Ball (Liquidator), in the matter of ACN 141 037 229 Pty Ltd (in Liquidation) (formerly known as “Think Money Wealth Through Property Pty Ltd”) (No 2)
[2021] FCA 533
•18 May 2021
FEDERAL COURT OF AUSTRALIA
Ball (Liquidator), in the matter of ACN 141 037 229 Pty Ltd (in Liquidation) (formerly known as “Think Money Wealth Through Property Pty Ltd”) (No 2) [2021] FCA 533
File number(s): QUD 238 of 2020 Judgment of: GREENWOOD J Date of judgment: 18 May 2021 Catchwords: CORPORATIONS – consideration of an application under s 477(2B) of the Corporations Act 2001 (Cth) for an approval of a Funding Agreement and a Retainer Agreement in relation to legal services Legislation: Corporations Act 2001 (Cth), s 477(2B) Cases cited: Hurst, in the matter of Liquor National Pty Ltd (in liq) [2019] FCA 1581
Re 77738930144 Pty Limited (in liq) (formerly Commercial Indemnity Pty Ltd) [2017] NSWSC 452
Division: General Division Registry: Queensland National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporation Insolvency Number of paragraphs: 18 Date of last submission/s: 8 April 2021 Date of hearing: 14 May 2021 Solicitor for the Plaintiffs: Stacks Law Firm ORDERS
QUD 238 of 2020 IN THE MATTER OF ACN 141 037 229 PTY LTD (IN LIQUIDATION) (FORMERLY KNOWN AS “THINK MONEY WEALTH THROUGH PROPERTY PTY LTD”); ACN 164 472 020 PTY LTD (IN LIQUIDATION) (FORMERLY KNOWN AS “THINK PUBLICATIONS PTY LIMITED”); AND ACN 601 865 025 PTY LTD (IN LIQUIDATION) (FORMERLY KNOWN AS “WHAT THE FOX PTY LTD”)
MITCHELL WARREN BALL AS LIQUIDATOR OF ACN 141 037 229 PTY LTD (IN LIQUIDATION) (FORMERLY KNOWN AS “THINK MONEY WEALTH THROUGH PROPERTY PTY LTD”)
First Plaintiff
MITCHELL WARREN BALL AS LIQUIDATOR OF ACN 164 472 020 PTY LTD (IN LIQUIDATION) (FORMERLY KNOWN AS “THINK PUBLICATIONS PTY LIMITED”)
Second Plaintiff
MITCHELL WARREN BALL AS LIQUIDATOR OF ACN 601 865 025 PTY LTD (IN LIQUIDATION) (FORMERLY KNOWN AS “WHAT THE FOX PTY LTD”)
Third Plaintiff
ORDER MADE BY:
GREENWOOD J
DATE OF ORDER:
18 MAY 2021
THE COURT ORDERS THAT:
1.Pursuant to section 477(2B) of the Corporations Act 2001 (Cth) (the “Act”), the plaintiff liquidator of ACN 141 037 229 Pty Ltd (in Liquidation) (formerly known as “Think Money Wealth Through Property Pty Ltd”), ACN 164 472 020 Pty Ltd (in Liquidation) (formerly known as “Think Publications Pty Limited”) and ACN 601 865 025 Pty Ltd (in Liquidation) (formerly known as “What the Fox Pty Ltd”) be authorised to enter into:
(a)a Litigation Funding Agreement with Pretium Funding Pty Ltd in the form exhibited to the confidential affidavit of Mitchell Warren Ball affirmed on 17 July 2020 in support of the originating application filed on behalf of the plaintiffs on 17 July 2020; and
(b)a Retainer Agreement with Stacks/Southern Highlands Pty Ltd trading as Stacks Law Firm, in the form exhibited to Mr Ball’s confidential affidavit affirmed on 17 July 2020.
2.The plaintiff is granted liberty to apply in relation to these orders.
3.Pursuant to s 23 and s 37P of the Federal Court of Australia Act 1976 (Cth), rule 1.32 and rule 1.36 of the Federal Court Rules 2011, these orders and the reasons for judgment in support of these orders are made and published from Chambers.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
GREENWOOD J:
These proceedings are concerned with the resolution on the papers of the matters the subject of the orders sought by paras 5 and 6 of the plaintiff’s originating application. These reasons are to be read together with the reasons for judgment published in Ball (Liquidator), in the matter of ACN 141 037 229 Pty Ltd (in Liquidation) (formerly known as “Think Money Wealth Through Property Pty Ltd” [2021] FCA 521 (“Ball judgment”).
All abbreviations referred to in the earlier Balljudgment are adopted in these reasons.
