Supreme Court New South Wales Medium Neutral Citation: In the matter of Wollongong Coal Limited; In the matter of Jindal Steel & Power (Australia) Pty Limited [2020] NSWSC 614 Hearing dates: 29 April 2020 Date of orders: 29 April 2020 Decision date: 22 May 2020 Jurisdiction: Equity - Corporations List Before: Black J Decision: Orders made retrospectively extending time for satisfaction or waiver of conditions precedent to schemes of arrangement. Catchwords: CORPORATIONS – Schemes of arrangement – Where court has powers to retrospectively extend time to satisfy or waive conditions precedent – Whether power should be exercised Legislation Cited: - Corporations Act 2001 (Cth), ss 411, 1322(4)(d) - Uniform Rules of Civil Procedure 2005 (NSW), rr 1.12, 36.17 Cases Cited: - Kempe v Ambassador Insurance Company (Bermuda) [1998] 1 WLR 271 - Re AGL Gas Networks Ltd [2001] NSWSC 165 - Re Tawana Resources NL (No 4) [2019] FCA 75 - Re The Dominion Insurance Company of Australia Ltd [2013] NSWSC 898 - Re Wollongong Coal Ltd and Jindal Steel & Coal Australia Pty Ltd [2020] NSWSC 73 Category: Procedural and other rulings Parties: Wollongong Coal Limited (First Plaintiff) Jindal Steel & Power (Australia) Pty Limited (Second Plaintiff) Representation: Counsel: C R C Newlinds SC/N M Bender (Plaintiffs) I M Jackman SC (Certain scheme creditors) Solicitors: DLA Piper Australia (Plaintiffs) Gilbert & Tobin (Certain scheme creditors) File Number(s): 2019/384003 Judgment Nature of the application, background and affidavit evidence 1. By Interlocutory Process filed on 27 April 2020, the Plaintiffs, Wollongong Coal Limited ("WCL") and Jindal Steel & Power (Australia) Pty Ltd ("JSPAL") sought an order under rules 1.12 or 36.17 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") or s 1322(4)(d) of the Corporations Act 2001 (Cth) that certain time periods under schemes of arrangement approved by the Court on 14 February 2020 be extended. Specifically, WCL and JSPAL sought an order that the CP Satisfaction Long Stop Date (as defined) be extended to 1 April 2020 and the Settlement Long Stop Date (as defined) be extended to a date 7 days after the entry of the Court's orders, with that order to operate retrospectively from the date orders approving the schemes were made on 14 February 2020. The application was supported by creditors representing a substantial proportion of creditors by value and number, who were represented at the hearing. I made the orders sought at the conclusion of the hearing, on 29 April 2020. These are my reasons for doing so. 2. By way of background, Gleeson JA summarised the terms of and background to the relevant schemes in his judgment in respect of the second Court hearing in Re Wollongong Coal Ltd and Jindal Steel & Coal Australia Pty Ltd [2020] NSWSC 73, as follows: "The scheme companies are [JSPAL] and [WCL]; both are registered under the Corporations Act 2001 (Cth). [WCL] is an ASX-listed coal mining company. Its shares have been voluntarily suspended from trading since 13 December 2018. JSPAL is wholly owned by Jindal Steel & Power (Mauritius) Ltd (JSPML), which in turn is wholly owned by Jindal Steel & Power Ltd (JSPLI), the ultimate parent company of the Jindal Group. JSPML holds 60.38 per cent of the shares in [WCL]. The balance of the shares is held by the public. JSPAL borrows funds from JSPML and on-lends those funds to [WCL]. JSPAL also borrows funds from outside lenders and on-lends those funds to [WCL], under two facilities known as the Axis facility and the SBI facility. Those facilities are in default. [WCL] is a guarantor of the Axis and the SBI facilities. … ... The scheme meetings were held on 30 January 2020. The resolutions agreeing to the proposed schemes were overwhelmingly passed by the requisite majorities referred to in s 411(4)(a) of the Corporations Act. … [WCL] carries on the business of mining and producing coal for sale and export near Wollongong on the south-coast of New South Wales. Through two wholly-owned subsidiaries it owns two coal collieries known as Russell Vale and Wongawilli. Those collieries have not operated consistently for a number of years. The Russell Vale colliery has been placed on care and maintenance since 2015 following environmental and health safety concerns. Operations at Wongawilli have been intermittent in recent years and Wongawilli has been placed on care and maintenance since May 2019. As a consequence, [WCL] has struggled to finance their operations and has had difficulties making payments under its facilities with its secured lenders. In July 2019, [WCL] filed a final [Amended] Underground Expansion plan seeking regulatory approval to carry out an underground mining at Russell Vale. Subject to the schemes being approved, the directors