Supreme Court New South Wales Medium Neutral Citation: In the matter of RBS Group (Australia) Pty Ltd – RBS Group [2012] NSWSC 43 Hearing dates: 2 February 2012 Date of orders: 2 February 2012 Decision date: 02 February 2012 Jurisdiction: Equity Before: Ward J Decision: 1. Pursuant to section 411(4)(b) and section 411(6) of the Corporations Act 2001 (Cth) ("Act"), the scheme of arrangement between RBS Group (Australia) Pty Ltd ("RBSGA") and its member, having been duly agreed to in accordance with subsection 411(4)(a)(ii) of the Act at the meeting of the member of RBSGA in the form set out in the explanatory statement sent to the member of RBSGA, be approved, subject to the following alterations, namely: (a) in the definition of "RBSGA Existing Funding" the deletion of the words "the advance of $240 million from RBS Equities (Australia) Limited ("RBSGA Equities") to RBSGA" and the addition in lieu thereof of the words "all loans advanced to RBSGA by related bodies corporate of RBSGA"; and (b) in the definition of "RBSGA Hedging Arrangements", the addition of the words "(Australia) Limited ("RBS Equities") after the first occurrence of the words "RBS Equities", so that the schemE of arrangement is in the form set out in Annexure A to these orders ("Scheme"). 2. Pursuant to section 411(12) of the Act, RBSGA be exempted from the requirements of section 411(11) of the Act. 3. Pursuant to section 413(1) of the Act, as from the Implementation Date (as defined in the Scheme): (a) that part of the undertaking and property of RBSGA identified in Part 1 of Annexure "B" to these orders be transferred to, and vested in, RBS Alternative Investments (Australia) Pty Ltd without further act or deed of any party; (b) that part of the liabilities of RBSGA identified in Part 2 of Annexure "B" to these orders be transferred to, and become the liabilities of, RBS Alternative Investments (Australia) Pty Ltd without further act or deed of any party; (c) all legal proceedings pending by or against RBSGA which pertain to the RBSGA's Warrants Business (as defined in Annexure "B" to these orders) be continued by or against RBS Alternative Investments (Australia) Pty Ltd (as the case may be) without any further act or deed, other than an amendment of the record of the relevant court or tribunal for which RBS Alternative Investments (Australia) Pty Ltd will be responsible; and (d) all rights of holders of the financial products issued by RBSGA and described to Annexure C to these orders pursuant to the deeds poll executed by The Royal Bank of Scotland N.V. ("RBS N.V.") identified in Annexure D to these orders ("RBS N.V. Guarantees") be extinguished and the RBS N.V. Guarantees cease to have effect, without further act or deed of any party. 4. Liberty be reserved to any party to apply for any consequential orders as may be considered necessary or desirable under section 413 of the Act in connection with the transaction to be effected pursuant to the orders above. Legislation Cited: Companies Act 1985 (UK), s 425 Corporations Act 2001 (Cth), ss 411, 413, Pt 5.1 Financial Services and Markets Act (UK), ss 111, 112 Supreme Court (Corporations) Rules 1999 Uniform Civil Procedure Rules 2005, r 7.6 Cases Cited: ASC v Marlborough Gold Mines Ltd (1993) 177 CLR 485 Basis Capital Funds Management Ltd v BT Portfolio Services [2008] NSWSC 555 Brooklands Selangor Holdings Ltd v Inland Revenue Commissioner [1970] 2 All ER 76 Fraser v NRMA Holdings Ltd (1995) 55 FCR 452 FT Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Ply Ltd (1977) 3 ACLR 69 In Re AGL Gas Networks Ltd (2001) 37 ACSR 441 In Re NRMA Ltd (2000) 156 FLR 349 ING Funds Management Ltd v JP Morgan Nominees Australia Ltd [2009] NSWSC 59 John Alexander's Clubs Pty Limited v White City Tennis Club Limited (2010) 241 CLR 1 Permanent Trustee Co Ltd (2002) 43 ACSR 601 Re Adelaide Air Conditioning and Domestic Engineers Ltd (In Liq) [1972] 6 SASR 603 Re AGL Sydney Limited (1994) 13 ACSR 597 Re Crusader Ltd [1996] 1 Qd R 117 Re Investorinfo Ltd [2005] FCA 1848 Re Kalgoorlie Lake View Pty Ltd (2005) 56 ACSR 144 Re La Seda de Barcelona SA [2010] EWHC 1364 (Ch) Re Matine Ltd (1998) 28 ACSR 268 Re Norwich Union Linked Life Assurance Ltd [2004] EWHC 2802 (Ch) Re Professional Investment Holdings Limited (No 2) [2010] FCA 1336 Re Sonodyne International Ltd (1994) 15 ACSR 494 Re South Africa Supply and Coal Storage Co [1904] 2 Ch 268 Re T & N Ltd [2006] EWHC 1447 (Ch) Re: Hill Samuel Life Assurance (Unreported, 10 July 1995) SGIC Insurance Ltd v Insurance Australia Ltd (2004) 51 ACSR 470 Stork ICM Australia Pty Ltd v Stork Food Systems Australia Pty Ltd (2007) 25 ACLC 208 Texts Cited: Goode, Principles of Corporate Insolvency Law (4th ed) Category: Principal judgment Parties: RBS Group (Australia) Pty Ltd (Plaintiff) RBS Alternative Investments (Australia) Pty Ltd (First Defendant) The Royal Bank of Scotland N.V. (Second Defendant) The Royal Bank of Scotland PLC (Third Defendant) Graeme Brant (Fourth Defendant) File Number(s): 2011/375890 Publication restriction: Nil JUDGMENT 1. HER HONOUR: In this matter, RBS Group (Australia) Pty Ltd (RBSGA) sought various orders in relation to a proposed scheme meeting to be held in relation to a scheme of arrangement proposed to be entered into with its sole member. 