think, a different idea. There you must have the rolling, somehow or other, of two concerns into one. You must weld two things together and arrive at an amalgam - a blending of two undertakings. It does not necessarily follow that the whole of the two undertakings should pass - substantially they must pass - nor need all the corporators be parties, although substantially all must be parties. The difference between reconstruction and amalgamation is that in the latter is involved the blending of two concerns one with the other, but not merely the continuance of one concern. An amalgamation may take place, it seems to me, either by the transfer of undertakings A and B to a new corporation, C, or by the continuance of A and B by B upon terms that the shareholders of A shall become shareholders in B. It is not necessary that you should have a new company. You may have a continuance of one of the two companies upon the terms that the undertakings of both corporations shall substantially be merged in one corporation only.' 74 Buckley J's explanation of the meaning of 'reconstruction' was adopted by Pennycuick J in Brooklands Selangor Holdings Ltd v Inland Revenue Commissioners [1970] 1 WLR 429 at 445, and by Plowman J in Baytrust Holdings Ltd v Inland Revenue Commissioners [1971] 1 WLR 1333 at 1352-3. Both of these cases concerned the construction of s 55 of the Finance Act 1927 (UK). 75 In Citizens and Graziers' Life Assurance Co Ltd v Commonwealth Life (Amalgamated) Assurances Ltd (1934) 51 CLR 422, the High Court had to consider whether particular circumstances constituted an 'amalgamation' of two companies. Dixon J discussed the concept of the amalgamation of two companies at 457-8. His Honour said: 'The union of shareholders, which amalgamation involves, is, of course, not concerned with the members of the combining corporations as persons. It is the reorganization of share capital that matters. The replacement of two separate systems of share capital by one appears to be required before a union of two companies limited by shares can justly be called an amalgamation of the companies. In the process of reorganization, classes or divisions of shares, or amount of share capital, in one or other or both of the old companies may find no representation in the one system of capital which emerges. But the substantial result must be to reduce for practical purposes two or more organizations of capital to one, and two or more incorporated companies to one. The amalgamation to which the clause in the memorandum refers is not a mere combination of businesses separately conducted, but an amalgamation of companies. There is no context to enlarge the meaning of the expression. To accomplish such an amalgamation, it seems necessary, either to consolidate the constituent elements of the old companies into a new one, or to merge in one of the old companies the constituent elements of the other. Possibly a transaction may be an amalgamation although the corporate existence of the consolidating companies, or of the merged company, may be continued for some special and definite purpose. But the continuance of two corporations under separate control, organized with their separate systems of share capital and capable of independent activities, appears to me inconsistent with an amalgamation of more than their existing enterprises.' 76 I agree with Mr Oakes that a restrictive interpretation should not be placed on either the term 'reconstruction' or the term 'amalgamation'. I also accept his submission that the approach should be simply to inquire whether the circumstances of a particular case fall within one or the other or both of the words, without first attempting to delineate their respective boundaries of meaning. 77 In my view, the arrangement as proposed is a reconstruction. The whole of the undertaking, property and liabilities of Stork ICM is to be transferred to and vest in Stork FSA. These circumstances fall within Buckley J's description of a 'reconstruction' in South African Supply. Although the run off activity of Stork ICM can hardly be called the 'carrying on' of an undertaking, that business-related activity will be taken over by Stork FSA, and will continue to be, indirectly, an activity of the parent company, Stork NV, as it is at present. It will, however, be an activity distinct from the trading activity of Stork FSA. Stork FSA will receive particulars of claims made by the potential claimants, and will deal with insurers and CMS in relation to them. That is to say, Stork FSA will continue to do what Stork ICM does now, but its activity in this respect will not form part of its trading activity. 78 To my mind, the word 'amalgamation' does not so easily lend itself to the proposed arrangement, because there will be no 'blending' of the two activities, even though they will both be carried on by Stork FSA.

