Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar the Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand

Background to the Issues for Judicial Advice

1. The Debt Financing Documents relevant to this application are a series of deeds that became known among the parties as the Senior Bond Trust Deed (a deed appointing PCL as the Senior Bond Trustee and for convenience referred to in these reasons as "the Senior Trust Deed"); the Junior Bond Trust Deed; the Senior Inter-creditor Deed; the Security Trust Deed; the Common Terms Deed and the Global Deed of Security. Aspects of some of these deeds are relevant to the judicial advice now being sought. All of the Debt Financing Documents are governed by the laws of New South Wales. They are very complex. The Court's approach in these reasons is not to restate their terms in all their complexity, but rather to set out the minimum material necessary to allow the issues for advice to be understood.
2. PCL was a representative party in the main proceedings in its capacity as the trustee of both the Senior Bonds and the Junior Bonds. BNY was a party to the main proceedings in its capacity as the Security Trustee of the various securities held over Reliance Rail's assets that secure repayment of the secured debt, including the Senior Bonds and the Junior Bonds.
3. The judgment of McDougall J, (at [4] - [10]), crisply provides general background to the creation and structure of the Debt Facility and explains some of the challenges of interpreting the documents comprising the Debt Facility: "[4] The plaintiffs agreed to design, manufacture, commission and make available to Rail Corporation of New South Wales 78 electric train sets for use on the Sydney rail network, and associated maintenance and other facilities. To do that, the second plaintiff (Finance) undertook to borrow, by a combination of bonds and bank debt, $2.256 billion dollars. The bonds comprised $1.8 billion dollars of "Senior Bonds" and $100 million of "Junior Bonds". The Senior Bonds, together with the bank debt, constituted "Senior Debt". [5] The Senior Bonds were issued in ten tranches. The first two tranches were CPI indexed Instalment Bonds ("Instalment Senior Bonds"), which were expressed to mature on 26 December 2035. The third to tenth tranches were non-CPI indexed Bullet Bonds (Bullet Senior Bonds), which matured, tranche by tranche, over dates from 26 September 2018 to 26 September 2023. [6] The Junior Bonds were non-CPI indexed Bullet Bonds, issued in two tranches each maturing on 26 September 2023. [7] The Instalment Senior Bonds contained no provision for early repayment. The Bullet Senior Bonds and the Junior Bonds did contain provisions for early repayment, limited as to the time for doing so. [8] The obligations of Finance in respect of the whole of the Debt were guaranteed by the first plaintiff (Rail) and the third plaintiff (Holdings). [9] The documentation for the debt facility is extremely substantial and extremely complex. In the usual way of things, the documents interlock to a considerable extent. They make liberal use of defined terms. The definitions are in some cases contained within the particular document in which a defined term is used, and in other cases located in another document. It is not uncommon, when reading a clause in one document, to be required to go to two other documents to find the meaning of a particular defined term. [10] The key documents (in the order in which they appear in the court book) are the Common Terms Deed, the Senior Intercreditor Deed, the Senior Bond Trust Deed, the Junior Bond Trust Deed, and the Pricing Supplement for each tranche of the bonds. The Pricing Supplements are given effect by the Senior and Junior Bond Conditions which form part of, respectively, the Senior Bond and Junior Bond Trust Deeds. Each Pricing Supplement sets out the specific terms applicable to the tranche to which it relates."
4. After the contest in the main proceedings McDougall J found that each tranche of Senior Bonds and Junior Bonds was able to be redeemed early for the purpose of arranging a refinancing, without obtaining the consent of the Bondholders to that early redemption (McDougall J, at [82]).
5. But insofar as an early redemption was able to occur, each Secured Beneficiary (which included the Senior Bondholders and the Junior Bondholders) was entitled to be "Finally Paid" (as defined in the Security Trust Deed), which included receiving payment pursuant to an Indemnity set out in clause 8.2 of the Common Terms Deed (McDougall J, at [91]): "[91] It seems to me to follow necessarily that no Creditor will be Finally Paid until, among other things, all amounts that are payable, owing but not currently payable, contingently owing, unpaid, or reasonably likely in the future to fall within any of those categories have been paid.14 Amounts that may become payable under the cl 8.2 indemnity must fall within the definition of amounts contingently owing, or reasonably likely in the future to be contingently owing, by the Obligors, to any Creditor who is a Secured Beneficiary. Secured Beneficiaries include Senior and Junior Creditors,15 and thus include anyone other than an Obligor who makes Financial Indebtedness available to the Obligors in respect of the bonds issue and bank debt".
6. In determining the relevant amount to ensure that each Secured Beneficiary or Creditor qualified as "Finally Paid", McDougall J anticipated an issue that has been well tested since his judgment: that "the ascertainment of the amount required to procure that any particular Creditor be Finally Paid might be both lengthy and complex": (McDougall J, at [57]). These anticipated complexities explain some of the need for the present judicial advice.
7. These reasons do not canvass the complexities of the mechanics of redemption of bonds in the ordinary course. These are well explained in the evidence of Mr Andrea Ruver. It is evident from that explanation that, due to the prescriptive nature of those mechanics, it is unusual for positive input or written confirmation to be required of any Bondholder at redemption. Bondholders often hold their interests through clearing systems and it can commonly be impossible to compel them to make themselves known or to respond to the trustee in the position of the plaintiffs.

The Timing of the Application

1. On three earlier occasions during the course of the main proceedings, the Trustees sought and obtained judicial advice from the Court in relation to their continued conduct of the main proceedings. On each occasion, the Court advised the Trustees that they would be justified in continuing to defend the proceedings.
2. The Trustees now seek the Court's opinion, advice or direction in relation to, inter alia, whether they would be justified in entering into, and performing their respective obligations under, an additional deed that coordinates the refinance of all of Reliance Rail's debt, including by providing for the early redemption of the Bonds. The additional deed is called the NSW Rolling Stock - Refinancing Coordination Deed (and is referred to in these reasons as "the Proposed RCD"). At the time of the hearing of the application for judicial advice, the Proposed RCD was substantially agreed.
