FEDERAL COURT OF AUSTRALIA

Trust Company (Nominees) Limited, in the matter of Angas Securities Limited v Angas Securities Limited (No 3) [2016] FCA 895

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to section 283HB(1)(g) of the Corporations Act 2001, the court orders that:

(a)    An otherwise valid written proxy, in order to be able to be counted on the extraordinary resolution set out in the Notice of Meeting accompanying the Explanatory Statement forwarded by the defendant to debenture holders on 26 July 2016 (the extraordinary resolution), must be received by Computershare by email, facsimile or post by no later than 5.00pm (ACST) on 10 August 2016 (the closing time), save that, in the case of an otherwise valid written proxy sent by post received after that time, but post-marked no later than 10 August 2016, then such a written proxy will also be counted.

(b)    All otherwise valid written proxies sent by post, which are received after the closing time but post-marked after 10 August 2016 shall be separately recorded by Computershare, tallied, and the result of said tallying included in any separate report provided by Computershare to the defendant and/or the court.

(c)    All otherwise valid written proxies sent by post, will remain valid proxies for the purpose of voting on the extraordinary resolution provided that:

(i)    they are post-marked no later than 10 August 2016 (inclusive); and

(ii)    they have not been revoked by subsequent written proxy (where such subsequent written proxy is post-marked no later than 10 August 2016 (inclusive) and received by Computershare at any time prior to the closing time).

(d)    The plaintiff may send a short notice to debenture holders by email or post explaining the effect of these orders in the form attached to these orders.

2.    Costs reserved.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

BEACH J:

1    The present application involves the procedures to be followed at a meeting of debenture holders in Angas Securities Limited (Angas) to be held on 11 August 2016 to consider a resolution to approve amendments to the relevant trust instrument to modify a run-off proposal the subject of previous court applications and approval by me.

2    The background to the present application is set out in my reasons published on 28 July 2015 and 14 August 2015. The present reasons should be read with those reasons (see (2015) 107 ACSR 464; [2015] FCA 772 and [2015] FCA 861).

3    The Trust Company (Nominees) Ltd (the Trustee) and Angas are parties to a Trust Deed for First Ranking Debenture Stock dated 19 July 2000 (as amended and supplemented from time to time) (the Trust Deed). The Trust Deed was entered into pursuant to s 283AA(1) of the Corporations Act 2001 (Cth) (the Act) in respect of debentures issued by Angas. As at 10 July 2015, Angas had issued $219.65 million of fixed interest debenture securities; no further debentures have been issued as a result of various freezing orders in place.

4    Currently, Angas is implementing a run-off proposal designed to repay debenture holders. But the implementation of the run-off proposal has not met the forecasts upon which it was originally based. Accordingly, Angas is in effect seeking debenture holders’ approval to modify the current run-off proposal. Ultimately, however, the Trustee will need to execute a formal variation to the Trust Deed. Further, Court approval and appropriate orders will be necessary to effect any variation to the Trust Deed and the run-off proposal.

5    The Trustee for its part is seeking to press its originating application seeking orders designed to impose an external administration regime under a first ranking charge over the assets of Angas in favour of the Trustee to secure the payment of moneys owing by Angas to debenture holders.

6    On 22 July 2016 I made orders convening a meeting of debenture holders on 11 August 2016. Subsequent to that meeting and taking into account any resolution passed at that meeting, I will then decide whether I should further modify the run-off proposal or accede to the Trustee’s application, the latter option having the effect of placing Angas and its assets under external administration.

7    On 3 August 2016, I made orders which, in effect, varied the procedures applicable to the meeting as set out in the Trust Deed, particularly concerning proxy voting. Schedule 3 of the Trust Deed sets out rules relating to meetings, resolutions and notices for the holding of debenture holders’ meetings. The orders of 3 August 2016 were made pursuant to the Court’s power under s 283HB(1)(g) of the Act. These are my reasons for making such orders.

BACKGROUND

8    On 9 June 2015, I made orders which, inter alia, provided for distributions to be made to Angas’ debenture holders on certain dates (30 October 2015, 29 February 2016 and 30 June 2016), with a final distribution (together with any outstanding interest) to be made by 30 December 2016 (the Run-Off Orders).

9    At the meeting of debenture holders on 10 August 2015, the debenture holders by extraordinary resolution approved the regime contemplated by the Run-Off Orders. On 14 August 2015, I declared that for the purpose of giving effect to the Run-Off Orders, the Trustee was justified in making the amendments to the Trust Deed approved by the extraordinary resolution of debenture holders and that the implementation of the Run-Off Orders accorded with the Trustee’s duties under the Trust Deed and the Act.

