Brown v DML Resources Pty Ltd

Sub-area: Corporations and Corporate Insolvency

Date of hearing: 9 August 2022

Counsel for the Plaintiffs: Mr M Karam with Ms A Osborn Brodie

Solicitor for the Plaintiffs: McInnes Wilson Lawyers

Counsel for the Intervening Parties: Mr D Robens

Solicitor for the Intervening Parties: Harrington Hall Lawyers

ORDERS ACD 14 of 2022

ACD 16 of 2022 IN THE MATTER OF 3 PROPERTY GROUP 13 PTY LTD (IN LIQUIDATION) ACN 621 691 932 AND BE ATHLETIC CANBERRA PTY LTD (IN LIQUIDATION) ACN 619 049 740

STEPHEN JOHN HUNDY IN HIS CAPACITY AS LIQUIDATOR OF 3 PROPERTY GROUP 13 PTY LTD (IN LIQUIDATION) Plaintiff

3 PROPERTY GROUP 13 PTY LTD (IN LIQUIDATION) ACN 621 691 932 Plaintiff

BE ATHLETIC CANBERRA PTY LTD (IN LIQUIDATION) ACN 619 049 740 Plaintiff

order made by: WIGNEY J DATE OF ORDER: 13 October 2022

1. The applicants identified in the schedule to the interlocutory application dated 15 July 2022 and filed in proceeding ACD 14 of 2022 be granted leave, pursuant to r 2.13(1) of the Federal Court (Corporations) Rules 2000 (Cth) (the Rules), to be heard in that proceeding without becoming a party to the proceeding, subject to the limitation in order 2.
2. The grant of leave referred to in order 1 is limited to leave to rely on the following material in answer to the relief sought in the originating process dated 22 April 2022: (a) the written submissions dated 1 August 2022 and filed in the proceeding; (b) those parts of the affidavit of Mr Jaime Farrelly sworn 14 July 2022, including the annexures to that affidavit, which are specifically identified in the written submissions referred to in paragraph (a); and (c) such other parts of the affidavit and annexures referred to in paragraph (b) to which it is necessary to refer to fully understand those parts of the affidavit that are specifically identified in the written submissions referred to in paragraph (a).
3. The interlocutory application dated 15 July 2022 and filed in ACD 14 of 2022 be otherwise dismissed.
4. The applicants identified in the schedule to the interlocutory application dated 15 July 2022 and filed in proceeding ACD 14 of 2022 pay the plaintiffs' costs of and associated with the interlocutory application.
5. The applicants identified in the schedule to the interlocutory application dated 15 July 2022 and filed in proceeding ACD 16 of 2022 be granted leave, pursuant to r 2.13(1) of the Rules, to be heard in that proceeding without becoming a party to the proceeding, subject to the limitation in order 6.
6. The grant of leave referred to in order 5 is limited to leave to rely on the following material in answer to the relief sought in the originating process dated 22 April 2022: (a) the written submissions dated 1 August 2022 and filed in the proceeding; (b) those parts of the affidavit of Mr Jaime Farrelly sworn 14 July 2022, including the annexures to that affidavit, which are specifically identified in the written submissions referred to in paragraph (a); and (c) such other parts of the affidavit and annexures referred to in paragraph (b) to which it is necessary to refer to fully understand those parts of the affidavit that are specifically identified in the written submissions referred to in paragraph (a).
7. The interlocutory application dated 15 July 2022 and filed in ACD 16 of 2022 be otherwise dismissed.
8. The applicants identified in the schedule to the interlocutory application dated 15 July 2022 and filed in proceeding ACD 16 of 2022 pay the plaintiffs' costs of and associated with the interlocutory application.
9. The originating process in ACD 14 of 2022 and ACD 16 of 2022 be listed for hearing on a date to be fixed after consultation with the plaintiffs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