3. The Trustees sought to have the Second Further Amended Summons heard on an urgent basis. Shortly before the hearing, Reliance Rail had advised the Trustees that the refinancing was required by the State of New South Wales ("the State") to be completed by Tuesday, 28 November 2017. In order for that date to be met: 1. Reliance Rail advised the Trustees that the Proposed RCD must be executed by no later than 2.00pm on 23 November 2017, because Reliance Rail would need to issue finance utilisation requests under its new financing facilities on the morning of Friday 24 November 2017 to allow completion on 28 November 2017; and 2. The Trustees would need to issue various notices to Reliance Rail under the Proposed RCD confirming payout amounts owing to, inter alia, the Bondholders (see clauses 4.8(a)(ii) and 4.8(a)(iii) of the Proposed RCD).
4. The Trustees have given notice of the present application to the following entities which were parties to, or associated with, the Debt Facility: 1. the Secured Beneficiaries (as defined in the Security Trust Deed) by notice from BNY dated 20 November 2017; 2. the Senior Bondholders, by notice from PCL dated 20 November 2017; 3. the Junior Bondholders, by notice from PCL dated 20 November 2017; 4. the solicitors acting for: 1. Dexia Credit Local SA ("Dexia") and FMS Wertmanagement Aör ("FMS"), both Senior Bondholders and, respectively, the third and fourth defendants in the Reliance Rail proceedings; 2. Assured Guaranty Corp and Assured Guaranty Municipal Corp, both Senior Bondholders and, respectively, the fifth and sixth defendants in the Reliance Rail proceedings; and 3. Syncora Guarantee Inc. ("Syncora") and FGIC UK Limited ("FGIC"), both parties that have guaranteed Reliance Rail's obligations under, inter alia, the Bonds ("Financial Guarantors"), and, respectively, the seventh and eighth defendants in the Reliance Rail proceedings.
5. The timing of the application to the Court in this case deserves comment. What the Court says in the paragraphs immediately following is not a criticism of the lawyers involved in this case. When the application was presented by Mr P. Brereton SC and Mr D. Sulan, of counsel and Mr. S. Harris, Hogan Lovells lawyers, it was presented to a very high standard.
6. But the decision making of the commercial parties to these proceedings and to the Proposed RCD meant that the Court was left with little time to give proper consideration to this application for judicial advice.
7. The central purpose of Trustee Act, s 63 advice was identified in Marley v Mutual Security Merchant Bank and Trust Co Ltd [1991] 3 All ER 198 ("Marley"), (at 201), where the Privy Council stated: "[I]n exercising its jurisdiction to give directions on a trustee's application the court is essentially engaged solely in determining what ought to be done in the best interests of the trust estate and not in determining the rights of adversarial parties."
8. In Macedonian Church (at [105]) the High Court affirmed what was said in Marley, that the Court's "sole purpose in giving judicial advice is to determine what ought to be done in the best interest of the trust estate".
9. It follows that the Court should be given adequate time to consider what is in the best interests of the trust estate. The time pressures that were placed upon the Court by the conduct of this transaction were less than optimal.
10. The final notices sent out to Bondholders indicated that the Trustee Act, s 63 application was not to be made before 10am on 22 November 2017. Given my involvement in the various earlier judicial advice, inquiries were made of my Associate on Friday, 17 November 2017, as to my possible availability to give the judicial advice, stating that the application "would be one to two hours". The Court wrote back on Monday 20 November 2017 offering to list the matter on 27 November 2017. However, the parties replied the same day stating that the "application will need to be made on or by Wednesday 22 November 2017". The matter was subsequently listed on 22 November 2017.
11. When the proceedings convened at 10am on 22 November 2017, the Court was told in response to its concerns that the timetable for the transaction had been set, in part, by the State. The State's need for the deadline for the refinancing to be done by 28 November related to an option the State had with another party in relation to the co-maintenance of the trains in question. The Court was informed that Sydney Trains was signing the documentation on 22 November 2017 and that the State was scheduled to sign the documentation on 23 November 2017.
12. Another factor driving the timetable was that the appeal hearing from McDougall J's judgment, which had been listed for hearing on 28 November, had been vacated and a directions hearing set in the Court of Appeal on 4 December 2017. It was obviously important for the Proposed RCD to be finalised, if possible, before that directions hearing.
13. Whilst Reliance Rail intimated that a change to the documentation within these circumstances would "be problematic" for keeping with the State's timetable, it was nevertheless made clear by Mr Brereton SC that the Court should take such time as it required to deal with the s 63 application.
14. The transaction documents are substantial. As these reasons have earlier indicated, McDougall J commented on the challenges he faced in dealing with their bulk. At 10am on 22 November 2017, the Court was presented with a bundle of documents of 1,081 pages together with other exhibits containing a suite of transaction documents of eye-watering complexity. It took almost all day to open the case and take the Court through the materials. The expectation was that the Court would provide judicial advice within less than 24 hours.
15. Working overnight, the Court managed to do that. But this situation is not ideal and it is hoped it will not recur. The urgent consideration that was required in this case will generally be avoidable by the bringing of draft documents to the Court at an earlier time. In this case, reasonably adequate drafts of the Proposed RCD were available before 22 November 2017.
16. The Court's orders included a grant of liberty to apply to the Trustees on 24 hours' notice. In the result, once the Court gave its judicial advice, it was not necessary to relist the matter for any purpose.

Section 63 of the Trustee Act

1. Trustee Act, s 63(1) provides that: "(1) A trustee may apply to the Court for an opinion advice or direction on any question respecting the management or administration of the trust property, or respecting the interpretation of the trust instrument."
2. The existence of a question as to the management or administration of the trust, or interpretation of the trust instrument, is the only jurisdictional requirement for obtaining relief under Trustee Act, s 63: see Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar the Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66 ("Macedonian Church") per Gummow A-CJ, Kirby, Hayne and Heydon JJ (at [58]);
3. Once the jurisdictional requirement is satisfied, the Court has discretion to provide advice of the kind contemplated by the section. The discretion is confined only by the subject matter, scope and purpose of the legislation (Macedonian Church, at [59] and [196]).
