Hayes, in the matter of Denham Constructions Pty Limited (in liq)
[2018] FCA 2053
•10 AUGUST 2018
FEDERAL COURT OF AUSTRALIA
Hayes, in the matter of Denham Constructions Pty Limited (in liq) [2018] FCA 2053
File number: NSD 1432 of 2018 Judge: MARKOVIC J Dates of judgment: 10 and 16 August 2018 Date of publication of reasons: 20 December 2018 Catchwords: CORPORATIONS – application pursuant to s 477(2B) of the Corporations Act 2001 (Cth) (Act) for the Court’s retrospective approval of funding and costs agreements entered into by the liquidator – whether approval should be granted nunc pro tunc – application allowed.
CORPORATIONS – application by a liquidator for an order pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations), Sch 2 to the Act, that he is justified in redacting certain details on forms lodged with the Australian Securities and Investments Commission – application allowed.
PRACTICE AND PROCEDURE – application by a liquidator for non-publication orders pursuant to s 37AF(1)(b)(iv) of the Federal Court of Australia Act 1976 (Cth) (FCA Act) – whether orders necessary to prevent prejudice to the proper administration of justice under s 37AG(1)(a) of the FCA Act – application allowed.
Legislation: Corporations Act 2001 (Cth) ss 477(2B), 596A, 596B, 1322(4)(d), Sch 2 ss 90-15, 90-20(1)
Federal Court of Australia Act 1976 (Cth) ss 37AE, 37AF(1), 37AG, 37AJ
Cases cited: Australian Competition and Consumer Commission v Air New Zealand Ltd (No 3) [2012] FCA 1430
Hamilton, in the matter of ACN 101 634 146 Pty Ltd (in liq) [2014] FCA 687
Hogan v Australian Crime Commission (2010) 240 CLR 651
In the matter of Octaviar Administration Pty Ltd (in liq) [2017] NSWSC 1556
Robinson, in the matter of Reed Constructions Australia Pty Ltd (in liq) [2017] FCA 594
Stanford v DePuy International Ltd [2013] FCA 1304
Stewart, in the matter of Newtronics Pty Ltd [2007] FCA 1375
Walley, in the matter of Poles & Underground Pty Ltd (Administrators Appointed) [2017] FCA 48
Woods, in the matter of Paladin Energy Ltd (Administrators Appointed) [2017] FCA 836
Dates of hearing: 10 and 16 August 2018 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 50 Counsel for the Plaintiff: Mr C Harris SC Solicitor for the Plaintiff: Colin Biggers & Paisley ORDERS
NSD 1432 of 2018
IN THE MATTER OF DENHAM CONSTRUCTIONS PTY LIMITED (IN LIQUIDATION) ACN 086 503 568 MR ALAN HAYES (AS OFFICIAL LIQUIDATOR) OF DENHAM CONSTRUCTIONS PTY LIMITED (IN LIQUIDATION)
Plaintiff
JUDGE:
MARKOVIC J
DATE OF ORDER:
10 AUGUST 2018
THE COURT ORDERS THAT:
1.Grant leave to the plaintiff to file in Court its originating process which is also to be filed electronically by 4.00 pm today, 10 August 2018.
2.Grant leave to the plaintiff to file in Court the affidavit of Alan John Hayes sworn 1 August 2018.
3.Pursuant to s 37AF(1)(b)(iv) and s 37AG(1)(a) of the Federal Court of Australia Act 1976 (Cth) the affidavit of Alan John Hayes sworn 1 August 2018 and exhibit AJH1 to that affidavit be made confidential and prohibited from disclosure to any person, except with the consent of the plaintiff or by order of the Court made on an application in respect of which the plaintiff has been given at least 3 business days’ notice in writing.
4.Pursuant to s 37AJ of the Federal Court of Australia Act 1976 (Cth) Order 3 operates for a period of two years from the date of this order or such earlier period as the Court might subsequently order.
5.Grant leave to the plaintiff to file any further amended originating process and any further affidavits in support by 4.00 pm on 15 August 2018.
