Re McDermott and Potts

The matter before the court involved liquidators of a corporation, seeking direction that they were justified in compromising a proceeding and approval to enter into the compromise under section 477(2B) of the Corporations Act 2001 (Cth). The liquidators had proposed to settle the proceeding by entering into a compromise, which was opposed by all significant creditors. The court was required to determine whether the liquidators were justified in compromising the proceeding, given the opposition of all significant creditors.

The court considered the importance of the creditors' views in determining whether the liquidators were justified in compromising the proceeding. The court also examined the role and adequacy of legal advice provided to the liquidators in relation to the proposed compromise. Additionally, the court considered the personal risk of adverse costs faced by the liquidators if the proceeding was discontinued. The court found that the creditors' views were an important consideration, but not determinative, in deciding whether the liquidators were justified in compromising the proceeding. The court also found that the liquidators had received adequate legal advice in relation to the proposed compromise.

The court concluded that the liquidators were justified in compromising the proceeding, as the settlement offered a reasonable prospect of resolving the proceeding in the best interests of the corporation and its creditors. The court also found that the liquidators were not personally at risk of adverse costs if the proceeding was discontinued. The court noted that the relationship between sections 477(2B) and 511 of the Corporations Act 2001 (Cth) was such that the court's approval under section 477(2B) was not required if the liquidators were not personally at risk of adverse costs. The court's approval was therefore granted, and the compromise was approved.

The court ordered that the liquidators be and were justified in compromising the proceeding and that the compromise be and was approved under section 477(2B) of the Corporations Act 2001 (Cth). The court also ordered that the liquidators' costs of the proceeding be paid from the assets of the corporation, to the extent that they were not personally at risk of adverse costs.