ANTONY LESLIE JOHN WOODINGS as Liquidator of BELL GROUP LTD (IN LIQ) & BELL GROUP FINANCE PTY LTD (IN LIQ) - [2017] WASC 322

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: ANTONY LESLIE JOHN WOODINGS as Liquidator of BELL GROUP LTD (IN LIQ) & BELL GROUP FINANCE PTY LTD (IN LIQ) [2017] WASC 322

CORAM: MASTER SANDERSON

HEARD: 31 OCTOBER 2017

DELIVERED : 10 NOVEMBER 2017

FILE NO/S: COR 156 of 2017

BETWEEN: ANTONY LESLIE JOHN WOODINGS as Liquidator of BELL GROUP LTD (IN LIQ) & BELL GROUP FINANCE PTY LTD (IN LIQ)
Plaintiff

Catchwords:

Corporations Law - Application by liquidator for directions - Turns on own facts

Legislation:

Corporations Act 2001 (Cth)

Result:

Directions given

Category: B

Representation:

Counsel:

Plaintiff:     Mr J C Vaughan SC
First Interested Party      :     Mr A J Sefton for Insurance Commission of Western Australia
Second Interested Party :     Mr A D'Arcy for Bell Group NV
Third Interested Party     :     Mr S Penglis for WA Glendinning & Associates Pty Ltd

Solicitors:

Plaintiff:     Ashurst Australia
First Interested Party      :     State Solicitor for Western Australia
Second Interested Party :     Lipman Karas
Third Interested Party     :     DLA Piper

Case(s) referred to in judgment(s):

Plan B Trustees Ltd v Parker (No 2) [2013] WASC 216
Plaza BV v The Law Debenture Trust Corporation Plc [2015] EWHC 43

