Greentree Resources Pty Ltd (in liq) v Greentree, in the matter of Greentree Resources Pty Ltd (in liq)
[2025] FCA 256
•20 March 2025
FEDERAL COURT OF AUSTRALIA
Greentree Resources Pty Ltd (in liq) v Greentree, in the matter of Greentree Resources Pty Ltd (in liq) [2025] FCA 256
File number(s): NSD 1593 of 2024 Judgment of: JACKMAN J Date of judgment: 20 March 2025 Catchwords: BANKRUPTCY AND INSOLVENCY – Application for court approval to compromise debts owing to first plaintiff – Application for court approval to enter into retainer agreement, litigation funding agreement and Deed of Settlement and Release – Application for suppression orders – Application for appointment of liquidators as receivers and managers without security over property assets and undertaking of a trust – Applications granted Legislation: Corporations Act 2001 (Cth)
Federal Court of Australia Act 1976 (Cth)
Cases cited: Bruton Holdings Pty Limited (In liq) v Commissioner of Taxation [2011] FCAFC 79; (2011) 193 FCR 442
Michell, in the matter of Walkers, Brick and Block Pty Limited (In liq) [2025] FCA 119
Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 17 Date of hearing: 20 March 2025 Counsel for the Plaintiffs Mr D Neggo Solicitor for the Plaintiffs Stacks Law Firm Counsel for the Defendants No appearance Solicitor for the Defendants LegalVision ILP Pty Ltd ORDERS
NSD 1593 of 2024 IN THE MATTER OF GREENTREE RESOURCES PTY LTD (IN LIQUIDATION)
ACN 606 844 375BETWEEN: GREENTREE RESOURCES PTY LTD (IN LIQ)
ACN 606 844 375First Plaintiff
BRADD WILLIAM MORELLI AS JOINT AND SEVERAL LLIQUIDATOR OF GREENTREE RESOURCES PTY LTD (IN LIQ) ACN 606 844 375
Second Plaintiff
EMMA MARIE MOS AS JOINT AND SEVERAL LIQUIDATOR OF GREENTREE RESOURCES PTY LTD (IN LIQ) ACN 606 844 375
Third Plaintiff
AND: ADAM CRAIG GREENTREE
First Defendant
GREENTREE PROPERTIES PTY LTD
(ACN 166 100 625)Second Defendant
GREENTREE EQUIPMENT PTY LTD
(ACN 166 676 026) (and another named in the Schedule)Third Defendant
ORDER MADE BY:
JACKMAN J
DATE OF ORDER:
20 MARCH 2025
THE COURT ORDERS THAT:
1.Pursuant to section 477(2B) of the Corporations Act 2001 (Cth) (the Act), the Second Plaintiff and Third Plaintiff (the Liquidators) have approval, nunc pro tunc, to enter into, on behalf of the First Plaintiff (the Company), the Litigation Funding Agreement with Clover Risk Funding Pty Limited located at pages 1 to 34 of Confidential Exhibit BWM-4.
2.Pursuant to section 477(2B) of the Act, to the extent required, the Liquidators have approval, nunc pro tunc, to enter into, on behalf of the Company, a retainer agreement with Stacks Davis Lawyers in the form located at pages 35 to 41 of Confidential Exhibit BWM-2.
3.Pursuant to section 477(2A) of the Act, the Liquidators have approval to compromise debts owing to the Company on the terms set out in the Deed of Settlement and Release located at pages 5 to 17 of Exhibit BWM-3.
4.Pursuant to section 477(2B) of the Act, the Liquidators have approval, nunc pro tunc, to enter into, on behalf of the Company, the Deed of Settlement and Release located at pages 5 to 17 of Exhibit BWM-3.
5.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 following documents be marked confidential, be kept confidential and not be provided or disclosed to any person until further order of the Court:
(a)the contents of Confidential Exhibit “BWM-2” exhibited to the affidavit of Bradd William Morelli affirmed on 8 November 2024 and marked “confidential”; and
(b)the contents of Confidential Exhibit “BWM-4” exhibited to the affidavit of Bradd William Morelli affirmed on 19 March 2025.
6.Pursuant to section 57(1) of the Federal Court of Australia Act 1976 (Cth), the Liquidators be appointed as receivers and managers without security over the property, assets and undertaking of the Greentree Resources Trust (Trust Assets).
7.The Liquidators have, in respect of the Trust Assets, the powers provided for under section 420 of the Corporations Act 2001 (Cth) other than those in subsections 420(2)(s), (t), (u) and (w) as if the reference in that section to “the corporation” were a reference to the Trust.