6.Adjourn the hearing of the application to 2.15 pm on 16 August 2018 before the Commercial and Corporations Duty Judge.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
ORDERS
NSD 1432 of 2018
IN THE MATTER OF DENHAM CONSTRUCTIONS PTY LIMITED (IN LIQUIDATION) ACN 086 503 568 MR ALAN HAYES (AS OFFICIAL LIQUIDATOR) OF DENHAM CONSTRUCTIONS PTY LIMITED (IN LIQUIDATION)
Plaintiff
JUDGE:
MARKOVIC J
DATE OF ORDER:
16 AUGUST 2018
THE COURT ORDERS THAT:
1.Pursuant to s 37AF and s 37AG(1)(a) of the Federal Court of Australia Act 1976 (Cth) disclosure of paras 2 to 5 inclusive of the affidavit of Alan John Hayes sworn 15 August 2018 be made confidential and prohibited from disclosure to any person except with the consent of the plaintiff or by order of the Court made on an application in respect of which the plaintiff has been given at least 3 business days’ notice in writing.
2.Pursuant to s 37AJ of Federal Court of Australia Act 1976 (Cth) Order 1 operates for a period of two years from the date of this order or such earlier period as the Court might subsequently order.
3.Pursuant to s 1322(4)(d) of the Corporations Act 2001 (Cth) (Act) the period for making an application under s 477(2B) of the Act for approval of entry by the plaintiff into the agreements described as the preliminary funding and indemnity agreement dated 27 September 2016, the supplementary funding and indemnity agreement dated 9 January 2017 (Second Funding Agreement), the supplementary funding and indemnity agreement dated 5 December 2017 (Third Funding Agreement), the costs agreement between the plaintiff and Colin Biggers & Paisley dated 15 December 2016 (Costs Agreement) and the revised costs agreement estimate between the plaintiff and Colin Biggers & Paisley dated 20 June 2018 (Revised Costs Agreement) be extended to 10 August 2018.
4.Pursuant to s 477(2B) of the Act approval be granted nunc pro tunc for the plaintiff to enter into and cause Denham Constructions Pty Limited (in liquidation) to enter into the Second Funding Agreement, the Third Funding Agreement, the Costs Agreement and the Revised Costs Agreement.
5.Pursuant to s 90-15(1) of the Insolvency Practice Schedule (Corporations), being Sch 2 to the Act, the plaintiff was and is justified in acting as set out in para 53(b)(iii) of his confidential affidavit sworn on 1 August 2018.
6.Adjourn the balance of the amended application for further hearing to 2.15 pm on Tuesday, 21 August 2018 before the Commercial and Corporations Duty Judge.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
MARKOVIC J:
On 10 August 2018, in my capacity as Commercial and Corporations Duty Judge, I made orders including an order that, pursuant to s 37AF(1)(b)(iv) and s 37AG(1)(a) of the Federal Court of Australia Act 1976 (Cth) (FCA Act), the affidavit of Alan John Hayes sworn 1 August 2018 (First Hayes Affidavit) and exhibit AJH1 to that affidavit be made confidential and prohibited from disclosure to any person (First Confidentiality Orders) and that, pursuant to s 37AJ of the FCA Act, those orders operate for a period of two years from the date of the order.
On that occasion, I was not prepared to make certain other orders sought by the plaintiff (Liquidator) and granted leave to him to file any further amended originating process and affidavits in support.
The interlocutory hearing was adjourned to 16 August 2018 and on that date I relevantly made the following orders:
·pursuant to ss 37AF, 37AG(1)(a) and 37AJ of the FCA Act disclosure of [2]-[5] of the affidavit of the Liquidator sworn 15 August 2018 (Second Hayes Affidavit) be made confidential and prohibited from disclosure except in certain circumstances for a period of two years pursuant to s 37AJ of the FCA Act (Second Confidentiality Orders);
·pursuant to s 1322(4)(d) of the Corporations Act 2001 (Cth) (Act) the period for making an application under s 477(2B) of the Act for approval of entry by the Liquidator into, among others, a supplementary funding and indemnity agreement dated 9 January 2017 (Second Funding Agreement); a supplementary funding and indemnity agreement dated 5 December 2017 (Third Funding Agreement); a costs agreement between the Liquidator and Colin Biggers & Paisley (CBP) dated 15 December 2016 (Costs Agreement); and a revised costs agreement estimate between the Liquidator and CBP dated 20 June 2018 (Revised Costs Agreement) be extended to 10 August 2018;
·pursuant to s 477(2B) of the Act approval be granted nunc pro tunc for the Liquidator to enter into and cause Denham Constructions Pty Limited (in liq) (Company) to enter into the Second Funding Agreement, the Third Funding Agreement, the Costs Agreement and the Revised Costs Agreement; and
·pursuant to s 90-15(1) of the Insolvency Practice Schedule (Corporations) (Insolvency Schedule), being Sch 2 to the Act, the Liquidator was and is justified in acting as set out in [53(b)(iii)] of the First Hayes Affidavit.
