Woods, in the matter of Gold Merchants International (Aust) Pty Ltd (in liq)
[2025] FCA 149
•3 March 2025
FEDERAL COURT OF AUSTRALIA
Woods, in the matter of Gold Merchants International (Aust) Pty Ltd (in liq) [2025] FCA 149
File number(s): VID 58 of 2025 Judgment of: O’CALLAGHAN J Date of judgment: 3 March 2025 Catchwords: CORPORATIONS – application for approval of remuneration pursuant to s 477(2B) of the Corporations Act 2001 (Cth) – application for confidentiality, suppression and non-publication orders pursuant to ss 37AF(1)(b) and 37AG(1)(a) of the Federal Court of Australia Act 1976 (Cth) – application for dispensation from the requirements of r 9.2(2) of the Federal Court (Corporations) Rules 2000 (Cth) – applications granted Legislation: Corporations Act 2001 (Cth) ss 477(2)(a)–(b), 477(2B), Sch 2 (Insolvency Practice Schedule (Corporations)), ss 60-10 and 60-12
Federal Court of Australia Act 1976 (Cth) ss 37AF and 37AG(1)(a)
Federal Court (Corporations) Rules 2000 (Cth) r 9.2(2)
Cases cited: Deputy Commissioner of Taxation v Shac Communications Pty Ltd [2024] FCA 488
In the matter of One.Tel Limited [2014] NSWSC 457; (2014) 99 ACSR 247
Division: General Division Registry: Victoria National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 54 Date of hearing: 28 February 2025 Counsel for the Plaintiffs B Petrie Solicitor for the Plaintiffs Craddock Murray Neumann Lawyers Pty Ltd ORDERS
VID 58 of 2025 IN THE MATTER OF GOLD MERCHANTS INTERNATIONAL (AUST) PTY LTD (IN LIQUIDATION) ACN 132 180 066
ROBERT WOODS IN HIS CAPACITY AS LIQUIDATOR OF GOLD MERCHANTS INTERNATIONAL (AUST) PTY LTD (IN LIQUIDATION) ACN 132 180 066
First Plaintiff
GOLD MERCHANTS INTERNATIONAL (AUST) PTY LTD (IN LIQUIDATION) ACN 132 180 066
Second Plaintiff
ORDER MADE BY:
O’CALLAGHAN J
DATE OF ORDER:
3 MARCH 2025
THE COURT ORDERS THAT:
1.Leave be granted to the plaintiffs to file an amended originating process in a substantially similar form to that annexed to the confidential affidavit of Robert Woods affirmed 27 February 2025.
Confidentiality, suppression and non-publication orders
2.Pursuant to ss 37AF(1)(b) and 37AG(1)(a) of the Federal Court of Australia Act 1976 (Cth), until such time as any litigation (including any appeal) arising out of the winding up and affairs of Gold Merchants International (Aust) Pty Ltd (in liquidation) (the Company) is concluded or until otherwise ordered, the following documents be kept confidential and shall not be published or disclosed to another party on the ground that it is necessary to prevent prejudice to the proper administration of justice:
(a)the confidential affidavit affirmed by Mr Woods on 9 January 2025 (First Confidential Affidavit);
(b)the confidential exhibit marked “RW-2” to the First Confidential Affidavit (Confidential Exhibit);
(c)the confidential affidavit affirmed by Mr Woods on 27 February 2025, including the annexures to that affidavit;
(d)the written submissions filed by the plaintiffs on 27 February 2025 and marked “Plaintiffs’ Confidential Submissions”; and
(e)the transcript of the hearing before O’Callaghan J on 28 February 2025
(collectively, the Confidential Documents).
3.Each of the Confidential Documents is to be marked “Confidential” on the electronic court file and is not to be published, inspected or otherwise accessed by any person other than by duly authorised employees and officers of the court, until such time as any litigation (including any appeal) arising out of the winding up and affairs of the Company is concluded or until otherwise ordered.
