Deputy Commissioner of Taxation, in the matter of ACN 154 520 199 Pty Ltd (in liq) v ACN 154 520 199 Pty Ltd (in liq) (No 2)
[2017] FCA 755
•7 July 2017
FEDERAL COURT OF AUSTRALIA
Deputy Commissioner of Taxation, in the matter of ACN 154 520 199 Pty Ltd (in liq) v ACN 154 520 199 Pty Ltd (in liq) (No 2) [2017] FCA 755
File number: NSD 74 of 2017 Judge: GLEESON J Date of judgment: 7 July 2017 Catchwords: CORPORATIONS – winding up – creditors’ voluntary winding up –application under s 477(2B) of the Corporations Act 2001 (Cth) for the approval of a funding agreement – application for retroactive approval nunc pro tunc – application granted
CORPORATIONS – winding up – creditors’ voluntary winding up – application under s 477(2B) of the Corporations Act 2001 (Cth) for approval of funding agreement to be entered into by special purpose liquidator – application granted
COSTS – proceedings in which liquidator is a defendant – ordinary rule applied
COSTS – liquidator’s application for approval of a funding agreement under s 477(2B) of the Corporations Act 2001 (Cth) – liquidator’s costs to be costs in the liquidation
Legislation: Corporations Act 2001 (Cth)
Federal Court of Australia Act 1976 (Cth)
Cases cited: Chamberlain v RG & H Investments Pty Ltd; re Hardy Bros (Earthmoving) Pty Limited (in liq) (No 2) [2009] FCA 1531; (2009) 76 ACSR 415
Corporate Affairs Commission v ASC Timber Pty Ltd (1998) 29 ACSR 109
Deloughery v Weston (2010) 79 ACSR 180; [2010] NSWCA 148
Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher [2011] FCAFC 89; (2011) 85 ACSR 38
Hamilton, re ACN 101 634 146 Pty Ltd (in liq) [2014] FCA 687
Lardis v Free [2014] FCA 304
Leigh re King Bros [2006] NSWSC 315
McGrath re HIH Insurance Ltd [2010] NSWSC 404; (2010) 266 ALR 642
Onefone Australia Pty Ltd v One.Tel Ltd (2010) [2010] NSWSC 498; (2010) 78 ACSR 163
Pascoe; re Matrix Group Ltd (in liq) [2011] FCA 1117
Re 7 Steel Distribution Pty Ltd (in liq) (recs and mgrs apptd) [2013] NSWSC 669; (2013) 31 ACLC 13-021
Re ACN 076 673 875 Ltd [2002] NSWSC 578; (2002) 42 ACSR 296
Re Ambient Advertising Pty Ltd (in liq) [2015] NSWSC 1079
Re Gerard Cassegrain & Co Pty Ltd (in liq) [2013] NSWSC 257
Re Golden Sands Hospitality Pty Ltd (in liq) (No 2) [2017] NSWSC 450
Re Kevin Jacobsen Pty Ltd (in liq) [2016] NSWSC 538; (2016) 113 ACSR 277
Re Octaviar Administration Pty Ltd (in liq) [2014] NSWSC 344
Re Wilson Lovatt & Sons Limited [1977] 1 All ER 274
Silvia v Brodyn Pty Ltd [2007] NSWCA 55; (2007) 25 ACLC 385
Stewart, re Newtronics Pty Ltd [2007] FCA 1375
Victoria v CTM Training Solutions Pty Ltd (In Liq) [2017] VSC 47
Victoria v Goulburn Administration Services (In Liq) [2016] VSC 654
Date of hearing: 24, 29 May 2017 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 47 Counsel for the Plaintiff: Mr PD Crutchfield QC with Mr SA Linden Solicitor for the Plaintiff: K & L Gates Counsel for the Defendants: Mr RD Marshal SC with Mr DC Eardley Solicitor for the Defendants: Hammond Nguyen Turnbull
Table of Corrections 14 July 2017 The word “confidential” in order 1 of the orders made on 7 July 2017 has been deleted. ORDERS
NSD 74 of 2017 IN THE MATTER OF ACN 154 520 199 PTY LTD (IN LIQUIDATION)
BETWEEN: DEPUTY COMMISSIONER OF TAXATION
Plaintiff
AND: ACN 154 520 199 PTY LTD (IN LIQUIDATION)
First Defendant
SCHON GREGORY CONDON IN HIS CAPACITY AS LIQUIDATOR OF ACN 154 520 199 PTY LTD (IN LIQUIDATION)
Second Defendant
JUDGE:
GLEESON J
DATE OF ORDER:
24 MAY 2017
THE COURT ORDERS THAT:
1.Pursuant to s 1322(4)(d) of the Corporations Act 2001 (Cth) (“Act”), the time for the second defendant to bring an application for leave to enter into the Deed of Agreement & Indemnity with ABC Refinery (Australia) Pty Ltd (“Deed”) dated 18 November 2016 and the proposed variation to the Deed in the form set out in Annexure SGC9 to the affidavit of Schon Gregory Condon sworn on 24 April 2017 (“Proposed Variation”) is extended to 24 April 2017.
