Carter (Liquidator), in the matter of Australian Vocational Learning Institute Pty Ltd (in liq) (No 2)
[2020] FCA 729
•21 May 2020
FEDERAL COURT OF AUSTRALIA
Carter (Liquidator), in the matter of Australian Vocational Learning Institute Pty Ltd (in liq) (No 2) [2020] FCA 729
File number: NSD 1384 of 2019 Judge: GLEESON J Date of judgment: 21 May 2020 Date of publication of reasons: 28 May 2020 Catchwords: CORPORATIONS – application by a liquidator for approval under s 477(2B) of the Corporations Act 2001 (Cth) to enter into a funding agreement on behalf of the company in liquidation – factors relevant to the Court’s assessment of an application under s 477(2B) – application granted
PRACTICE AND PROCEDURE – application by a liquidator for a suppression order under s 37AF of the Federal Court of Australia Act 1976 (Cth) to protect information concerning a funding agreement – whether order is necessary to prevent prejudice to the proper administration of justice – suppression orders made
Legislation: Corporations Act 2001 (Cth) ss 58FF(1), 477(2B)
Federal Court of Australia Act 1976 (Cth) s 37AF
Date of hearing: 21 May 2020 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 8 Counsel for the Plaintiffs: ZM Hillman Solicitor for the Plaintiffs: Clayton Utz ORDERS
NSD 1384 of 2019 IN THE MATTER OF AUSTRALIAN VOCATIONAL LEARNING INSTITUTE PTY LTD (IN LIQUIDATION) (ACN 097 453 828)
AUSTRALIAN VOCATIONAL LEARNING INSTITUTE PTY LTD (IN LIQUIDATION) (ACN 097 453 828)
First Plaintiff
MOIRA KATHLEEN CARTER
Second Plaintiff
JUDGE:
GLEESON J
DATE OF ORDER:
21 MAY 2020
THE COURT ORDERS THAT:
1.Pursuant to s 477(2B) of the Corporations Act 2001 (Cth), the second plaintiff is granted approval to enter into the Funding Agreement in the form exhibited to the confidential affidavit of Moira Kathleen Carter sworn on 18 May 2020.
2.Pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth), on the ground that the order is necessary to prevent prejudice to the proper administration of justice, the contents of the following documents be suppressed until the conclusion of the liquidation:
(a)paragraphs 35, 36, 37-41, 42-49 of the affidavit of Moira Kathleen Carter sworn on 18 May 2020;
(b)the documents exhibited at Tabs 4, 7 and 8 of MC-2; and
(c)any submissions filed by the applicants in support of this application that are marked as the “Plaintiffs’ Confidential Submissions”.
3.The plaintiffs’ costs of the proceedings be costs in the liquidation of the first plaintiff.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
GLEESON J:
On 21 May 2020, I granted approval pursuant to s 477(2B) of the Corporations Act 2001 (Cth) (Act) to the second plaintiff (liquidator) to enter into a second funding agreement, and ancillary orders. The purpose of the agreement is to facilitate recovery action consequent upon investigations into the affairs of the first plaintiff (AVLI). My reasons for my orders are as follows.
BACKGROUND FACTS
Background facts concerning AVLI’s business prior to external administration; its external administration from 2 December 2016 to 19 June 2018; and the liquidator’s investigations up to August 2019 are set out at [2]-[14] of my reasons for approving the liquidator’s entry into a funding agreement (with the same funder) to facilitate further investigations into the affairs of AVLI: Carter, in the matter of Australian Vocational Learning Institute Pty Ltd (in liq) [2019] FCA 1638 (first reasons for judgment).
In November 2019, the liquidator obtained an extension of time to make an application under s 588FF(1) of the Act up to and including 1 June 2020 with respect to any voidable transaction involving AVLI and each or any of Paul Lange (the sole director of AVLI) and five other entities: Carter (Liquidator), in the matter of Australian Vocational Learning Institute Pty Ltd (in liq) [2019] FCA 2076.
The liquidator has conducted further investigations, including obtaining production of documents. Attempts to conduct public examinations were cut short as a result of the COVID19 pandemic. However, the liquidator obtained legal advice concerning her prospects of certain recovery actions and has decided to commence those proceedings, subject to obtaining approval of the new funding agreement.
APPROVAL TO ENTER INTO FUNDING AGREEMENT
Legal framework
The relevant legal framework is set out at [18]-[21] of my first reasons for judgment.
Consideration
The following considerations that supported entry into the first funding agreement also broadly support entry into the second funding agreement:
(1)A funding agreement is the only mechanism by which prospective recoveries may be pursued.
(2)The funding agreement does not contain any unusual or onerous terms.
(3)Having regard to the terms of the funding agreement under consideration in this case, the likelihood of the liquidator being able to obtain funding on better terms than is presently offered is low. There is no real risk of the liquidator incurring liabilities that would have to be met out of funds that could otherwise be distributed to creditors.
(4)There is no evidence of a lack of good faith or error of law on the part of the liquidator in proposing to enter into the funding agreement and pursue recovery proceedings. There is nothing to suggest that entry into the funding agreement would be outside of the proper exercise of the liquidator’s powers.
(5)There is a strong public interest in the liquidator bringing recovery actions for the purpose of recovering monies owed to the Commonwealth.
(6)There is no reason to believe that any person will suffer relevant prejudice as a result of the approval of the funding agreement.
CONFIDENTIALITY
Again, the relevant legal framework is set out at [25]-[27] of the first reasons for judgment.
As in the previous case, I was satisfied that it was appropriate to make an order of the kind sought to preserve the confidentiality of the terms of the second funding agreement and also to ensure that the liquidator’s proposed proceedings are not prejudiced by becoming known to their subjects.
I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gleeson. Associate:
Dated: 28 May 2020
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