Approval application
4.Pursuant to s 477(2B) of the Corporations Act 2001 (Cth) (the Act), the first plaintiff be granted approval, to the extent such approval is necessary, to enter into and perform their obligations under (and to cause the second plaintiff to enter into and perform their obligations under) the following agreements:
(a)the funding agreement in the form of the agreement which is at pages 1–30 of the Confidential Exhibit (the Funding Agreement), nunc pro tunc; and
(b)a costs disclosure and costs agreement with Craddock Murray Neumann Lawyers Pty Ltd (CMN) in a substantially similar form to that which is at pages 31–39 of the Confidential Exhibit (the CMN Agreement).
5.Pursuant to s 477(2B) of the Act, for the purposes of the first plaintiff conducting further investigations into the affairs of the second plaintiff and/or commencing and pursuing any claims which may be identified, the first plaintiff be granted approval, to the extent such approval is necessary, to enter into and perform his obligations under (and to cause the second plaintiff to enter into and perform its obligations under):
(a)any further funding agreements with the Commissioner of Taxation for the Commonwealth of Australia, provided that any further funding agreements are in a substantially similar form to the Funding Agreement; and
(b)any further costs disclosure and costs agreements with CMN, provided that any further costs disclosure and costs agreements are in a substantially similar form to the CMN Agreement.
Remuneration application
6.The requirement to comply with r 9.2(2) of the Federal Court (Corporations) Rules 2000 (Cth) be dispensed with to the extent that the first plaintiff has not already complied with that requirement.
7.Pursuant to s 60-10(1)(c) of the Insolvency Practice Schedule (Corporations) contained in Sch 2 to the Act, the first plaintiff’s:
(a)remuneration incurred in the performance of his duties arising in connection with his appointment and in the exercise of his powers in his capacity as liquidator of the second plaintiff for the period 30 January 2024 to 30 September 2024 be determined and approved in the amount of $121,345.50 (excluding GST);
(b)remuneration to be incurred in the performance of his duties arising in connection with his appointment and in the exercise of his powers in his capacity as liquidator of the second plaintiff for the period 1 October 2024 to finalisation be determined and approved in the amount of $200,000 (excluding GST); and
(c)internal disbursements incurred as liquidator of the Company for the period 30 January 2024 to finalisation of the liquidation be approved in the amount of $600 (excluding GST).
8.The first plaintiff’s costs of, and incidental to, these proceedings be costs in the winding up of the second plaintiff.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011 (Cth).
REASONS FOR JUDGMENT
O’CALLAGHAN J
Introduction
I made the orders set out above at the hearing on 28 February 2025.
Mr Ben Petrie of counsel appeared for the plaintiffs. He prepared very helpful written submissions, which meant that the hearing was dealt with expeditiously.
I said that I would give reasons for making the orders. These are those reasons.
Gold Merchants International (Aust) Pty Ltd (in liquidation) (the Company) was incorporated in July 2008. It carried on a wholesale business trading in scrap gold, gold bullion and other precious metals from offices in Melbourne and Sydney.
Between December 2014 and May 2017, the Deputy Commissioner of Taxation (the Commissioner) undertook an audit of the Company’s activity statements and income tax returns lodged in the period 1 July 2012 to 30 September 2014. The Commissioner made assessments of net amounts and penalties totalling almost $144 million. The Company ceased trading soon after. It is not necessary (or desirable) to recite here how that came about, save to say that it involved a brazen scheme to avoid paying taxes.
On 12 December 2022, the Company was wound up. Adrian Warry and Shane Dean of Dye & Co were appointed joint and several liquidators.
On 30 January 2024, they conveyed a meeting of the Company’s creditors at which the creditors resolved to remove the liquidators and to appoint the first plaintiff instead.
