Re Gunns Limited (In Liq)
[2016] VSC 832
•7 December 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S CI 2016 04932
IN THE MATTER of Gunns Limited (In Liquidation) (Receivers and Managers Appointed)
| DANIEL MATHEW BRYANT, CRAIG DAVID CROSBIE, AND IAN MENZIES CARSON as joint and several liquidators of GUNNS LIMITED (in liquidation) (receivers and managers appointed) (ACN 009 478 148) | Plaintiffs |
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JUDGE: | Gardiner AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 2 December 2016 |
DATE OF PUBLISHING REASONS: | 7 December 2016 |
CASE MAY BE CITED AS: | Re Gunns Limited (In Liq) |
MEDIUM NEUTRAL CITATION: | [2016] VSC 832 |
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LIQUIDATIONS – Court approval of litigation funding agreement pursuant to s 477(2B) and s 506(1A) of the Corporations Act 2001 (Cth) – Application by liquidators for orders under s 30 of the Open Courts Act 2013 (Vic) and for confidentiality in the inherent jurisdiction of the court in respect of the evidence filed in the application, the written outline of submissions relied upon by the plaintiffs and the transcript of the hearing of the application.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr M Hoffman QC with Mr B Gibson | Johnson Winter and Slattery |
HIS HONOUR:
On 2 December 2016, on the return of the originating process filed by the plaintiffs, I made orders, inter alia, that:
Pursuant to section 30 of the Open Courts Act 2013 (Vic), on the grounds that it is necessary to prevent a real and substantial risk of prejudice to the proper administration of justice that cannot be prevented by other reasonably available means, the application be heard at a hearing of the Court from which the public is excluded with the exception of:
(a)the Plaintiffs and their legal representatives; and
(b)all necessary staff of the Court including any associate, any orderly and any Court recording officer.
I also made orders in the inherent jurisdiction of the Court as follows:
On the grounds that it is necessary to prevent prejudice to the proper administration of justice, that the following documents, namely, Mr Crosbie’s affidavit sworn on 30 November 2016 in these proceedings (including the exhibits and attachments thereto), the supporting written outline of submissions and any transcript of hearing of the application (Documents):
(a)are to be placed in a sealed envelope marked: ‘Confidential – not to be accessed for inspection without order of a Judge or Associate Judge of the Court’; and
(b)are not available for inspection except so far as the Court further orders,
and any application to inspect the Documents is to be referred to a Judge, Associate Judge or Judicial Registrar of the Court with three business days’ notice thereof to be provided to the solicitors for the Plaintiffs.
I also made substantial orders pursuant to ss 477(2B) and 506(1A) of the Corporations Act 2001 (Cth) (‘the Act’) that the plaintiffs in their capacity as joint and several liquidators of Gunns Limited (In Liquidation) (Receivers and Managers Appointed) (ACN 009 478 148) (‘Gunns’) and the Gunns Group companies listed in the attached Schedule 1 to the originating process (‘Gunns Group’) have approval to enter into and cause Gunns and the Gunns Group to enter into the funding agreement that appears at pages 1 to 22 of Confidential Exhibit ‘CDC-1’ to the affidavit of Mr Craig David Crosbie sworn on 30 November 2016 (‘the Agreement’).
I also ordered pursuant to s 511 of the Act that the plaintiffs are justified in carrying out their duties as liquidators of the Gunns Group on the basis that, if they incur reasonable expenditure in the care, protection, preservation and/or realisation of the ‘Claim’ the subject of the Agreement (as defined therein), they will be entitled to: (a) an indemnity for that expenditure and reasonable remuneration out of the proceeds of that claim; and (b) a lien to secure that indemnity.
Finally I ordered that the costs of the application are costs in the winding up of Gunns and may be paid out of the assets of Gunns.