2. The matter first came before me on 15 December 2011 by way of an Originating Process filed by RBSGA on 24 November 2011. At that time, RBSGA applied, pursuant to s 411(1) of the Corporations Act 2001 (Cth), for an order that it convene and hold a meeting of its members for the purpose of considering, and if thought fit, approving (with or without modification) a scheme of arrangement between RBSGA and its members. An order was also sought for the joinder of a representative defendant to represent the interest of warrant holders on the basis that the interests of Warrant Holders are affected by the proposal (see John Alexander's Clubs Pty Limited v White City Tennis Club Limited (2010) 241 CLR 1) and it would be impracticable and unduly expensive to join all 14,000 Warrant Holders (counted on a per Warrant basis). The evidence was that the Warrant Holders are widely geographically dispersed and, since the Warrants are not exclusively marketed to wholesale investors, many Warrant Holders are not institutions or professional investors. 3. At the first Court hearing in December last year, I made an order pursuant to rule 7.6 of the Uniform Civil Procedure Rules 2005 joining a representative defendant to represent the interests of all Warrant Holders (a similar approach having been adopted in Basis Capital Funds Management Ltd v BT Portfolio Services [2008] NSWSC 555 and ING Funds Management Ltd v JP Morgan Nominees Australia Ltd [2009] NSWSC 59). I also made the orders sought approving the convening of the Scheme meeting, having considered the material provided and the submissions by Senior Counsel for RBSGA (Mr Jackman SC) and having regard to what had been said as to the proper approach of the Court at the first meeting in FT Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Ply Ltd (1977) 3 ACLR 69 at 72.4 (NSWCA), approved in ASC v Marlborough Gold Mines Ltd (1993) 177 CLR 485 at 504, and that the standard of review is whether the scheme is not inappropriate (whether it is reasonable to suppose that sensible business people might consider that the arrangement proposed is of benefit to members, as noted in Re Sonodyne International Ltd (1994) 15 ACSR 494 at 499 per Hayne J). (See also Re Crusader Ltd [1996] 1 Qd R 117, per Thomas J at 125.31-32; Fraser v NRMA Holdings Ltd (1995) 55 FCR 452 at 468.) 4. I listed the matter before me on 2 February 2012 for the hearing of the application by RBSGA for the approval of the Scheme of Arrangement (with any modification or amendment) following the meeting of members which was to be held pursuant to the orders made in December. 5. The matter came back before me on 2 February 2012 by which time the representative defendant (Mr Harris) had had the benefit of independent advice from Allens Arthur Robinson. He was represented at the second hearing and had no objection to the making of the orders that are sought in relation to the Scheme. 6. On that occasion, having regard to the material before the Court and having had the benefit of the further submissions from Mr Jackman I gave approval to the Scheme of Arrangement (as modified following the first hearing). I gave short oral reasons at the time, noting that there was no objection to the Scheme; the sole member of the company having voted to approve the scheme at a meeting that was duly convened for that purpose and that no notification was raised by warrant holders following the notification and advertisement in relation to the proposed hearing. I made brief observations in relation to two particular aspects of the matter. I now publish those reasons, with some additions in order to record in more detail the background to the application. In that regard, I have drawn largely on the comprehensive submissions provided in relation to the application. Background 1. The Scheme and associated orders sought pursuant to s 413 of the Corporations Act were for the purpose, first, of effecting a transfer of part of the assets, undertakings and liabilities of RBSGA (its Warrants Business) from RBSGA to a newly formed single purpose entity (RBS Alternative Investments (Australia) Pty Limited (RBSAI), the first defendant) and, second, to extinguish certain guarantees issued by The Royal Bank of Scotland N.V., the second defendant (RBS N.V.), pertaining to the Warrants Business (the extinguishment of those guarantees to be concurrent with the issue of new guarantees by The Royal Bank of Scotland plc, the third defendant (RBS plc). 