10    On 31 May 2016, the parties provided an update to me on the status of the run-off of Angas’ debenture loan book. Angas requested that the matter be listed for directions to consider its proposal to further amend the Run-Off Orders and the Trust Deed as the run-off had not met the relevant forecasts or time lines.

11    As at 31 May 2016, Angas had made payments to debenture holders pursuant to the Run-Off Orders, comprising 30 cents in the dollar. A further distribution of 10 cents in the dollar was due to be made on 31 May 2016, such payment being part of a 20 cents in the dollar payment originally due in February 2016 but extended by majority resolution of the Loans Realisation Committee. Moreover, under the Run-Off Orders, a further 10 cents in the dollar distribution was also due on 30 June 2016. It would appear that Angas took the view that it would not have sufficient funds to make the two 10 cents in the dollar distributions on 31 May 2016 or on 30 June 2016 due to delays in realising sufficient assets. Angas also apparently formed the view that it was unlikely that it would complete the loan realisation process by 31 December 2016 as required by the Run-Off Orders. 

12    Angas proposed amendments to the Run-Off Orders and the Trust Deed, which included amending the dates and amounts of the remaining interim distributions to debenture holders, extending the redemption date for debentures such that the period of the run-off would be extended to 30 June 2017 (with discretion for the Loans Realisation Committee to grant one further extension of three months), and suspending the payment of interest on debentures from 1 August 2016 (the Amended Run-Off Proposal). Angas considered that these changes would provide Angas with more time to complete the asset realisation process. Angas proposed calling a meeting of debenture holders on 11 August 2016 to seek approval for the Amended Run-Off Proposal from the debenture holders.

13    In the light of these developments, I made orders on 7 June 2016 which provided, inter alia, that:

(a)    Angas file and serve an interlocutory application and supporting affidavit in relation to the Amended Run-Off Proposal;

(b)    ASIC and the Trustee file and serve any affidavits and interlocutory applications concerning pursuing the relief under the Trustee’s originating application;

(c)    Angas prepare a draft updated explanatory statement to debenture holders (updated explanatory statement) which disclosed material information necessary for debenture holders to vote at the foreshadowed meeting of debenture holders on 11 August 2016, and that Angas and the Trustee consult in good faith with each other and ASIC in relation to the updated explanatory statement; and

(d)    Angas’ interlocutory application and any interlocutory application filed by ASIC or the Trustee be heard on 22 July 2016.

14    Pursuant to those orders, Angas filed an interlocutory application on 15 June 2016 in relation to the Amended Run-Off Proposal seeking orders convening a further meeting of debenture holders.

15    On 21 July 2016, the Trustee filed an interlocutory application which, in essence, sought orders anterior to enforcing the first ranking charge Angas had granted in favour of the Trustee to secure the payment of moneys owing by Angas to debenture holders.

16    At a hearing before me on 22 July 2016, the Trustee resisted any amendments to the Run-Off Orders on the basis that, in the Trustee’s view, Angas’ directors should no longer be permitted to manage the run-off. It contended that the control of Angas’ real and personal property the subject of the charge should be placed under the control of a receiver. In the Trustee’s view, receivership was necessary to protect the debenture holders’ interests. This is a matter that I will have to decide in due course.

17    I considered that it would be in the debenture holders’ best interests to express their views on the Amended Run-Off Proposal so that I could then consider the appropriate course to take. Further, any amendment to the Trust Deed, in the present circumstances, will require an extraordinary resolution. As such, on 22 July 2016 I approved the form of a notice of meeting and explanatory statement to be sent to debenture holders and for the convening of a meeting of debenture holders. I made the following orders:

1.    Pursuant to section 283HB(1)(g) of the Corporations Act 2001 (Cth) (the Act), a meeting of persons who were registered as holding debentures issued by the defendant at 9:30am (AEST) on 22 July 2016 (Debenture Holders) be convened on 11 August 2016 for the purpose of Debenture Holders voting on the Extraordinary Resolution proposed in the Explanatory Statement (defined in order 2).

2.    The defendant may issue the Notice of Meeting and Explanatory Statement to all Debenture Holders and any persons who were registered as holding redeemable preference shares issued by the defendant at 9:30am (AEST) on 22 July 2016 (RPS Holders) in substantially the form attached to these orders and marked “A” (Explanatory Statement).

3.    Pursuant to section 283HB(1)(g) of the Act, the Explanatory Statement be communicated to Debenture Holders and RPS Holders by 26 July 2016.

4.    Pursuant to section 283HB(1)(g) of the Act each Debenture Holder be entitled to one vote at the meeting for each complete parcel of $10,000 debentures they held on 9:30am (AEST) on 9 August 2016.