WIGNEY J: 1 Mr Stephen Hundy (the liquidator) is the liquidator of two companies which are in the process of being wound up. Those companies are 3 Property Group 13 Pty Ltd (in liquidation) and Be Athletic Canberra Pty Ltd (in liquidation). The liquidator has applied for orders in respect of the winding up of both companies which would secure the Court's retrospective approval of his entry into funding agreements which, by virtue of s 477(2B) of the Corporations Act 2001 (Cth), he was not permitted to enter into without the approval of either the Court, the committee of inspection, or by a resolution of the creditors. Those applications are yet to be heard. 2 In the meantime, a number of persons or entities who are creditors, or claim to be creditors or officers of creditors, of 3 Property and Be Athletic (collectively, the intervening parties) filed interlocutory applications seeking leave pursuant to r 2.13(1) of the Federal Court (Corporations) Rules 2000 (Cth) to be heard in respect of the liquidator's applications without becoming parties to the proceedings. The applications by the intervening parties in respect of both companies were heard together given the similarity of the facts and circumstances in the two matters. 3 The narrow issue for determination at this point of the proceedings is whether the Court should exercise the discretion in r 2.13 of the Rules to permit the intervening parties to be heard in respect of the liquidator's applications pursuant to s 477(2B) of the Corporations Act for approval of the funding agreements in the winding up of both 3 Property and Be Athletic. 4 For the reasons that follow, the intervening parties should be granted leave to be heard in respect of the liquidator's applications, albeit on a strictly limited basis.

relevant Background facts 5 Both 3 Property and Be Athletic were incorporated in 2017. Their directors included Mr Gary Kelly and Mr Jaime Farrelly, though both Mr Kelly and Mr Farrelly resigned as directors shortly before the appointment of the liquidator in October 2020 in the case of 3 Property, and November 2020 in the case of Be Athletic. 3 Property's shareholder is 3 Property Group Holdings 2 Pty Ltd (3PGH2) and Be Athletic's shareholders include Stormer Corporation Pty Ltd and KFT Group (ACT) Pty Ltd. 6 Both 3 Property and Be Athletic purchased properties in the Canberra area in 2018. Both borrowed money from various sources to fund the property purchases. Both subsequently entered into contracts with Stone Living Pty Ltd for the construction of townhouses on the properties. Both subsequently had disputes with Stone in respect of the construction contracts. Those disputes, or at least some of them, were resolved in Stone's favour in adjudication decisions made under the Building and Construction Industry (Security of Payment) Act 2009 (ACT). The contracts with Stone were subsequently terminated. 3 Property retained Lifestyle Homes (ACT) Pty Ltd, a company associated with Mr Kelly and KFT Group, to finish building the townhouses. 7 Both 3 Property and Be Athletic sold the properties they had purchased to related entities in 2020. 3 Property sold its property to 3 Property Group 17 Pty Ltd (3PG17), a company of which Mr Kelly and Mr Farrelly were directors and the shares in which were owned by 3PGH2. Be Athletic sold its property to Sage Campbell Pty Ltd, a company of which Mr Kelly and Mr Farrelly were directors and the shares in which were held by Mr Kelly and Mr Farrelly. 8 As might be expected, the liquidator conducted investigations into the affairs of both 3 Property and Be Athletic. In the course of those investigations, the liquidator entered into agreements with Stone pursuant to which Stone agreed to provide funding in respect of certain aspects of the conduct of the winding up of both 3 Property and Be Athletic. Separate agreements were entered into in respect of the two companies. It is unnecessary for present purposes to say anything more concerning the funding agreements. They are the subject of the liquidator's applications pursuant to s 477(2B) of the Corporations Act. The liquidator has sought confidentiality orders in respect of information concerning the funding agreements. The question whether confidentiality orders should be made on a final basis is to be determined in the context of the liquidator's applications for approval of the funding agreements. 9 The liquidator has also commenced separate proceedings in the Court in his capacity as liquidator and on behalf of both 3 Property and Be Athletic. It is also unnecessary to provide any detail concerning the nature of those proceedings. It suffices to note that the proceeding commenced on behalf of 3 Property seeks relief against 3PG17, Mr Kelly and Mr Farrelly. The proceeding commenced on behalf of Be Athletic seeks relief against Sage Campbell, Mr Kelly and Mr Farrelly. It is readily apparent that the liquidator's conduct of the proceedings is being funded pursuant to the funding agreements that the liquidator has entered into with Stone which are the subject of the liquidator's applications pursuant to s 477(2B) of the Corporations Act. 10 It should finally be noted that proofs of debt have been lodged in the winding up of 3 Property by, relevantly: 3PGH2, 3 Property Group 11 Pty Ltd (3PG11), 3PG17, Stormer Corporation, KFT Group and Lifestyle. Proofs of debt have been lodged in the winding up of Be Athletic by, relevantly: 3PGH2, 3PG11, Sage Campbell, Stormer Corporation, KFT Group and Lifestyle. 11 The liquidator has no doubt given some consideration to the proofs of debt that have been lodged in the winding up of both companies. It is, however, unnecessary for present purposes to provide any detail concerning the nature of the debts said to be owed by 3 Property and Be Athletic to the corporate intervening parties. It may be accepted, for present purposes at least, that the corporate intervening parties are either creditors, or claim to be creditors, of either or both of 3 Property and Be Athletic. Some of the debts, or claimed debts, are for relatively large amounts.

