QBE Insurance (Australia) Limited v Coyne in his capacity as liquidator of Educational World Travel Pty Ltd (in liquidation)
[2021] FCA 594
•2 June 2021
FEDERAL COURT OF AUSTRALIA
QBE Insurance (Australia) Limited v Coyne in his capacity as liquidator of Educational World Travel Pty Ltd (in liquidation) [2021] FCA 594
File number: NSD 308 of 2021 Judgment of: ALLSOP CJ Date of judgment: 2 June 2021 Catchwords: CORPORATIONS – application made pursuant to s 477(2B) of the Corporations Act 2001 (Cth) for approval by Court of liquidator’s entry into agreement on behalf of company – where agreement already entered into – approval granted Legislation: Corporations Act 2001 (Cth) ss 477(2B), 1322(4)(a) Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance – Insurance List Number of paragraphs: 11 Date of last submission: 28 May 2021 Date of hearing: Determined on the papers Solicitor for the Applicant: Ms L Massey of Dentons Solicitor for the Respondents: Mr P Welling of KHQ Lawyers ORDERS
NSD 308 of 2021 BETWEEN: QBE INSURANCE (AUSTRALIA) LIMITED (ACN 003 191 035)
Applicant
AND: DAVID COYNE IN HIS CAPACITY AS LIQUIDATOR OF EDUCATIONAL WORLD TRAVEL PTY LTD (ACN 006 888 179) (IN LIQUIDATION)
First Respondent
EDUCATIONAL WORLD TRAVEL PTY LTD (ACN 006 888 179) (IN LIQUIDATION)
Second Respondent
AND BETWEEN: EDUCATIONAL WORLD TRAVEL PTY LTD (ACN 006 888 179) (IN LIQUIDATION)
Cross-Claimant
AND: QBE INSURANCE (AUSTRALIA) LIMITED (ACN 003 191 035)
Cross-Respondent
ORDER MADE BY:
ALLSOP CJ
DATE OF ORDER:
2 JUNE 2021
THE COURT ORDERS THAT:
1.Confidential Annexure DC-2 to the affidavit of David Coyne affirmed on 28 May 2021 not be disclosed from the Court file to any person without the prior leave of a judge of the Court.
2.Pursuant to s 477(2B) of the Corporations Act 2001 (Cth), the first respondent’s entry into the Protocol Agreement dated 26 March 2021 (the Protocol Agreement) with the applicant, both in his own capacity and on behalf of the second respondent, be approved.
THE COURT DECLARES THAT:
3.Pursuant to s 1322(4)(a) of the Corporations Act2001 (Cth), neither the entry by the first respondent into the Protocol Agreement, nor the Protocol Agreement itself, is invalid by reason of the first respondent not having obtained approval pursuant to s 477(2B) of the Corporations Act2001 (Cth) prior to entering into the Protocol Agreement.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
ALLSOP CJ:
This is an interlocutory application for orders pursuant to s 477(2B) of the Corporations Act 2001 (Cth) to approve the entry by a liquidator into an agreement on the company’s behalf. The first respondent, Mr Coyne, is the appointed liquidator of the second respondent, Educational World Travel Pty Ltd (in liquidation) (EWT). The application concerns an agreement entered into by Mr Coyne with the applicant, QBE Insurance (Australia) Limited, which relates to the conduct of this proceeding (Protocol Agreement).
Mr Coyne filed his interlocutory application on 28 May 2021. In support of his application Mr Coyne also filed an affidavit affirmed by him on 28 May 2021. Confidential Annexure DC-2 to that affidavit contains the Protocol Agreement. Clause 7 of the Protocol Agreement provides that the Protocol Agreement, any correspondence between the parties and any documents relating to this proceeding are confidential and must not be published or disclosed to any person other than the Court, another party, a party’s external advisers, related entities or reinsurers, without prior written consent from the other parties.
Mr Coyne was appointed liquidator of EWT on 30 November 2020. On 22 December 2020, EWT’s insurance broker lodged a business interruption claim notification on its behalf, seeking indemnity under a “QBE Office Pack Insurance Policy – 41A843909BPK” issued by QBE.
On 17 March 2021, the solicitors for QBE informed Mr Coyne that it wished to run a test case with respect to the claim. The offer contained an arrangement as to costs. The next day, Mr Coyne was informed that QBE wished to commence the proceedings urgently, so as to align with a timetable already set down in a group of business interruption test cases recently commenced in this Court. Mr Coyne states at [19] of his affidavit that QBE informed him that if he were to meet the next procedural milestone in the existing test cases, he and his legal advisors had to act urgently.
On 26 March 2021, Mr Coyne entered into the Protocol Agreement with QBE on behalf of himself and EWT. Pursuant to the Protocol Agreement, an arrangement was reached about costs.
Mr Coyne states at [23] of his affidavit that while his fees incurred as liquidator are not met by QBE under the Protocol Agreement, he will not seek to recover the remuneration associated with his participation in the proceeding unless there is a successful result for EWT and a corresponding cash return to it under the insurance policy.
Mr Coyne required approval from the Court, the committee of inspection or of a resolution of the creditors to enter into the Protocol Agreement on behalf of EWT because it is expected that the term of the Protocol Agreement and the discharge of the parties’ obligations under the Protocol Agreement will continue for a period in excess of three months: Corporations Act 2001 (Cth) s 477(2B).
On 13 May 2021, Mr Coyne circulated to the creditors details of this proceeding, the Protocol Agreement and his application seeking relief pursuant to s 477(2B). Mr Coyne states at [30] of his affidavit that he has not received from the creditors any objections to his entry into the Protocol Agreement or the relief sought in his application.
On the basis of the matters set out above, in particular the potential return to creditors under the policy as a consequence of the proceeding, the arrangement as to costs, and Mr Coyne’s undertaking not to seek to recover his fees unless there is a cash return to EWT under the policy, I am satisfied that the Court should approve Mr Coyne’s entry into the Protocol Agreement on behalf of EWT.
Mr Coyne explains at [26] of his affidavit that, given the urgency with which the proceedings were commenced, he did not have sufficient time to convene a meeting of the creditors to seek approval for entry into the Protocol Agreement or to seek approval from the Court pursuant to s 477(2B) before the agreement was entered into. There is no question but that Mr Coyne has acted honestly. I am prepared to make a declaration pursuant to s 1322(4)(a) of the Corporations Act that neither the entry by Mr Coyne into the Protocol Agreement, nor the Protocol Agreement itself, is invalid by reason of Mr Coyne not having obtained approval pursuant to s 477(2B) prior to entering into the Protocol Agreement. I am satisfied that it is just and equitable that this declaration be made and that no substantial injustice has been or is likely to be caused to any person as a result of the declaration.
Therefore, having read and considered the affidavit of David Coyne affirmed on 28 May 2021 and the annexures thereto, the Court makes the following orders and declaration:
(1)The Court orders that Confidential Annexure DC-2 to the said affidavit not be disclosed from the Court file to any person without the prior leave of a judge of the Court.
(2)Pursuant to s 477(2B) of the Corporations Act, the Court orders that the first respondent’s entry into the Protocol Agreement dated 26 March 2021 with the applicant, both in his own capacity and on behalf of the second respondent, be approved.
(3)Pursuant to s 1322(4)(a) of the Corporations Act, the Court declares that neither the entry by the first respondent into the Protocol Agreement, nor the Protocol Agreement itself, is invalid by reason of the first respondent not having obtained approval pursuant to s 477(2B) of the Corporations Act prior to entering into the Protocol Agreement.
I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Chief Justice Allsop. Associate:
Dated: 2 June 2021
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