I set out below my reasons for making these orders.
BACKGROUND
The Company operated as a building company engaged in the construction of mid to large scale commercial and industrial properties, with up to 70 employees and a large number of subcontractors.
On 1 September 2016 the Liquidator was appointed to the Company.
On 2 September 2016 Gavin Moss was appointed as the receiver and manager of the Company (Receiver). He resigned on 9 February 2018.
On 27 September 2016 the Liquidator entered into the First Funding Agreement for the purpose of conducting investigations into the Company. On 9 January 2017 the Liquidator entered into the Second Funding Agreement and on 5 December 2017 he entered into the Third Funding Agreement.
The Liquidator entered into the Costs Agreement with CBP on 15 December 2016 on his own and the Company’s behalf. The Costs Agreement was superseded on 30 October 2017. On 20 June 2018 the costs agreement estimate was revised and the Liquidator entered into the Revised Costs Agreement.
According to the Liquidator, the Company owes creditors a significant amount of money, including approximately $4m in priority employee entitlements. The Liquidator’s evidence was that there are virtually no assets of which he has been able to obtain possession or realise. The only potential assets of the Company of which the Liquidator is aware are four separate adjudication determinations or judgments in favour of the Company. However, those judgments are the subject of disputes and/or offsetting claims.
On 6 July 2018, pursuant to s 596A and s 596B of the Act, the Liquidator obtained leave from the Court to examine a number of parties and seek access to documents from those parties. A number of the parties to be examined are either listed in the books and records of the Company as creditors or are related entities of the Company.
In the First Hayes Affidavit the Liquidator sets out, among other things, the details of his proposed investigations in relation to the Company, the Company’s financial position, his remuneration and disbursements, which were then unpaid, and the estimated legal costs of conducting the proposed public examinations.
As noted at [2] above, on 10 August 2018 when the application came before me for hearing, I made the orders set out at [1] above. But because of a lack of evidence as to whether certain agreements went longer than their terms for the purpose of s 477(2B) of the Act, I did not make all the orders sought by the Liquidator and adjourned the matter to 16 August 2018 for further hearing.
On 15 August 2018 the Liquidator swore the Second Hayes Affidavit which, among other things, disclosed the identity of the funder and set out further details of the period over which work was carried out pursuant to the funding agreements. The Liquidator also lodged an amended originating process in which he relevantly sought the following relief:
2.Order pursuant to sections 37AF and 37AG(1)(a) of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act):
(a)disclosure of the affidavit of Alan John Hayes sworn 1 August 2018 and affidavit of Alan John Hayes sworn 15 August 2018 be prohibited except with the consent of the plaintiff or by order of the Court made on application in respect of which the plaintiff has been given at least 3 business days’ notice in writing;
(b)the affidavits and the exhibit to the affidavit of Alan John Hayes sworn 1 August 2018 be retained in the Court file in an envelope marked ‘Confidential: to be opened with the consent of the plaintiff or by Order of the Court’.
3.Order under section 37AJ of the Federal Court Act that the Order under sections 37AF and 37AG(1) in paragraph 2 herein operates for a period of 2 years from the date of this Order, or such earlier period as the Court might subsequently order.
4.Order pursuant to section 1322(4) of the Corporations Act extending to 10 August 2018, being the date of filing of the Originating Process in this proceeding, time for the making of the application for Order 5 below.
5.Order pursuant to section 477(2B) of the Corporations Act that the making by the Plaintiff of an agreement which is in, or substantially to the effect of, the documents that are in Confidential Exhibit AJH1 located behind Tabs 4, 5, 6 and 7, to the affidavit of Alan John Hayes sworn 1 August 2018 be approved nunc pro tunc.
6.Direction pursuant to section 90-15(1) of the Insolvency Practice Schedule (Corporations), being Schedule 2 of the Corporations Act, and sections 479(3) and 1322 of the Corporations Act that the Plaintiff was and is justified in acting as set out in paragraph 53(b) of the Plaintiffs’ affidavit sworn 4 August 2018.