of [WCL] expressed confidence in the explanatory statement [accompanying] the proposed schemes that mining operations will resume at Russell Vale in late 2020 or early 2021. The date that the directors of [WCL] now expect mining operations will resume is March 2021. The Explanatory Statement sent to lenders on [24 December 2020] stated that the existing facilities which are secured comprised: … (3) The SBI facility pursuant to which JSPAL, as borrower, and [WCL], among others, as guarantor, entered into a $US98,690,000 facility agreement in 2015 with SBI (Sydney) and SBI (Mauritius) Limited as the original lenders. The governing law of the SBI facility is New South Wales law: cl 25. As at 30 November 2019, the SBI facility had an aggregate outstanding amount of $US78,301,339. The facility is in default. On 19 September 2019, a notice of demand and acceleration was issued to JSPAL as borrower and [WCL], among others, as guarantor. An initial forbearance agreement entered into by the parties has been replaced by the restructuring support agreement; (4) The Axis facility pursuant to which JSPAL, as borrower, and [WCL], among others, as guarantor, entered into a $US69,000,000 facility agreement in 2015 with Axis Bank Ltd as the original lender (with an option to increase the facility by $US561,000,000). The governing law of the SBI facility was changed to New South Wales law on 19 December 2019, by a Consent letter between the Obligors and the Majority Lenders under the SBI facility. As at 30 November 2019, the Axis facility had an aggregate amount outstanding of approximately $US291,857,860. The facility is in default. … On 11 November 2019, JSPAL and [WCL] and nine lenders under the SBI and Axis facilities, referred to as the Consenting Creditors, entered into a Restructuring Support Agreement to give effect to the proposed restructuring by way of the schemes. Under the Restructuring Support Agreement as amended on 19 December 2019, the Consenting Creditors have agreed to support the schemes and their implementation on the terms of the Restructuring Support Agreement. The Consenting Creditors comprise all of the lenders under the SBI facility and a majority in number and 78.94[%] in value of the lenders under the Axis facility. … The effect of the schemes is to restructure the existing SBI and Axis facilities by offering the secured lenders the opportunity to participate in one of two rescheduled facilities described as Rescheduled Facility A (which provides for various reductions of principal amounts outstanding upon certain milestones occurring) or Rescheduled Facility B (which extends the repayment schedule). In outline, Rescheduled Facility A is subject to a reduction of up to 29 per cent in the amount of principal upon certain milestones being met. It will be repaid before Rescheduled Facility B and has a higher coupon rate with a margin of 4.5 per cent. Rescheduled Facility B facility will rank pari passu in respect of guarantees and security provided with Reschedule Facility A, but will be repayable in full and without any reduction in the principal amount, in three equal payments amount to one-third of the total outstanding under Rescheduled Facility B, such payments to be made on 30 September 2026, 30 September 2027 and 30 September 2028. Rescheduled Facility B has a lower margin than Rescheduled Facility A of 3 per cent and lenders will not be able to exercise their rights to enforce a security interest while the principal amount is outstanding under Reschedule Facility A." 1. The application was supported by voluminous evidence. By an affidavit dated 7 April 2020, Mr Milind Oza, who is a director of WCL and JSPAL updated the position as to the indebtedness of JSPAL, from that disclosed in affidavit evidence relied on in the first and second hearings in respect of the scheme. By his affidavit dated 13 April 2020, Mr Sanjay Sharma, the company secretary of WCL, referred to the second court hearing for the schemes and orders approving the schemes made by the Court, to certain conditions precedent to the scheme, and to the failure to make the "equalisation payments" contemplated by the schemes when due. Mr Sharma also referred to events in India that had impacted on the funding of WCL by its overseas parent companies, JSPML and JSPLI, and particularly on the ability to obtain approval for transfer of funds out of India to provide such funding. Mr Sharma recognised that, by reason of the failure to satisfy conditions precedent to the scheme, it had terminated on 30 March 2020, subject to the application which is now brought to the Court to retrospectively extend the time for satisfaction of those conditions precedent. WCL had announced that matter to Australian Securities Exchange ("ASX") on 3 April 2020. Mr Sharma also addressed subsequent developments in respect of the companies, including dealings with secured scheme creditors and his assessment of future prospects of the WCL Group. 