By orders 5 and 6 of the originating application, the plaintiff sought an order that each company and the plaintiff as liquidator of each company be authorised to enter into a retainer with Stacks Law Firm in the form exhibited to the confidential affidavit of Mr Ball affirmed on 17 July 2020 (the “Retainer Approval”) and an order that the plaintiff as liquidator of each company be authorised to enter into a Litigation Funding Agreement with Pretium Litigation Funding Pty Ltd (“Pretium”) in the form exhibited to Mr Ball’s confidential affidavit (the “Funding Approval”).
The Retainer Approval and the Funding Approval are each sought under s 477(2B) of the Corporations Act 2001 (Cth) (the “Act”). That section provides that, except with the approval of the Court or the committee of inspection or by reason of a resolution of the creditors, a liquidator of a company must not enter into an agreement on the company’s behalf if:
(a) without limiting paragraph (b), the term of the agreement may end; or
(b)obligations of a party to the agreement may, according to the terms of the agreement, be discharged by performance;
more than 3 months after the agreement is entered into, even if the term may end, or the obligations may be discharged, within those 3 months.
In support of the applications, the liquidator relies upon the first affidavit of Mr Ball affirmed on 17 July 2020 and the confidential affidavit of Mr Ball also affirmed on 17 July 2020.
As to the principles governing an application under s 477(2B) of the Act, Gleeson J expressed these observations in Hurst, in the matter of Liquor National Pty Ltd (in liq) [2019] FCA 1581 at [15]‑[19]:
15Section 477(2B) of the Act qualifies the general power of liquidators under s 477(2)(m) to “do all such things as are necessary for the winding up the affairs of the company and distributing its property”.
16The standard imposed under s 477(2B) concerns an assessment by the Court that entry into the agreement is a proper exercise of power and not ill-advised or improper on the part of the liquidator, rather than involving the exercise of commercial judgment: Re Gerard Cassegrain & Co Pty Ltd(in liq) [2013] NSWSC 257 (Cassegrain) at [11] per Black J citing McGrath and Another (in their capacity as liquidators of HIH Insurance Limited and Others) [2010] NSWSC 404; (2010) 266 ALR 642 at [13].
17In Pascoe; Re Matrix Group Ltd (in liq) [2011] FCA 1117 at [7], Jacobson J cited with approval the following statement by Austin J of the relevant test in Leigh; Re AP and PJ King Pty Ltd (in liq) [2006] NSWSC 315 at [23]:
Although the court has the statutory task [under s 477(2B)] of giving “approval” to a liquidator’s agreement that may end more than three months after it is entered into, the case law shows that the court undertakes something less than a complete “merits review”. As Giles J said in Re Spedley Securities Ltd (in liq) (1992) 9 ACSR 83 at 85-6:
… the court is necessarily confined in attempting to second guess the liquidator in the exercise of his powers, and generally will not interfere unless there can be seen to be some lack of good faith, some error of law or principle, or real and substantial grounds for doubting the prudence of the liquidator’s conduct.
18The Court’s task is to satisfy itself, having regard to the liquidator’s commercial judgment, that there is no error of law, grounds for suspecting bad faith or any other good reason to intervene: Corporate Affairs Commission v ASC Timber Pty Ltd (1998) 29 ACSR 109 at 118; Stewart, Re Newtronics Pty Ltd [2007] FCA 1375.
19In Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher [2011] FCAFC 89; (2011) 85 ACSR 38 at [24], the Full Court endorsed the following comprehensive list of factors relevant to the Court’s assessment of a proposed litigation funding agreement:
(1) the liquidator’s prospects of success in the litigation;
(2) the nature and complexity of the cause of action;
(3) the extent to which the liquidator has canvassed other funding options;
(4) the level of the funder’s premium;
(5) the liquidator’s consultation with creditors; and
(6)the risk involved in the claim (including the amount of costs likely to be incurred in the proposed litigation, the extent to which the funder is to contribute to those costs, and the extent to which the funder is to contribute to the defendant’s costs if the action is not successful, or towards any order for security for costs).
In Re 77738930144 Pty Limited (in liq) (formerly Commercial Indemnity Pty Ltd) [2017] NSWSC 452, Gleeson JA said this at [53]‑[54]:
[53]The object of the approval process under s 477(2B) is to ensure that contractual provisions as to timing do not cut across the general expectation that the winding up will proceed in an expeditious fashion as circumstances allow: Re HIH Insurance Ltd [2004] NSWSC 5 at [15] (Barrett J); Re HIH Overseas Holdings Ltd (inprov liq) [2001] NSWSC 426 at [5] (Barrett J).