2.Pursuant to s 477(2B) of the Act, the second defendant have leave, nunc pro tunc, to enter into the Deed.
3.Pursuant to s 477(2B) of the Act, the second defendant has leave to enter into the Proposed Variation.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
ORDERS
NSD 74 of 2017 IN THE MATTER OF ACN 154 520 199 PTY LTD (IN LIQUIDATION)
BETWEEN: DEPUTY COMMISSIONER OF TAXATION
Plaintiff
AND: ACN 154 520 199 PTY LTD (IN LIQUIDATION)
First Defendant
SCHON GREGORY CONDON IN HIS CAPACITY AS LIQUIDATOR OF ACN 154 520 199 PTY LTD (IN LIQUIDATION)
Second Defendant
JUDGE:
GLEESON J
DATE OF ORDER:
7 JULY 2017
THE COURT ORDERS THAT:
1.Pursuant to sections 506(1A) and 477(2B) of the Corporations Act 2001 (Cth), leave is granted to Rahul Goyal and Jennifer Anne Nettleton as special purpose liquidators of the first defendant to enter into a funding agreement with the plaintiff, in the same or substantially the same form as the proposed Deed of Funding and Indemnity annexed at “AZ-11” to the Affidavit of Aris Zafiriou sworn 26 May 2017.
2.Pursuant to section 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 further order of the Court:
(a)the affidavit of Aris Zafiriou sworn 9 March 2017 comprising seven paragraphs; and
(b)annexure AZ-11 to the affidavit of Aris Zafiriou sworn 26 May 2017.
3.The plaintiff’s and the second defendant’s costs of the proceedings be costs in the liquidation of the first defendant.
4.Any person demonstrating sufficient interest in order 2 above have liberty to apply on 3 days’ notice.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
GLEESON J:
This judgment deals with two applications relating to the funding of the liquidation of the first defendant (“EBS”).
The second defendant (“primary liquidator”) was appointed as liquidator of EBS on 22 September 2016 following a resolution that EBS be wound up in a creditors’ voluntary winding up.
On 6 April 2017, Rahul Goyal and Jennifer Anne Nettleton (“special purpose liquidators”) were appointed liquidators of EBS, as additional liquidators to carry out specified functions comprising, primarily, the conduct of investigations into the restructure of EBS and EBS’s dealings with the London Bullion Market Association (“LBMA”): Deputy Commissioner of Taxation, re ACN 154 520 199 Pty Ltd (in liq) v ACN 154 520 199 Pty Ltd (in liq) [2017] FCA 444.
The appointment of the special purpose liquidators was made on the application of the Deputy Commissioner of Taxation (“DCT”).
Application for approval nunc pro tunc of funding agreement for primary liquidator
On 6 April 2017, the primary liquidator was granted leave to file an application for approval of a funding agreement that he made with ABC Refinery (Australia) Pty Ltd (“ABC”) dated 18 November 2016 (“primary liquidator’s funding agreement”).
On 24 April 2017, the primary liquidator filed an interlocutory application together with an affidavit in support sworn on 24 April 2017 and an outline of submissions. By his interlocutory application, the primary liquidator sought orders that he be granted:
(1)leave, nunc pro tunc, pursuant to s 477(2B) of the Corporations Act 2001 (Cth) (“Act”) to enter into the primary liquidator’s funding agreement; and
(2)leave pursuant to s 477(2B) to enter into a proposed variation of primary liquidator’s funding agreement.
The primary purpose of the primary liquidator’s funding agreement, as stated in the recitals to the agreement, is to enable the primary liquidator to fund investigations into the “legitimacy of the Assessment that places the ATO as a major creditor of the company” (the word “Assessment” referring to assessments dated 8 April 2016, and any other relevant assessments and subsequent objections) and the conduct of an appeal against the “Assessment” to the Administrative Appeals Tribunal (“AAT”) and/or this Court. The scope of the funding agreement extends to expenses incurred in the course of investigating “any related matter to the liquidation of the Company” capped at an amount of $30,000.