2. The Scheme was described by Mr Jackman as similar to the scheme of reconstruction approved in SGIC Insurance Ltd v Insurance Australia Ltd (2004) 51 ACSR 470 at 593, in that RBSGA has only one member, that being accepted to be sufficient to attract the jurisdiction under s 413, without the need for a creditors' scheme. 3. The background to the present application is that in 2007, a consortium comprising The Royal Bank of Scotland Group plc (RBS Group), Fortis Bank and Banco Santander (acting together through RFS Holdings NV (RFS)) acquired the ABN AMRO Group. Thereafter, certain businesses of ABN AMRO Group were variously merged with RBS Group or Banco Santander, sold or wound down. 4. In February 2010, the primary bank entity of the acquired group, ABN AMRO Bank NV, was divided into two separate entities: the first (maintaining the name ABN AMRO Bank NV) was subsequently transferred to the State of The Netherlands, and the second, RBS N.V., which is a body corporate organised under the laws of The Netherlands, was owned by RFS. 5. On 19 April 2011, the boards of RBS Group, RBS plc (a wholly owned subsidiary of RBS Group and a sister entity of RBS NV), RBS Holdings N.V., and RBS N.V. approved the proposed transfer of a substantial part of the business activities of RBS N.V. to RBS plc by which the businesses of the entities of the former ABN AMRO Group were to be consolidated within the companies ultimately owned by RBS Group. I was informed that it was expected that the proposed transfers by which this consolidation was to occur were to be implemented on a phased basis over a period ending 31 December 2013. I was further informed that the proposed transfers were consistent with RBS Group's broader efforts to simplify its structure in order to reduce the risks, costs and complexity associated with its present corporate structure. 6. In conjunction with the proposed transfers, various transactions were proposed concerning Australian entities in the RBS group structure: first, the transfer by RBSGA to RBS Holdings of all of RBSGA's subsidiaries (which I was informed has already taken place); second, the transfer of the Warrants Business from RBSGA to RBSAI, pursuant to the proposed Scheme and ancillary orders sought in these proceedings, and the entry into the New Guarantees replacing the Existing Guarantees; and, thirdly, the transfer of all shares held by RBS N.V. in RBS Holdings to RBS AA Holdings (UK) Ltd, a direct subsidiary of RBS Group plc (such that ownership of the RBS Holdings group of companies is to be transferred from RBS N.V. to RBS AA Holdings (UK) Ltd). The stated intention was that RBS N.V. will cease to have any interest in or obligations pertaining to the conduct of the Warrants Business. 7. RBSGA is a corporation duly incorporated under the Corporations Act. It is a 'Part 5.1 body' for the purposes of Part 5.1 of the Corporations Act. It is wholly owned by RBS Holdings (Australia) Pty Ltd (RBSHA), which is also a corporation duly incorporated under the Corporations Act. RBSHA is a subsidiary of RBS N.V.. 8. RBSGA carries on a number of businesses each of which operates as a separate and distinct business unit within the company. Those businesses were described as being: 1. undertaking operational and management responsibilities associated with warrants and other types of financial products (referred to collectively as Warrants) which RBSGA has issued to retail and wholesale investors (this being referred to as the Warrants Business); 2. providing infrastructure advisory services (which business I was informed is subject to completion of a pending sale transaction not related to the proposal which is the subject of these proceedings); 3. providing bond management services (the Bond Management Business); 4. supporting the issue of warrants and potentially other financial products by RBS plc (referred to as the RBS plc Warrants Business); 5. undertaking operational and management responsibilities of a New Zealand branch, which acts as a funding conduit for the lending business operated by RBS (New Zealand) Limited (the New Zealand Funding Business); and 6. undertaking operational and management responsibilities associated with a security issued by RBSGA, and two securities issued by a third party issuer and managed by RBSGA, in New Zealand (the New Zealand Structured Products Business). 1. As indicated earlier, under the Scheme it is intended to effect the transfer of the Warrants Business from RBSGA to the newly incorporated entity RBSAI. 