The reasons for my making the orders under ss 477(2B), 506(1A) and 511 of the Act are exposed in the exchanges I had with Mr Hoffmann QC, senior counsel for the plaintiffs, in his oral submissions at the hearing of this application. The transcript of that hearing together with the written submissions which were relied upon have been placed on the Court file in a sealed envelope, as provided by the terms of my order. The purpose of these reasons is to briefly summarise the basis of my orders made under s 30 of the Open Courts Act2013 (Vic) and for confidentiality of the evidence, transcript and written submissions relied upon by the plaintiffs.
Section 28 of the Open Courts Act 2013 (Vic) provides for a presumption in favour of an open court. It provides:
To strengthen and promote the principle of open justice, there is a presumption in favour of hearing a proceeding in open court to which a court or tribunal must have regard in determining whether to make any order, including an order under this Part: (a) that the whole or any part of a proceeding be heard in closed court or closed tribunal; or (b) that only specified persons or classes of persons may be present during the whole or any part of a proceeding.
Section 30 provides relevantly:
Power to close proceeding to the public
(1) Subject to subsections (2) and (3), a court or tribunal—
(a)may order that the whole or any part of a proceeding be heard in closed court or closed tribunal; or
(b)may order that only persons or classes of persons specified by it may be present during the whole or any part of a proceeding.
(2)A court or tribunal other than the Coroners Court may make a closed court order if satisfied as to one or more of the following grounds—
(a)the order is necessary to prevent a real and substantial risk of prejudice to the proper administration of justice that cannot be prevented by other reasonably available means;
Example
Other reasonably available means may include directions to the jury, making a proceeding suppression order, or orders excluding only certain persons or a more limited class of persons from the court or tribunal.
The subject matter of the plaintiffs’ application for substantive relief in the originating process was the approval for them to enter into a litigation funding agreement between them, the Gunns Group and Claims Funding Australia Pty Ltd. The application was supported by an affidavit of one of the plaintiffs, Mr Crosbie, sworn 30 November 2016. It is a lengthy affidavit with some 2,000 pages of exhibits. Amongst the matters deposed to in Mr Crosbie’s affidavit, and referred to in the documents exhibited, included:
(a) information about claims and proceedings that the plaintiffs may pursue;
(b) information including legal advice concerning the KPMG claim that is the subject of legal professional privilege, which the plaintiffs and the Gunns Group do not wish to waive;
(c) information on how the claims are proposed to be funded;
(d) details of the benefit to each of the parties to the funding agreement and the terms of the funding agreement;
(e) details of communications between the plaintiffs and the funder;
(f) information that is confidential to the Gunns Group and the committees of inspection appointed to the Gunns Group; and
(g) confidential and privileged information as to the claims that the plaintiffs may bring in relation to voidable transactions under Part 5.7B of the Act.
Mr Crosbie contends in his affidavit that if such matters were made public and available, Gunns Group may suffer irreparable harm and detriment as a result of the disclosure of commercially sensitive and privileged material, and that (among other things) the plaintiffs may be prejudiced in their ability to pursue or settle claims and claim against the Gunns Group’s insurance policies.
In McGrath v HIH Insurance Ltd,[1] Barrett J considered an application by a liquidator for orders that his application for approval to enter into an agreement under s 477(2B) of the Act be heard in camera. He stated:
10In the present case, I see two other public interests as competing with the public interest in the open justice. The first is the public interest in the due and beneficial administration of the estates of insolvent companies under the Corporations Act by liquidators appointed by and answerable to the court, that administration being for the benefit of creditors. The public interest in the due administration of the insolvent estates of the HIH companies is particularly pronounced where there are many thousands of creditors from all walks of life. The liquidators are officers of the court and are entitled to have the court appropriately facilitate such actions as they may properly take in the interests of creditors and in the furtherance of the public interest to which I have just referred.