On 18 November 2016, the primary liquidator, on behalf of EBS, filed an application in the AAT for review of the Australian Taxation Office’s (“ATO”) decision to disallow EBS’s objection to the relevant assessments (“tax appeal”).
Since entering into the funding agreement, the primary liquidator has been investigating potential recoveries for EBS, particularly three amounts that the primary liquidator considers to be unfair preferences paid to the ATO. The primary liquidator has formed the view that his costs will probably exceed the $30,000 cap. Accordingly, he seeks leave to enter into a variation of the funding agreement which removes the cap.
The primary liquidator’s application for these orders was unopposed.
On 24 May 2017, I made orders extending the time for the primary liquidator to make an application for leave to enter into the primary liquidator’s funding agreement and made orders, nunc pro tunc, granting the primary liquidator leave to enter into that agreement and the proposed variation. The reasons for making those orders are set out below.
Application for approval of funding agreement for special purpose liquidators
By the originating process that sought appointment of the special purpose liquidators, and as set out in the affidavit filed in support, the DCT also sought an order that leave be granted for the special purpose liquidators to enter into a funding agreement with the DCT on behalf of EBS.
The DCT filed a confidential affidavit made by Aris Zafiriou dated 9 March 2017 (“confidential affidavit”) annexing a copy of the proposed deed of funding and indemnity (“proposed SPL funding agreement”) in accordance with a confidentiality order made on 8 February 2017.
The stated purpose of the proposed SPL funding agreement was to enable the special purpose liquidators to carry out the functions set out in the orders that the DCT sought in its originating process, which were eventually made on 6 April 2017.
By affidavit sworn 24 April 2017, the primary liquidator stated that he would not oppose the proposed SPL funding agreement if it met the following requirements:
(1)it does not affect all creditors in the liquidation;
(2)it relates to the special purpose liquidators only carrying on functions as ordered by the Court;
(3)it does not affect and/or impede the primary liquidator’s duties;
(4)it deals with funding for the primary liquidator in dealing with the special purpose liquidator; and
(5)if any adverse costs orders are made against the special purpose liquidators and/or EBS, those orders do not affect the administration of the liquidation and the rights of existing creditors.
The primary liquidator expressed particular concern that recoveries he may make for preference payments should not be accessed by the special purpose liquidators to indemnify the costs they incur or are ordered to pay.
On 24 May 2017, following an application by the primary liquidator for access to the SPL funding agreement, I made a direction that the DCT deliver to senior counsel for the primary liquidator a redacted copy of the proposed SPL funding agreement to enable the primary liquidators to make submissions about whether it should be approved by the Court.
After reviewing the redacted SPL funding agreement, the primary liquidator made submissions identifying particular concerns about the SPL funding agreement. Those concerns related to indemnification against adverse costs orders, including costs orders which might be made against EBS.
The DCT considered those concerns and prepared a revised SPL funding agreement which was provided to the Court as an annexure to an affidavit of Mr Zafiriou sworn 26 May 2017. In addition, the liquidator relied upon an affidavit of Mr Goyal affirmed 28 May 2017 which states, relevantly, that:
(1)the special purpose liquidators are prepared to enter into the revised SPL funding agreement, and to execute the revised SPL funding agreement on behalf of EBS;
(2)Mr Goyal believes the revised SPL funding agreement to be in the best interests of creditors;
(3)it is envisaged that the life of the revised SPL funding agreement will extend to functions outlined in a schedule to the agreement, which are largely investigation tasks;
(4)in the event litigation is to be pursued by the SPLs, a new funding arrangement will be required, which will require subsequent court approval pursuant to s 477(2B); and
(5)it is not the SPLs’ intention to undertake litigation on behalf of EBS without the approval and funding of the ATO (including funding for any adverse costs order that may be made).
After a further hearing on 29 May 2017, I reserved my decision in respect of the approval sought by the special purpose liquidators to enter into the revised SPL funding agreement.
Legal framework concerning approval of liquidators’ funding agreements
Section 477(2B) of the Act provides:
Except with the approval of the Court, of the committee of inspection or of a resolution of the creditors, a liquidator of a company must not enter into … an agreement on the company’s behalf (for example, but without limitation, a lease or an agreement under which a security interest arises or is created) 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.