…
9. Such further or other Order as may be appropriate.
10.Order that the costs of the application be costs and expenses in the winding up of Denham Constructions Pty Limited (in Liquidation).
(underlining and strike out omitted)
At the hearing on 16 August 2018 I informed the Liquidator that I was not inclined, on the evidence before me, to make Order 5 set out in the preceding paragraph in relation to [53(b)(i)] or [53(b)(ii)] of the First Hayes Affidavit. Accordingly, the proceeding was adjourned to 21 August 2018 for further hearing. On 20 August 2018 the Liquidator informed the Court he no longer pressed his application for that relief.
CONFIDENTIALITY ORDERS
Legal principles
Section 37AF(1) of the FCA Act sets out the Court’s power to make suppression or non-publication orders. The Court can, relevantly, prohibit the publication or disclosure of information tending to reveal the identity of any person who is related to any party in a proceeding before the Court (see s 37AF(1)(a) of the FCA Act) as well as information that is lodged with or filed in the Court that relates to a proceeding before the Court (see s 37AF(1)(b)(iv) of the FCA Act).
The Court may make a suppression order or non-publication order where, among other things, the order is necessary to prevent prejudice to the proper administration of justice: s 37AG(1)(a) of the FCA Act. The Court must specify the ground or grounds on which a suppression or non-publication order is made: s 37AG(2) of the FCA Act.
In deciding whether to make a suppression or non-publication order, s 37AE of the FCA Act requires the Court to “take into account that a primary objective of the administration of justice is to safeguard the public interest in open justice”.
In relation to the duration of such orders, s 37AJ of the FCA Act states:
(1)A suppression order or non‑publication order operates for the period decided by the Court and specified in the order.
(2)In deciding the period for which an order is to operate, the Court is to ensure that the order operates for no longer than is reasonably necessary to achieve the purpose for which it is made.
(3)The period for which an order operates may be specified by reference to a fixed or ascertainable period or by reference to the occurrence of a specified future event.
There is a heavy onus on the party who seeks the protection of confidentiality orders to establish that the character of each document in relation to which protection is sought warrants such an order: see, for example, Woods, in the matter of Paladin Energy Ltd (Administrators Appointed) [2017] FCA 836 at [33] (Woods) and the cases cited therein.
The power in s 37AF of the FCA Act to make suppression or non-publication orders based on the ground in s 37AG(1)(a) is to be construed in light of the judgment in Hogan v Australian Crime Commission (2010) 240 CLR 651 at [29]-[33], which concerned what was then s 50 of the FCA Act but which is equally applicable to s 37AF: see, for example, Stanford v DePuy International Ltd [2013] FCA 1304 at [19]-[20]; Woods at [31]; Australian Competition and Consumer Commission v Air New Zealand Ltd (No 3) [2012] FCA 1430 at [18]-[21]. That is, it is insufficient to make an order under s 37AF because it appears to be convenient, reasonable or sensible, or to serve some notion of the public interest or because of some balancing exercise. A suppression or non-publication order is not to be made lightly and the requisite necessity must be demonstrated.
Consideration
I was satisfied that the First Confidentiality Orders and the Second Confidentiality Orders should be made. I accepted the Liquidator’s submission that, in order for him to be able to conduct effective examinations under s 596A and s 596B of the Act to investigate the possibility of pursuing various claims to recover assets on behalf of the Company’s creditors and assist reporting to the Australian Securities and Investments Commission (ASIC) and other regulatory bodies, it was necessary to ensure that certain documents be kept confidential.
In the circumstances of this case and based on the evidence provided I was satisfied, in relation to both the First Hayes Affidavit and its exhibit and the relevant paragraphs of the Second Hayes Affidavit, that confidentiality orders were reasonably necessary to prevent any attempt to restrict the Liquidator’s use of certain confidential materials as well as to prevent persons summoned for examination from potentially tailoring their answers in light of knowledge obtained from access to such documents.
The Liquidator submitted that for the purpose of s 37AJ of the FCA Act, a two year period would be “sufficient to enable the examinations to be completed” and for any action arising out of those examinations to be commenced. I accepted that submission and that it was appropriate to maintain the confidentiality of the material at least until the conclusion of the examinations. Accordingly, I ordered that the confidentiality orders operate for a period of two years which, in my opinion, is not longer than reasonably necessary to achieve the purpose for which the confidentiality orders have been made.