APPLICATIONS BY THE INTERVENING PARTIES 12 The intervening parties seek leave to be heard in respect of the liquidator's applications for approval of the funding agreements. That leave is sought pursuant to r 2.13(1) of the Rules. That rule provides as follows: Leave to creditor, contributory or officer to be heard The Court may grant leave to any person who is, or who claims to be: (a) a creditor, contributory or officer of a corporation; or (b) an officer of a creditor, or contributory, of a corporation; or (c) any other interested person; to be heard in a proceeding without becoming a party to the proceeding. 13 The intervening parties in the case of the liquidator's application concerning 3 Property are: Mr Kelly, Mr Farrelly, 3PGH2, Lifestyle, 3PG11, Stormer Corporation, KFT Group and 3PG17. The intervening parties in the case of the liquidator's application concerning Be Athletic are: Mr Kelly, Mr Farrelly, Sage Campbell, 3PGH2, 3PG11, Stormer Corporation, KFT Group and Lifestyle. 14 As can be seen, the intervening parties are all either creditors, or claim to be creditors or officers of creditors, of 3 Property and Be Athletic. The issue is whether the Court should exercise its discretion to permit the intervening parties to be heard in respect of the liquidator's applications. 15 The intervening parties relied on lengthy and detailed affidavits sworn by Mr Farrelly which annexed voluminous documentary exhibits. They also relied on slightly shorter and less detailed affidavits sworn by Mr Kelly. The liquidator did not object to any of the affidavit or documentary evidence adduced by the intervening parties, at least to the extent that they were relied on in respect of the leave applications, though he maintained that much of the evidence was not relevant to the issue for determination. Perhaps not surprisingly, given the nature of the intervening parties' applications, the liquidator did not seek to cross-examine Mr Farrelly or Mr Kelly. 16 It is both unnecessary and undesirable in the circumstances to give any detailed consideration in these reasons to the affidavit and documentary evidence relied on by the intervening parties. It suffices to note that the evidence included various claims and allegations by Mr Kelly and Mr Farrelly concerning disputes that both 3 Property and Be Athletic had with Stone in respect of the building works, including claims and allegations concerning the adjudication of those disputes. The evidence also included various claims and allegations concerning the conduct of the liquidator, in particular in respect of the willingness of the liquidator to investigate or pursue what were said to be claims that 3 Property and Be Athletic had or may have against Stone. Both Mr Kelly and Mr Farrelly also speculated about the terms of the funding agreements between the liquidator and Stone and complained that they or the other intervening parties have not been offered the opportunity to provide funding to the liquidator on the same or similar terms to the funding agreements with Stone. 17 The liquidator adduced short affidavit evidence in response to the intervening parties' evidence. The liquidator's affidavits, again perhaps understandably, did not engage with all of the detailed claims and allegations in the affidavits of Mr Kelly and Mr Farrelly. The pertinent points to note about the liquidator's evidence are: first, the liquidator is of the view that there is no merit in contesting the adjudicator's decisions concerning the disputes between Stone and 3 Property and Be Athletic respectively; second, the liquidator denied Mr Kelly's and Mr Farrelly's claims, outlined in their affidavits, to the effect that he has not objectively considered or investigated whether 3 Property and Be Athletic have any available claims against Stone; third, the liquidator has not identified any meritorious claims that 3 Property or Be Athletic may have against Stone that would result in the recovery of funds for the benefit of creditors in the liquidation; and fourth, the liquidator was not aware, prior to reading Mr Farrelly's affidavit, that Mr Farrelly apparently intended or proposed to fund investigations and litigation against Stone. 18 For the reasons expanded on later, given the nature of the intervening parties' applications, it is neither necessary nor desirable to attempt to resolve any of the factual issues that may arise in the evidence. Those issues are perhaps best considered and resolved in the substantive proceedings, if considered relevant, or in the context of other proceedings that Mr Kelly or Mr Farrelly may choose to commence, or other applications that they may choose to file, in respect of the liquidator's conduct of the winding up. 19 The intervening parties submitted, in summary, that they should be heard in respect of the liquidator's applications for approval of the funding agreements with Stone because they want to submit, in response to those applications, that the funding agreements should not be approved. In their submission, they have a legitimate interest to be heard because they were creditors, or officers of creditors, of the two companies in question and their interests could be prejudiced by the approval of the funding agreements. 20 If they are permitted to be heard in respect of the liquidator's applications, the main basis of their opposition to the approval of the funding agreements would be their contention that the liquidator has not objectively considered whether the companies have any claims against Stone. They submit, in that regard, that if the funding agreements are approved, it would be highly unlikely that the liquidator would investigate or pursue any claims that the companies may have against Stone. The intervening parties would also submit that the funding agreements were likely to give Stone some form of priority in the winding up and that, as creditors, they should have been given the same opportunity to fund the liquidator on the same or similar terms.

