Kwinana, in the matter of Kwinana WtE Pty Ltd as trustee for the Kwinana WtE Holding Trust (No 2) [2024] FCA 281

A INTRODUCTION 1 This is the second hearing of an application by Kwinana WtE Pty Ltd (Hold Co), Kwinana WtE Project Co Pty Ltd (Project Co) and Kwinana WtE Finance Co Pty Ltd (Finance Co) (collectively, Scheme Companies) in relation to a proposed scheme of arrangement (Scheme). 2 At the first hearing, I made orders for the convening of meetings of certain creditors of the Scheme Companies: see Kwinana, in the matter of Kwinana Wte Pty Ltd as trustee for the Kwinana Wte Holding Trust [2024] FCA 48 (Kwinana (No 1)). The purpose of those meetings was for the creditors to consider, and if thought fit agree to, a proposed creditors' scheme of arrangement. At those meetings, the relevant creditors (Scheme Creditors) voted unanimously in favour of the Scheme. 3 Today, the Scheme Companies seek approval for the Scheme, pursuant to ss 411(4)(b) and 411(6) of the Corporations Act 2001 (Cth) (Corporations Act). 4 In support of the application, the Scheme Companies rely upon: (1) an affidavit of Henry Charles Argent Higgins sworn on 16 February 2024 (Higgins Affidavit); (2) an affidavit of John McNamee sworn on 1 March 2024 (Second McNamee Affidavit); and (3) an affidavit of Timothy Michael Klineberg sworn on 5 March 2024 (Second Klineberg Affidavit). 5 It should be noted from the outset that in addition to the affidavit material read on the application, I heard oral evidence this morning from Mr McNamee, who is the company director, secretary, and Chairman of the Scheme Companies. Mr McNamee gave evidence that the shortly before the hearing today, a remaining condition precedent to the proposed Scheme had been fulfilled. For this purpose, I was provided with a revised proposed Scheme, which was marked Exhibit A in the proceeding. 6 For the reasons which will follow, I am satisfied that it is appropriate to make orders to approve the Scheme.

B.1 The Scheme 7 A detailed description of the Scheme and relevant background is set out in Kwinana (No 1) (at [6]-[25]). 8 In summary, the Scheme is a proposed creditors' scheme that will involve the compromise of certain secured debt owed by the Scheme Companies (whether as principal creditor or guarantor) to the Scheme Creditors. Ultimately, the Scheme Creditors will receive $0.9222 in the dollar of the debt that they are owed, which will amount to approximately $364.7 million. 9 In order to finance that compromise, the majority of the funds to pay the Scheme Creditors (approximately $351 million) will be provided by a company known as Kwinana WTE Holding Pty Ltd (Acciona Buyer). The Acciona Buyer is associated with the Acciona group, which is the contractor for the waste to energy plant owned by the Scheme Companies. The Acciona Buyer will receive full ownership of Hold Co, and a subscription of shares in Finance Co.

B.2 Dispatch of material to Scheme Creditors 10 The Orders made at the first hearing dated 5 February 2024 (Orders) set out, among other things, how material in relation to the Scheme was to be distributed to the Scheme Creditors. 11 The Orders provided for the Scheme Booklet to be sent to Scheme Creditors by registered post and email to the addresses listed in the Finance Documents (as defined in the Scheme). I am told the Orders were complied with for all Scheme Creditors where they had a postal and electronic address. In respect of one Scheme Creditor, Cooperative Rabobank UA, it did not have an email address listed in the Finance Documents, so it was sent the Scheme Booklet by way of mail only. 12 I am told copies of the Scheme Booklet were also sent to the solicitors for the Scheme Creditors, and to the solicitors acting for the Agent and Security Trustee under the Finance Documents.

B.3 Scheme meetings 13 The evidence discloses that the Scheme meetings were held on 21 February 2024 in accordance with the Orders. Of the Scheme Creditors, 11 of 12 submitted proxies prior to the Scheme meetings. The final Scheme Creditor (Shinhan Bank Col Ltd) sent a representative to the Scheme meetings.