By an application filed 9 January 2025 the plaintiffs (i.e. the liquidator and the Company) sought:
(a)a determination under s 60-10(1)(c) of the Insolvency Practice Schedule (Corporations) contained in Sch 2 to the Corporations Act 2001 (Cth) (the Insolvency Practice Schedule) that the liquidator’s remuneration be approved in the amount of $121,345.50 (excluding GST) in respect of duties performed in the period 30 January 2024 to 30 September 2024 and in the additional sum of $200,000 (excluding GST) in respect of duties already performed and all future duties to be performed from 1 October 2024 until the finalisation of the liquidation, as well as approval for internal disbursements in the amount of $600 (excluding GST) incurred as liquidator of the Company for the period 30 January 2024 to finalisation of the liquidation (collectively, the Remuneration Application); and
(b)an order under s 477(2B) of the Corporations Act 2001 (Cth) (the Act) that the liquidator be granted approval to enter into and to perform his obligations under certain agreements in respect of which the plaintiffs also seek confidentiality orders (Approval and Confidentiality Application).
The Remuneration Application
The plaintiffs relied on the affidavit of Robert Woods affirmed 9 January 2025.
The liquidator also sought dispensation from the requirements of r 9.2(2) of the Federal Court (Corporations) Rules 2000 (Cth) (Corporations Rules), to the extent that such notice has not already been given in accordance with that rule. I granted that leave because, as was submitted (and deposed):
(a)the liquidator currently holds a mere $19,500 or so in the bank account of the Company;
(b)he previously sought approval for his remuneration in his report to creditors dated 30 April 2024, and the creditors who voted did not approve his remuneration proposals;
(c)any further requests of creditors for approval of his remuneration and disbursements will likely not be approved by creditors of the Company given the number of related party creditors whom he reasonably expects to vote against any further remuneration proposals;
(d)the liquidator has identified further investigations that warrant being undertaken in circumstances where he has identified unsecured debts or claims in a total amount exceeding $230 million, and the Commissioner is a creditor in the amount of $226,500,343.71 (representing 98% of all unsecured debts or claims so far identified); and
(e)the remuneration in respect of which the liquidator seeks approval will be mostly funded by the Commissioner of Taxation under a funding agreement between the Commissioner of Taxation and the liquidator, executed on 4 September 2024 and titled “Deed of Indemnity” (the Funding Agreement). It is anticipated that the balance of any remuneration payable that is not provided for under the Funding Agreement will be met out of any assets the liquidator recovers on behalf of the Company.
For these reasons, the persons identified in r 9.2(2) of the Corporations Rules will not be affected by the approval of the liquidator’s remuneration, and the additional time and cost that would be incurred by having to comply fully with that rule would be of no utility. Accordingly, I granted the leave sought.
Applicable principles
The Remuneration Application is made pursuant to s 60-10 of the Insolvency Practice Schedule. That provision applies to remuneration sought by an “external administrator”, which includes a liquidator.
Pursuant to s 60-12 of the Insolvency Practice Schedule, the court is to have regard to the following matters in making a remuneration determination:
(a)the extent to which the work by the external administrator was necessary and properly performed;
(b)the extent to which the work likely to be performed by the external administrator is likely to be necessary and properly performed;
(c)the period during which the work was, or is likely to be, performed by the external administrator;
(d)the quality of the work performed, or likely to be performed, by the external administrator;
(e)the complexity (or otherwise) of the work performed, or likely to be performed, by the external administrator;
(f)the extent (if any) to which the external administrator was, or is likely to be, required to deal with extraordinary issues;
(g)the extent (if any) to which the external administrator was, or is likely to be, required to accept a higher level of risk or responsibility than is usually the case;
(h)the value and nature of any property dealt with, or likely to be dealt with, by the external administrator;
(i)the number, attributes and conduct, or the likely number, attributes and conduct, of the creditors;
(j)if the remuneration is worked out wholly or partly on a time-cost basis, the time properly taken, or likely to be properly taken, by the external administrator in performing the work;
(k)whether the external administrator was, or is likely to be, required to deal with one or more controllers, or one or more managing controllers;
(l)if:
(i)a review has been carried out under Subdivision C of Division 90 (review by another registered liquidator) into a matter that relates to the external administration; and
(ii)the matter is, or includes, remuneration of the external administrator,
the contents of the report on the review that relate to that matter; and
(m)any other relevant matters.