5.    This proceeding be listed for further hearing at 9:30am on 19 August 2016, during which the Court may make orders based on the outcome of the Debenture Holders’ vote on the Extraordinary Resolution contemplated by paragraph 1 above.

[…]

18    Pursuant to these orders, a meeting of debenture holders is to be held on 11 August 2016. At that meeting, the debenture holders will be asked to approve, by extraordinary resolution, proposed amendments to the Trust Deed which are intended to give effect to the Amended Run-Off Proposal, and which broadly provide for:

(a)    the dates and amounts of the remaining interim payments to be amended so that instead of making interim payments in fixed amounts on fixed dates, Angas would make part repayments in amounts determined by Angas;

(b)    the redemption date for all debentures to be extended from 31 December 2016 to 30 June 2017 or such later date, being no later than 30 September 2017, as is approved by the Loans Realisation Committee; and

(c)    interest payments on debentures to be suspended from 1 August 2016, but with interest to continue to accrue at 4% per annum, with payment of this suspended interest to be made to debenture holders after the principal on their debentures has been paid in full, or if Angas has insufficient assets remaining to pay the suspended interest in full, payment of their pro rata share.

19    A hearing has also been listed for 19 August 2016 at which (or thereafter) the Court may make orders based on the outcome of the debenture holders’ meeting or may accede to the position advanced by the Trustee concerning external administration.

20    Further, at the hearing on 22 July 2016 I foreshadowed that I would allow the Trustee to provide a statement to debenture holders setting out its views on the Amended Run-Off Proposal so that the Trustee’s position would be put to debenture holders prior to the meeting scheduled for 11 August 2016. But on that occasion I did not make any formal orders in this regard. The understanding at that hearing was that the Trustee would prepare a draft statement, Angas and ASIC would provide comments on the draft statement, the parties would seek to agree on a form of document, and failing this the matter would be brought back before me for adjudication on any differences.

21    As it turned out, the parties were not able to agree on the form of the Trustee’s statement. As such, a hearing was held by me on 29 July 2016, at which I provided advice in relation to the Trustee’s draft statement and made appropriate directions. Relevantly, I ordered the following:

[…]

2. Pursuant to section 283HA of the Corporations Act 2001 (Cth) and section 63 of the Trustee Act 1925 (NSW) the plaintiff is directed and advised that it may, if it so chooses:

(a)    issue a letter to the debenture holders of the defendant in the form attached as annexure A to these orders; and

(b)    attend the meeting of the debenture holders of the defendant on 11August 2016 to make any statement or answer any question as it sees fit.

[…]

22    At the hearing on 29 July 2016, Angas agreed that it would facilitate dispatch of the Trustee’s statement via Computershare.

23    On 1 August 2016, the Trustee’s solicitors contacted my chambers seeking an urgent hearing on the basis that Angas’ solicitors had failed to confirm whether the Trustee’s statement had been sent. Accordingly, a hearing was listed the next day.

24    On the morning of 2 August 2016, I heard the parties in relation to the status of the dispatch of the Trustee’s statement. The following became apparent to me. On Friday 29 July 2016 at 6.19pm, the Trustee’s solicitors forwarded to Angas’ solicitors the final form of the Trustee’s statement to be circulated to debenture holders via Computershare. Subsequently that evening, Angas provided the statement to Computershare. But as Computershare had received the letter and attached proxy form after business hours on Friday 29 July 2016, Computershare could only schedule the dispatch of the documents on Monday 1 August 2016. On Monday 1 August 2016, Computershare faced delays dispatching the documents because it encountered formatting issues with the proxy form.

25    I stood the matter down until the afternoon of 2 August 2016 to allow counsel for Angas to seek proper instructions on the time for dispatch of the Trustee’s statement and attached proxy form to debenture holders. When the matter resumed that afternoon, Angas assured the Court that the Trustee’s statement would be dispatched later that afternoon by priority post so that the debenture holders would receive the Trustee’s statement and proxy form by 3 August 2016; some debenture holders would also receive it earlier by email.

26    There was urgency in having the Trustee’s statement and proxy form dispatched to debenture holders given:

(a)    the importance to debenture holders of having the benefit of the Trustee’s statement before making a decision (including as to the submission of any proxy);

(b)    the important role of proxies in determining the outcome of the last debenture holders’ meeting on 10 August 2015;

(c)    the delays that could be encountered in documents reaching debenture holders who resided outside metropolitan areas; and

(d)    that the date of the debenture holders’ meeting was quickly approaching.

