Financiers for the Opes Prime group of companies are celebrating the recent vote for schemes of arrangement which will bring to an end a number of actual and threatened claims against them and receivers appointed by them. Controversially the proposed schemes compelled creditors to give releases to third parties.
A number of the unique features of the schemes of arrangement were considered in a recent landmark decision of Justice Finkelstein in the Federal Court. The decision ([2009] FCA 813) permitted the proposed schemes of arrangement to be put to creditors.
The schemes considered by the Court provide for pooling the assets of the group companies and a $227 million cash contribution by ANZ and Merrill Lynch. The fund thereby created will be distributed between the former Opes Prime clients who have commenced numerous proceedings, the litigation funders who are backing some of the proceedings and the other unsecured creditors. The “consideration” for the cash contribution is a release of all current and future claims against the banks.
In making his decision, Justice Finkelstein gave careful consideration to reported cases both in Australia and overseas. His Honour noted the importance of schemes of arrangement in corporate life generally and emphasised the need for flexibility. He concluded that a scheme can bind a creditor in his capacity as a creditor of a third party providing that there is “a sufficient nexus between a release and the relationship between the creditor and the scheme company.” In the present case, Justice Finkelstein was satisfied that there was a sufficient connection due to the overlap between the claims that were made by former clients against Opes Prime and its former financiers and the interlocking nature of those claims.
Masi Zaki, Graduate