2. RBS N.V. had executed a number of deeds poll in favour of the holders of particular Warrant series (the Warrant Holders), under which RBS N.V. unconditionally and irrevocably guaranteed the due and punctual payment by RBSGA of all monies payable to the Warrant Holders in connection with the particular Warrant held by the respective Holders and, if applicable, the other obligations of RBSGA, and of any trustee, in connection with that Warrant. Mr Jackman noted that the Scheme provided for those guarantees (the RBS N.V. Guarantees) to be extinguished and replaced by substantially similar guarantees to be issued by RBS plc. 3. On 12 December 2011, RBSGA, RBSAI, RBS N.V. and RBS plc entered into a Scheme Implementation Deed pursuant to which, inter alia, RBSAI agreed to pay to RBSGA the amount of approximately $260 million in consideration for the transfers to be made under the Scheme (the exact quantum of which payment was to be determined on the implementation date of the Scheme and dependent on the net asset value of the Warrants Business calculated on that date); RBS plc agreed and undertook to execute the RBS plc Guarantees on substantially the same terms as the RBS N.V. Guarantees; and the parties have acknowledged and agreed that the RBS N.V. Guarantees are to be extinguished immediately upon the making of orders under s 413 of the Corporations Act by the Court. 4. An independent expert's report was prepared by Lonergan Edwards & Associates Limited assessing the effect of the proposal on the Warrant Holders. It concluded that implementation of the Scheme would not prejudice Warrant Holders and that they would be materially better off if the Scheme proceeds because RBSAI will have a significantly greater capacity to meet the obligations to Warrant Holders under the Warrants than RBSGA; and the change in the identity of the guarantor is unlikely to have a material impact on the position of the Warrant Holders. 5. Following the first hearing, certain minor amendments were made to the Explanatory Statement. I was taken to those amendments at the second court hearing and was satisfied that they did not affect the disclosure of the substance of the proposal the subject of the proceedings. The final version of the Explanatory Statement was registered with the Australian Securities and Investments Commission on 16 December 2011, and was provided to the sole member of RBSGA, to each of the directors of RBSGA and its member, and to the auditor of RBSGA on 20 December 2011. It was also made available on the website of RBS. Announcements were provided to ASX Limited via its company announcements platform and to holders of unlisted Warrants by way of a mailout to those holders. 6. The Scheme Meeting was held on 23 January 2012. The sole member of RBSGA attended the Scheme Meeting by its duly appointed proxy, Mr Andrew Jeffrey Chick, and voted all of its shares in favour of the resolution put to it at the meeting. Accordingly, the Scheme was approved by the required majorities. 7. In January 2012 it was announced that certain strategic and organisational changes were proposed to be made to the RBS Group's wholesale banking operations. Those changes were described in an affidavit read on the second court hearing. It was submitted that they will have no impact on the financial position of RBSGA or RBSAI. The changes were brought to the attention of ASIC and ASX Limited and to the attention of the independent expert (Mr Craig Edwards of Lonergan Edwards & Associates Limited). They did not cause the independent expert to change its opinion that implementing the Scheme (as defined in the revised Independent Expert's Report) does not prejudice RBS Product Holders (as therein defined) and that RBS Product Holders will be materially better off if the Scheme proceeds. 8. Following the Scheme Meeting, RBSGA identified a number of matters relating to the hedging arrangements pertaining to its Warrants Business, namely that certain hedges held by RBS N.V. (worth $5.7 million) and other hedges held by RBS plc (worth $1.1 million) do not appear as assets on RBSGA's balance sheet. In both cases, I am informed that the hedges are not intended to appear as assets on the balance sheet because they are not booked to RBSGA. It was also noted that the allocation (as between RBSGA's Warrants Business and the RBS plc Warrants Business) of hedge-related assets on the balance sheet of RBSGA was incorrect (but the error was not such that the total net assets of RBSGA were misstated). These matters were also brought to the attention of the independent expert and did not cause him to change his opinion in relation to the Scheme. (It was noted that the benefit of the RBS N.V. hedges were to be transferred to RBSAI pursuant to the terms of the Scheme. As to the RBS plc hedges, it was noted that these fall outside the terms of the Scheme documentation as drafted. I understand that RBSGA, RBSAI and RBS plc have made certain arrangements to provide for the transfer of those hedges from RBSGA to RBSAI, and the continued provision of hedging services by RBS plc to RBSAI, separately from, but in parallel to, the implementation of the Scheme. Reasons 1. Section 411 (1) of the Corporations Act provides that: Where a compromise or arrangement is proposed between a Part 5.1 body and its creditors or any class of them or between a Part 5.1 body and its members or any class of them, the Court may, on the application in a summary way of the body or of any creditor or member of the body, or in the case of a body being wound up, of the liquidator, order a meeting or meetings of the creditors or class of creditors or of the members of the body or class of members to be convened in such manner, and to be held in such place or places (in this jurisdiction or elsewhere), as the Court directs and, where the Court makes such an order, the Court may approve the explanatory statement required by paragraph 412(1 )(a) to accompany notices of the meeting or meetings. 