The principles applicable to determining an external administrator’s application for remuneration are well settled. See Deputy Commissioner of Taxation v Shac Communications Pty Ltd [2024] FCA 488 at [17]. They may be summarised as follows:
(a)the overarching principle is that a liquidator or receiver is entitled to fair and reasonable remuneration;
(b)the question of fairness and reasonableness must be decided by the court, even in the absence of a contradictor;
(c)such an application is to be determined in a summary way in which the rules of evidence are not strictly observed;
(d)there must be evidence before the court which shows that the work done was appropriate and necessary;
(e)the detail of evidence adduced should be proportionate to the size of the administration and the amount of work done;
(f)a liquidator’s expressed views about the reasonableness of the remuneration is relevant but not decisive;
(g)the determination of whether the remuneration claimed is fair and reasonable does not call for an item-by-item analysis of the work claimed that would be involved in the taxation of solicitors’ costs; and
(h)even where there is detailed evidence before the court, there is no touchstone or reliable independent measure of reasonableness other than judicial impression.
The court is not limited to approving remuneration and expenses for past work performed, but may also give its approval for work anticipated to be carried out in the future.
The liquidator’s evidence
In his affidavit affirmed 9 January 2025 and the Remuneration Approval Report (the Report) exhibited to that affidavit, Mr Woods addressed the criteria of which the court must satisfy itself as a condition of approving the remuneration sought by the liquidator.
He deposed that his remuneration has been, and will continue to be, calculated on a time-cost basis. His hourly rates, including that of his staff, are set out in the Report, together with an explanation of those rates. The hourly rates range between $250–$700 per hour (excluding GST). I accept that those rates are commensurate with those sought by external administrators in other recent cases where the courts have approved of remuneration.
The liquidator also gave evidence that, in accordance with his usual practice, he has allocated tasks, and will continue to allocate tasks, to his staff by reference to their respective experience, thus helping to keep the costs of the liquidation proportionate to the work to be undertaken.
In relation to the work that he and his staff have already undertaken and the work to be undertaken in the future, the liquidator provided:
(a)a detailed summary of the work, by reference to different task areas, the total amount of time spent (or expected to be spent) on each task and a detailed narration of the work in question; and
(b)a summary of the hours spent on each task (or expected to be spent on each major task) by each staff member.
In relation to the remuneration he has already incurred between 30 January 2024 and 30 September 2024, the liquidator provided an overview of the work undertaken, including a progress report, which provides an itemised break-down of how the sum of $121,345.50 (excluding GST) has been arrived at, including a description of the work performed, the staff member who performed that work and their hourly rate.
In relation to the future work, the liquidator deposed that:
(a)the quantum of unsecured debts and claims over $230 million is obviously significant;
(b)the Company does not have cash at the bank of any material value, and that the only known asset arises from a loan given to a director under which the total amount owing to the Company is anywhere between $336,640 and $2,629,386 (once any set-offs have been accounted for); and
(c)there are certain important matters that warrant further investigation.
Mr Woods also deposed to the work he anticipates undertaking in the future to recover any assets of the Company and to identify and pursue any claims he may have.
Given the total debts of the Company, I agree that the liquidator should be funded to undertake that work.
Further, a substantial proportion of his remuneration will be funded by the Commissioner of Taxation.
I accept the submission that the remuneration sought to be approved is self-evidently proportionate compared to the total debts owing by the Company and the work to be undertaken.
In this case, the liquidation is not close to completion, but because the liquidator’s future remuneration will be wholly funded by a creditor who has already executed the Funding Agreement for that purpose, the fact that the liquidation is not near to completion is of little significance. Approving the liquidator’s future remuneration now is not prejudicial to other creditors, and making a determination now will avoid the costs of a further application to the court.
For these reasons, I also made the order sought approving the liquidator’s remuneration, including future remuneration.
The Approval and Confidentiality Application
In support of the orders sought under the Approval and Confidentiality Application, the plaintiffs relied upon:
(a)the confidential affidavit of Mr Woods affirmed 9 January 2025;
(b)the affidavit of Mr Woods about remuneration, which was also affirmed 9 January 2025; and
(c)a supplementary confidential affidavit affirmed by Mr Woods on 27 February 2025 in which he explains the basis for amending the originating process.