B.4 Material provided to Scheme Creditors 14 I am told that after the Scheme meetings, it became apparent that the version of the Scheme contained within the Scheme booklet inadvertently omitted certain material. 15 In particular, Sch 17 of the Scheme is the Equity Transfer Terms. Those terms provide for the transfer of the shares in Hold Co and the transfer of the units in the Kwinana WtE Holding Trust (Holding Trust) to the Acciona Buyer. The Equity Transfer Terms have certain schedules and one annexure. It is these schedules and annexure that were omitted from the version of the Scheme contained in the Scheme booklet. 16 Even though these schedules and annexure were omitted from the Equity Transfer Terms sent as part of the Scheme booklet, I am nonetheless satisfied that the Scheme Creditors were aware of them. A complete copy of the Equity Transfer Terms was annexed to the Restructuring Support Agreement that was executed by 10 of the 12 Scheme Creditors, and to which an additional Scheme Creditor has now acceded. 17 I am informed the only Scheme Creditor that has not agreed to be bound by the Restructuring Support Agreement has confirmed that it was provided with the Restructuring Support Agreement prior to the Scheme meetings and that its vote at the Scheme meetings would not have changed if it had been provided with a complete copy of the Equity Transfer Terms.

B.5 ASIC's position and objections 18 ASIC has not provided a letter under s 411(17)(b) of the Corporations Act in circumstances where this is a creditors' scheme and relates to an unlisted company, such that the provisions of Ch 6 of the Corporations Act do not apply. Nonetheless, ASIC has confirmed in writing that it does not propose to appear or make submissions at this hearing. 19 On 27 February 2024, in accordance with the Orders, the Scheme Companies published in The Australian an advertisement of the proposed second hearing, as a means for notifying any objections to the Scheme. I am told that as at 5 March 2024, no objection has been received.

C AMENDMENTS TO THE SCHEME 20 As noted earlier, the form of Scheme before the Court today is different from that which was placed before the Court at the first hearing and was the subject of the Scheme meetings. To that extent, the Scheme Companies seek certain amendments to the Scheme. 21 Section 411(6) of the Corporations Act provides: The Court may grant its approval to a compromise or arrangement subject to such alterations or conditions as it thinks just. 22 Such alterations may be proposed by the company propounding the scheme. Often the cases in which s 411(6) has been applied concern amendments of a minor or technical nature, however, the power is not limited to alterations which are immaterial, insubstantial, or insignificant. It is only circumscribed by the requirement that the Court thinks the alteration is one that is just: Re Boart Longyear Ltd (No 2) [2017] NSWSC 1105; (2017) 122 ACSR 437 (at 464-465 [91] per Black J); Re Newcrest Mining Limited (No 2) [2023] FCA 1251 (at [39] per Beach J). Absence of prejudice to those affected by the Scheme will be a relevant matter. Whether the modifications take the scheme outside the reasonable contemplation of voting creditors may also be a relevant (although not determinative) factor: Re Boart (at 467-468 [100], [102]-[104] per Black J). 23 The proposed amendments to the Scheme deal with the omission of the schedules and annexure to the Equity Transfer Terms. In particular, approval is sought for a form of the Scheme that includes those schedules and annexure as part of the Equity Transfer Terms within the Scheme. 24 I am satisfied that it is appropriate to make an order pursuant to s 411(6) amending the Scheme, for the following reasons. 25 First, the proposed amendments are of a minor or technical nature. They are to add documents that were plainly intended to be included as part of the Scheme, but which were inadvertently omitted. 26 Secondly, the addition of these documents to the Scheme does not affect the substantive rights of any of the Scheme Creditors. They are part of the Equity Transfer Terms, which deal with the transfer of the equity stake in Hold Co and the Holding Trust, rather than affecting the rights of the Scheme Creditors. 27 Thirdly, the approval of a Scheme that includes the inadvertently omitted pages was within the contemplation of the Scheme Creditors when they voted. As noted above, the full version of the Equity Transfer Terms was provided to all of the Scheme Creditors prior to the Scheme meetings. Moreover, under the Restructuring Support Agreement, 11 of the 12 Scheme Creditors have agreed that the Equity Transfer Terms should be implemented as part of the Scheme. The only Scheme Creditor that has not agreed to the Restructuring Support Agreement (representing 2.37 per cent of the total Secured Debt commitments) has confirmed that its vote at the Scheme meetings would not have been altered had the omitted pages been included in the Scheme booklet. 28 Fourthly, the approval of a scheme with amendments or alterations is not an unprecedented occurrence. There are numerous instances where Courts have approved a scheme in an amended form, including in Re Newcrest (No 2); Re Village Roadshow Limited (No 2) [2020] FCA 1857; and Re Redflex Holdings Limited (No 3) [2021] FCA 527.