27    At the hearing on 2 August 2016, counsel for the Trustee also raised the issue that there may not be sufficient time for the proxies to be received in time for the meeting. As such, there was a risk that a considerable number of proxies would be deemed invalid under Schedule 3 of the Trust Deed. The Trustee was reluctant to request delaying the debenture holders’ meeting, but also did not wish to risk disenfranchising debenture holders due to the proxies not being received in time before the meeting. The Trustee proposed a solution whereby the Court could make orders truncating the time for proxy lodgement and to allow certain proxies received by mail after the meeting to be taken into account and treated as valid. However, Angas raised a point as to whether the Court had the power to make such orders as they would have the effect of varying Schedule 3 to the Trust Deed. In the circumstances, and at the request of Angas, I adjourned the matter to 3 August 2016 to hear further submissions on whether, if I were to make the proposed orders, such orders would be within power. On 3 August 2016, I heard those submissions and after hearing such submissions as to the existence and exercise of the relevant power(s), I made the 3 August 2016 orders. These are my reasons.

STATUTORY POWER

28    Sections 283HA and 283HB of the Act provide:

283HA General Court power to give directions and determine questions

If the trustee applies to the Court for any direction in relation to the performance of the trustee’s functions or to determine any question in relation to the interests of the debenture holders, the Court may give any direction and make any declaration or determination in relation to the matter that the Court considers appropriate. The Court may also make ancillary or consequential orders.

Note:    Under this section, the Court may order a meeting of debenture holders to be held, see section 283EC.

283HB Specific Court powers

(1)    If the trustee or ASIC applies to the Court, the Court may make any or all of the following orders:

(a)    an order staying an action or other civil proceedings before a court by or against the borrower or a guarantor body;

(b)    an order restraining the borrower from paying any money to the debenture holders or any holders of any other class of debentures;

(c)    an order that any security for the debentures be enforceable immediately or at the time the Court directs (even if the debentures are irredeemable or redeemable only on the happening of a contingency);

(d)    an order appointing a receiver of any property constituting security for the debentures;

(e)    an order restricting advertising by the borrower for deposits or loans;

(f)    an order restricting borrowing by the borrower;

(g)    any other order that the Court considers appropriate to protect the interests of existing or prospective debenture holders.

(2)    In deciding whether to make an order under subsection (1), the Court must have regard to:

(a)    the ability of the borrower and each guarantor to repay the amount deposited or lent as and when it becomes due; and

(b)    any contravention of section 283GA by the borrower; and

(c)    the interests of the borrower’s members and creditors; and

(d)    the interests of the members of each of the guarantors.

Note:    The Court may order a meeting of debenture holders to be held (see section 283EC).

29    I have previously observed the following matters concerning the above provisions’ construction and operation.

30    First, the scope and exercise of any power under either provision must be considered in the context of Chapter 2L generally and its purpose and object.

31    Second, s 283HB confers on the Court a broad remedial and protective jurisdiction and associated powers, with the debenture holders as the principal beneficiaries thereof. Nevertheless, the powers are confined by those enumerated in s 283HB, albeit that s 283HB(1)(g) from one perspective may be seen to be a plenary power.

32    Third, the Court’s powers under s 283HB are intended, inter alia, to supplement the armoury of relief available to the Trustee under the general law and under the specific terms of the Trust Deed.

33    Fourth, although s 283HB(1) contains a broad discretionary power, the Court must have regard to the enumerated matters in s 283HB(2). As to such enumerated matters:

(a)    The fact that various factors must be considered does not entail that other factors not mentioned may not be considered.

(b)    Further, the structure of s 283HB indicates that the mandatory factors and their weight take priority over any non-mandatory factors.

(c)    Further, in terms of the priority or weight to be given to the matters referred to in s 283HB(2) inter se, strictly no weighting or priority is expressed. Nevertheless, the structure, context and purpose of the provisions would tend to suggest that the consideration referred to in s 283HB(2)(a) should be accorded greater weight than, say, s 283HB(2)(c) or (d), assuming, in relation to (c), that one is dealing with creditors other than debenture holders. But overall, the structure and purpose of Chapter 2L is to protect debenture holders. Moreover, this is reflected in the text of s 283HB(1)(g).

34    Fifth, once the Court has considered the matters in s 283HB(2), it is open to the Court to make any order under s 283HB(1) that is calculated to protect the interests of debenture holders. So much may also be said concerning the making of ancillary or consequential orders under s 283HA, although I have not been requested to exercise any power thereunder in terms of the procedures for the 11 August 2016 meeting.