MASTER SANDERSON: The plaintiff is the liquidator of the Bell Group Ltd (TBGL) and Bell Group Finance Pty Ltd (BGF) and makes an application for directions. The application is made pursuant to s 479(3) and to the extent necessary s 477(6) and the law which applies to the windings up of TBGL and BGF due to the operation of s 1408(1) of the Corporations Act 2001 (Cth).
The application is made in circumstances where the plaintiff is in a position of conflict and where creditors have diametrically opposed views as to the steps the plaintiff should take. Two matters of importance follow from that.
First, the circumstance of conflict raises an issue of propriety making this an appropriate case for the giving of directions. If there is a difficulty at any stage of an administration it is the liquidator's 'clear duty' to inform the court and seek directions. Second, the application is one for judicial guidance in the true sense - as is apparent from the form the application takes - the plaintiff does not advocate for either of the competing positions. He intends to follow the court's direction.
Broadly speaking, the question is whether the plaintiff should, or should not, take steps - and cause TBGL and BGF as the relevant companies in liquidation to take steps - to apply for the release and discharge of certain undertakings (referred to as the October 2004 undertakings).
The October 2004 undertakings restrict the plaintiff and the companies amending the terms of two Trust Deeds governing bonds issued by TBGL and BGF (being bonds held by the Insurance Commission of Western Australia (ICWA)). In particular the undertakings have the effect of precluding amendments which concern the subordinated nature of the bonds. Accordingly, the release and discharge of the October 2004 undertaking might facilitate a 'de‑subordination' of the bonds (although no such de‑subordination proposal is presently on foot or intended).
The application arises in the context of an underlying dispute between Bell Group NV (BGNV) and ICWA as to whether the October 2004 undertakings can or should be released and discharged so that, if it considers it necessary, ICWA might revisit the question of partial de‑subordination of its bonds. The dispute is one of many in circumstances where the plaintiff has brought an application for orders under s 564 in relation to substantial recoveries seeking orders that would benefit both BGNV and ICWA.
(Counsel for WA Glendinning and Associates Pty Ltd appeared at the hearing and provided both written and oral submissions. In broad terms these submissions supported those put by BGNV. While extremely helpful the submissions did not go beyond what was put by BGNV and I have not thought it necessary to separately deal with those submissions. However, references to submissions made by BGNV in this decision should also be taken as references to submissions made on behalf of WA Glendinning and Associates Pty Ltd).
The plaintiff relies on his affidavits sworn 10 July 2017, 21 July 2017 and 9 August 2017. ICWA and BGNV, as interested parties, have also filed affidavits. The plaintiff has no objections to the admissibility of the contents of those affidavits.
Litigation between a BGNV bondholder and the Law Debenture Trust Corporation plc (LDTC) in the United Kingdom resulted in a 2015 judgment by Proudman J, Plaza BV v The Law Debenture Trust Corporation Plc [2015] EWHC 43. Those reasons contain a succinct statement of the relevant background.
Prior to the settlement agreement referred to below, an abridged summary of the relevant history is that:
(1)Over 1991 to 1995 various Bell Group companies were wound up.
(2)The Bell liquidators were without funds to investigate or pursue claims against certain banks. Funding was provided by various creditors pursuant to AFIs (which contemplated the liquidators seeking a s 564 award in favour of the indemnifiers in relation to any successful recoveries). Large and complex litigation followed.
(3)One party to the AFIs was LDTC as trustee under two Trust Deeds governing the terms of certain domestic bonds as issued by TBGL and BGF. At all material times the domestic bonds were held by ICWA. The debts represented by the domestic bonds are some $168 million as to TBGL and $96 million as to BGF.
(4)The domestic bond Trust Deeds provide for contractual and turnover trust subordination arrangements in relation to the domestic bonds as held by ICWA. In substance the debts were subordinated in the windings up.