4. The jurisdiction is described in Jacobs' Law of Trusts in Australia, 8th Ed (at [21-31]) as follows: "A trustee is not obliged to take any risks … by exercising a power or discretion where there is a possibility that the propriety of such exercise might afterwards be called into question by the beneficiaries…the trustee is entitled to approach the court and to ask … for authority to perform the necessary act, or for advice upon the exercise of a power or discretion…"
5. Protecting the interests of the trust estate is the principal purpose of an application for judicial advice and protecting the trustee is another purpose Macedonian Church (at [104] - [105] and [196]); see also Castle Hill Joinery and Interiors Pty Ltd (as trustee for the Gladstone Road Trust) [2013] NSWSC 1525 per Darke J (at [18]).
6. Where a trustee acts in accordance with judicial advice, provided all material facts are disclosed to the Court, it receives protection from claims in respect of those actions: s 63(11). The Court does not decide contested facts on such an application, but merely advises a trustee whether the trustee would be justified in acting or not acting in a particular way in accordance with certain assumed facts. If a trustee acts in accordance with the Court's advice, and the assumptions upon which the Court is asked to give its advice are factually correct, the trustee is protected from potential suits for breach of trust.
7. The material presently put before the Court by the Trustees is advanced as material in the nature of assumptions that the Court is asked to make, in order to give advice to the Trustees. If those factual assumptions turn out not to be correct, the Court's advice may not protect the Trustees from future action.
8. The Trustees moved on their Second Further Amended Summons and read the following affidavits and exhibits as statements of the material relied upon: (1) the affidavit of Andrea Ruver of 22 November 2017, together with Exhibit "AR-1" and Confidential Exhibit "AR-2" to that affidavit; and (2) the affidavit of Scott Harris of 22 November 2017, together with Exhibit "SAH-1" to that affidavit.

Bondholder Support for the Proposed RCD and the Resolution of other Disputes

1. At the hearing before McDougall J, Dexia and FMS fielded the main opposition to the relief that Reliance Rail sought. Dexia and FMS collectively hold an interest of about 86.3% of Tranche 1 and around 91.33% of Tranche 2 of the Senior Bonds (called here "the Dexia/FMS CPI Bonds"). Dexia and FMS also collectively hold an interest in around 37% of the other Tranches of the Senior Bonds.
2. As earlier indicated, Dexia and FMS filed an appeal against McDougall J's decision, and Reliance Rail filed a notice of cross-appeal. However, since the filing of the appeal, the Trustees have been advised that Dexia and FMS have reached a settlement with Reliance Rail, part of which is reflected in the Proposed RCD (to which Dexia and FMS are proposed to be parties). The Trustees are not aware of all aspects of the settlement. The Proposed RCD contemplates that the Dexia/FMS CPI Bonds will remain on foot, but will be amended, as part of Reliance Rail's refinanced debt package following the refinancing (see clause 4.9(b)(iii)(A) of the Proposed RCD).
3. Further, following McDougall J's decision, a dispute developed between the Financial Guarantors (entities that guaranteed the repayment of any tranche of Senior Debt or Junior Debt) and Reliance Rail as to the amounts which would be due to the Financial Guarantors under indemnities contained in the Debt Financing Documents, prior to any release of the security held by BNY as the Security Trustee. The Trustees have been informed that this dispute has also been resolved, which is also reflected in the inclusion of the Financial Guarantors as parties to the Proposed RCD and an express confirmation in the Proposed RCD that the Financial Guarantors will provide to the Trustees confirmation to the effect that they have received the payments due to them (see clauses 4.8(a)(viii), 4.8(a)(ix), 5.1(a)(xiii), 5.1(a)(xiv), 5.1(b)(x) and 5.1(b)(xi) of the Proposed RCD).
4. The Trustees understand that the Bondholders broadly support the refinance arrangements and the entry into the Proposed RCD. The material put before the Court on this application certainly suggests that widespread Bondholder support may be assumed.

The Questions for Judicial Advice

1. The questions for judicial advice arise, in part, because the Senior Trust Deed does not contain an express power for PCL to enter into the Proposed RCD. The Trustees are necessary parties to the Proposed RCD. The structure of the refinancing involves the retirement of the Trustees and the appointment of new trustees to act in relation to the incoming financiers. This will involve the taking of various steps by the Trustees. In the absence of express authority in the Trust Deeds for the Trustees to enter the Proposed RCD and take these various steps, the Trustees can be authorised under the Trust Deeds to proceed in accordance with instructions on behalf of the Bondholders. The initial questions for judicial advice relate to what is sufficient to constitute valid instructions under the Trust Deeds for PCL and BNY to enter the Proposed RCD and take the various steps.
2. Clauses 7.1 and 7.2 of the Senior Trust Deed contemplate that the Senior Bondholders may provide instructions to PCL as the Senior Bond Trustee under the Senior Trust Deed. Such instructions, in the present circumstances, are instructions for PCL to enter the Proposed RCD.
3. PCL need not exercise any of its rights under the senior Trust Deed, but where PCL does receive instructions "it agrees to follow them but only to the extent they are in accordance with the Debt Financing Documents": Senior Trust Deed clause 7.1. Subject to certain exceptions, instructions from Senior Bondholders are issued to the Senior Bond Trustee, PCL, by an Ordinary Senior Bondholder Resolution: Senior Trust Deed clause 7.2. As will be seen, more than an ordinary resolution is sometimes required to instruct the Senior Bond Trustee: in some circumstances an Extraordinary Senior Bondholder Resolution, or a Special Quorum Bondholder Resolution, may be required. Where PCL receives instructions "it may do anything it considers necessary or desirable" in connection with the relevant resolution (clause 7.3). The Junior Bond Trust Deed contains relevantly identical powers and restrictions on instructing PCL in its capacity as Junior Bond Trustee.
4. At the time of seeking judicial advice, PCL anticipated that Extraordinary Senior Bondholder Resolutions and Extraordinary Junior Bondholder Resolutions would be passed to give instructions to it to enter into and perform obligations under the Proposed RCD. It seeks advice as to whether, if these resolutions are passed, it is justified in following those instructions.
5. Clause 7.2 of the Senior Trust Deed provides (and the Junior Trust Deed has equivalent provisions): "Except as expressly provided in the Senior Bondholder Meeting Provisions and subject to the Senior Intercreditor Deed, in relation to all matters affecting a Tranche, the Senior Bondholders of that Tranche may instruct the Senior Bond Trustee by Ordinary Senior Bondholder Resolution."