2. By his affidavit dated 13 April 2020, Mr Benjamin Campbell, who is one of the scheme administrators, referred to the steps which had been completed as at the date of termination of the schemes and to agreements then reached between the scheme companies and consenting scheme creditors to extend the CP Satisfaction Long Stop Date and Settlement Long Stop Date (as defined) under the scheme before it terminated on the failure to satisfy the Pre-Settlement Date Conditions Precedent (as defined). Mr Campbell indicated his consent to act as scheme administrator if the schemes were reinstated by the orders now sought from the Court. By his affidavit dated 13 April 2020, Mr Christopher Hill, who is a scheme administrator with Mr Campbell, also confirmed his continuing consent to act as a scheme administrator in the same circumstances. 3. By a second affidavit dated 22 April 2020, Mr Sharma referred to the circumstances in which the scheme companies and certain scheme creditors representing 79% in value and 80% in number of the secured scheme creditors had entered into an agreement concerning payments due to the secured scheme creditors, including the equalisation payments and other payments required by conditions precedent to the scheme, and revised terms in respect of payments in relation to a facility which were due and unpaid on 31 March 2020. Mr Sharma referred to the documentation of those arrangements in a letter dated 20 April 2020 described as the Second Omnibus Amendment Letter. 4. By an affidavit also dated 22 April 2020, Mr Nishant Baranwal, who is vice president and head of investor relations at JSPLI addressed the position in respect of the background to the scheme, creditors and financing facilities in respect of JSPAL and JSPLI, and the position of two creditors who had not opposed the schemes but had not then consented to the Second Omnibus Amendment Letter, the position of a third creditor, and attempts to obtain Indian central bank approval for the transfer of funds from India to support the scheme companies. An affidavit dated 23 April 2020 of Mr Manju Dudeja, the Executive Vice President (Banking Relations) at JSPLI also addressed JSPLI's engagement with central banking authorities in India in respect of the relevant funds transfer. 5. By a further affidavit dated 28 April 2020, Mr Sharma referred to the fact that legal representatives for the consenting creditors had confirmed the release from escrow of an acknowledgement page for an additional creditor, Arkkan Fund Opportunities Ltd, in respect of the Second Omnibus Amendment Letter, with the result that all Consenting Creditors (as defined) had provided their consent to that letter. Mr Sharma also referred to the fact that Madison Pacific, acting as Axis Agent (as defined) under the Rescheduled Axis Facility and SBI Agent (as defined) under the Rescheduled SBI Facility (as defined) had confirmed the release from escrow of its acknowledgement pages to the Second Omnibus Amendment Letter. Mr Sharma noted that the Consenting Creditors, including Arkkan, comprised 88.23% of creditors in number and 84.93% in value of the total Rescheduled Facility A commitment and 88.33% in number and 83.02% in value of the total commitment under Rescheduled Facility A and Rescheduled Facility B. Mr Sharma also referred to notice of these proceedings given to secured scheme creditors and to announcements made to ASX in that regard. 6. By her affidavit dated 28 April 2020, Ms Mabel Wong, who is a solicitor employed by the firm of solicitors acting for WCL and JSPAL referred to service of relevant documents upon interested parties and upon the Australian Securities and Investments Commission ("ASIC"), which had advised that it did not propose to make any submissions in respect of the application and did not appear at the hearing of the application. 7. By a supplementary note provided to the Court for the hearing on 29 April 2020, the Plaintiffs addressed the circumstances in which the First Omnibus Letter (as defined) was executed and took effect, and the authority of Madison Pacific Trust Limited as facility agent to effect the relevant amendments and to release its signature to that letter from escrow arrangements. The Plaintiffs refer to instructions given by the legal representatives of relevant creditors to Madison Pacific to execute that letter on behalf of those creditors, and it is now apparent that those instructions extended to all of the consenting creditors. I am satisfied that that authority has been established, and on that basis the extension of time sought to satisfy the CP Long Stop Satisfaction Date (as defined) to 1 April 2020 would be sufficient to allow the scheme to have continued operation. 