(5)In 1996 there was a proposal that the domestic bond Trust Deeds be amended to 'de‑subordinate' ICWA's domestic bonds to the extent that ICWA or LDTC received any s 564 award in respect of the funding under the AFIs. The banks who were defendants in the main proceeding brought action CIV 2061/1996 in response. Among other things the banks challenged the propriety of the proposed amendments to effect the proposed partial de‑subordination.
(6)So far as there was an overlap between CIV 2061/1996 and the Bell proceedings, in December 2003 Owen J determined that some of the issues in CIV 2061/1996 were to be imported into the then ongoing trial of the Bell proceedings.
(7)Following the 'overlap judgment' there were negotiations to limit the extent of the overlap issues needed to be tried as part of the Bell proceedings. As a result:
•TBGL, BGF and the Bell liquidators gave certain undertakings -the October 2004 undertakings - in the Bell proceedings and CIV 2061/1996. So too did LDTC;
•the Banks obtained leave to discontinue their original action against TBGL, BGF and the Bell liquidators in CIV 2061/1996.
(8)By the October 2004 undertakings, among other things, TBGL, BGF and the Bell liquidators undertook not to enter into or execute the instruments by which it had been proposed to de‑subordinate ICWA's domestic bonds. They also undertook not to enter into or execute any instrument which had a like purpose or effect. There was liberty to apply to release or vary the undertakings if any amendment sought to be made to the domestic bond Trust Deeds 'does not in any way adversely affect the rights, interests or position of Senior Creditors'. LDTCs undertaking was to the same effect.
(9)In September 2013 the parties to the Bell proceedings reached a conditional settlement. The Bell liquidators sought and obtained orders approving entry into the settlement deed. Among other things Allanson J gave directions that the Bell liquidators:
[W]ould be acting properly and [are] justified in ... performing and ... causing the Companies to perform the agreements under the Settlement Deed.
(10)The settlement became unconditional and was completed in late June 2014
The settlement deed contained terms to the effect that:
•the Banks were to discontinue their original action in CIV 2061/1996 (cl 20(a)(viii));
•LDTC and ICWA were to discontinue their counterclaim in CIV 2061/1996 as against the banks (cl 20(a)(ix));
•TBGL, BGF, the Bell liquidators, LDTC and ICWA, among others, were obliged to take any and all steps reasonably necessary to facilitate the release of the October 2004 undertakings (cl 6(h) and cl 20(a)(vii)). (BGNV is expressly excluded from this obligation in relation to the undertakings in the CIV 2061/1996 proceedings.)
Post completion of the settlement deed attempts were made to discontinue the original action and counterclaim in CIV 2061/1996. Those attempts were protracted as BGNV and ICWA disputed whether the discontinuances should be without prejudice to an application to release the October 2004 undertakings.
The current status of CIV 2061/1996 is that:
•On 16 March 2017 an order was made permanently staying the counterclaim in CIV 2061/1996.
•Pritchard J has reserved judgment on BGNV's application to dismiss or discontinue the original action in CIV 2061/1996 (the application having been heard on 31 March 2017).
Attempts were also made to bring about the execution of a memorandum of proposed consent orders to release some of the October 2004 undertakings. This proved too controversial. BGNV informed the plaintiff that it was not prepared to consent to the release of the October 2004 undertakings and would oppose orders providing for the release and discharge of the undertakings.
BGNV foreshadowed that its grounds of opposition would include that:
•It was not in the interests of TBGL and BGF for the October 2004 undertakings to be released.
•The pre‑conditions contained in the 'liberty to apply' provision of the undertakings had not been satisfied.
•No justification had been put forward to explain why it is necessary to release the undertakings - given that there was no intention to make any amendments to the domestic bond Trust Deeds.
Among other things BGNV contended that, in deciding whether to make application for release of the October 2004 undertakings, Mr Woodings is in a position of conflict because it is not in the interests of 'senior creditor' Bell group company creditors of TBGL and BGF for the undertakings to be released.
On becoming sole liquidator of the Bell companies Mr Woodings proffered an undertaking to seek directions when in a position of actual, apparent or potential conflict.