The Court’s role in considering an application under s 477(2B) is to determine whether it is a proper or bona fide exercise of the liquidator’s powers. In Re 7 Steel Distribution Pty Ltd (in liq) (recs and mgrs apptd) [2013] NSWSC 669; (2013) 31 ACLC 13-021 at [17], Black J said:
The Court is not concerned, in granting an approval under s 477(2B) of the Corporations Act, with matters of commercial judgment but is concerned to be satisfied that the entry into the agreement is a proper exercise of power and not ill-advised or improper on the part of the liquidator ... In Pascoe; Re Matrix Group Limited (in liq) [2011] FCA 1117 at [14], Jacobsen J [sic] noted that the question for the Court in such an application was whether the liquidator’s judgment had been infected by a lack of good faith, or an error of law or principle, and whether there was a real or substantial ground for doubting the prudence of the Liquidator’s conduct in seeking to enter into the funding arrangement. That question arises, in the context of s 477(2B), in the context of entry into a longer term agreement, the performance of which might otherwise delay the completion of the winding-up.
In Stewart, re Newtronics Pty Ltd [2007] FCA 1375 (“Newtronics”), Gordon J, at [26(4)], cited with approval Austin J’s statement in Corporate Affairs Commission v ASC Timber Pty Ltd (1998) 29 ACSR 109 at 118 that, in reviewing the liquidator’s proposal, the task of the Court is not “to reconsider all of the issues which have been weighed up by the liquidator in developing the proposal, and to substitute its determination for his in....a hearing de novo”, but rather the task of the Court is:
… simply to review the liquidator’s proposal, paying due regard to his or her commercial judgment and knowledge of all of the circumstances of the liquidation, satisfying itself there is no error of law or ground for suspecting bad faith or impropriety, and weighing up whether there is any good reason to intervene in terms of the “expeditious and beneficial administration” of the winding up …
The standard imposed under s477(2B) concerns an assessment by the Court as to whether 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 at [11] per Black J citing McGrath re HIH Insurance Ltd [2010] NSWSC 404; (2010) 266 ALR 642.
In 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 King Bros [2006] NSWSC 315 at [23]:
Although the court has the statutory task [under s477(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.”
In Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher [2011] FCAFC 89; (2011) 85 ACSR 38 at [24], the Full Court endorsed the following list of factors (identified by Austin J in Leigh re King Bros at [25] and Re ACN 076 673 875 Ltd [2002] NSWSC 578; (2002) 42 ACSR 296 at [17]-[34]) relevant to the Court’s assessment of a litigation funding agreement:
(1)the prospects of success of the proposed litigation;
(2)the interests of creditors other than the proposed defendant;
(3)possible oppression;
(4)the nature and complexity of the cause of action;
(5)the extent to which the liquidator has canvassed other funding options;
(6)the level of the funder’s premium;
(7)consultations with creditors; and
(8)the risks involved in the claim.
Grant of approval nunc pro tunc
A liquidator should seek the Court’s approval before entering into a long term agreement. However, the Court may give retrospective approval to an agreement under s 477(2B) in appropriate circumstances: Re Kevin Jacobsen Pty Ltd (in liq) [2016] NSWSC 538; (2016) 113 ACSR 277 at [75]; Hamilton, re ACN 101 634 146 Pty Ltd (in liq) [2014] FCA 687; Newtronics at [25]; Chamberlain v RG & H Investments Pty Ltd; re Hardy Bros (Earthmoving) Pty Limited (in liq) (No 2) [2009] FCA 1531; (2009) 76 ACSR 415 at [22]-[24].
Approval of primary liquidator’s funding agreement
In his 24 April 2017 affidavit, the primary liquidator gave an explanation for his oversight of the requirement to seek prior approval of his funding agreement and apologised to the Court for the inconvenienced caused. I accepted the primary liquidator’s explanation.
The following submissions were made in support of the primary liquidator’s application for retrospective approval of the funding agreement:
(1)The terms of the funding agreement make it clear that the primary liquidator keeps his independence.
(2)There is no creditor that would fund the liquidator.
(3)The primary liquidator has considered other funding options. There are no other external funding options available as the tax appeal will not provide, if successful, a costs order or damages from which to pay a professional funder. The relief sought in the tax appeal would serve to remove or reduce a debt that is presently owing.
(4)The funding agreement has a defined scope as to its operation in regards to the tax appeal.
(5)The primary liquidator took tax counsel’s advice and formed a view as to the prospects of success in the tax appeal. Those proceedings have merit and are not frivolous or vexatious.
(6)The primary liquidator considered all creditors and the benefit of pursuing the tax proceedings.