6. The default presumption clause 7.2 imposes is that an Ordinary Senior Bondholder Resolution (the least demanding of the relevant hierarchy of resolutions) is all that is required to instruct the Senior Bond Trustee. But that default position may be displaced by the operation of the Senior Bondholder Meeting Provisions, which are set out in Schedule 2 of the Senior Trust Deed. Once again the Junior Trust Deed has equivalent provisions.
7. Three levels of requirement for resolutions for instruction to the Senior Bond Trustee are provided for in the Senior Bondholder Meeting Provisions. Each level of requirement to give a valid instruction depends on the nature of the issue the subject of the resolution proposed to be passed. The three levels are as follows: 1. Special Quorum Senior/Junior Bondholder Resolution - this type of Resolution is required in the circumstances set out in paragraph 5.2 of Schedule 2 of each of the Trust Deeds; including, in the case of the Senior Bond Trust Deed, a Unanimous Decision as defined in the Senior Inter-creditor Deed, and resolutions that effect major changes to the rights or obligations of Senior Bondholders, and, in the case of the Junior Bond Trust Deed, a Junior Creditor Endorsement and resolutions that effect major changes to the rights or obligations of Junior Bondholders; 2. Extraordinary Senior/Junior Bondholder Resolution - this type of Resolution is required in the circumstances set out in paragraph 5.1 of Schedule 2 of each of the Trust Deeds, which includes certain variations of a Debt Financing Document or the waiver of any breach or other non-compliance with the Borrower's obligations in connection with any Debt Financing Document, and in the case of the Senior Bond Trust Deed only, a Majority Decision as defined in the Senior Intercreditor Deed; and 3. Ordinary Senior/Junior Bondholder Resolution - this level of resolution is required in all other circumstances.
8. The voting requirements for the passage of each of the different levels of resolution vary, depending on whether the resolution is put to a vote at a convened bondholder meeting, or whether it is put by way of a circular resolution. Here a circular Extraordinary Resolution is proposed to give the relevant instructions. The level of voting for each level of resolution is as follows: Bondholder meeting Circular Senior/JuniorBondholder Resolution Resolution type Required proportion of aggregate principal amount outstanding of Senior/Junior Bonds for quorate meeting Percentage of votes required for resolution to pass Required proportion of aggregate principal amount of outstanding Senior/Junior Bonds Ordinary Senior Bondholder Resolution 10% 50% 50% Extraordinary Senior Bondholder Resolution 50% 66⅔% 66⅔% Special Quorum Senior Bondholder Resolution 75% 66⅔% 100%

1. PCL submits that it considers, that if it receives an instruction to enter into the Proposed RCD following the passing of the anticipated Extraordinary Resolutions, it will be required pursuant to clause 7.1 of the Trust Deeds to take that action, unless a limited number of circumstances apply. PCL considers that it would not be required to do so, if the instruction required it to do something that is not in accordance with the Debt Financing Documents (in contravention of Clause 7.1) or if, relevantly, an Extraordinary Senior Bondholder Resolution is required rather than a Special Quorum Senior Bondholder Resolution. PCL submits that neither of these circumstances arises. But whether or not PCL is justified in treating neither circumstance as arising, and disabling PCL from entry into the Proposed RCD, is the first aspect of the judicial advice being sought. The following particular matters are relevant to the Court's consideration of such circumstances on this application.
2. (1) Timing of the Bond Redemption. Under clause 7.1 of Schedule 1 of the Senior Trust Deed, and the equivalent provision of the Junior Trust Deed, the time by which the Borrower is required to pay the Redemption Amount for the Bonds is 12:00 noon on the due date. But under the Proposed RCD, the payment of the relevant Redemption Amount will not occur until 4pm on the day for payment (see clause 5.1(b) of the Proposed RCD). This raises a four hour difference between the requirements on the Borrower under the Trust Deeds (which are each a Debt Financing Document - see for example Senior Trust Deed clause 1.4) and the requirements under the Proposed RCD.
3. If the relevant instruction requires the Trustee to do something that is not in accordance with the Debt Financing Documents, then the Trustee is not obliged to follow the instruction but rather should adhere to the Debt Financing Documents.
4. But the Trustees submit that this difference from the Debt Financing Documents does not impede the Trustee complying with the instruction here. The Trustees submit that if Resolution 2 of the proposed Extraordinary Senior Bondholder Resolutions is passed, that resolution will authorise any non-compliance by the Borrower with the obligation under clause 7.1 of Schedule 1 of the Trust Deeds.
5. In the Court's opinion, authorisation for the course proposed is capable of being granted by an Extraordinary Resolution of Bondholders and the Senior Bond Trustee would be justified in acting accordingly. By clause 5.1(c) of Schedule 2 of the Senior Trust Deed (matched in clause 5.1(b) of the Junior Trust Deed), only an Extraordinary Resolution (not a Special Quorum Resolution) is required for "the waiver of any breach or other non-compliance (or the authorisation of any proposed breach or non-compliance) with the obligations by the Borrower in connection with any Debt Financing Document", other than certain irrelevant exceptions. As the Trust Deeds are Debt Financing Documents, non-compliance with the Borrower's obligation under the Trust Deeds may be authorised by Extraordinary Resolution.
6. It is also necessary for it to be shown that the Special Quorum provisions do not also apply to this situation and that a Special Quorum is not required under clause 5.2 of Schedule 2 of the Trust Deeds. In the Court's opinion, the Trustees are justified in acting on the basis that the Special Quorum provisions do not so apply.
7. Under Schedule 2 clause 5.2(a) of the Trust Deeds, a Special Quorum is required where a "Unanimous Decision" is mandated under the Senior Inter-creditor Deed, or within the definition of "Junior Creditor Endorsement" in the case of the Junior Trust Deed. Schedule 2 clause 5.2(b)-(l) requires a Special Quorum Senior Bondholder Resolution in a range of situations, other than where a Unanimous Decision is required under the Senior Inter-creditor Deed.