Mr Woodings acknowledges the conflict as asserted by BGNV. Among other things, and despite Allanson J's directions that the Bell liquidators would be acting properly and are justified in performing and causing the Bell companies to perform the settlement deed, an issue arises as to whether on the proper construction of the settlement deed:
•as contended by ICWA - the Bell parties have a present obligation to make application for the release of the October 2004 undertakings;
•as contended by BGNV - the Bell parties have no such obligation but only an obligation to facilitate any such application if made.
In September 2014 Mr Woodings, by his solicitors, informed ICWA that he would prefer not to press for a release of the October 2004 undertakings for the time being. The matter then fell into abeyance.
Having previously said that the reason no application for release of the October 2004 undertakings had been made was 'that it may prove ultimately unnecessary', a position ICWA has advanced on a number of occasions, in June 2017 solicitors for ICWA requested that the Bell parties 'join ... in an application for the release and discharge of the undertakings' in accordance with the settlement deed. (It is that request which has led to the present application.)
The letter sent on behalf of ICWA went on to state:
[I]t is not proposed that steps should be taken to advance the application beyond filing it, at this stage. Rather, the application should at least be made so that there is, clearly, an identified and unresolved issue within the scope of CIV 2061 of 1996 ... which preserves the possibility, should it be necessary, of an amendment being made to the Trust Deeds.
It should be inferred that ICWA's request was made to answer a submission made by BGNV at the hearing before Pritchard J on 31 March 2017. BGNV made the submission that 'there is no presently outstanding issue in respect of the undertakings'. It also addressed a suggestion at the hearing on 31 March 2017 that there be a condition that an application be made to release the October 2004 undertakings. Both matters are mentioned in the State Solicitor's Office (SSO) letter dated 28 June 2017 requesting that the Bell parties make the application.
As to possible amendment of the domestic bond Trust Deeds to effect partial de‑subordination the current position is that:
(1)Were either TBGL or BGF to seek to amend the domestic bond Trust Deeds the plaintiff would first seek directions before doing so.
(2)TBGL and BGF have not sought to amend the domestic bond Trust Deeds. Nor has LDTC requested that TBGL or BGF agree to amend the domestic bond Trust Deeds.
(3)In action CIV 2666/2016 ICWA contends that LDTC alone may amend the domestic bond Trust Deeds, with the consent of ICWA, such that any s 564 award would not be subject to the subordination and turnover provisions. (Importantly such an amendment would be effected without any involvement on the part of TBGL, BGF or Mr Woodings as liquidator of TBGL and BGF.)
(4)ICWA acknowledges that the Bell parties' October 2004 undertakings do not require release or discharge if ICWA is successful in obtaining that relief in CIV 2666/2016. (This is said to justify not determining now the argument with respect to the release and discharge.) Elsewhere ICWA has said that whether a hearing is necessary to determine whether the October 2004 undertakings should be released is 'not assured' as 'it may ultimately be unnecessary to apply to release the undertakings'.
(5)LDTC has not taken any step to seek a release and discharge of its October 2004 undertakings.
In the course of litigation in the United Kingdom, in October 2014, LDTC - by its counsel - informed the High Court of Justice in substance that if asked by ICWA to amend the domestic bond Trust Deeds to effect de‑subordination:
(1)LDTC would consider that request in the light of the circumstances then prevailing; and
(2)it is invariably the case that LDTC would seek directions if it was in any doubt as to what to do.
It is now necessary to say something more about the subordination and turnover trust provisions of the TBGL and BGF Trust Deeds. As I have said all of the bonds issues by TBGL and BGF are held by ICWA. LDTC is the trustee of the bond issue.
ICWA holds its bonds subject to the terms of the TBGL and BGF trust deeds. The trust deeds contain subordination provisions which operate in the event of the winding up of TBGL and/or BGF. In the TBGL trust deed the subordination clause subordinates the claims of ICWA, as bondholder, in the winding up of the issuer, TBGL. In the BGF trust deed, the subordination clause subordinates the claims of ICWA, as bondholder, in the winding up of the issuer, BGF, and the guarantor, TBGL.