The liquidator sought approval under s 477(2B) of the Act to enter into the following agreements:
(a)the Funding Agreement;
(b)any future funding agreements with the Commissioner of Taxation in the same, or substantially the same, form;
(c)a costs disclosure and costs agreement with Craddock Murray Neumann Lawyers Pty Ltd (CMN) (I will refer to this agreement as the CMN Agreement); and
(d)any future costs disclosure and costs agreements with CMN in the same, or substantially the same, form (provided CMN’s charge-out rates remain the same).
Applicable principles
Section 477(2B) of the Act provides:
(2B) 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 In the matter of One.Tel Limited [2014] NSWSC 457; (2014) 99 ACSR 247, Brereton J summarised the principles applicable to an application under that provision at [26] and [30], as follows:
(a)the role of the court is to grant or deny approval to the liquidator’s proposal, not to reconsider every issue considered by the liquidator, nor to develop some alternative proposal which might seem preferable;
(b)in reviewing the liquidator’s proposal, the court pays due regard to his or her commercial judgment and knowledge of all of the circumstances of the liquidation, but satisfies itself that there is no error of law or ground for suspecting bad faith or impropriety, and evaluates whether the proposal is consistent with the expeditious and beneficial administration of the winding up;
(c)importantly, the court’s approval is not an endorsement of the proposed agreement, but is merely permission for the liquidator to exercise his or her own commercial judgment in the matter. Accordingly, the approval confers the liquidator’s power to enter into the transaction, but does not amount to the court approving the transaction itself;
(d)s 477(2B) is concerned with long-term agreements which might protract the liquidation, and has the effect that the liquidator cannot enter such agreements without the approval of the committee of inspection, the creditors, or of the court. Its rationale is that the interests and wishes of those affected, particularly creditors, should be highly influential in determining whether the liquidator should assume a contractual obligation that could interfere with the expeditious completion of the winding up; and
(e)in considering giving approval under s 477(2B), the main consideration is the impact of the agreement on the duration of the liquidation, and whether that is, in all the circumstances, reasonable in the interests of the administration.
It is also well established that, in an appropriate case, approval can be given nunc pro tunc under s 477(2B) of the Act.
Funding Agreement
As I have explained above, the Commissioner of Taxation is a creditor of the Company and has lodged a proof of debt with the liquidator in the sum of $226,500,343.71.
The terms of the Funding Agreement provide, in summary:
(a)the “indemnity purpose” is to enable the liquidator to “continue investigations on the various transactions made prior to liquidation and identify any breaches” (see clause 1.1, clause 3, and schedule 1);
(b)the “indemnity amount” is $235,865.39 (including GST) (see clause 1.1, clause 3, and schedule 1);
(c)the “indemnified work” (i.e. the investigations to be undertaken by the liquidator) is summarised in schedule 1 and is divided into two stages, where:
(i)stage 1 (totalling $112,995.86) encompasses the work completed and the liquidator’s remuneration and expenses incurred in relation to the application filed 9 January 2025; and
(ii)stage 2 (totalling $122,869.53) encompasses the completion of the tasks outlined in schedule 1, being to investigate the affairs of the Company and to report the outcome of those investigations; and
(d)the Commissioner of Taxation is to have priority in respect of any recoveries made by the liquidator, in reimbursement of all indemnity expenses (see clauses 7.1 and 7.2).
The liquidator deposed to the investigations he anticipates undertaking, including the identities of the parties he intends to investigate and a broad description of the conduct that warrants further investigation.
He deposed, and I accept, that the Funding Agreement provides the best outcome for the creditors of the Company in circumstances where any recoveries, after payment to the Commissioner of Taxation of the amount of funding and the liquidator’s own expenses and remuneration, will be available to be paid out as a dividend to ordinary unsecured creditors.