8. Looking at Schedule 2 clause 5.2(a) of the Senior Trust Deed, the Senior Inter-creditor Deed requires a Unanimous Decision (under clause (a)(iii)(B) of the definition of "Unanimous Decision") where "any change to any other Debt Financing Document…changes the tenor, timing, order, scheduled amount of or calculation of payments to a Senior Creditor or refinancing amounts in respect of all the Senior Debt".
9. PCL submits Schedule 2 clause 5.2(a) is not engaged merely because payment is to take place under the Proposed RCD by 4pm rather than by 12 noon. Rather, it is submitted the requirement for a Unanimous Decision is directed towards changes to the due date or to significant "timing" changes which impact upon the rights of Bondholders (for example, by bringing forward an early redemption date or where the conditions for early redemption have not otherwise been satisfied).
10. The question is whether "timing" in this definition of Unanimous Decision applies to timing changes within a day, or whether it means change from one day to another. PCL submits that the change of time from payment from 12:00 noon to 4pm does not fall within the subject matter to which "timing" is addressed in the Unanimous Decision definition.
11. This submission is persuasive and the Trustees are justified in acting on it. Clause 5.2(d) of the Senior Trust Deed expressly requires a Special Quorum Senior Bondholder Resolution where there is "a variation of the date on which any payment is due on any Senior Bonds…" (emphasis added). The Senior Trust Deed expressly contemplated a Special Quorum Senior Bondholder Resolution was required when the time for payment was changed by a day or more but it failed to include in the requirement a timing change of merely a period of hours within a day. The Trust Deed may justifiably be interpreted as excluding the latter possibility. To the extent that this result might be said to be inconsistent with the Senior Inter-creditor Deed, because it might require a Unanimous Decision (under clause (a)(iii)(B) of the definition of "Unanimous Decision"), the Senior Trust Deed has priority of meaning in the interpretation of Debt Financing Documents.
12. The Court advises that the Trustees would be justified in proceeding on the basis of an Extraordinary Resolution of Bondholders, as it submits.
13. (2) The Bond Substitution Provisions and Dexia/FMS. Under the Proposed RCD and certain other transaction documents (to which the Trustees are not a party), after the refinancing Dexia and FMS will continue as Senior Bondholders in respect of the Dexia/FMS CPI Bonds (the subject of Tranche 1 and Tranche 2), but their bonds will contain amended terms. PCL submits that this continuation does not mean that a Special Quorum Senior Bondholder Resolution is required.
14. Clause 5.2(c) of the Senior Trust Deed requires a Special Quorum Senior Bondholder Resolution if there was to be an "exchange or substitution of any Senior Bonds for, or the conversion of those Senior Bonds into, other debt or equity securities or other obligations, other than an exchange, substitution or conversion which is expressly provided for in the Debt Financing Documents". PCL submits there is no relevant "exchange or substitution" of Senior Bonds by Dexia / FMS upon the refinancing. To the contrary, the facts put before the Court are that the refinancing arrangements will involve a continuation of the Dexia/FMS CPI Bonds with amended terms.
15. Further, clause 13(c) of Schedule 2 of the Trust Deeds provides a mechanism for separate meetings where a resolution "give rise to a conflict of interest between the [Bondholders] of one Tranche or group of Tranches so affected and the [Bondholders] of another Tranche or group of Tranches…".
16. Whilst Dexia and FMS are in a different position to other Bondholders, in continuing to hold the Dexia/FMS CPI Bonds under the refinancing arrangements, PCL has not identified any conflict of interest (an expression not otherwise defined in the Debt Financing Documents) arising from the amendment of these bonds, which would require a meeting of separate Tranches of Bondholders. Nor has any Bondholder suggested that such a conflict might arise or that there is any other requirement for separate meetings of Tranches.
17. The giving of instructions to BNY to enter into the Proposed RCD requires brief separate consideration. BNY is appointed as the Security Trustee under the Security Trust Deed, one of the suite of Debt Financing Documents. Clause 1.7 of the Proposed RCD provides for an instruction to be given by each of the Secured Beneficiaries to BNY to enter into and perform its obligations under the Proposed RCD. Under clause 3.3(b) of the Security Trust Deed, BNY is permitted to act where it receives an instruction from the Secured Beneficiaries (see also clause 2.4 of the Senior Inter-creditor Deed). Each of the Secured Beneficiaries will be a party to the Proposed RCD and will thereby directly provide instructions to the Security Trustee for entry into it. Thus no separate requirement for a resolution by Secured Beneficiaries arises for the giving of instructions to BNY. On that basis, BNY is justified in entering into and performing its obligations under the Proposed RCD.
18. (3) Confirming the Secured Money has been "Finally Paid". BNY's position as the Security Trustee for the existing Secured Beneficiaries will be displaced upon the refinancing and will lead to BNY's retirement from that position. BNY is accordingly defined as the Retiring Security Trustee under the proposed RCD. The trigger by which BNY is to release its security over Reliance Rail's property and to retire is when "all the Secured Money has been Finally Paid" (see clause 2.10 of the Global Deed of Security). The remaining question for judicial advice relates to the adequacy of the proposed arrangements for ascertaining whether or not "all Secured Money has been Finally Paid" to permit this release of security.
19. "Finally Paid" is defined in clause 1.2 of the Security Trust Deed as follows: "Finally Paid means the later of the following: (a) in respect of: (i) a particular Secured Beneficiary, when that Secured Beneficiary confirms to the Security Trustee that all of the Secured Money of that Secured Beneficiary has been fully and finally repaid and all of that Secured Beneficiary's commitments under all Debt Financing Documents have been cancelled or reduced to zero (which the Secured Beneficiary agrees to do promptly); and … (iii) otherwise, when the Secured Beneficiaries confirm to the Security Trustee that all of the Secured Money has been fully and finally repaid other from a source of additional Secured Money on any refinancing and all commitments under the Debt Financing Documents have been cancelled or reduced to zero (which the Secured Beneficiaries agree to do promptly). Confirmations referred to in this definition must be provided by the relevant Secured Beneficiary, Secured Beneficiaries or Financial Guarantor on full and final repayment of their Secured Money."