This subordination is effected by two mechanisms:
(1)a (contractual) postponement of ICWA's claims against TBGL and BGF in their windings up (via the proof of debt lodged by LDTC in those windings up) to the claims of the unsubordinated or senior creditors of TBGL or BGF; and
(2)an obligation by LDTC to hold any moneys paid to it in the winding up of TBGL or BGF on (turnover) trust first for LDTC's costs and expenses and secondly for the claims of the senior creditors of TBGL and BGF (to the extent of the 'Appropriate Amount'), and thirdly, for ICWA.
The subordination provisions are supported by cl 9(C) of the TBGL/BGF trust deeds which:
(1)prohibit ICWA from proving in the winding up of TBGL and BGF unless certain conditions are satisfied (which they are not); and
(2)provide that any moneys recovered by ICWA in those windings up are to be held on trust by ICWA for LDTC who, in turn, holds them subject to the turnover trust referred to above.
The effect of these provisions is in the liquidation of TBGL and BGF the claims of ICWA as holder of the TBGL and BGF bonds (via the proofs of debt lodged by LDTC in those windings up) are subordinated to the claims of other unsubordinated (ie senior) creditors of TBGL and BGF. Accordingly, no amount can be paid by LDTC to ICWA until after the claims of the senior creditors have been met. As a result of these arrangements, ICWA's claims in respect of the TBGL/BGF bonds are subordinated and rank behind the claims of the senior creditors of TBGL and BGF.
In the main Bell litigation conducted before Owen J, his Honour found that the turnover trust provisions in other trust deeds with substantially identical turnover trust provisions to those in the TBGL and BGF trust deeds, created a presently constituted trust in favour of the senior creditors of TBGL and BGF covering the right to prove, and any distributions made in the respective windings up. That finding was not challenged on appeal by any of the parties to the Bell litigation, including LDTC, Mr Woodings, TBGL or BGF.
Funding for the Bell litigation, and the investigations leading to the commencement of that litigation, was provided to the liquidators of TBGL and BGF by ICWA, LDTC, the Commonwealth of Australia and BGNV (collectively the Indemnifying Creditors).
This funding was provided on the basis that if monies were recovered as a result of the litigation, the liquidators of TBGL and BGF would seek an order under s 564 of the Corporations Law in favour of the Indemnifying Creditors.
There were some differences between the indemnification arrangements entered into by the liquidator of TBGL and those entered into by the liquidator of BGF. These differences arose because not all of the Indemnifying Creditors were creditors of both TBGL and BGF. Thus, while each of BGNV, the Commonwealth and LDTC were creditors of TBGL and BGF, ICWA was only a creditor of TBGL. It was not a creditor of BGF. Because ICWA was not a creditor of BGF, the agreement indemnifying Mr Woodings, as liquidator of BGF, was only entered into by BGNV, LDTC and the Commonwealth as indemnifying creditors. ICWA, although a party to the agreement, was not an indemnifying creditor under this agreement. In contrast, because ICWA was a creditor of TBGL, the agreement indemnifying the liquidator of TBGL was entered into by BGNV, the Commonwealth, LDTC and ICWA as indemnifying creditors.
The agreed mechanism for providing a return to the Indemnifying Creditors from a successful prosecution of the Bell litigation (the making of orders in the windings up of TBGL and BGF pursuant to s 564 of the Corporations Law) created a potential problem for ICWA. The problem was this:
(1)s 564 contemplates the making of an order in favour of a 'creditor';
(2)while ICWA was a creditor of TBGL it was not a creditor of BGF and has not lodged a proof of debt in BGF. The relevant creditor was LDTC, who has lodged a proof of debt. (That is why, under the BGF agreement for indemnification the relevant party with the obligation to indemnify Mr Woodings was LDTC, not ICWA. ICWA gave no indemnity to Mr Woodings);
(3)it follows that in the winding up of BGF any s 564 order would need to be made in favour of LDTC, and not ICWA;
(4)however, any payment to LDTC in the winding up of BGF, will be caught by the turnover trust provisions of the TBGL/BGF trust deeds which require LDTC to hold any monies paid to it in the winding up of TBGL or BGF on trust for the benefit of the senior creditors of TBGL and BGF in priority to ICWA.