(7)The funding agreement will not deplete EBS’s assets but will allow the AAT, in effect, to determine the real creditors of EBS.
(8)There is no oppression or abuse of process in bringing the tax appeal.
(9)There is no premium being charged by the funding party.
(10)There is no benefit to the funding party disproportionate to the risk undertaken in the provision of funding.
(11)The funding agreement provides the primary liquidator with an indemnity that he can rely on and by doing so protect the assets of the company from exposure, inter alia, to adverse costs orders (albeit the AAT does not usually make costs orders).
(12)The commercial decision before the primary liquidator at the time of entering the funding agreement was a “relatively straightforward one”. The primary liquidator was in the position where if he did not enter into the funding agreement with ABC, the tax appeal would never take place.
(13)The funding agreement has been performed.
I accepted that the liquidator’s decision to bring the tax appeal is properly based on advice that the proceeding is not frivolous or vexatious. The tax appeal will determine whether the DCT is a creditor of EBS: at present, the tax debt is over $200 million and comprises over 99% of EBS’s total debts. There is no identifiable oppression in pursuing the tax appeal, the liquidator is not subject to any unusual control by ABC in pursuing the tax appeal and the liquidator will be fully indemnified.
Taking these matters into account, I was satisfied, on the basis of the primary liquidator’s evidence and my review of the funding agreement, that there was no reason to conclude that the liquidator’s entry into the funding agreement was other than a proper exercise of his power, or that it was an ill-advised or improper act on the part of the liquidator. Accordingly, I extended the time for making the application for approval and granted the approval sought under s 477(2B).
In relation to the proposed variation of the funding agreement, its purpose is to remove a funding cap in the funding agreement. In his 24 April 2017 affidavit, the primary liquidator stated that the purpose of the funding cap being removed was to enable funding to be provided for investigations and recovery actions that the primary liquidator wishes to undertake outside the tax appeal. The primary liquidator has made a demand for recovery of the three payments which was rejected. He no longer presses for recovery of two of the payments but maintains that EBS is entitled to recover $367,933.75 from the Australian Taxation Office for reasons which are articulated in correspondence to the ATO. In those circumstances, I was satisfied that there was no reason to conclude that the liquidator’s entry into the proposed variation would be other than a proper exercise of his power, or that it was an ill-advised or improper act on the part of the liquidator.
Approval of special purpose liquidators’ funding agreement
The DCT made the following submissions:
(1)The proposed funding is for investigations into the “Examinable Matters”, as defined in annexure A to the orders made on 6 April 2017. The DCT submitted that the nature and complexity of the Examinable Matters favours the granting of approval by the Court.
(2)The amount of costs likely to be incurred in the conduct of the investigations and any action in connection with the Examinable Matters is likely to be substantial and, under the proposed funding agreement, the DCT is to fund those costs in full.
(3)It is clear on the evidence that the special purpose liquidators have no other funding options.
(4)The DCT is entitled to no more than the law allows any creditor that provides funding to a liquidator.
(5)The special purpose liquidators have consulted with the DCT, who is by far the most significant creditor. The DCT’s debt represents over 99% of EBS’s debts.
(6)The revised SPL funding agreement addresses each of the concerns raised by the primary liquidator.
In Re Ambient Advertising Pty Ltd (in liq) [2015] NSWSC 1079 at [43]-[46], Robb J, after deciding to appoint a special purpose liquidator, approved the entry into a funding agreement for the same reasons as the appointment of the special purpose liquidator.
The special purpose liquidators need to be funded to carry out the functions that are the subject of their appointment. I have reviewed the revised SPL funding agreement. Based on that review and on the evidence of Mr Goyal, I accept that there is no reason to conclude that the special purpose liquidators’ entry into the revised SPL funding agreement is other than a proper exercise of their power, or to conclude that it would be an ill-advised or improper act on the part of the special purpose liquidators.
Accordingly, I am satisfied that it is appropriate to grant the approval sought.
OTHER MATTERS
Confidentiality
Section 37AF of the Federal Court of Australia Act 1976 (Cth) provides:
(1) The Court may, by making a suppression order or non-publication order on grounds permitted by this Part, prohibit or restrict the publication or other disclosure of:
(a) information tending to reveal the identity of or otherwise concerning any party to or witness in a proceeding before the Court or any person who is related to or otherwise associated with any party to or witness in a proceeding before the Court; or
(b) information that relates to a proceeding before the Court and is:
(i) information that comprises evidence or information about evidence; or
(ii) information obtained by the process of discovery; or
(iii) information produced under a subpoena; or
(iv)information lodged with or filed in the Court.