(3) Does s 413 authorise the making of an order that will have the effect of making Stork FSA, in place of Stork ICM, liable to the potential claimants? 79 Section 413 of the Act has its genesis in s 54 of the Companies Act 1928 (UK) which did not come into force, although the provision later appeared as s 154 of the Companies Act 1929 (UK). The present English provision is s 427 of the Companies Act 1985 (UK). 80 The genesis of the English provision is paras 81-85 of the Report of the Company Law Amendment Committee (1925-26) (HMSO Cmnd 2657, 1926) produced by a Committee chaired by Mr Wilfrid Greene KC, but the comments there do not assist in relation to any issue before the Court. 81 The following table indicates the history of the provision in New South Wales and Commonwealth legislation: Legislation Section Number Companies Act 1936 (NSW) Section 134 Companies Act 1961 (NSW) Section 183 Companies (New South Wales) Code (NSW) Section 317 Corporations Law (Cth) Section 413 Corporations Act 2001 (Cth) Section 413

82 In Nokes v Doncaster Amalgamated Collieries Limited [1940] AC 1014 ('Nokes') it was held that the provision applied only to rights and liabilities that were capable of being assigned under the general law. ASIC raised for my consideration the question whether the 'no assignment without consent' provision meant that Stork ICM's right of insurance indemnity could not be transferred under s 413. I discuss this question later, but since Nokes applies to 'liabilities' as well as to 'property', it is convenient to discuss the case here. 83 In Nokes, approval of a scheme of amalgamation was granted under s 153 of the Companies Act 1929 (UK) and an order was made under s 154 for the transfer of all the property and liabilities of the companies that were being amalgamated to a new company. The issue was whether a contract of service between an employee and a 'transferor' company became, by the operation of the order, a contract of service between the employee and the 'transferee' company. By majority, the House of Lords held that it did not. Section 154(1) of that Act was, relevantly, similar to s 413(1) of the Act. However, the definitions of 'property' and 'liabilities' in subs (4) of the English s 154 were different from the definitions of those expressions now found in subs (4) of the Australian s 413. Subsection (4) of the English s 154 provided: 'In this section the expression "property" includes property, rights and powers of every description, and the expression "liabilities" includes duties.' Subsection (4) of the Australian s 413 was set out at [66] above. 84 The facts in Nokes were that after the making of the order, Mr Nokes absented himself from work in circumstances that would have made him liable under s 4 of the Employers and Workmen Act 1875 (UK)if he could be regarded as employed under a contract of service with the transferee company. In holding that he could not be, the majority of the House of Lords held that s 154(1) applied only to rights and liabilities that were capable of being assigned under the general law, and that the mutual contractual obligations of employer and employee were not. A contract of service can not be bought or sold or given away. Under the general law, a new contract of service would have had to be entered into with the new employer, and s 154 did not overcome that position. Lord Romer dissented. 85 In Re "L" Hotel Co Ltd & Langham Hotel Co Ltd [1946] 1 All ER 319, Uthwatt J said (at 320) that he saw the principle of Nokes as limiting the statutory provision to 'only such property as could be transferred by an act inter partes'. 86 While s 134(4) of the Companies Act 1936 (NSW)and s 183(5) of the Companies Act 1961 (NSW) both defined 'property' and 'liabilities' in terms in substance indistinguishable from those of the English s 154(4), new expanded definitions of those terms were introduced into the Australian legislation in 1981 as part of s 317 of the Companies Code,and they have remained unchanged since (see [66] above). They make it clear that 'duties that are of a personal character or are incapable under the general law of being performed vicariously' are included in the notion of 'liabilities', and that 'rights and powers that are of a personal character and are incapable under the general law of being assigned or performed vicariously' are included in the notion of 'property'. The researches of counsel have not discovered the reason for the expansion of the definitions, but it may have been to overcome the holding in Nokes. 87 The Scheme provides in cl 4 for Stork ICM's property and liabilities to be transferred to, and to be vested in or become the property and liabilities of, Stork FSA, without the need for any further act or deed. Clause 1.1 defines 'liabilities' to mean: 'all liabilities however arising and whether present, unascertained, immediate, future or contingent, including any "liabilities" (within the meaning in subsection 413(4) of the Corporations Act) and any Future Proceedings.' The expression 'Future Proceedings' is defined in cl 1.1 of the Scheme to mean: 'legal proceedings which have not commenced, but for which the cause of action has accrued or the events that lead to a cause of action accruing have occurred.' However, it was agreed that in any order to be made, this definition should be varied in the interests of the potential claimants so as to read: 'legal proceedings which have not commenced, but for which the cause of action has accrued or the injury or other event that may lead to a cause of action accruing (including, without limitation, exposure to asbestos dust) has occurred, or will occur in the future.' 88 Stork ICM's liability to potential claimants is not a 'duty' within s 413(4)'s inclusory definition of 'liabilities'. However, in my opinion, it falls within the word 'liabilities' in s 413(4) according to the ordinary meaning of the term in any event. 89 In Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1, the High Court held unanimously that the word 'liabilities' in s 14 of the Stevedoring Industry Acts (Termination) Act 1977 (Cth), which provided for a vesting in the Stevedoring Industry Finance Committee of liabilities of the Australian Stevedoring Industry Authority, operated to vest in the Committee the liability of the Authority in respect of a breach of its duty of care to safeguard wharf labourers against exposure to asbestos fibres, even though the injury was suffered after the vesting under s 14 took place. Gleeson CJ observed that depending on the context, 'liability' can include contingent or potential liability (his Honour cited Walters v Babergh District Council (1983) 82 LGR (Eng) 235 (QBD)). The Chief Justice noted (at 14) that the legislation abolished the Authority which no longer had the capacity to meet any claims upon it, and said that there was no good reason to distinguish between complete and inchoate causes of action, where the Authority had committed a breach of a legal duty. 90 The other members of the Court also read the word 'liabilities' in s 14 expansively, rather than narrowly. 91 That the word 'liabilities' in s 413 should also receive an expansive interpretation is indicated by the purpose of the section of facilitating the transfer of undertakings. 92 In my opinion the inchoate, potential or contingent liabilities of Stork ICM to the potential claimants, are capable of being made the subject of an order under s 413(1), and therefore of becoming inchoate, potential or contingent liabilities of Stork FSA instead.