This 'problem' meant that there was a risk that ICWA, through LDTC, would fund the Bell litigation to a successful conclusion, but not receive the full benefit of any orders made under s 564.
A solution was proposed to overcome the 'problem' of the turnover trust. That solution involved LDTC, TBGL and BGF seeking to amend the subordination provisions of the TBGL and BGF trust deeds by further supplemental deeds known as the Second Supplemental Deeds. In essence, the amendments proposed by the Second Supplemental Deeds seek to 'de‑subordinate' any s 564 payment made to LDTC in the winding up of TBGL or BGF by excluding such a payment from the operation of the turnover trusts. As a result, any s 564 payment made to LDTC would be held by LDTC for the benefit of ICWA and not for the benefit of the senior creditors of TBGL and BGF.
If the proposed amendments are brought into effect, ICWA, which presently ranks behind the senior creditors of TBGL and BGF, would rank in priority to those senior creditors. In a practical sense the proposed amendments fundamentally alter the relative rights of ICWA and the senior creditors. At the moment, the senior creditors rank ahead of ICWA in respect of all payments in the windings up of TBGL and BGF. The Second Supplemental Deeds seek to change this and have ICWA rank ahead of (not after) the senior creditors in respect of any s 564 payment paid to LDTC.
LDTC executed the Second Supplemental Deeds in early to mid‑1995. The deeds have never been executed or approved by TBGL or BGF (or their liquidators) and have therefore never had any force or effect. LDTC and ICWA both accept this.
Mr Woodings' position is that he will not execute the deeds without prior court sanction. Mr Woodings previously had a contractual obligation to seek such directions and, if the court sanctioned him doing so, to execute the Second Supplemental Deeds. Mr Woodings was released from these obligations in 2004.
In 2004, LDTC and ICWA abandoned their proposal to amend the TBGL/BGF trust deeds by the Second Supplemental Deeds. Thus on 19 May 2004 Edgar & Co, the solicitors for LDTC and ICWA, wrote to Mr Woodings' solicitors confirming:
[O]ur clients have determined that they no longer wish to pursue the execution of the Second Supplemental Deeds.
Our clients have no objection to the liquidators of TBGL and BGF giving an undertaking to the Court to the effect that they will not cause TBGL and BGF to consent, and TBGL and BGF will not consent, to any amendments to the Trust Deeds.
Edgar & Co also confirmed the position to the Banks' solicitors:
Our clients no longer seek the consent of TBGL and BGF to the Second Supplemental Deeds or any other agreements to amend the Trust Deeds that govern the convertible bonds issued by TBGL and BGF.
The undertakings referred to by Edgar & Co were given on 7 October 2004.
LDTC gave a permanent undertaking to the Supreme Court of Western Australia in the main litigation against the banks and TBGL, BGF and their liquidators gave permanent undertakings to the Supreme Court of Western Australia in CIV 1464/2000 and the bank litigation in CIV 2061/1996.
The undertakings prevent LDTC from, amongst other things:
(1)making any amendment to the subordination or payment obligations of the TBGL and BGF trust deeds. As a result, no amendment can be made that would have the effect of 'de‑subordinating' ICWA; or
(2)requesting TBGL, BGF or their liquidators from approving the amendments proposed by the Second Supplemental Deeds.
The undertakings can be released or varied, pursuant to a limited reservation of liberty to apply, to permit an amendment to the trust deeds but only if the proposed amendment does not in any way adversely affect the rights, interests or position of the senior creditors of TBGL or BGF. It is BGNV's position that an amendment that seeks to change ICWA's subordinated status so that ICWA ranks in priority to the senior creditors, rather than behind them, would, on any view, adversely affect the rights, interests or position of the senior creditors and thus could not be made pursuant to the liberty to apply provision.
Prior to giving the undertakings TBGL, BGF and their liquidators sought and received various assurances from LDTC and ICWA. In particular, they asked LDTC and ICWA to confirm that:
(1)they did not require TBGL, BGF or their liquidators to execute the Second Supplemental Deeds. LDTC and ICWA gave this confirmation;
(2)they had no objection to TBGL, BGF and their liquidators giving the undertakings. LDTC and ICWA had no objection;
(3)LDTC and ICWA stood by the Deeds of Indemnity dated 14 December 1998. LDTC and ICWA confirmed that they did so;
(4)the liquidators would be released from their obligations to pursue the application for directions seeking approval to execute the Second Supplemental Deeds and, if sanctioned by the Court to do so, to execute those deeds. LDTC and ICWA confirmed that this was the case; and
(5)LDTC and ICWA would consent to the liquidators discontinuing their application for directions. LDTC and ICWA indicated that they would so consent.
By [31] ‑ [47] of his written submissions, counsel for BGNV set out in some detail why BGNV sees the undertakings as important and offers a view as to the effect of the undertakings on a present litigation instigated by ICWA. I do not propose to summarise what was said by counsel. I do accept the existence of the undertakings is important to BGNV and significant in the context of the present litigation. It is important to note that this application for directions does not determine any issue between the parties. It is solely concerned with whether or not Mr Woodings should take certain steps. That is all I had to determine.
It was the primary submission of BGNV that any application for release of the undertakings was doomed to fail and therefore a 'no steps' direction should be made. In dealing with this question all parties raised the question of whether the undertakings were final or interlocutory. In the end, all parties seemed to have come to the conclusion that it did not matter one way or the other because the test for both interlocutory and final undertakings was the same. It seems to me that is correct. But, even if it is not, it is arguable one way and the other as to whether the undertakings are final or interlocutory. If Mr Woodings is to take steps that is one of the issues which the court will be called upon to resolve. So for present purposes, the point can be regarded as arguable.
There was considerable discussion between the parties as to whether or not a liquidator in Mr Woodings position could be directed to take steps if he was satisfied the application was unlikely to succeed. Counsel for ICWA accepted if the position was hopeless and any application was doomed to failure then it would be inappropriate in the circumstances of this case to make a 'take steps' direction. Without going through the precise form of the agreement embodied in the settlement deed I am prepared to accept that a direction should not be made if I was satisfied the application would not succeed.