[54]The following propositions can be derived from the authorities, when deciding whether to grant approval under s 477(2B):
1.the controlling consideration is the interests of creditors concerned in the winding up;
2.the court pays regard to the commercial judgment of the liquidator;
3.although the court is not a rubber stamp for whatever the liquidator puts forward, it is not the role of the court to independently appraise the commercial desirability and commercial terms of the transaction,
4.the court will generally not interfere unless there can be seen to be some lack of good faith, some error in law or principle, or some real and substantial ground for doubting the prudence of the liquidator’s proposal.
See Re Spedley Securities Ltd (in liq) (1992) 9 ACSR 83 at 85‑6; State Bank (NSW) v Turner Corporation Ltd (1994) 14 ACSR 480 at 483; Re HIH Insurance Ltd [2004] NSWSC 5 at [15] and Re G A Listing & Maintenance Pty Ltd (1994) 15 ACSR 308 at 311.
In the present case, the affidavit material establishes that the liquidator is not presently funded by any person and presently there are no funds in the winding up of any one of the companies to enable investigations to take place. Aspects of these matters are set out in the earlier Ball judgment. See paras 119 to 142 of Mr Ball’s first affidavit (the non‑confidential affidavit).
The liquidator has lodged a report in accordance with s 533(2) of the Act with ASIC concerning aspects of the affairs of each of the companies (“TMW”, “Publications” and “Fox”): see [1] of the earlier Ball judgment. The object of the report is to inform ASIC about matters arising out of the winding up of each company: see [12]‑[18], [20]‑[28] and [34]‑[37] of the earlier Ball judgment.
Although Mr Ball has sought funding from ASIC to enable further investigations to be carried out in relation to the affairs of the three companies, Mr Ball deposes that ASIC has not offered to provide any funding to carry out further investigations.
As to the possibility of funding from the Australian Taxation Office (“ATO”), Mr Ball deposes at para 141 of his first affidavit that he has not progressed an application for funding from the ATO because the ATO has not lodged a proof of debt in respect of either TMW or Fox and such a request cannot be progressed without obtaining counsel’s opinion on the prospect of success of any claims.
As mentioned earlier, Mr Ball in his first affidavit deposes that he has not had sufficient funds at any stage of the administration to obtain the opinion of counsel.
In order for the liquidator to conduct a proper investigation into the affairs of each company (and the inter‑relationship in the affairs of the companies), conduct all necessary examinations and, if so advised, bring any claims that may be available, the liquidator must obtain legal advice on the various issues and be supported by appropriate funding arrangements to enable the investigation to proceed and advice obtained.
Having regard to the principles, there is no reason to doubt that the proposal to enter into the Funding Agreement serves the purpose of enabling steps to be taken in the winding up of each company. Having regard to paras 29 to 32 of Mr Ball’s confidential affidavit, I accept his judgment that the terms of the arrangements are “typical, reasonable and competitive” and “[n]othing in the Funding Agreement appears out of the ordinary with agreements of this nature”.
Mr Ball also observes that at the date of affirming his confidential affidavit, the prospective dividend to priority and unsecured creditors of the companies is nil. If recovery is made as a result of successfully prosecuting a proceeding (as described in the earlier Ball judgment), the prospects of a return to creditors would “improve significantly”. For the reasons expressed in Mr Ball’s confidential affidavit, Mr Ball expresses the belief that it is in the interests of the creditors for him, as he liquidator of each company, to enter into the Funding Agreement.
As to the Retainer Agreement, the liquidator of each company has to date engaged Stacks Law Firm on a speculative basis on the footing that the firm will only be entitled to payment of its professional fees if any monies are recovered in the relevant proceedings. Mr Ball deposes in his confidential affidavit to being satisfied that the hourly rates proposed to be charged by the firm under the Retainer Agreement are similar to the hourly rates charged by other solicitors with expertise in conducting public examinations and insolvency related litigation, previously retained by the liquidator. Mr Ball deposes that he has previously engaged Stacks Law Firm to act successfully on his behalf in similar matters and he is satisfied that the firm has the relevant expertise to conduct the matters on behalf of the liquidator. Mr Ball deposes that, based on his experience, the terms of the retainer are “typical, reasonable and competitive”.
Mr Ball deposes that he is satisfied that the commercial terms of the retainer are appropriate, not unusual in his experience and generally serve the interests of the creditors: see paras 33 to 38 of Mr Ball’s confidential affidavit.
Having regard to all of these considerations, I am satisfied that orders ought to be made under s 477(2B) approving both arrangements.
I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Greenwood. Associate:
Dated: 18 May 2021
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