8.The costs and expenses incurred by the Liquidators in acting as receivers and managers of the Trust Assets, and in making this application, be costs and expenses in the liquidation of the Company.
9.The Liquidators have liberty to apply for approval of their remuneration in the liquidation of the Company, and for an order that the remuneration be paid out of the Trust Assets.
10.The Liquidators otherwise have liberty to apply on three days' notice, such notice to specify the nature of the relief sought and the grounds relied upon.
11.The proceedings be listed for case management hearing on 1 September 2025 at 9.30 am.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
Delivered ex tempore, revised from transcriptJACKMAN J:
This is an application for:
(1)court approval for the second and third plaintiffs (the Liquidators) to compromise debts owing to the first plaintiff (the Company) and for approval, nunc pro tunc, for them to enter into three documents pertaining to the substantive proceedings, being a retainer agreement with a law firm, a litigation funding agreement and a Deed of Settlement and Release;
(2)an order that certain evidence relating to the terms of the retainer agreement and the litigation funding agreement be kept confidential; and,
(3)an order appointing the Liquidators as receivers and managers without security over the property assets and undertaking of a trust connected with the Company known as the Greentree Resources Trust (the Trust).
The Company was the trustee of the Trust. In that capacity, the Company carried on a business providing civil and general fencing contracting services. So far as is known, the Company had no activities other than as trustee. The Company was wound up on 9 November 2021 as a result of which the trustee's office was “vacated” under cl 17.2 of the Trust Deed. However, no replacement trustee was ever appointed to the Trust. The Company, therefore, holds the assets comprising the Trust fund as bare trustee: Michell, in the matter of Walkers, Brick and Block Pty Limited (In liq) [2025] FCA 119 at [9]; Bruton Holdings Pty Limited (In liq) v Commissioner of Taxation [2011] FCAFC 79; (2011) 193 FCR 442 at [4] (Stone, Jacobson and Edmonds JJ). At present, the assets comprising the Trust fund are minimal. However, that may change once approval is obtained to effect the proposed settlement of the substantive litigation.
The ATO has lodged a proof of debt in the liquidation for approximately $1.8 million. The only other potential creditors now identified are related parties of the Company and, in particular, a related corporate entity, Greentree Properties Pty Limited, for an amount of $113,000.
Between about March and September 2024, with the assistance of solicitors who were prepared to conduct public examinations on a “speculative basis”, the Liquidators identified a number of arguable claims against the Company's director, Mr Greentree, and related parties. However, at its highest, there was only around $14,000 available in the liquidation, which was insufficient to fund proceedings to pursue the claims.
The Liquidators called a meeting of creditors to take place on 7 November 2024 in order to consider a retainer agreement with the solicitors who had carried out the examinations and a litigation funding agreement for the purposes of advancing and funding the proceedings. The meeting could not proceed on 7 November 2024 as no quorum was achieved, perhaps unsurprisingly since a number of the related party creditors were also the proposed defendants in the proceedings being contemplated.
However, as some of the potential claims were facing imminent time bars, the Liquidators commenced proceedings by Originating Process lodged on 8 November 2024. The Liquidators were not prepared to commence proceedings without having an arrangement in place to protect them from potential adverse cost orders and so signed the funding agreement which contains such protection. The Originating Process included claims for relief seeking approval to enter into the litigation funding agreement and a retainer agreement with the solicitors pursuant to s 477(2B) of the Corporations Act 2001 (Cth) nunc pro tunc. Meanwhile, the immediately required legal work by the law firm was performed pursuant to a cost agreement, which does not require s 477(2B) approval in order for that work to occur because the costs agreement was expressed to terminate automatically if approval was not obtained within 85 days after acceptance.
Deed of Settlement and Release and Approval Deed
The Deed of Settlement contemplates that the defendants will pay to the Liquidators a “Settlement Sum” of $400,000 and that the main related party creditor (Greentree Properties Pty Limited) will not prove in the winding up of the Company. In return it is contemplated that the defendants will be released from all claims.
However, the Liquidators require approval to compromise their debt claim (pursuant to s 477(2A)) and to enter into the Deed of Settlement and Release (pursuant to s 477(2B)). It is a term of the Approval Deed that the Deed of Settlement and Release shall be deemed to be exchanged immediately upon the Liquidators obtaining that approval.