20. The term Secured Beneficiaries appearing here is defined in the Security Trust Deed to include each Senior Creditor and each Junior Creditor. And the definition of Senior Creditor and Junior Creditor relevantly includes the Senior and Junior Bondholders, the Senior and Junior Bond Trustees, and the agents for holders of various forms of Senior and Junior Debt, agents that are known as Senior and Junior Debt Representatives: see the Senior Inter-creditor Deed.
21. As McDougall J explained (at [53]) the defined term "Finally Paid" uses the concept of Secured Money from another of the Debt Facility documents, the Common Terms Deed. The definition of Secured Money is broad and includes "all amounts…at any time…for any reason or circumstance…whether at law or otherwise…and whether or not of a type within the contemplation of the parties at the time of the [making of the Debt Facility]…are payable, are owing but not currently payable, are contingently owing, or remain unpaid, by a Chargor to a Secured Beneficiary...or [that] a Secured Beneficiary is liable to pay by reason of any act or omission on a Chargor's part…"
22. Payment for the Bonds is subject to a formula under the Trust Deeds and is an essentially mechanical calculation. But again, as McDougall J explained (at [56]), the concept of "Finally Paid" also includes a right to payment under an expansive indemnity against reasonable Costs and other liabilities under clauses 8.1 and 8.2 of the Common Terms Deed. Under these clauses, the Obligors (generally the Reliance parties) agree to indemnify each Secured Beneficiary against all manner of losses and Costs as defined. The potential sources of the losses required to be indemnified include the early repayment, redemption, discharge or payment of any scheduled payment and specifically include amounts in respect of "break costs".
23. But PCL, as the Debt Representative for the Bondholders, does not necessarily have insight into each Bondholders' rights or potential claims to any indemnity under clauses 8.1 and 8.2. This is at least one reason why, as noted above, McDougall J held that "the ascertainment of the amount required to procure that any particular Creditor be Finally Paid might be both lengthy and complex" (at [57]).
24. To overcome this lack of insight, and to attempt to secure some certainly in the amount to be paid to Secured Beneficiaries so they can be treated as Finally Paid and their securities released, the Proposed RCD sets up a proposed regime of notification and confirmation of amounts due and requiring to be Finally Paid. The relevant apparatus within the proposed RCD achieves this first by (clause 1.11 (b) for Senior Bonds, and 1.12 (b) for Junior Bonds) authorising the parties to act upon an assumption that they are entitled to treat non-notification of a claim for reimbursement or indemnity, as evidence of lack of intention to make a claim by the Secured Beneficiaries concerned: "(b) The parties to this deed (other than the CPI Bondholders and the Retiring Creditors who are not holders of Senior Bonds) acknowledge that, in providing the Senior Bond Amount under this deed, the Retiring Senior Bond Trustee acts in reliance on: (i) such information held by the Retiring Senior Bond Trustee as at the date of provision of the notice by the Retiring Senior Bond Trustee under clause 4.8(a)(ii) of this deed, including such information as may have been provided by the holders of Senior Bonds in response to any notices issued by the Retiring Senior Bond Trustee to the holders of the Senior Bonds prior to the Designated Date, including notices dated 4 September 2017, 6 September 2017, 12 September 2017, 22 September 2017 and 17 October 2017; and (ii) its entitlement to assume that a failure by any particular holder of Senior Bonds to respond to any notices issued by the Retiring Senior Bond Trustee to the holders of the Senior Bonds prior to the Designated Date (including those listed above) means that that holder of Senior Bonds does not intend to make any claim for reimbursement or indemnity under the Transaction Documents (as that term is defined in the Terminating CTD) following the Designated Date."
25. The various notices referred to in Clause 1.11(b) of the Proposed RCD have all been served and will be referred to in more detail below. Under the Proposed RCD (clause 4.8(a)(ii)), once the Retiring Senior Bond Trustee has calculated the amount due (called the Senior Bond Amount) it may be required to notify it to an entity, Finco, that is responsible for making payments on behalf of the refinanciers. Clause 4.8(a)(ii) provides as follows: "4.8 Notice of outstanding amount (a) At any time prior to the Designated Date (and any number of times), Finco may request that, within 2 Business Days of the date of the request: (ii) the Retiring Senior Bond Trustee give written notice to Finco, the Retiring Intercreditor Agent and the Retiring Security Trustee setting out the amount of Secured Money (as defined in the Terminating STD) that Finco must pay in order to, on the Designated Date, redeem all Senior Bonds (other than the CPI Bonds) plus the aggregate of all interest, fees, break costs and other amounts that are payable, owing, or accrued, under the Senior Bond Trust Deed (other than in respect of the CPI Bonds) to any person (the Senior Bond Amount);"
26. Similar provisions are made in the Proposed RCD for the ascertainment on behalf of refinanciers of what is defined as the Junior Bond Amount ((clause 4.8(a)(iii)) and the Retiring Security Trustee Amount (clause 4.8(a)(iv)).
27. The Proposed RCD then seeks to satisfy the requirement that the Senior and Junior Bondholders and other Secured Beneficiaries, who are all Retiring Creditors, be "Finally Paid" by providing that they confirm that they have been "Finally Paid". That confirmation is to be provided by the Retiring Security Trustee as the Debt Representative of the Bondholders. This is provided for in clause 6.1(a)(vii)(B) of the Proposed RCD, and the definition of "Retiring Creditor" which includes the Senior Bond Trustee and the Junior Bond Trustee as Debt Representative, as follows: "(vii) for the avoidance of doubt and without limiting paragraphs (i) to (iv) above: (B) each Retiring Creditor to whom an amount is payable under clause 5.1 (Payments on the Designated Date) confirms that, upon confirmation from the Retiring Security Trustee that it has received: (1) correctly completed irrevocable MT202 SWIFT messages confirming that the payments to the Retiring Creditors (other than the Financial Guarantors) contemplated under clause 5.1 [Payments on the Designated Date) have each been made; and (2) with respect to the Financial Guarantors only, evidence by way of email confirmation from Clayton Utz as solicitors to the Financial Guarantors, that the payments contemplated under clauses 5.1(b)(x) and 5.1(b)(xi) have been received, that Retiring Creditor will be deemed to have confirmed to the Retiring Security Trustee that it has been 'Finally Paid' (as defined in the Terminating STD) and the whole of the property the subject of the Security may be released from the Security at the Effective Time, and each Retiring Creditor authorises and consents to such release;"
28. With this background about the structure of the proposed RCD, three issues arise in the Court considering whether the Trustees are justified in treating the definition of "Finally Paid" as being satisfied in the circumstances by entry into and performing the Proposed RCD. These three issues are: (a) the adequacy of the arrangements for PCL to notify the Bondholders of their rights; (b) the adequacy of the confirmations received from Secured Beneficiaries; and (c) the adequacy of certain Dexia/FMS arrangements.