1. Mr Jackman noted that the word "arrangement" in s 411 has been held to be of wide import and is not limited by the word "compromise" (In Re NRMA Ltd (2000) 156 FLR 349). Reference was also made to Re Sonodyne International Ltd (1994) 15 ACSR 494. 2. I accepted that the Scheme in question involved an arrangement touching and concerning the rights and liabilities of RBSGA in that, upon implementation, RBSGA will cease to hold the Transferring Assets (as defined therein) and will cease to be subject to the Transferring Liabilities. RBSHA will retain its shareholding in RBSGA, and the economic value of the Warrants Business will be transferred from one direct, wholly owned subsidiary of RBSHA to another direct, wholly owned subsidiary of RBSHA. 3. Reference was made both to SGIC and the position in the United Kingdom in this regard (noted in Goode, Principles of Corporate Insolvency Law (4th ed), [1-46] footnote 178). Mr Jackman noted that use of a members' scheme has been adopted in schemes involving the transfer of the property and liabilities of one member of a corporate group to another (Stork ICM Australia Pty Ltd v Stork Food Systems Australia Pty Ltd (2007) 25 ACLC 208 at [69]; Re AGL Sydney Limited (1994) 13 ACSR 597). 4. As to the ancillary orders sought at the second hearing, s 413(1) of the Corporations Act provides that: Where an application is made to the Court under this Part for the approval of a compromise or arrangement and it is shown to the Court that the compromise or arrangement has been proposed for the purposes of, or in connection with, a scheme for the reconstruction of a Part 5.1 body or Part 5.1 bodies or the amalgamation of 2 or more Part 5.1 bodies and that, under the scheme, the whole or any part of the undertaking or of the property of a body concerned in the scheme (in this section called the transferor body) is to be transferred to a company (in this section called the transferee company), the Court may, either by the order approving the compromise or arrangement or by a later order, provide for all or any of the following matters: (a) the transfer to the transferee company of the whole or a part of the undertaking and of the property or liabilities of the transferor body; (b) the allotting or appropriation by the transferee company of shares, debentures, policies or other interests in that company that, under the compromise or arrangement, are to be allotted or appropriated by that company to or for any person; (c) the continuation by or against the transferee company of any legal proceedings pending by or against the transferor body; (d) if the transferor body is a company—the deregistration by ASIC, without winding up, of the transferor body; (e) the provision to be made for any persons who, within such time and in such manner as the Court directs, dissent from the compromise or arrangement; (f) the transfer or allotment of any interest in property to any person concerned in the compromise or arrangement; (g) such incidental, consequential and supplemental matters as are necessary to ensure that the reconstruction or amalgamation is fully and effectively carried out. 1. Pursuant to s 413(4), "liabilities" includes "duties of any description, including duties that are of a personal character or are incapable under the general law of being assigned or performed vicariously"; "property" includes "rights and powers of any description, including rights and powers that are of a personal character and are incapable under the general law of being assigned or performed vicariously". 2. As to the meaning of the terms 'amalgamation' or 'reconstruction', Mr Jackman notes that in Stork ICM Australia Pty Ltd v Stork Food Systems Australia Pty Ltd (2007) 25 ACLC 208, Lindgren J said that a restrictive interpretation should not be placed on those words and that : …the approach should be simply to inquire whether the circumstances of a particular case fall within one or the other or both of the words, without first attempting to delineate their respective boundaries of meaning. 