APPLICATION PURSUANT TO S 477(2) OF THE ACT
Legal principles
Section 477(2)(m) of the Act provides that a liquidator of a company may do all such other things as are necessary for winding up the affairs of the company. That power is qualified in relation to the entry into of agreements on the company’s behalf by s 477(2B) of the Act: Robinson, in the matter of Reed Constructions Australia Pty Ltd (in liq) [2017] FCA 594 (Robinson) at [31].
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.
In relation to approval pursuant to s 477(2B) of the Act, Courts have given retrospective approval in certain circumstances: see, Stewart, in the matter of Newtronics Pty Ltd [2007] FCA 1375 at [25] and the cases cited therein.
In Robinson Gleeson J summarised at [33]-[34] and [36]-[38] the principles in relation to an application pursuant to s 477(2B) of the Act:
33In Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher [2011] FCAFC 89; (2011) 85 ACSR 38 ("Fortress") at [40], the Full Court observed that, in considering whether to give approval under s 477(2B), the Court must consider the purposes for which the powers of a liquidator exist. Those purposes include the recovery of funds for the benefit of creditors: McGrath and Another (in their capacity as liquidators of HIH Insurance Limited and Others) [2010] NSWSC 404; (2010) 266 ALR 642 at [13]; Pascoe; re Brentwood Village Ltd (in liq) [2014] FCA 1295, [44].
34The 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 Re McGrath (in their capacity as liquidators of HIH Insurance Ltd) [2010] NSWSC 404; (2010) 266 ALR 642.
…
36The 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.
37In Fortress, at [24], the Full Court endorsed the following comprehensive list of factors (identified by Austin J in Leigh re AP& PJ King Pty Ltd (in liq) [2006] NSWSC 315 at [25] and Re ACN 076 673 875 Ltd (rec’r & mgr apptd) (in liq) [2002] NSWSC 578; (2002) 42 ACSR 296 at [17]-[34]) relevant to the Court’s assessment of a proposed 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.
38Generally, creditors are the best judge of their commercial interests, and the approval of creditors is an important discretionary factor in favour of the approval of the funding agreement: cf. Buiscex Ltd v Panfida Foods Ltd (in liq) (1998) 28 ACSR 357 at 362.
Section 1322(4)(d) of the Act provides that the Court may, on application by any interested person, make an order, either unconditionally or subject to conditions, extending the period for doing any act, matter or thing or instituting or taking any proceeding under this Act or in relation to a corporation or abridging the period for doing such an act, matter of thing or instituting or taking such a proceeding.
Consideration
The Liquidator applied for an order extending the period for making his application under s 477(2B) of the Act for approval of entry into the various agreements pursuant to s 1322(4)(d) of the Act. I was satisfied that the time for making the application should be extended because there was no substantial injustice that was likely to be caused to any person by the granting of the extension: s 1322(6)(c) of the Act.
There is no doubt that the Liquidator ought to have sought earlier approval. A liquidator has certain duties and obligations imposed on him or her by the Act and in discharging his or her office should not only be aware of those duties but ensure that he or she acts diligently to fulfil them. That said, in this instance, the Liquidator’s inaction was not a result of dishonesty and is not sufficient in itself to prevent the Court’s exercise of its powers to give the agreements retrospective approval: see also, for example, Hamilton, in the matter of ACN 101 634 146 Pty Ltd (in liq) [2014] FCA 687 at [6]-[7].
I turn then to the application under s 477(2B) of the Act. From the Liquidator’s evidence it was clear that the work funded by the Second Funding Agreement was not completed within the expected period of three months but continued for a total of about eleven months, notwithstanding the expiration of that agreement. In relation to the Third Funding Agreement, the Liquidator gave evidence that work pursuant to that agreement had been carried out since 5 December 2017 and, as at the date of the Second Hayes Affidavit, was continuing, again, for a period of time clearly over three months.
The Costs Agreement commenced on 15 December 2016 and the Revised Costs Agreement commenced on 20 June 2018. I accepted, as the Liquidator submitted, that the Costs Agreement and the Revised Costs Agreement travel with the funding agreements because they provide for the Liquidator’s legal representation in carrying out work to be funded by the Second and Third Funding Agreements.
I was satisfied that it was appropriate to approve the Liquidator’s entry into the Second Funding Agreement, the Third Funding Agreement, the Costs Agreement and the Revised Costs Agreement for the following reasons.