(4) If 'yes' to (3), does s 413 authorise the making of an order that will have the effect of vesting in Stork FSA, in place of Stork ICM, the contractual right to enforce a right of insurance indemnity in favour of Stork ICM in respect of such claims? 93 The 'property' in question is Stork ICM's contractual right to require insurers to indemnify Stork ICM under insurance arrangements, in respect of sums for which Stork ICM is or may become liable to pay, as workers' compensation or damages at common law, to the potential claimants. If the insurer should fail to indemnity Stork ICM, the remedy to which Stork ICM would be entitled is a monetary one. 94 As noted above, the Scheme provides for all property of Stork ICM to be transferred to and to be vested in Stork FSA, without the need for any further act or deed. The word 'property' is defined in cl 1.1 of the Scheme to mean: 'any legal or equitable estate or interest (whether present or future and whether vested or contingent) in real or personal property of any description, including a thing in action, any "property" (within the meaning in subsection 413(4) of the Corporations Act) and any other thing capable of being transferred by order of the Court in accordance with paragraph 413(1)(a) of the Corporations Act.' It suffices to say that Stork ICM's contractual right of indemnity is a 'thing in action'. 95 I do not think the right of indemnity is a 'right of a personal character and ... incapable under the general law of being assigned or performed vicariously' within s 413(4). In my view, however, it is 'property' according to the ordinary meaning of that term. 96 Two distinct issues arose as to whether the Court could make an order which would have the effect of assigning Stork ICM's right of insurance indemnity. The first issue concerned the 'no assignment without consent' provision (set out at [48]). The second issue related to the question whether the order would change the content of the insurer's obligation as a result of substituting one insured (Stork FSA) for another (Stork ICM). 97 Although I need not resolve these issues in view of the new course the proceeding took (see below), I express the opinion that neither issue raises a problem for the Scheme. 98 In relation to the 'no assignment of interest without consent' provision, my view is that that provision applies only to assignments by an act of the insured, and has nothing to say to a transfer effected by an order of the Court under s 413. The provision contemplates an assignment bythe holder of the interest under the policy. Sections 413(1) and (2), on the other hand, contemplate a court order 'providing for' a transfer. It is the operation of s 413(2) on the order, if and when made, that causes the transfer of the property and liabilities, without any involvement of Stork ICM. Neither Stork ICM nor the Court 'transfers' the property or liabilities of Stork ICM for the purposes of the policy provision. Stork ICM's application for the order does not effect the transfer, and, in case it matters, strictly the Court's order that provides for the transfer does not do so either: it is the operation of s 413(2) upon such an order that does so. 99 Support for the view expressed in the preceding paragraph is found in a line of authority concerning contractual promises not to assign real or personal property without consent. It is held that such promises do not extend to assignments effected by operation of law upon the making of an order of the court following an adjudication, even if it was the person who promised not to assign who applied for the order: In re Riggs; ex parte Lovell [1901] 2 KB 16; Marsh v Gilbert [1980] 2 EGLR 44; In re Landau (a Bankrupt) [1998] Ch 223; Krasner v Dennison [2001] Ch 76. 100 The second issue to which I referred, can best be considered by reference to Housing Guarantee Fund Ltd v Yusef [1991] 2 VR 17 ('HGFL v Yusef'). 