1. It was submitted that guidance could be obtained from the description in Re South Africa Supply and Coal Storage Co [1904] 2 Ch 268 per Lord Buckley at 281 that the meaning of those words depended on the meaning given to them in commerce and, at 286, that: Then it remains to consider whether what was done was for the purpose of "reconstruction or amalgamation". What does "reconstruction" mean? To my mind it means this. An undertaking of some definite kind is being carried on, and the conclusion is arrived at that it is not desirable to kill that undertaking, but that it is desirable to preserve it in some form, and to do so, not by selling it to an outsider who shall carry it on - that would be a mere sale - but in some altered form to continue the undertaking in such a manner as that the persons now carrying it on will substantially continue to carry it on. It involves, I think, that substantially the same business shall be carried on and substantially the same persons shall carry it on. But it does not involve that all the assets shall pass to the new company or resuscitated company, or that all the shareholders of the old company shall be shareholders in the new company or resuscitated company. Substantially the business and the persons interested must be the same. Does it make any difference that the new company or resuscitated company does or does not take over the liabilities? I think not. I think it is none the less a reconstruction because from the assets taken over some part is excepted provided that substantially the business is taken, and it is immaterial whether the liabilities are taken over by the new or resuscitated company or are provided for by excepting from the scheme of reconstruction a sufficient amount to answer them. It is not, therefore, vital that either the whole assets should be taken over or that the liabilities should be taken over. You have to see whether substantially the same persons carry on the same business; and if they do, that, I conceive, is a reconstruction. 1. It is noted that this dictum was adopted as an accurate statement of what is meant by the word 'reconstruction' in Brooklands Selangor Holdings Ltd v Inland Revenue Commissioner [1970] 2 All ER 76; that said to denote "the transfer of the undertaking or part of the undertaking of an existing company to a new company with substantially the same persons as members as were members of the old company". 2. I accepted that there was jurisdiction under s 413(1)(a) to make orders of the kind sought as the Scheme proposed was a compromise or arrangement proposed for the purposes of, or in connection with, a scheme for the reconstruction of a Part 5.1 body or Part 5.1 bodies, involving the transfer to RBSAI of part of the undertaking or of the property and liabilities of RBSGA in relation to the Warrants Business. 3. At the second hearing there was evidence that ASIC had provided a letter in the usual form stating that it had no objection to the Scheme and that the requisite notification advertising the second hearing had been placed in The Australian newspaper on 24 January 2012 in compliance with the Supreme Court (Corporations) Rules 1999. 4. There was also confirmation that the conditions precedent upon which the implementation of the Scheme is contingent had been satisfied. 5. Reliance was placed on the submissions made at the first court hearing, supplemented by submissions as to the steps that had occurred since then. 6. In my oral reasons I raised two matters: first, the matters that had been discovered in relation to the accounts and the position of the company since the first court hearing and the amendments made in relation to the Scheme and the revised explanatory statement in that regard and, second, the question (foreshadowed at the first court hearing) as to the power to make the ancillary orders for the extinguishment of the guarantees. 7. As to the first, I noted that the matters that had been discovered had been drawn to the attention of the independent expert who has confirmed that those matters do not affect the opinion given (the independent expert having confirmed the opinion as to the lack of prejudice to Warrant Holders and that they will be in a better position if the scheme is approved). 8. As to the amendments made to the Scheme following the first court hearing, s 411(6) of the Corporations Act provides that the Court may grant its approval to a compromise or arrangement subject to such alterations or conditions as it thinks just. Mr Jackman noted that this section grants the Court a broad discretion, including the discretion to approve a scheme in a form other than that which was put to, and approved by, the members of scheme company (referring to Re Investorinfo Ltd [2005] FCA 1848). 