The Funding Agreement is self-evidently in the interests of the creditors as a whole, as it will only increase the prospects of recoveries, in circumstances where the Company’s assets are minimal relative to its total unsecured debts. There is obviously no prejudice to the other creditors, who are not being asked to provide funding under the agreement.
I am satisfied that the Funding Agreement has been entered into for a proper purpose by the liquidator, applying his own commercial judgment.
For those reasons, I gave the approval sought to enter into the Funding Agreement, nunc pro tunc.
Future funding agreements
By an amended originating process annexed to the confidential affidavit of Mr Woods filed 27 February 2025, the liquidator seeks approval under s 477(2B) of the Act to enter into any future agreements with the Commissioner of Taxation in the same, or substantially the same, form as the Funding Agreement.
He deposed as follows (in his supplementary affidavit):
(a)he considers that further investigations are required to ascertain any claims which he might be able to pursue for the benefit of creditors of the Company;
(b)he has already submitted a further request to the Commissioner of Taxation for funding;
(c)the scope of that second request is limited to conducting further investigations, principally in relation to analysing bank statements in the name of the Company and of third parties who have received payments from or made payments to the Company; and
(d)there are substantial transactions recorded in the Company’s bank statements involving persons whose identities are yet to be ascertained, and in circumstances where the commercial justification of the transactions remains unclear.
Given that the scope of the approval sought by him is already relatively clear and will not involve prejudice to the other creditors, I granted approval for the liquidator to enter into future funding agreements that he sought (noting that if the Commissioner of Taxation proposes to enter into an agreement with the liquidator that is materially different to the Funding Agreement, he agrees that he will be required to approach the court to seek approval under s 477(2B)).
CMN Agreement and future CMN agreements
As the liquidator of the Company, Mr Woods, obviously enough, may bring or defend any proceeding in the name of the Company, and may engage solicitors to assist him in his duties. See ss 477(2)(a)–(b) of the Act.
Mr Woods has retained CMN to assist him in his duties, including specifically for the purposes of the investigations contemplated by the Funding Agreement.
The CMN Agreement contains an estimate of CMN’s legal costs for stage 1 and stage 2 of the investigations to be undertaken by the liquidator, which estimates I accept are commensurate with the work to be undertaken.
Having regard to the complex work to be undertaken by him, I agree that it is appropriate that he has the assistance of solicitors for that purpose.
Accordingly, I granted the approval sought to enter into the CMN Agreement.
Further, in accordance with the amended originating process and as explained in the supplementary affidavit, the liquidator also sought (and I gave) approval to enter into future agreements with CMN in the same, or substantially the same, terms (but subject to CMN’s charge-out rates remaining the same).
Confidentiality orders
The plaintiffs seek confidentiality and related orders under s 37AF(1)(b) and s 37AG(1)(a) of the Federal Court of Australia Act 1976 (Cth) (the FCA Act) in relation to the materials put before the court in support of the Approval and Confidentiality Application.
The liquidator explained the basis for seeking those orders in his confidential affidavits filed 9 January 2025 and 27 February 2025. In summary, he deposed that the Funding Agreement and CMN Agreement disclose matters which the liquidator intends to investigate in the liquidation of the Company. If those matters are disclosed to third parties, and especially the parties in question, the targets of the investigations may be able to take steps to frustrate the investigations or prospects of achieving a recovery.
Further, the liquidator deposed that the Funding Agreement and CMN Agreement disclose the extent to which he has been funded to undertake investigations. If this information were to be disclosed to the targets of future investigations, they may be able to use that information to their advantage.
Given the circumstances in which the liability to the Commissioner of Taxation arose, those propositions are irresistible.
It is well established that commercial sensitivity can be an appropriate basis for making a suppression or non-publication order. Further, the clear public interest in the due and beneficial administration of the estates of insolvent companies for the benefit of creditors is a relevant consideration in favour of granting an order under s 37AF of the FCA Act.
I therefore made the confidentiality, suppression and non-publication orders sought.
I certify that the preceding fifty-four (54) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice O’Callaghan. Associate:
Dated: 3 March 2025
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