29. (3)(a) Adequacy of the Notifications to Retiring Creditors. The Retiring Security Trustee will be required to determine the payout figures for the various Retiring Creditors, including Senior and Junior Bondholders as part of its preparation for the redemption and refinance. As earlier indicated, those payout figures are the "Senior Bond Amount" and the "Junior Bond Amount" as defined in the Proposed RCD.
30. In order to determine the payout figures for the Retiring Creditors, PCL has sent several detailed notifications to the Retiring Creditors, including Bondholders and received some responses. The various notices were as follows: 1. notices issued on 6 September 2017, 12 September 2017 and 22 September 2017, requesting that Bondholders provide confirmation of the amounts owing in respect of their Bonds as at certain refinancing dates being proposed by Reliance Rail (including, in addition to principal, accrued interest and any fees owing, any other amounts payable under the Debt Financing Documents); 2. further notices issued on 17 October 2017: 1. providing the Bondholders with the relevant Bond Trustees' calculations of the amounts owing on their Bonds as at the then proposed refinancing date of 31 October 2017 (being the Par Amount (as defined in the Senior Bond Trust Deed) on the CPI Bonds, and the principal and accrued interest on all other Bonds); 2. requesting that Bondholders advise the relevant Bond Trustee of any claims they wish to make under the indemnity provisions in the Common Terms Deed, including particulars of the claim; and 3. advising that in the absence of notification of such an indemnity claim, the relevant Bond Trustee would proceed on the assumption that that Senior Bondholder did not make a claim under the indemnity provisions and issue notices of outstanding amount to Reliance Rail accordingly; and 1. further notices issued on 21 November 2017 on equivalent terms to those sent on 17 October 2017, but providing the Bondholders with the relevant Bond Trustees' calculations of the amounts owing on their Bonds as at the new proposed refinancing date of 28 November 2017 (being the Par Amount on the CPI Bonds (save certain Dexia/FMS CPI Bonds), and the principal and accrued interest on all other Bonds).
31. The notices issued on 17 October 2017 and the further notices issued on 21 November 2017 elicited a number of responses. These responses (subject to formal verification but sufficient for present purposes) are evidenced in an affidavit of Mr Scott Andrew Harris filed and read on behalf of the Trustees and show that 91.58% of the Senior Bonds held and 94% of the Junior Bonds held have already expressed their support for the proposed resolutions, figures that not only show wide support for the resolutions but a wide degree of consultation and engagement by bondholders with the Trustees' present communications to them.
32. It should further be noted that Mr Harris' affidavit also shows that notice of the present applications was given on 20 and 21 November 2017 to Reliance Rail, Dexia and FMS, the Finance Guarantors, and to the Senior Bondholders. None of them sought to appear on the present applications.
33. The Trustees submit that their notification process was appropriate and a reasonable method to expose any reimbursement or indemnity claims. In my view, the frequency and detail of the notices that were given in September, October and November 2017 and their clear requests for notification of any reimbursement or indemnity claims are reasonable and sufficient in the circumstances to bring to the attention of Retiring Creditors the need to notify potential reimbursement and indemnity claims.
34. As indicated above, the Proposed RCD provides that the Trustees may act upon the information which they possess as to possible indemnity claims. The Proposed RCD provides that for the purposes of confirming the Senior Bond Amount and the Junior Bond Amount to Reliance Rail (see clauses 1.11(b) and 1.12(b) of the Proposed RCD): (1) information provided in response to the various notices referred to above; and (2) a failure to respond to those notices referred to above, reasonably grounds the assumption on the part of the Trustees that a particular Bondholder does not wish to make a claim for indemnity. Given the frequency, detail and quality of the notices given, the Trustees are justified in acting on these assumptions provided for in the Proposed RCD.
35. (3)(b) Adequacy of Confirmations from Secured Beneficiaries. Confirmations are proposed to be given by the Secured Beneficiaries to BNY as Security Trustee that the Secured Beneficiaries have been "Finally Paid". The relevant confirmations are contained (see above) in clause 6.1(a)(vii)(B)(1) of the Proposed RCD which provides that the confirmation by the Secured Beneficiaries is deemed to have been given upon BNY confirming that it has received irrevocable SWIFT messages confirming the payments.
36. The Commonwealth Bank of Australia Limited ("CBA") is the incoming Facility Agent for Reliance Rail's new lending facilities. CBA has confirmed that the payments contemplated under the Proposed RCD will be made using its Payment Management System, which operates using "real-time gross settlement", the effect of which is that: 1. the transfer of settlement money takes place in real time; and 2. the SWIFT confirmation itself is an historical snapshot of a payment that has been processed and has left the institution.
37. The factual material before the Court suggests that it is common for SWIFT messages, such as those contemplated under the Proposed RCD, to be used to evidence that payment has been instructed or received for the purpose of completing complex instructions.
38. The Court advises that confirmations contained in the Proposed RCD are sufficient to justify the Trustees treating the requirement of the definition "Finally Paid" have been met, if the relevant terms of the proposed RCD are followed.
39. (3)(c) Adequacy of the Dexia/FMS arrangements. As noted above, as part of their settlement of the proceedings Dexia and FMS will continue to hold what is defined as the Dexia/FMS CPI Bonds under the refinancing agreed with Reliance Rail. The Dexia/FMS CPI Bonds have features of the existing bonds held by Dexia and FMS under existing Debt Facility, but amended to accommodate their involvement in the refinanced facility. Dexia and FMS are by their respective entry into the Proposed RCD, in which they are each described as a "CPI Bondholder", giving a number of important confirmations to permit the release of the Secured Beneficiaries under the existing Debt Facility.