9. In particular, he noted that in Re Investorinfo, Gyles J noted that if the alteration is of a minor kind which does not really affect the details of the scheme, then the Court has power to approve the scheme as amended (citing Re Adelaide Air Conditioning and Domestic Engineers Ltd (In Liq) [1972] 6 SASR 603 at 605 per Zelling J; Re H Craig Pty Ltd (1971-73) CLC 40-026 per Mitchell J; Re Permanent Trustee Co Ltd (2002) 43 ACSR 601 at [21] per Barrett J, as his Honour then was). Reliance was also placed on Re Professional Investment Holdings Limited (No 2) [2010] FCA 1336, where Jacobson J said (at [38]) that the discretion may be exercised where "although the alteration changes creditors' rights (and presumably also the rights of members), it would have the effect of putting the scheme into a form that is consistent not only with the procedures with respect to the meetings and voting that was in fact adopted, and the resultant expressions of will, but also the regime which was described in the Explanatory Statement". 10. I was satisfied that the amendments in question were minor and not so novel or substantial as to take the varied scheme beyond the reasonable contemplation of the shareholders at the time they agreed to it (see Re Professional Investment Holdings at [39], Re Matine Ltd (1998) 28 ACSR 268 at 284, Re Kalgoorlie Lake View Pty Ltd (2005) 56 ACSR 144 at [7]-[8]). 11. The second matter that I raised was as to the jurisdiction of the court pursuant to s 413 of the Corporations Act to make ancillary orders and, in particular, the operation of s 413(1)(g) in relation to the extinguishment of the guarantees, that being one of the conditions for the operation of the scheme. In this regard, reliance was placed on In Re AGL Gas Networks Ltd (2001) 37 ACSR 441 where Santow J, as his Honour then was, said: Section 413(1)(g) is expressed in suitably broad terms so as to give the court wider powers to ensure that a reconstruction or amalgamation is fully and effectively carried out. The clear intent of the provision is to allow the court to make such orders as are appropriate to ensure that schemes of arrangement intended by the members and the court to be carried out are carried out. 1. In Re AGL Gas consideration was given to the power of the Court to make an order which would give retroactive operation to an earlier order of the court made under s 411. (At an earlier time, court orders had been obtained approving an amalgamation of the plaintiff's subsidiary companies subject to certain conditions precedent, including obtaining an amendment of the plaintiff's Gas Act authorisation. The parties had acted on a defective authorisation as if the conditions precedent had been satisfied and, upon discovery of the defect, the plaintiff sought an order to give the original court orders retroactive operation.) 2. Santow J considered that there were several different ways in which the relief sought by the plaintiff could be granted including inter alia an order made pursuant to s 413(1)(g). In relation to that provision, having considered the breadth of the expression in the passage noted above, his Honour was of the view that to the extent that the scheme had not been fully and effectively carried out for want of satisfaction of the condition precedent contained in cl 3(b) of the scheme within the time specified by reason of the misapprehension earlier identified, this was a suitable case for remedial orders under s 413(1)(g) (at [43]). 3. His Honour's comments therefore encompass orders which a court may make that are "as appropriate to ensure" that a scheme is carried out. There, unless an order was made to rectify the original court orders and give the scheme retroactive effect, there would be no such scheme. By analogy, here, unless the ancillary orders sought are made the conditions to which the Scheme is subject (and its intended operation) will not come into effect. 4. Mr Jackman also placed reliance on English decisions concerning similarly worded provisions in legislation in the United Kingdom legislation for the proposition that s 413(1)(g) should be interpreted broadly (Re Norwich Union Linked Life Assurance Ltd [2004] EWHC 2802 (Ch) and where schemes of arrangement, the terms of which provided for the release of an entity's guarantees, have been sanctioned (Re La Seda de Barcelona SA [2010] EWHC 1364 (Ch)). 5. In particular, Mr Jackman noted that in the Norwich Union case, the High Court of England and Wales held that the word "necessary" in s 112(1)(d) of the Financial Services and Markets Act (UK) did not stand by itself and was part of the phrase "necessary to secure that the scheme shall be fully and effectively carried out" and hence that the word was not to be construed strictly in respect of supplementary and consequential matters. 