(2) The Court may make such orders as it thinks appropriate to give effect to an order under subsection (1).
By s 37AG(1)(a), the Court may make a suppression order or non-publication order on the ground that the order is necessary to prevent prejudice to the proper administration of justice. By s 37AG(2), a suppression order or non-publication order must specify the ground or grounds on which the order is made.
Confidentiality orders were sought in respect of an affidavit of Mr Zafiriou dated 9 March 2017, which annexes the proposed SPL funding agreement and the revised proposed SPL funding agreement annexed to Mr Zafirou’s affidavit of 26 May 2017. The subject matter of the draft proposed agreements is of a “commercially confidential and sensitive kind, related to aspects of the [potential] litigation that any plaintiff ... would take particular care to keep from the other party or parties”: Onefone Australia Pty Ltd v One.Tel Ltd (2010) [2010] NSWSC 498; (2010) 78 ACSR 163 at [2] (Barrett J), referred to with approval on appeal in Deloughery v Weston (2010) 79 ACSR 180; [2010] NSWCA 148 at [22] (Giles JA and Handley AJA, with whom Spigelman CJ agreed).
In previous cases which are substantially similar to this case, including Re Ambient Advertising Pty Ltd (in liq) [2015] NSWSC 1079, Victoria v Goulburn Administration Services (In Liq) [2016] VSC 654 and Victoria v CTM Training Solutions Pty Ltd (In Liq) [2017] VSC 47, the proposed funding deeds were kept confidential as between the special purpose liquidators and the funder. There is no reason why this matter should be any different.
The clear public interest in the due and beneficial administration of the estates of insolvent companies for the benefit of creditors is a relevant consideration in favour of a s 37AF order in this case. I was satisfied that an order pursuant to s 37AF should be made to protect commercially confidential information provided in support of the application.
I have made confidentiality orders in respect of the entirety Mr Zafirou’s affidavit of 9 March 2017 and the revised proposed SPL funding agreement annexed to Mr Zafirou’s affidavit of 26 May 2017. It is possible that not every paragraph, clause or part of this material is of a commercially confidential and sensitive nature. In my view, it would not serve the interests of justice to require the parties to expend time and money in identifying in detail which particular portions of the material should be the subject of an order under s 37AF. The approach of Ball J in Re Octaviar Administration Pty Ltd (in liq) [2014] NSWSC 344 at [15] to [21] is a useful guide in this case. Accordingly, I have ordered that a party demonstrating sufficient interest in the confidentiality order may apply to the Court if it seeks to access the affidavits.
Costs
At the hearing for the application for the appointment of the special purpose liquidators on 6 April 2017, I reserved my judgment in respect of the costs of the application. The DCT submitted that its costs should be paid out of the assets of the company, as distinct from the assets of the company recovered or realised by the special purpose liquidators.
At the hearing on 29 May 2017, I reserved my judgment in respect of the costs of the primary liquidator’s application to access the proposed SPL funding agreement.
Where proceedings brought against a liquidator are successful, generally a costs order will be made in such a way that the liquidator does not incur any personal liability: see Silvia v Brodyn Pty Ltd [2007] NSWCA 55; (2007) 25 ACLC 385 at [52] per Hodgson JA(citing Re Wilson Lovatt & Sons Limited [1977] 1 All ER 274 at 285) and Lardis v Free [2014] FCA 304 at [39]-[40]. Ordinarily, a successful applicant for the approval of a funding agreement under s 477(2B) of the Act will be entitled to an order that his or her costs be costs in the winding up of the company: cf Re Golden Sands Hospitality Pty Ltd (in liq) (No 2) [2017] NSWSC 450.
In respect of the DCT’s applications to appoint the special purpose liquidator and for the approval of the proposed SPL funding agreement, the DCT was successful and costs will follow the event. There being no disentitling conduct on the part of the primary liquidator, the DCT’s costs of these applications should be costs in the liquidation of EBS.
The primary liquidator was successful in his application for the approval, nunc pro tunc, of the primary liquidator’s funding agreement and the proposed variation to that agreement. He was also successful in his application for access to the proposed SPL funding agreement. Accordingly, the primary liquidator’s costs of the interlocutory process dated 20 April 2017 should also be costs in the liquidation of EBS.
I certify that the preceding forty-seven (47) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gleeson. Associate:
Dated: 7 July 2017
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