101 In HGFL v Yusef,Yusefand Beaton formed a building construction company ('the company'). Registration of the company with the Master Builders Housing Fund Ltd ('MBHFL') was conditional upon provision to MBHFL of personal guarantees by Yusef and Beaton. The company was also required to be bound by the rules of MBHFL as in force or amended from time to time. Deeds of guarantee and indemnity were executed and delivered by which Yusef and Beaton guaranteed to MBHFL all moneys which the company might become liable to pay to MBHFL. 102 As a result of the approval of a scheme under s 317 of the Companies (Victoria) Code, the property, undertakings, liabilities, obligations and duties of MBHFL were transferred to and vested in Housing Guarantee Fund Ltd ('HGFL'). The company applied for, and was granted, recognition by HGFL. HGFL requested Beaton and his wife (who had also become a director of the company) and Yusef to provide guarantees to HGFL. Mr and Mrs Beaton did so, but Yusef declined. In fact, he resigned as a director of the company. 103 The company contracted to erect a dwelling house for clients. The work fell behind schedule and the work completed was defective. The company went into a creditors' voluntary liquidation, the building contract was terminated, and the clients gave notice of complaint to HGFL, which settled their claim on terms, the reasonableness of which was not in issue. HGFL claimed indemnification from Mr and Mrs Beaton under an indemnity arising from the guarantees they had given to HGFL after the amalgamation. HGFL's claim against Yusef, however, rested on the guarantee and indemnity he had earlier given to MBHFL. 104 Yusef succeeded before the primary Judge, Marks J. MBHFL appealed. 105 The indemnity in favour of MBHFL arose from its rules. Rule 6.6 provided that the company should bind itself in the terms of Sch 2 to the Rules. Schedule 2 made it clear that the indemnified liability was a liability of MBHFL. It was not questioned that MBHFL's rights under Yusef's guarantee might be assigned or transferred, but, as Crockett J observed (at 21): 'it is altogether another matter to say, as the appellant does, that the scheme of arrangement operated so as to cause the guarantee to serve as a security for the company's liabilities that were never those of MBHFL.' His Honour accepted Yusef's submission that the scheme of arrangement and the provisions of s 317 did no more than transfer to HGFL the rights which MBHFL had, and did not change the content of those rights. Yusef did not become guarantor in respect of new liabilities of HGFL that arose pursuant to HGFL's rules. His Honour said (at 21): 'Were he [Yusef] to become such a guarantor he would be providing [HGFL] with a guarantee not only to a different person but in respect of the company's indebtedness arising pursuant to a completely different contract entered into with and more favourable to [HGFL].' 106 The other members of the Court, Murphy and Cummins JJ, in independent judgments, generally agreed. 107 HGFL v Yusef is distinguishable from the present case. In HGFL v Yusef, the circumstances that gave rise to the liability occurred after the Court order was made, whereas in the present case, all those circumstances have already occurred, even though they have not yet crystallised in the form of a notified claim. 108 The point is that the transfer in HGFL v Yusef had the potential to impose on Yusef a liability to HGFL in respect of circumstances in relation to which he was not liable to MBHFL. In contrast, Stork ICM is in run off, and the policies do not apply to an ongoing business. It must be immaterial to an insurer whether Stork FSA or Stork ICM refers on to it claims brought by the potential claimants in respect of circumstances, all of which occurred prior to the sale of Stork ICM's business in 2003. 109 The substitution of a different entity as the insured is itself immaterial. In HGFL v Yusef it was not questioned that MBHFL's rights under Yusef's guarantee might be transferred. In the present case, the very 'no assignment without consent' provision itself shows that it was contemplated that a different entity might become the insured as the result of a transfer. 110 In the result, Stork ICM's contractual right of indemnity is capable of being made the subject of an order under s 413, and therefore of benefiting Stork FSA in place of Stork ICM.