8. In summary, on 14 February 2020, Gleeson JA made orders approving the schemes, subject to a minor amendment; those orders were lodged with ASIC on that date and certain conditions under the schemes were satisfied by that date, and they became effective on that date. However, cl 15 of the schemes provided for their termination, relevantly, if certain conditions precedent were not satisfied or waived on or before 11:59pm on the CP Satisfaction Long Stop Date (as defined) or the Settlement Date did not occur on or before 11:59pm on the Settlement Long Stop Date (as defined). The relevant conditions precedent included the making of specified equalisation payments, which were not made within the requisite times. The schemes then terminated in accordance with their terms at the close of 29 March 2020, because the CP Satisfaction Long Stop Date passed without those payments that were Pre-Settlement Date Conditions Precedent (as defined) being made or the secured scheme creditors providing a waiver. A requisite majority of secured scheme creditors then provided that waiver on 30 March 2020. As I noted above, the Plaintiffs now seek orders extending the CP Satisfaction Long Stop Date (as defined) and the Settlement Long Stop Date (as defined) with the result that the schemes would no longer terminate on 29 March 2020. That result is supported by the scheme creditors who appear in this application, who are the substantial majority of scheme creditors by number and value. I return to the significance of that matter below. Submissions and determination 1. Mr Newlinds, who appeared with Mr Bender for the Plaintiffs, referred to three possible sources of the Court's power to make the orders sought by the Plaintiffs. I am satisfied that the Court has that power, although different views have been expressed in the case law as to the basis of that power. 2. First, rule 1.12 of the UCPR provides that the Court may, by order, extend or abridge any time fixed by the UCPR or any judgment or order of the Court, including after that time expires. That rule is applicable in Corporations matters by r 1.10 of the Supreme Court (Corporations) Rules 1999 (NSW). That power allows the Court to extend or abridge the time in which steps are required to be taken under a scheme of arrangement under the Corporations Act on the basis that, once a scheme is approved at the second Court hearing, it is subsumed into the order of the Court: Re AGL Gas Networks Ltd [2001] NSWSC 165 at [47]; Re The Dominion Insurance Company of Australia Ltd [2013] NSWSC 898 at [33]. I recognise that the Privy Council reached a different view in Kempe v Ambassador Insurance Company (in liq) [1998] 1 WLR 271, but that decision has not been applied in subsequent Australian cases. I should follow those Australian cases, given the desirability of consistency of decision-making in matters arising under the national corporations legislation. 3. Second, Mr Newlinds points to r 36.17 of the UCPR which allows a Court, on the application of a party or of its own motion, to correct a mistake or error arising from an accidental slip or omission in a judgment or order. In Re AGL Gas Networks above, Santow J relied on that provision in amending a scheme with retrospective effect where a condition precedent to the operation of the scheme had not been satisfied by reason of a slight delay in the receipt of an amendment to a necessary statutory authorisation. Santow J there referred to authority that the application of the slip rule is not confined to giving effect to the intention of the Judge at the time when the Court's order was made or judgment given, and extends to the intention which the Court would have had, but for the failure that caused the accidental slip or omission. The reference to an "accidental slip or omission" is there to the making of an order, or the approval of a scheme, in a form that would not be satisfied given subsequent events. Santow J also observed that the Court's inherent power to amend an entered judgment which did not represent the parties' true intention could be used to extend a time limit contained in a scheme. His Honour there observed (at [33]) that both the parties and the Court were operating under a mistake of fact that the relevant authorisation would be obtained prior to the specified time and: "If the parties or the Court had been aware of the true state of affairs, I find that it is inevitable that the Court would have made an order altering the terms of the order and the scheme pursuant to s 411(6) of the Corporations Law." 1. In Re Dominion Insurance Company of Australia