In the matter of Martha Cove Marina Pty Ltd (in liquidation)

[2015] NSWSC 2049

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Martha Cove Marina Pty Ltd (in liquidation) [2015] NSWSC 2049
Hearing dates:	20 April 2015
Date of orders:	20 April 2015
Decision date:	20 April 2015
Jurisdiction:	Equity - Corporations List
Before:	Brereton J
Decision:	Leave granted for liquidator to enter into litigation funding deed and engage solicitors for the prosecution of those proceedings.
Catchwords:	CORPORATIONS – winding up – liquidators – application for leave under (Cth) Corporations Act 2001, s 477(2B) – leave to enter into litigation funding agreement and to engage solicitors for prosecution of proceedings – purpose of s 477(2B) in preventing protraction of liquidation.
Legislation Cited:	(Cth) Corporations Act 2001, s 471, s 477(2B)
Category:	Procedural and other rulings
Parties:	Andrew Hugh Jenner Wily in his capacity as liquidator of Martha Cove Marina Pty Ltd (in liquidation) ACN 120 574 405 (first plaintiff) Martha Cove Marina Pty Ltd (in liquidation) ACN 120 574 405 (second plaintiff)
Representation:	Counsel: E A J Hyde (plaintiffs)   Solicitors: Squire Patton Boggs (plaintiffs)
File Number(s):	2015/103423

Judgment (ex tempore)

1. HIS HONOUR: By originating process filed on 8 April 2015, the first plaintiff Andrew Hugh Jemmer Wily, in his capacity as liquidator of the second plaintiff Martha Cove Marina Pty Limited, seeks an order pursuant to (Cth) Corporations Act 2001, s 477(2B), granting leave to him to enter into a litigation funding deed between the plaintiffs and International Litigation Partners (No 6) Pty Limited, which deed is annexed to his supporting affidavit, and to engage solicitors (upon terms outlined in a retainer letter) to prosecute those proceedings.

2. It is my view that the section was not originally contemplated to address agreements of this type, but was more concerned with entry into long-term leases or business arrangements which might inhibit an expeditious winding up. However, it is clear that the view is now taken that an agreement of this type falls within the terms of the section.

3. This agreement is entered into in order to enable the liquidator to pursue claims against former directors and a third party from whom it is said that the company is entitled to recover a substantial amount which, if successful, should result in a significant dividend being available for creditors.

4. There is only one significant creditor and it is presently in receivership. Its receivers have taken an ambivalent view to the present application, and have expressed some concerns about the proposed funding agreement, but having been notified of the application and having been given four days’ notice of the hearing, together with copies of all supporting material, as they requested in a letter of 1 April 2015, have not appeared to oppose it.

5. On an application under s 477(2B), the Court is principally concerned with the matter that attracts the operation of that provision, namely that the agreement is a so-called "long-term agreement", in that obligations of a party to the agreement may, according to its terms, be discharged by performance, or the term of the agreement may end, more than three months after the agreement is entered into. The essential purpose of the provision is to ensure that liquidations are not unnecessarily protracted by entry into long-term agreements. On an application under s 477(2B), the Court is not involved in giving judicial advice to the liquidator and is not “approving” the agreement as it might on a s 471 application, nor is it advising the liquidator that he is justified in entering into the agreement, but merely giving him permission and power to enter into a long-term agreement where that would otherwise be prohibited. The Court's leave under s 477(2B) does not immunise the liquidator from subsequent complaint if it were established that the agreement were one which he ought not properly and reasonably have entered into. Pursuit of the proposed proceedings offers distinct benefits for creditors over an expeditious winding up. In those circumstances, the Court should grant the leave sought.

6. The Court orders that:

1. Pursuant to Corporations Act, s 477(2B), the first plaintiff be granted leave to enter into the litigation funding deed between the plaintiffs and International Litigation Partners (No 6) Pty Limited as annexed and marked “confidential annexure AHJW1” to the affidavit of Andrew Hugh Jemmer Wily sworn 7 April 2015 and to engage Squire Patton Boggs, solicitors for the plaintiff, as outlined in Squire Patton Boggs' letter dated 15 December 2014 as annexed and marked “confidential annexure AHJW3” to the said affidavit.

2. The affidavit of Andrew Hugh Jemmer Wily sworn 7 April 2015 be placed in a sealed envelope on the Court file marked "not to be inspected without the leave of a Judge" and remain confidential until further order of the Court.

3. The first plaintiff's costs and expenses of the originating process be costs and expenses in the liquidation.

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Decision last updated: 26 February 2016