D PRINCIPLES RELEVANT TO APPROVAL OF SCHEME 29 It is unnecessary to set out in detail the relevant principles, which are well known and uncontroversial. In summary, the Court must be satisfied of six matters in determining whether to give final approval to the scheme arrangement, namely: (1) that the plaintiff has complied with the orders of the Court convening the meeting of creditors; (2) that the meeting of creditors so convened has approved the Scheme with the requisite majority; (3) that all other statutory requirements have been satisfied; (4) that the Scheme is fair and reasonable so that an intelligent and honest person who was a creditor of the relevant class, properly informed and acting alone, might approve it; (5) that the plaintiff has brought to the attention of the court all matters that could be considered relevant to the exercise of the court's discretion; and (6) that there was full and fair disclosure to creditors of all information material to the decision whether to vote for or against the applicable scheme, see Re Solution 6 Holdings Ltd [2004] FCA 1049; (2004) 50 ACSR 113 (at 116-117 [18]-[24] per Jacobson J); Re Permanent Trustee Co Ltd [2002] NSWSC 1177; (2002) 43 ACSR 601 (at 603-604 [8]-[10] per Barrett J); Re Seven Network Ltd (No 3) [2010] FCA 400; (2010) 267 ALR 583 (at 588-589 [35]-[39] per Jacobson J).

E CONSIDERATION 30 For the following reasons, I am satisfied that it is appropriate to approve the Scheme pursuant to ss 411(4)(b) and 411(6) of the Corporations Act. 31 First, as noted earlier, the Scheme material was distributed to the Scheme Creditors in accordance with the Orders. 32 Secondly, the majorities required by s 411 have been obtained (and substantially exceeded) in respect of the Scheme. 33 Thirdly, in addition to the Scheme Companies receiving the requisite approvals for the Scheme from the Scheme Creditors, the statutory preconditions to the Court's approval have been satisfied. Section 412(7) of the Corporations Act provides that for a creditors' scheme, the Court must not make an order approving the scheme unless it is satisfied that ASIC has had a reasonable opportunity to examine the explanatory statement and to make submissions in relation to that statement. I am satisfied on the evidence before me that has occurred. 34 Fourthly, I am satisfied that the Scheme is fair and reasonable. As noted above, the Scheme Creditors will receive $0.9222 in the dollar. By way of comparison, the independent expert whose report was included in the Scheme booklet opined that if the Scheme is not implemented and the Scheme Companies are wound up within six months of the first hearing, the Scheme Creditors will receive between $0.039 and $0.802 in the dollar. This is the most likely outcome in the absence of the Scheme in the light of Mr McNamee's evidence that if the Scheme is not approved and implemented, the Scheme Companies will have no revenue and will be insolvent. 35 Fifthly, the Scheme booklet contained full and fair disclosure. At the first hearing, detailed evidence was led in relation to the Scheme and the verification process that had been undertaken in respect of it. 36 Sixthly, I am satisfied on the evidence before me that the plaintiff has brought all necessary matters in respect of the Scheme before the Court.

F A FINAL MATTER 37 The Scheme Companies seek a further order that they be exempted from the requirement under s 411(12) of the Corporations Act from compliance with s 411(11), such that a copy of the Court order approving the Scheme does not need to be annexed to each copy of the Scheme Companies' constitutions that may be issued in the future. Such an order is orthodox where, as here, the rights of shareholders are not affected, and I am satisfied that it should be made.

G CONCLUSION 38 The way in which this Scheme has been presented to the Court to allow an efficient disposition of the application is a model for the way in which these proceedings ought to be conducted. I am grateful to Mr Ahmed SC, senior counsel for the Scheme Companies, for his comprehensive submissions, and to the solicitors for the Scheme Companies for the relevant material being put together coherently. 39 I will make the orders proposed. I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Lee.

Associate: Dated: 22 March 2024 Schedule 1 - Scheme Creditors 1 Sumitomo Mitsui Banking Corporation Sydney Branch Clean Energy Finance Corporation; 2 Clean Energy Finance Corporation Siemens Bank GmbH Singapore Branch; 3 Perpetual Corporate Trust Limited as custodian for the Metrics Credit Partners Diversified Australian Senior Loan Fund; 4 Royal & Sun Alliance Insurance PLC; 5 Massachusetts Mutual Life Insurance Company; 6 C.M. Life Insurance Company; 7 TfL Trustee Company Limited as trustee of the TfL Pension Fund; 8 Siemens Bank GmbH Singapore Branch; 9 Investec Bank Limited; 10 Shinhan Bank Sydney Branch; 11 Cooperative Rabobank U.A; and 12 Investec Bank PLC. Annexure A