40. These confirmations provided for by Dexia and FMS in clause 6.1(a)(iv)(D) of the Proposed RCD, are in the following terms: (D) each CPI Bondholder confirms that, upon payment of the Senior Bond Amount at the Effective Time, that CPI Bondholder will be deemed to have agreed with the Obligors and the Retiring Security Trustee that the CPI Bonds are no longer subject to or secured under the terms of the Terminating Documents and that accordingly: (1) the CPI Bondholder will cease to be a "Secured Beneficiary" and a "Senior Creditor" for the purposes of the Terminating Documents; (2) the CPI Bonds will not constitute "Secured Moneys" under the Terminating STD or a commitment of the CPI Bondholder under a Debt Financing Document (as defined in the Terminating STD); and (3) the whole of the property the subject of the Security may be released from the Security at the Effective Time, and each CPI Bondholder (for itself only) authorises and consents to such release…
41. These confirmations have the effect that neither Dexia nor FMS remains as Secured Beneficiaries for the purposes of the definition of "Finally Paid" and thereby no "Secured Money" is required to be collected by BNY on their behalf, pursuant to clause 2.10 of the Global Deed of Security.
42. But these confirmations and the structure of the Proposed RCD raise issues as to whether the Trustees are justified in treating arrangements between Dexia, FMS and Reliance Rail as meeting the requirements for a refinancing of all of the Debt for the purpose of clause 7.4(d) of the Senior Inter-creditor Deed. The Trustees of course may only follow instructions to enter the Proposed RCD "to the extent [the instructions] are in accordance with the Debt Financing Documents": Senior Trust Deed clause 7.1.
43. One of the Debt Financing Documents, the Senior Inter-creditor Deed, provides in clause 7.4(d): "The Obligors may raise Financial Indebtedness to refinance all (and only all) of the Debt without the approval of any Creditor if: (d) the Financial Indebtedness is raised in a sufficient amount and manner to ensure all Creditors are Finally Paid at the same time upon first raising of the Financial Indebtedness…"
44. The Trustees submit on this application that "all" the Debt is being refinanced within the meaning of clause 7.4(d). This is because although Dexia and FMS will continue to provide finance, that finance will be provided upon new terms, which are contained in the CPI Bond Trust Deed Amendment Deed, an instrument which the Proposed RCD requires to be entered to amend the Senior Bond Trust Deed. The Trustees submit all the Debt is being refinanced on the amended Senior Bond Trust Deed rather than in accordance with the Debt Finance Documents, which documents (other than the Senior Bond Trust Deed, as amended) are indeed terminating as a result of the transactions provided for in the Proposed RCD.
45. The Trustees are justified in acting on the basis that, upon entry into the Proposed RCD, they will comply with in Clause 7.4(d) of the Senior Inter-creditor Deed as "all" the Debt regulated by the Debt Finance Documents is being refinanced as none of it is remaining as it was. Moreover, by reason of the confirmation which Dexia and FMS are giving in clause 6.1(a)(iv)(D) of the Proposed RCD they are no longer "Senior Creditors" and thereby they are no longer "Creditors" for the purpose of clause 7.4(d) of the Inter-creditor Deed.
46. This advice may be given, notwithstanding the requirements for a Special Quorum Senior Bondholder Resolution in clause 5.2 (c) of Schedule 2 of the Senior Bond Trust Deed. Schedule 2 clause 5.2 requires the passage of a Special Quorum Senior Bondholder Resolution of Senior Bondholders for matters that include (c) "the exchange or substitution or any Senior Bonds for, or the conversion of those Senior Bonds into, other debt or equity securities or other obligations…" By their amended terms, the Senior Bonds are not being transformed into "other debt or equity securities": they are still in the nature of senior bonds.
47. Thus as indicated the Trustees are justified in acting on the basis that upon entry into the Proposed RCD they will comply with in Clause 7.4(d) of the Senior Inter-creditor Deed.

Conclusion and Orders

1. The Court's advice is that the entry into the Proposed RCD by the Trustees is consistent with their duties as trustees and, upon the assumptions made, the Court will give them the directions and advice they request in the Further Amended Summons.
2. The Court therefore makes the following orders and directions: 1. The first plaintiff would be justified in: 1. relying on an Extraordinary Senior Bondholder Resolution (as defined in the Senior Bond Trust Deed) as an instruction by Senior Bondholders to enter into, and perform its obligations and exercise its rights under, the proposed NSW Rolling Stock PPP Refinancing Coordination Deed in, or substantially in the form which appears at pages 841 to 1016 of Exhibit "AR-1" (Proposed RCD); and 2. relying on an Extraordinary Junior Bondholder Resolution (as defined in the Junior Bond Trust Deed) as an instruction by Junior Bondholders in order to enter into, and perform its obligations and exercise its rights under, the Proposed RCD. 1. Upon receiving instructions of the kind identified in paragraphs 1(a) and 1(b), the first plaintiff would be justified in entering into and performing its obligations under the Proposed RCD. 2. Upon entering in to the Proposed RCD, the first plaintiff would be justified in relying upon the information concerning any indemnity claims by Senior Bondholders and Junior Bondholders under clause 8.1 and 8.2 of the Common Terms Deed which is known to the first plaintiff as at the date of provision by it of, and for the purposes of provision by it of, notice of the Senior Bond Amount and the Junior Bond Amount (as each term is defined in the Proposed RCD) under clauses 4.8(a)(ii) and 4.8(a)(iii) of the Proposed RCD respectively, provided that such notice is given after 12 noon today. 3. The second plaintiff would be justified in entering into and performing its obligations under the Proposed RCD. 4. Upon entering into the Proposed RCD, the second plaintiff would be justified in reassigning the Mortgaged Property and releasing the Charged Property under clause 2.10 of the Global Security Deed upon receipt by it of irrevocable MT202 SWIFT messages confirming that all payments contemplated under clauses 5.1 (other than those contemplated under clauses 5.1(b)(x), 5.1(b)(xi) and 5.1(a)(xv)) have been made, as provided for in clause 6.1 of the Proposed RCD. 5. The plaintiffs have liberty to apply on 24 hours' notice or such shorter time as the Court allows.

Amendments 04 April 2019 - amendments complete - not restricted. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 04 April 2019