35    Sixth, s 283HB(1)(g) confers power on the court to order the convening of a meeting of debenture holders and to regulate the procedure as to the conduct of such a meeting including the form and propounding of any resolution, who can vote and the manner of voting including any poll to be conducted, providing that such an order is appropriate to protect the interests of debenture holders. Indeed, this is confirmed in one sense by s 283EC, albeit that in the present case I am only considering the exercise of power under s 283HB.

36    Seventh, in addition to the power under s 283HB that can be exercised concerning the convening and conduct of any meeting of debenture holders, s 1319 is also of assistance. Section 1319 provides:

Where, under this Act, the Court orders a meeting to be convened, the Court may, subject to this Act, give such directions with respect to the convening, holding or conduct of the meeting, and such ancillary or consequential directions in relation to the meeting, as it thinks fit.

37    Now as I have said, I have ordered that a further meeting of debenture holders be convened for 11 August 2016. I have also made orders affecting the voting at such a meeting, particularly in respect of proxy voting. I accept that in doing so I have made orders inconsistent with the terms of the Trust Deed with respect to such matters, particularly Schedule 3.

38    An issue has been raised as to whether I have the power in such circumstances to vary the operation of the Trust Deed. I consider that I have the power to make the orders sought for reasons that include the following:

(a)    First, as a matter of construction, the statutory powers when construed in the context of the relevant statutory objects are sufficiently broad to empower the orders that I have made. Moreover, any such exercise of statutory power necessarily overrides the Trust Deed. Indeed, at a more general level, the Trust Deed and the parties’ rights, duties and obligations thereunder are subordinate generally to Chapter 2L and the Court’s supervisory role thereunder; ss 283AA, 283AB, 283BA, 283DA, 283HA and 283HB make this readily apparent.

(b)    Second, it may be queried as to whether I have, by the making of these orders, expressly or impliedly varied the terms of the Trust Deed as such, as opposed to varying or suspending the application of its terms to the particular meeting that I have ordered to be convened.

(c)    Third, whether or not I have effected such a variation, I consider that I have power to do so under the statutory provisions that I have identified and also under more general statutory provisions (see for example the Trustee Act 1925 (NSW)) or equitable principles applying to the Court’s exercise of jurisdiction over trustees and trusts (see In the matter of Banksia Securities Limited (in liquidation) [2016] NSWSC 357 at [34] and [35] per Black J). Moreover, in relation to the orders that I have made, there is some analogy with the types of orders dealt with in Amcom Telecommunications Limited, in the matter of Amcom Telecommunications Limited (No 3) [2015] FCA 596 (at [14], [36], [38] and [57] to [63] per McKerracher J) applying s 1319 in the context of a scheme meeting concerning a scheme of arrangement.

(d)    Fourth, in any event, I could in the exercise of and given the breadth of the said relevant statutory powers, in advance of the meeting otherwise excuse foreshadowed non-compliance with the terms of the Trust Deed. But if I have the statutory power under Chapter 2L to achieve this indirect result, there is no good reason to deny the existence of the power to achieve the result directly. To distinguish such scenarios would be a triumph of form over substance.

(e)    Fifth, let it be assumed that I have no such statutory power supporting the 3 August 2016 order so that what I have ordered would not be capable of producing, depending upon the result of the voting, an “Extraordinary Resolution” within the meaning of the Trust Deed. Nevertheless, in substance, the resolution produced would still be a fact relevant to the exercise by the Court of any power or discretion in considering the final relief sought by the Trustee in its originating application or the relief sought by Angas to facilitate or implement the Amended Run-Off Proposal.

EXERCISE OF POWER

39    In my view, the real question is not the existence of power, but rather its exercise.

40    I have little doubt as to the appropriateness of the orders that I have made.

41    First, their purpose and effect is clearly to benefit the debenture holders in giving them further time to consider the Trustee’s response to the Amended Run-Off Proposal for the purpose of properly exercising their right to vote including by way of proxy.

42    Second, there is no prejudice to either Angas or the Trustee flowing from the orders that I have made. Indeed, the Trustee sought even more expansive orders having the effect of varying the Schedule 3 procedures, which broader variations I did not accede to.

43    Third, the orders sought will be conducive to achieving an outcome from the debenture holders’ meeting that is likely to put me in the best position of considering either to:

(a)    direct the Trustee to further amend the Trust Deed in accordance with any resolution passed at the meeting;

(b)    alternatively, to grant the relief sought by the Trustee in its originating application which will have the effect of imposing an external administration.

CONCLUSION

44    It is for the foregoing reasons that I made the 3 August 2016 orders and all the orders and ancillary directions made on 7 June, 22 and 29 July 2016.

Associate:

Dated:    5 August 2016