First, the evidence before me indicated that the Company currently had insufficient assets such that, without funding, the Liquidator would not be able to continue to investigate the possibility of pursuing claims against certain parties and associated companies.
Secondly, the Company owes creditors a significant amount of money, including approximately $4m owed in priority employee entitlements. It was evident that, without funding, the prospects of successfully pursuing claims against third parties for the benefit of the creditors would be greatly diminished. I accepted the Liquidator’s evidence that, without conducting public examinations, it would not be possible for him to determine whether other claims may be available to recover assets on the creditors’ behalf, including investigating the possibility of tracing assets which might assist in meeting any adverse judgment against any potential defendants. In short, I was satisfied that the Liquidator’s entry into of the funding agreements and cost agreements aligns with one of the purposes for which liquidators’ powers exist, namely, to recover funds for the benefit of creditors: Robinson at [33] citing McGrath and Another (in their capacity as liquidator of HIH Insurance Limited and Others) [2010] NSWSC 404; (2010) 266 ALR 642 at [13]; Pascoe; re Brentwood Village Ltd (in liq) [2014] FCA 1295 at [44].
Thirdly, due to the need to retain the confidentiality of the identity of the funder and the confidential nature of the investigations, I accepted that it was not appropriate for the Liquidator to ask all creditors for funding.
Fourthly, the Liquidator gave evidence that no uplift or premium was sought by the funder in the Second and Third Funding Agreements.
Fifthly, given the confidential nature of the investigations into the Company’s affairs and various parties’ conduct, I accepted that it was not appropriate for the Liquidator to have convened a meeting of creditors to seek approval of the Second Funding Agreement, the Third Agreement, the Costs Agreement and the Revised Costs Agreement. However, the Liquidator had consulted a number of creditors.
Sixthly, the Liquidator’s entry into the agreements was a proper exercise of his power and not ill-advised or improper: Robinson at [34]. That is demonstrated by the Company’s lack of assets which could be used to fund investigations itself in combination with the Liquidator’s preliminary enquiries which seemed to indicate potential breaches of the Act by certain parties.
On the evidence, I was satisfied, having regard to the Liquidator’s commercial judgment, that there was no error of law, grounds for suspecting bad faith or any other good reason to intervene: Robinson at [36].
APPLICATION PURSUANT TO S 90-15(1) OF THE INSOLVENCY SCHEDULE
Legal principles
Section 90-15(1) of the Insolvency Schedule provides that the Court may make such orders as thought fit in relation to the external administration of a company, including an order determining any question arising in the external administration of the company: s 90-15(3)(a) of the Insolvency Schedule.
Section 90-20(1) of the Insolvency Schedule permits a range of persons to apply to the Court for orders under s 90-15, including, relevantly, a person with a financial interest in the external administration of the company.
The principles applicable to the exercise of the Court’s power under s 90-15 of the Insolvency Schedule are, in effect, the same as those that applied to the exercise of the Court’s power under s 479(3) and s 511 of the Act: Walley, in the matter of Poles & Underground Pty Ltd (Administrators Appointed) [2017] FCA 486 at [32] and [41]. These principles were recently discussed by Black J in In the matter of Octaviar Administration Pty Ltd (in liq) [2017] NSWSC 1556 (Octaviar) where his Honour said at [7]-[9]:
7I summarised the scope of the Court’s power to give directions under s 479(3) of the Corporations Act in Re MF Global Australia Ltd (in liq) [2012] NSWSC 994; (2012) 267 FLR 27 at [7] as follows:
“Section 479(3) of the Corporations Act allows a liquidator to apply to the court for directions in relation to a matter arising under a winding up. The function of a liquidator’s application for directions under this section is to give the liquidator advice as to the proper course of action for him or her to take in the liquidation: Sanderson v Classic Car Insurances Pty Ltd (1985) 10 ACLR 115 at 117; (1986) 4 ACLC 114; Re Ansett Australia Ltd (admins apptd) and Korda [2002] FCA 90; (2002) 115 FCR 409; 40 ACSR 433 at [46]. The court may give directions that provide guidance on matters of law and the reasonableness of a contemplated exercise of discretion but will typically not do so where a matter relates to the making and implementation of a business or commercial decision, where no particular legal issue is raised and there is no attack on the propriety or reasonableness of the decision: Sanderson v Classic Car Insurances Pty Ltd above at 117; Re GB Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674 at 686–7; 5 ACSR 673; 9 ACLC 1291; Re Ansett Australia Ltd above at [65]; Re One.Tel Networks Holdings Pty Ltd [2001] NSWSC 1065; (2001) 40 ACSR 83 at [32].”