6. Under s 111(1) of the Financial Services and Markets Act, the Court has the power to make an order sanctioning an insurance business transfer scheme or a banking business transfer scheme. Pursuant to s 112(1)(d), if the court had made an order under s 111(1) sanctioning a scheme, the court could make a subsequent order "with respect to such incidental, consequential and supplementary matters as are, in its opinion, necessary to secure that the scheme is fully and effectively carried out." 7. The construction of s 112(d) was not determinative in the matter, however Lindsay J considered that English authorities on the point suggested that the wording of s 112(1)(d), particularly the words "matters…necessary to secure that the scheme is fully and effectively carried out", extended to matters which were more than desirable but less than vital (adopting the view of Knox J in Re: Hill Samuel Life Assurance (Unreported, 10 July 1995)). Knox J had said: Although 'necessary' is somewhere in the middle between 'vital' on the one hand and 'desirable' on the other, if it [is] used in the phrase 'necessary to secure that the scheme shall be fully and effectively carried out' and it extends to consequential and supplementary matters, it would seem to me legitimate for the Court to conclude within the ambit of a scheme which it approves something which will give the full benefit of the scheme to one or other of the two units that are being amalgamated. In that sense it seems to me that although this is certainly not a matter which is vital to the approval of the scheme... it nevertheless is something which is within the jurisdiction of the Court to approve and on that basis I do approve it. 1. Although, Lindsay J ultimately gave effect to the proposed order by another route, it was suggested that there would be power to give effect to the proposals under s 112(1)(d) (at [9]). 2. While obiter on the meaning of 'necessary' in the context of sanctioning schemes is useful guidance, it should be noted that the statutory provision there considered is different from s 413(1)(g) in that the latter omits the words "in its opinion". To the extent that this may suggest that the supplementary matter needs to be necessary from an objective viewpoint, it may be that there is a different standard of necessity applies in Australia. 3. It was submitted by Mr Jackman that, as the ultimate aim of the proposed Australian transfers includes the cessation of RBS N.V.'s involvement in the Warrants Business and the consolidation of the Warrants Business within the group of companies that are wholly owned by RBS Group, the extinguishment of the RBS N.V. Guarantees was necessary to ensure that the reconstruction is fully and effectively carried out. 4. As to the guidance to be gained from the approval of a schemes involving the release of a non-party guarantor, reliance was placed on Re La Seda de Barcelona. That case concerned a proposed corporate restructure that was to involve the parties entering into a scheme of arrangement where the release of a non-party guarantor was provided for in the scheme. The issue was whether the court had jurisdiction to sanction the scheme under s 425 of the now superseded Companies Act 1985 (UK), given that its terms included the release of a guarantor. In considering that question the court was not concerned with that constituted a "necessary" act to give effect to a scheme of arrangement; rather, it was concerned with what schemes (using the term generally) could be properly considered schemes of arrangement under the statute. In Seda de Barcelona reliance was placed on Re T & N Ltd [2006] EWHC 1447 (Ch), which concerned the same statutory provision and also addressed the question whether a particular proposed scheme fell within the terms of the UK Act. 5. I accept that Seda de Barcelona supports the conclusion that the release of a non-party guarantor can in some circumstances be seen as ancillary to the scheme of arrangement where the scheme encompasses the guarantor in turn releasing potential claims against companies in the scheme company's group. However, it does not address the question as to what is or may be "necessary" to ensure a scheme of arrangement is "fully and effectively" carried out within the meaning of s 413(1)(g). 6. I noted in my oral reasons that I had given some consideration as to whether it could be said that 'necessary' encompassed a condition to a scheme which is effectively a condition imposed by the party putting forward the scheme for approval. On balance I considered that, having regard to what was said in AGL Gas Networks and the manner in which the word has been interpreted in the limited cases in which it has been considered in a similar context, in circumstances where this is a condition that is required to be satisfied in order for the Scheme to come into effect and is necessary to give effect to the intended aims of the Scheme, there is jurisdiction to make the ancillary orders sought. 7. Accordingly, I considered that there was power to approve the Scheme as had been amended. I concluded that where the single member of the company has approved, in a meeting properly constituted, the scheme and there is no objection on behalf of the Warrant Holders and no appearance by any party opposing it, it was in order to approve the Scheme and I so ordered. ********** 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: 10 December 2024