11The second competing public interest arises from the fact that the agreements in respect of which application is made under s.477(2B) are agreements concerned with the pursuit of litigation. All the actions in contemplation are actions in this court. There is a clear public interest in the due administration of justice in that litigation. The liquidators who propose to pursue it for the benefit of creditors should, as a general matter, have an expectation that they will be able to do so free from distortions of a kind that would not arise if the litigation were pursued by an ordinary litigant in the ordinary way. Unlike ordinary litigants who pursue litigation in the ordinary way, liquidators in the position of the present applicants are required to come to the court to seek approval if and when it becomes appropriate for them to enter into contracts not to be performed within the space of three months. Were it not for that requirement and for the supervision of the Court in that respect, the liquidators would, like other litigants, merely go ahead and enter into the agreements to which the confidentiality concerns relate.
12The administration of justice is, in my view, very likely to be prejudiced in two ways by availability to the potential defendants of (and any public airing of) the information concerning the liquidators’ proceedings that will inevitably be divulged by the adducing of evidence and the making of submissions on the hearing of the s.447(2B) applications. There is a likelihood of a real and negative impact upon the due and orderly conduct of the proposed proceedings themselves, in that the defendants in them will have access to information that, in the ordinary course, a plaintiff is entitled to keep confidential in the plaintiff’s own interests. Any such access would produce an undue distorting effect in relation to the due conduct of those proceedings themselves. There is also a likelihood of a real and negative impact upon the due conduct of the several windings up by the court in the interests of the creditors of the respective companies. Although there have been changes in the legislative landscape since the decision of Marks J in Re Timberland Ltd; Commissioner for Corporate Affairs v Harvey [1980] VicRp 64; [1980] VR 669, I think it is still generally true to say, as his Honour there said, that “[t]he winding up is by the court which for the purpose the liquidator is”. In saying this, I do not mean to imply that a liquidator in a court ordered winding up enjoys some privileged position, as compared with any other litigant; merely that the fact that a winding up is a winding up by the court means that it in its own right an aspect of the process of the administration of justice.
13In the particular circumstances of the present s.477(2B) applications, I am satisfied that the two aspects of the public interest which compete with the public interest in the maintenance of open justice should be regarded as outweighing that latter interest. The special circumstances of the liquidators and the statutory functions they perform, coupled with the need for them to come to court on this occasion to seek leave in a way that an ordinary litigant does not have to seek, sets the case apart in such a way that justice will best be served by an examination of the matters the liquidators are bound to raise with the court in an atmosphere where they can lay them before the court fully and frankly and without any apprehension that the interests they are bound to serve will thereby be prejudiced. Applying the terminology used by Viscount Haldane LC in Scott v Scott, I am of the opinion that the paramount object of securing that justice is done in both the proceedings instituted by the liquidators’ filing of statements of claim and the respective windings up will really be rendered doubtful of attainment if an order under s.80 is not made.
[1][2005] NSWSC 731 [10]-[13].
These remarks were adopted by Debelle J in Re JN Taylor Holdings Ltd (in liq),[2] and by Gilmour J in Jones, Saker, Weaver and Stewart (Liquidators), in the matter of Great Southern Ltd (in liq) (Receivers and Managers Appointed).[3]
[2][2007] 62 ACSR 695 [28].
[3][2012] FCA 1072 [17].
The matters referred to in Mr Crosbie’s affidavit were required to be addressed in an application of this kind, but they are commercially sensitive, highly confidential and the subject of legal professional privilege. In the ordinary course, the plaintiffs would be entitled to keep this material confidential in both their and Gunns’ own interest, but have been required, because of the need to make the present application, to disclose such matters to the Court.
I consider that the order I made on 2 December 2016 was, adopting the formulation of s 30(2)(a), ‘necessary to prevent a real and substantial risk of prejudice to the proper administration of justice that cannot be prevented by other reasonably available means’. In doing so, I adopt, with respect, the reasoning of Barrett J in the passage of McGrath v HIH Insurance Ltd extracted above.
Identical considerations apply to the order that I made in respect of the confidentiality of the documents identified in paragraph 4 of my order. That documentation, if revealed, has the potential to prejudice the conduct of the plaintiffs’ proceeding and it is therefore appropriate for orders to be made restricting access to that material.
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