Ltd above, Brereton J also referred to Re AGL Gas Networks Ltd. His Honour there noted his reservations as to whether the Court's ability to extend the time fixed by any judgment or order would extend so far, but considered that he should follow the prevailing Australian authority including that case. His Honour also expressed doubt (at [35]) as to whether a failure to provide a longer period for satisfaction of a condition precedent could qualify as a "slip", which I share, and also doubted that a scheme, being a creature of statute, could be amended under the inherent jurisdiction, where the statute prescribes the procedures for approval and authority establishes that, once approved, a scheme cannot be amended other than by following the same procedures. 2. As Mr Newlinds points out, the approach taken by Santow J in Re AGL Gas Networks Ltd above was approved by Banks-Smith J in Re Tawana Resources NL (No 4) [2019] FCA 75 at [39]-[40]. That approach is plainly constructive and allows the Court to rectify an unanticipated error or delay that would otherwise have the result that a scheme would fail. It does seem to me that there is a degree of artificiality in the reasoning supporting that approach, so far as it relies on the Court's and the parties' lack of knowledge at the date of the orders of a matter that only occurred on a subsequent date. 3. Mr Newlinds also refers to s 1322(4)(d) of the Corporations Act which relevantly permits the Court to make an order extending the period for doing any act, matter or thing under the Corporations Act or in relation to a corporation, including an order extending a period which had already expired. That power may be exercised where no substantial injustice has been or is likely to be caused to any person. In Re AGL Gas Networks above, Santow J left open the possibility that that section would also be available to extend the period for satisfaction of conditions precedent to the effectiveness of a scheme of arrangement which was approved by the Court, and Mr Newlinds submitted that the better view was that that section applied in this situation. 4. I have no doubt, on the authorities, as to the Court's ability to extend the time for satisfaction of the relevant conditions precedent in this matter. I would myself prefer to base that extension on r 1.12 of the UCPR, treating the terms of the scheme as having been subsumed into the Court's orders in respect of the scheme. However, if it were necessary to do so, I would follow the decision of Santow J in Re AGL Gas Networks as to the operation of UCPR r 36.17, where that decision has been followed in subsequent cases and delivers a constructive outcome. It also seems to me that s 1322(4)(d) of the Corporations Act may well be applicable in the relevant circumstances although I, like other judges addressing this question, do not find it necessary to finally determine that question. 5. Mr Newlinds in turn submits that, on the premise where the Court has power to make the orders, there are strong similarities between this case and the facts of Re AGL Gas Networks. I accept that the failure to satisfy the conditions precedent arose from a short delay in the relevant waivers taking effect, and a longer time would have been allowed for the satisfaction of the conditions precedent if the parties had the benefit of hindsight. The failure to satisfy the conditions precedent by the specified dates and the failure of the schemes would deprive WCL, JSPAL and the consenting creditors of the benefits that they respectively expect from the schemes, and expose the companies to the risk of external administration which had been identified at the time the schemes were put before creditors for their approval. The fact that the schemes, and this application, has the support of a number of creditors in greater number and value than would be required for the statutory majorities to approve a scheme under s 411 of the Act is also a relevant factor, as Mr Newlinds point out. I also accept that there would be no practical utility and considerable wasted costs in requiring that a new meeting be convened to consider a new or revised scheme. It is no doubt possible, given the difficulties which have already been experienced, that future payments contemplated by the revised arrangements between WCL, JSPAL and the consenting creditors will be delayed or not made, but that does not seem to me to be reason to deprive WCL, JSPAL and creditors of at least the possibility that the schemes will achieve their intended objectives. 6. For these reasons, I made the orders sought by WCL and JSPAL, and supported by the consenting creditors, at the hearing on 29 April 2020. ********** 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: 27 May 2020