There is no express apportionment of parts of the “Settlement Sum” to any particular claims in the proceedings, which means it is at least possible that part of the “Settlement Sum” might fall within the Trust fund and, therefore, be held by the Company as bare trustee. Thus, the assets in the Trust fund might become more than minimal. For that reason, the Liquidators seek orders appointing them as receivers of the Trust so that, by way of enforcement of the Company's rights of indemnity and exoneration, the Liquidators can realise the Trust Assets and apply the proceeds to discharge the Company's liabilities.
In relation to the litigation funding agreement and the retainer agreement, Mr Neggo submits, and I accept that:
(a)There were no funds in the liquidation to enable investigations (such as public examinations) earlier than 2024 when the solicitors agreed to conduct “speculative” public examinations. Those investigations took place between about March and September 2024. The investigations revealed the viability of the claims the subject of these proceedings.
(b)If these proceedings had not been commenced there was absolutely no prospect of any return to creditors in the liquidation.
(c)There was no source of funds available to advance these proceedings other than by a litigation funder. The proceedings could not be commenced without a litigation funding agreement, nor could the proceedings be advanced to a conclusion without a retainer agreement with a law firm.
(d)The proceedings’ meetings needed to be commenced by 9 November 2024.
(e)Mr Morelli, one of the Liquidators, was mindful of his obligations under s 477(2B). He tried but could not satisfy those obligations by a meeting of creditors. He did not have the time to obtain court approval in advance and took prompt steps to obtain, nunc pro tunc, approval.
In relation to the considerations generally referable to litigation funding agreements:
(a)The prospects of success of the proceedings are informed by the fact that a substantially beneficial settlement of the proceedings has been negotiated.
(b)The nature and complexity of the proceedings was such that it was not possible to advance the case without funding.
(c)The Liquidators canvassed other funding options and were unsuccessful.
(d)Mr Morelli's evidence is that the terms of the funding agreement are typical, reasonable and competitive, and address all of the relevant and necessary matters that are expected in agreements of this nature.
(e)The Liquidators did not consult the creditors (other than to invite proposals for funding which were not taken up). The creditors can hardly complain since the litigation has resulted in a greater prospect of a return to creditors than otherwise.
(f)The risk involved in the claim was ameliorated by the funding agreement which provided for the funder to pay the Liquidators' expenses of the litigation and to bear the risk of adverse costs orders and orders for security for costs (noting that all those obligations were capped to an extent that appears more than adequate).
In relation to the retainer agreement, Mr Morelli's evidence is that the hourly rates proposed by the law firm are reasonable, that he has previously engaged the law firm and is satisfied that the firm has the relevant expertise, that, in his experience, the terms of the proposed retainer are typical, reasonable and competitive, and that he is satisfied that the terms are appropriate, not unusual and generally in the interest of creditors.
As to the Deed of Settlement and Release, Mr Neggo submits, and I accept, that Mr Morelli has approached the negotiated settlement of the matter in a careful and responsible manner. It is Mr Morelli's commercial judgment that it is in the interest of creditors for the Liquidators and the Company to enter into the deed. There is no reason to conclude that the entry into the deed is other than a proper exercise of the Liquidators' powers or to conclude that it is an ill-advised or improper act on the part of the Liquidators.
The application for suppression orders, pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth) (the FCA Act) is in my view, necessary to prevent prejudice to the proper administration of justice in retaining confidential matters in relation to which, in the event of a difficulty in recovering the amount due under the Deed of Settlement and Release, there may eventuate litigation concerning the parties to that agreement or others.
As to the proposed order that the Liquidators be appointed as receivers and managers without security over the property assets and undertaking of the Trust Assets, as I have indicated above, upon the winding up of the Company and the appointment of the Liquidators, the Company was removed as trustee of the Trust by operation of cl 17.2 of the Trust Deed and commenced to hold the assets of the Trust as bare trustee. The Company has a right to an indemnity by operation of cl 14.2 of the Trust Deed.
Section 57(1) of the FCA Act provides that the court may, at any stage of a proceeding, on such terms and conditions as the court thinks fit, appoint a receiver by interlocutory order in any case in which it appears to the court to be just or convenient so to do. The appointment of a liquidator as a receiver and manager in circumstances such as the present is a common course which brings certainty and efficiency to the process of liquidation.
Mr Neggo submits, and I accept, that it is in the interests of the Trust's creditors and beneficiaries for the Liquidators to be appointed as receivers and managers of the Trust, and that it is appropriate that the Liquidators be appointed as receivers and managers of the Trust Assets in order to preserve the right of indemnity and exoneration.
I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jackman. Associate:
Dated: 25 March 2025
SCHEDULE OF PARTIES
NSD 1593 of 2024 Defendants
Fourth Defendant:
JILL CHURNSIDE
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