(5) Should the Court, in the exercise of its discretion, approve the Scheme, and, in particular, should the Court be satisfied that the potential claimants are adequately protected? 111 I indicated to the parties in the course of the hearing my view: · that I should not make the orders sought unless I was clearly satisfied that the potential claimants would be no worse off if the order were made than they would be otherwise; · that I would not rely on the financial position of Stork FSA, the Stork ICM Deed of Indemnity and the Deed Poll, the Stork FSA Deed of Indemnity, or the letters of comfort; and · that the one and only real protection that the potential claimants have is to be found in the insurances held by Stork ICM. 112 I raised with the parties three questions that had been concerning me: 1. Can Stork NV obtain the benefit of the tax deduction under the tax law of the Netherlands only if Stork ICM is deregistered without winding up? 2. If so, can Stork ICM be deregistered without winding up, without first being denuded of all of its property and liabilities? 3. If so, can the desired result be achieved by an order under s 413, limited so as to exclude from the transfer: · the benefit of an insurance policy where the insurer has not consented to the transfer; and · the liability of Stork ICM to potential claimants to which such a policy responds?

1. Can Stork NV obtain the benefit of a tax deduction under the law of the Netherlands only if Stork ICM is deregistered without winding up? 113 The plaintiff filed and read an affidavit of Willem Henk Peters sworn 21 November 2006. Mr Peters is a director of Stork ICM, having held that position since 26 May 2004. He is also a tax director of Stork NV, having held that position since 1 November 1997. His affidavit shows that Stork NV and Stork International BV form part of a tax consolidated group in the Netherlands for the purpose of the Corporate Income Tax Act of the Netherlands. Mr Peters states that tax is levied on Stork NV as if Stork International BV has been dissolved into Stork NV, and, accordingly, all profits and losses of Stork International BV are treated as those of Stork NV. 114 Mr Peters states that, if Stork ICM is deregistered, then Stork NV, as the ultimate holding company of Stork ICM, will be entitled, under the Netherlands tax law, to obtain a tax benefit equal to the difference between the historical cost price of Stork ICM in the tax books of its direct shareholder, Stork International BV, and the net asset position of Stork ICM at the time of deregistration. If Stork ICM was deregistered on or before 31 December 2006, Stork NV would be entitled, for tax purposes, to deduct an amount from its profits for the year ending 31 December 2006. The deductible amount is calculated in a manner explained in Mr Peters's affidavit, and the applicable tax rate for the year 2006 is 29.6 percent. Mr Peters further explains that if Stork ICM was to be deregistered after 31 December 2006, but on or before 31 December 2007, then the deductible amount would be 'basically the same amount' plus or minus the movement in the net asset position of Stork ICM in the year 2007, but the applicable tax rate for 2007 would be 25.5 percent, which would reduce the tax advantage to Stork NV substantially. 115 Annexed to Mr Peters's affidavit is an extract of Art 13d of the Corporate Income Tax Act of the Netherlands and a translation of it. The English translation uses the word 'liquidation' and its derivatives, but I am assured that deregistration is regarded as satisfying that word. I accept that deregistration or liquidation of Stork ICM is required.