In Plan B Trustees Ltd v Parker (No 2) [2013] WASC 216 Edelman J set out matters which a court would take into account in determining whether or not a liquidator should take legal action. For the present purposes the only one of those requirements that is relevant relates to the prospect of success. Counsel for BGNV went through the relevant authorities in some detail. The test has been differently expressed from time to time by various courts in different jurisdictions. In the end I am satisfied that it is necessary to determine whether or not any application has a reasonable prospect of success.
At this point, a difficulty arises. Counsel for BGNV analysed in some detail the nature of the undertakings and the difficulty in obtaining the release of such undertakings. Given that I have concluded a 'take steps' direction ought be given, it is inappropriate for me to deal in any detail with the facts. At some stage a court will be called upon to determine whether or not the undertakings ought be released. Nothing in these reasons can or should affect that ultimate decision. The position is akin to an application for summary judgment. If the application is unsuccessful it is inappropriate to provide detailed reasons why. Eventually there will have to be a trial of the issues between the parties and at that stage issues can be resolved. But it is not appropriate in the context of the summary judgment application to offer a view as to which way the issues might be resolved and why. To do so could prejudice a fair trial of the matter. That is the case here.
That said, there are a number of points I would make. First, BGNV accepts for the purposes of this application that the court has jurisdiction to discharge a final undertaking when new facts or changed circumstances render a continuation of the undertaking unjust (see [91] of BGNV's written submissions dated 17 October 2017). So there is no absolute prohibition against a court releasing a party from undertakings. The question is whether or not the changed circumstances will render the continuation of the undertakings unjust.
In that regard I would refer to the following matters. First, the undertakings were given in the context of proceedings brought against the banks and consequent upon other proceedings being issued by the banks. The effect of the undertakings was to remove one issue from what was large and complex litigation. That assisted BGNV. Further, the banks were the parties who were the main beneficiaries of the undertakings. That is not to say they did not benefit other parties but it was the banks who were the prime movers. As part of the settlement with the banks they agreed to the release of the undertakings. That element of the bargain is important.
There is also the fact that ICWA funded the action against the banks and paid out around $200 million to do so. It is now being said consequent upon undertakings they may be denied a recovery. With the banks no longer insisting upon the undertakings it may be argued not releasing the undertakings may be unfair to ICWA. The fact the banks agree to a release of the undertakings may be seen as a changed circumstance.
As to the utility of any application to the creditors of TBGL and BGF, Mr Woodings, as part of the overall settlement of the action against the banks undertook to do what was necessary to obtain the release of the undertakings. As I have already said, if any application was doomed to fail then the contractual undertaking contained in a deed of settlement would not go so far as to compel Mr Woodings to take action. But, given that it is in my view arguable the application could succeed it is possible to say the contractual promise made by Mr Woodings should be respected.
As part of Mr Woodings case, he obtained an opinion from independent counsel. A copy of that opinion was provided to all relevant parties. It was prepared by Mr Darren Jackson SC and Mr Paul Walker. [Sentence redacted]. Some recent authorities have doubted whether the provision of an opinion from independent counsel to the court when a liquidator is seeking directions is appropriate. I express no view on that question. For the purpose of these reasons I have taken into account the opinion and the reasons why counsel reached the conclusion that they do. However, weighing all matters in the balance, I am satisfied that there are reasonable prospects of success in seeking to have the undertakings released.
BGNV also says that a take steps direction ought not be made because at present ICWA has given no indication it actually wishes to seek to have the undertakings released. The wording of cl 20(a)(vii) of the settlement deed suggests everyone concerned including Mr Woodings would act 'promptly' to seek release of the undertakings. It appears to be accepted by ICWA that Mr Woodings is not in any way in default for not having taken steps to date to seek release of the undertakings. It may be inferred ICWA took the view Mr Woodings was bound to do nothing until the party who would benefit from the release of the undertakings - that is ICWA - called on him to do so.
In my view it is irrelevant whether or not ICWA presently intends to seek to amend the trust deeds. The contractual obligation Mr Woodings undertook and the benefit ICWA received as a consequence thereof was to apply for a release of the undertaking. What BGNV is seeking to do is imply in the settlement deed a requirement that the application will only be made 'if necessary'. There is no warrant for implying into the agreement some sort of temporal requirement so that the application for release will only be made if it is required. If an application is made it may well be relevant to its determination whether or not ICWA is seeking to amend the trust deeds. But, the fact no such application is presently on foot does not alter the terms of the settlement and the conduct of Mr Woodings pursuant to that settlement.
Finally, it was submitted that if he applied to have the undertakings released Mr Woodings would be in breach of fiduciary and statutory duties imposed upon him as the liquidator of TBGL and BGF. Essentially it was said Mr Woodings has an obligation to act in the interests of the general body of creditors of both companies. It was said that as it would not be in the best interests of TBGL and BGF to take steps to do so, would involve a breach of duty.
With respect, that argument clearly fails. Mr Woodings thought it was in the best interests of the creditors of the two companies to enter into the settlement deed. He did so only after obtaining a direction to that effect from Allanson J. His Honour determined Mr Woodings would be acting properly in causing the companies to perform the agreements under the settlement deed. If Mr Woodings takes that step and applies to release the undertakings he is doing nothing more than complying with the terms of the settlement deed. The real question was whether or not Mr Woodings was acting properly in entering into the settlement deed. Once it was concluded he was, then giving effect to its terms cannot be a breach of his duties. This element of BGNV's argument fails.
For these reasons I would make the 'take steps' direction. I will hear the parties as to the precise form of orders and as to costs.