FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Barilla & Barilla (No 4) [2023] FedCFamC1F 822
File number(s): CAC 1604 of 2018 Judgment of: GILL J Date of judgment: 27 September 2023 Catchwords: FAMILY LAW – CORPORATIONS – liquidator a party to proceedings – liquidator seeking approval under sections 477(2A) and 477(2B) of the Corporations Act 2001 of a compromise of the debt claim in respect of the wife that would release the husband and wife from further claims – notice to be given to creditors of proposed compromise and application for approval Legislation: Corporations Act 2001 (Cth) - ss 477(2A) and 477(2B) Cases cited: Elderslie Finance Corp Ltd v Newpage Pty Ltd (No 6) (2007) 160 FCR 434
Re GVE Hampton Pty Ltd (In Liq) [2022] VSC 539
Re McDermott and Potts (in their capacities as joint and several liquidators of Lonnex Pty Ltd (in liq)) (ACN 097 786 751) [2019] VSCA 23
Re One Tel (2014) 99 ACSR 247
Division: Division 1 First Instance Number of paragraphs: 18 Date of hearing: 6 September 2023 Place: Canberra Solicitor for the Applicant: Ms Fox, Farrar Gesini Dunn Solicitor for the Respondent: Litigant in Person Counsel for the Intervener: Mr Blank Solicitor for the Intervener: Parker Coles Curtis ORDERS
CAC 1604 of 2018 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS BARILLA
Applicant
AND: MR BARILLA
Respondent
MR MARRIOTT AS LIQUIDATOR OF B PTY LTD (IN LIQUIDATION)
Intervener
ORDER MADE BY:
GILL J
DATE OF ORDER:
27 SEPTEMBER 2023
THE COURT ORDERS THAT:
1.Within fourteen days the liquidator shall serve upon the creditors of B Pty Ltd:
(a)These orders and reasons;
(b)A document setting out the terms of the proposed compromise with the wife.
2.The liquidator shall file an affidavit containing evidence sufficient to establish compliance with Order 1.
3.In the event that a creditor wishes to be heard in relation to the approval of the compromise then such creditor shall appear on 22 November 2023 at 10 am.
4.The further hearing of the application for approval and associated application is adjourned for hearing to 22 November 2023 at 10 am.
5.In the event that the liquidator has prepared the material that the liquidator seeks to rely upon in respect of the approval application, the liquidator is at liberty to seek confidentiality orders in relation to such at the further hearing of the matter.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved…
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- AGLC
- Barilla & Barilla (No 4) [2023] FedCFamC1F 822
- Case
- [2023] FedCFamC1F 822
- Decision Date
CaseChat Overview and Summary
The court examined the principles guiding the court's role in approving such compromises, emphasizing that the court's function is not to second-guess the liquidator's commercial judgment but to ensure that creditors' interests and wishes are considered. The court highlighted that it is not necessary to closely scrutinize the commercial merits of the transaction, generally granting approval unless there is a lack of good faith, an error in law or principle, or substantial doubt about the reasonableness of the liquidator's view. The court found that placing creditors on notice of the proposed compromise and its terms is essential, as their attitudes, wishes, and interests are crucial considerations. Without a compelling reason to the contrary, the court ruled that the liquidator must notify creditors about the proposed compromise and the pending application.
In addition to the notice requirement, the court addressed the liquidator's request for confidentiality regarding certain materials, such as legal advice. The court decided that the issue of confidentiality would be considered after the creditors had been duly notified and had the opportunity to be heard if they wished. This sequential approach ensured that the creditors' rights were protected before addressing the liquidator's request for confidentiality.
The court issued orders mandating that the liquidator notify the creditors within fourteen days of the court's decision, providing them with the terms of the proposed compromise and the opportunity to be heard if they wished. The liquidator was also required to file an affidavit proving compliance with these notification requirements. The further hearing of the application for approval and associated matters was adjourned to a later date to allow for these steps. The liquidator was permitted to seek confidentiality orders for the materials relied upon at the adjourned hearing.
Orders
Orders of the court
CAC 1604 of 2018
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN:
MS BARILLA
Applicant
AND:
MR BARILLA
Respondent
MR MARRIOTT AS LIQUIDATOR OF B PTY LTD (IN LIQUIDATION)
Intervener
ORDER MADE BY:
GILL J
DATE OF ORDER:
27 SEPTEMBER 2023
THE COURT ORDERS THAT:
1. Within fourteen days the liquidator shall serve upon the creditors of B Pty Ltd:
(a) These orders and reasons;
(b) A document setting out the terms of the proposed compromise with the wife.
2. The liquidator shall file an affidavit containing evidence sufficient to establish compliance with Order 1.
3. In the event that a creditor wishes to be heard in relation to the approval of the compromise then such creditor shall appear on 22 November 2023 at 10 am.
4. The further hearing of the application for approval and associated application is adjourned for hearing to 22 November 2023 at 10 am.
5. In the event that the liquidator has prepared the material that the liquidator seeks to rely upon in respect of the approval application, the liquidator is at liberty to seek confidentiality orders in relation to such at the further hearing of the matter.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
Ratio Decidendi
Legal Principle Established
The liquidator further sought to have material relied upon by him, such as legal advice, dealt with confidentially by the court, and not released to the husband nor to the creditors.Consideration Prior to considering the confidentiality issue it is appropriate to consider the notice to creditors issue. Each of the provisions is in place to ensure that the court (or creditors) exercise some oversight over a limited aspect of the exercise of the broad powers conferred upon a liquidator pursuant to s 477. The authorities provided in argument by the liquidator, in particular, Re GVE Hampton Pty Ltd (In Liq) [2022] VSC 539 in which Connock J provided a helpful survey of authorities, emphasised that the role of the court in giving or withholding approval was not the second guessing of the exercise of commercial judgment by the liquidator, or the assessment of the commercial desirability of the transaction. Rather, it is to ensure “that the interests and wishes of those affected by a compromise, chiefly the creditors, are a major consideration in making such a compromise.”[1] It does not involve a close consideration of the commercial merits of the transaction, largely entrusting the merits to the liquidator, and will generally give approval absent lack of good faith, error in law or principle, or real or substantial ground for doubting the reasonableness of the liquidator’s view.[2][1] Elderslie Finance Corp Ltd v Newpage Pty Ltd (No 6) (2007) 160 FCR 434, [18]-[28] (Lindgren J).[2] Re One Tel (2014) 99 ACSR 247, [29] (Brereton J). However, in so doing, and in ensuring the consideration of the creditors, the attitudes, wishes and interests of the creditors are important considerations.[3][3] Re McDermott and Potts (in their capacities as joint and several liquidators of Lonnex Pty Ltd (in liq)) (ACN 097 786 751) [2019] VSCA 23, [73], [74] and [83] (Whelan AP, McLeish and Hargrave JJA). This points to the need to place the creditors on notice of the proposed compromise and its terms, prior to the court considering approval. Accordingly, in the absence of a cogent reason being articulated to not place the creditors on notice, and prior to consideration as to whether advices and the like to the liquidator should be the subject of a confidentiality order, the liquidator will be required to put the creditors on notice of the proposed compromise and of this application.Conclusion Orders will be made to give the creditors notice of this application, notice of the terms of the proposed settlement, and of the ability of the creditors, should any wish to be heard in relation to the approval, to be so heard. The liquidator will further be required to provide evidence of the provision of such to the creditors. Following this step consideration will be given to any confidentiality orders pursued by the liquidator in relation to material to be relied upon in support of the approval.