2. Can Stork ICM be deregistered without winding up, without first being denuded of all of its property and liabilities? 116 There are three ways in which a company may be deregistered: voluntarily as the result of the lodgement with ASIC of an application to deregister under s 601AA of the Act; as a result of a decision by ASIC to deregister the company under s 601AB of the Act; or pursuant to an order of the Court under ss 413(1)(d), 481(5)(b) or 509(6) of the Act (see s 601AC of the Act). Sections 481(5)(d) and 509(6) are not relevant to this proceeding. 117 In the case of voluntary deregistration, the company's assets must be worth less than $1,000 and the company must have no outstanding liabilities: s 601AA(2)(c) and (e). There is no comparable constraint in the case of a deregistration initiated by ASIC under s 601AB or upon the making of an order under s 413. I agree with Mr Whitford SC that s 413(1)(a) and (d), in combination, seem to contemplate the making of an order providing for a transfer of only part of the property or liabilities of a company, yet for the deregistration of it by ASIC without winding up. Moreover, s 601AD points to such a construction. Subsection (1) of s 601AD provides that a company ceases to exist on deregistration, and subs (2) provides that, on deregistration, all of the company's property vests in ASIC. That is to say, the fact that a company has property does not make deregistration of the company impossible. 118 It is plain that it is no obstacle to the making of an order under s 413 for the deregistration of Stork ICM that the order will transfer to Stork FSA something less than the whole of the property and liabilities of Stork ICM, by, for example, excluding from the transfer the benefit of an insurance policy where the insurer has not consented to the transfer, and the liability of Stork ICM to potential claimants to which such a policy responds.

3. Can the desired result be achieved by an order under s 413, limited so as to exclude: · the benefit of an insurance policy where the insurer has not consented to the transfer, and; · the liability of Stork ICM to potential claimants to which such a policy responds? 119 Senior counsel for Stork ICM took instructions in relation to this question. The answer given was 'yes'. Ms McCallum SC saw no disadvantage from the viewpoint of the potential claimants if the matter were to proceed to finality with a variation to the Scheme under s 411(6) accordingly. 120 It seems to me that there should be excepted from the general transfer: · Stork ICM's right of indemnity, if any, against Zurich and against any other insurer that has not consented to an assignment under the Scheme of Stork ICM's interest under any insurance policy that responds to any liability of Stork ICM to potential claimants ('Excepted Policy'): and · any liability of Stork ICM to potential claimants to which an Excepted Policy responds ('Excepted Liability'). 121 I am proposing that an Excepted Policy will not be transferred to, or vest in, Stork FSA, and an Excepted Liability will not be transferred to and become a liability of Stork FSA, unless and until the Court makes a further order to that effect. In this respect, there will be liberty to Stork ICM and to Stork FSA to apply 122 In substance, Cook, GIO and Allianz have consented to a transfer. So, in substance, has CMS, in that it will not count against Stork FSA (in relation to payment out of the IGF) the fact of the transfer. The only insurer that, on the evidence, has not consented, is Zurich, which maintains that it never did insure Stork ICM. 123 If a claimant should wish to sue Stork ICM, and it is contended, for example, that Zurich was the insurer at the relevant time, the claimant will be entitled to apply under s 601AH(2) of the Act for the Court to order that ASIC reinstate the registration of Stork ICM. The Court would make such an order if it was satisfied that it was just to do so. It is true that a claimant in such a case would suffer the disadvantage of having to make such an application, but it seems to me that the likelihood of this eventuating is small, and that it would be very likely indeed that the order would be made, and probably on the basis that Stork FSA or Stork NV or, perhaps after its reinstatement, Stork ICM, pay the potential claimants' costs of the application since its purpose would be to allow the dispute as to the identity of Stork ICM's insurer at the relevant time to be resolved. (I agree, incidentally, with senior counsel for ASIC, that s 601AG would be of doubtful utility, because that section would operate only in a case where the facts showed that Stork ICM had a liability to the claimant immediately before the deregistration; see Orica Ltd v CGU Insurance Ltd (2003) 59 NSWLR 14.)

CONCLUSION 124 Subject to an amendment in the definition of 'Future Proceedings' in the Scheme, the Scheme should be approved, with an alteration so as to exclude, pending any further order under s 413, any Excepted Liability, and any right of indemnity under an Excepted Policy, in each case as described above. I certify that the preceding one-hundred and twenty-four (124) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren.

Counsel for Plaintiff and Defendant:: Mr M B Oakes SC

Solicitors for the Plaintiff and Defendant: McCullough Robertson

Counsel for Australian Securities and Investments Commission, appearing Mr P Whitford SC and amici curiae: Ms V McWilliam

Counsel appearing amicus curiae in the interests of potential claimants: Ms L McCallum SC

Dates of Hearing: 14, 20, 28 September; 20 October; 7, 15, 24 November; 7, 14 December 2006

Date of Judgment: 14 December 2006