8I also referred to the scope of the Court’s powers under s 511 of the Corporations Act in that decision and observed (at [8]) that:
“Section 511 of the Corporations Act provides an alternative source of power to give such a direction and the Liquidators also rely on that section. The principles applicable to an application under that section were recently reviewed by Ward J in Re Purchas [2011] NSWSC 91 … Applications made under this section in a voluntary winding up are determined in a similar manner to applications in a court ordered winding up under s 479(3) of the Corporations Act notwithstanding that section does not expressly require that it be ‘just and beneficial’ to give the relevant direction. The court may give such a direction where it will be ‘of advantage in the liquidation’: Dean-Willcocks v Soluble Solution Hydroponics Pty Ltd (1997) 42 NSWLR 209 at 212; Handberg v MIG Property Services Pty Ltd (2010) 79 ACSR 373 at [7]. The effect of a determination under the section is to sanction a course of conduct on the part of the liquidator so that he or she may adopt that course free from the risk of personal liability for breach of duty: Handberg v MIG Property Services Pty Ltd at [7].”
9I also recognise that the Court’s powers to give judicial advice and give directions under these sections are intended to facilitate the performance of a liquidator’s functions and should be interpreted widely to give effect to that intention, and the Court may give such advice or give such a direction where it is advantageous to the liquidation to do so: Dean-Willcocks v Soluble Solution Hydroponics Pty Ltd (1997) 42 NSWLR 209 at 212; Handberg v MIG Property Services Pty Ltd [2010] VSC 336; (2010) 79 ACSR 373 at [7]; Re One.Tel Networks Holdings Pty Ltd [2001] NSWSC 1065; (2001) 40 ACSR 83; Re One.Tel Ltd [2014] NSWSC 457; (2014) 99 ACSR 247 at [32]; Re Octaviar Ltd (in liq) and Octaviar Administration Pty Ltd (in liq) [2017] NSWSC 1005. The directions sought in this case do not involve either the GPLs or the SPL seeking a direction as to the making of implementing of a business or commercial decision, which the Court will generally be reluctant to give.
Consideration
The Liquidator sought a direction pursuant to s 90-15(1) of the Insolvency Schedule that he was justified in acting as set out in [53(b)(iii)] of the First Hayes Affidavit where he gave evidence that he had redacted certain details from forms for the Company lodged with ASIC. Those details contained the identity and nature of the funding receipts and investigation expenditure.
The Liquidator clearly had standing to apply for an order under s 90-15 of the Insolvency Schedule. He is a person with a financial interest in the external administration of the Company, as defined in s 5-30(a)(iii) for the purpose of s 90-20(1)(a), and an officer of the Company under s 90-20(1)(d): see s 9 of the Act.
The Liquidator submitted that a direction was required to approve the Liquidator’s action in circumstances where such action, while for the benefit of the creditors, was otherwise inconsistent with other obligations the Company had under the Act. While ASIC had sent the Liquidator a “no-action” letter in respect of the redactions in the two forms lodged with it, the Liquidator submitted that the Court’s direction was still necessary because the no-action letter did not resolve the breach.
I was satisfied that the Court should make the order pursuant to s 90-15(1) of the Insolvency Schedule sought by the Liquidator. The no-action letter did not provide the Liquidator with complete protection against legal action. It was expressly stated to be a “policy decision, not a legal opinion” and ASIC reserved its rights to take action or withdraw its letter at any time.
Based on the correspondence between the Liquidator and ASIC in relation to the redactions in the two forms, it was evident that the Liquidator had honestly and faithfully performed his duties and that he redacted the information for valid reasons, namely, because the redacted information would disclose the identity of the funder and the nature of the Liquidator’s proposed public examinations. Further, the order sought was not in relation to the making or implementing of a business or commercial decision, a direction which the Court will generally be reluctant to give, but involved questions of law and of the reasonableness of the Liquidator’s conduct, a matter that warrants the giving of directions by the Court: Octaviar at [9]-[10].
CONCLUSION
It was for those reasons that I made the orders on 10 and 16 August 2018.
I certify that the preceding fifty (50) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Markovic. Associate:
Dated: 20 December 2018
7