RELEVANT PRINCIPLES 21 In order to consider whether the Court should grant leave to the intervening parties to be heard in respect of the liquidator's applications pursuant to s 477(2B) of the Corporations Act, it is necessary to briefly address the principles that apply in respect of such applications. 22 Subsection 477(2B) of the Corporations Act provides as follows: 477 Powers of liquidator ... (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. 23 The reason that approval is required in respect of agreements which may operate or involve obligations that extend beyond three months is that such agreements tend to cut across the general expectation that the winding up of a company will proceed expeditiously: Re HIH Insurance Ltd [2004] NSWSC 5 at [15]; Re Golden Sands Hospitality Pty Ltd (in liq) (No 2) [2017] NSWSC 450 at [15]. 24 The requirement to obtain approval of such agreements affords some protection against ill-advised or improper actions on the part of the liquidator: Empire (Aust) Nominees Pty Ltd v Vince (2000) 35 ACSR 167; [2000] VSC 324 at [12]. The Court's task is not to second guess the liquidator's commercial judgment, but rather to determine whether there are grounds for suspecting a lack of good faith, or some error of law or principle, or some other good reasons to intervene: Re Spedley Securities Ltd (in liq) (1992) 9 ACSR 83 at 85-86; Leigh, re AP and PJ King Pty Ltd (in liq) [2006] NSWSC 315 at [23]; Stewart, re Newtronics Pty Ltd [2007] FCA 1375 at [26]; Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher & Barnet (2015) 89 NSWLR 110; [2015] NSWCA 85 at [125] (Bathurst CJ, with Beazley P, Macfarlan, Meagher and Barrett JJA agreeing). 25 In respect of funding agreements that require approval pursuant to s 477(2B) of the Corporations Act, the factors that may be relevant to assessing whether approval should be granted include: the manner in which the funding or indemnity will be provided under the agreement; the prospects of success of the proposed litigation; the risks involved in the claim; the interests of creditors other than the proposed defendant or respondent; possible oppression; the nature and complexity of the cause of action; the extent to which the liquidator has canvassed other funding options; the level of the funder's premium, if any; and the extent to which the liquidator has consulted with creditors: Leigh at [25]; Re ACN 076 673 875 Ltd (rec and mgr apptd) (in liq) (2002) 42 ACSR 296; [2002] NSWSC 578 at [16]-[34]; Hughes, in the matter of Sales Express Pty Ltd (in Liq) [2016] FCA 423 at [20]. 26 The Court may give retrospective approval under s 477(2B) in appropriate circumstances: Hutchison v Hillcrest Litigation Services Ltd [2010] NSWSC 934 at [25]; Newtronics at [25]; Vickers, in the matter of York Street Mezzanine Pty Ltd (in liq) (2011) 196 FCR 479; [2011] FCA 1028 at [27]; Hird (Liquidator), in the matter of Allmine Group Limited (in liq) [2018] FCA 781 at [33]. 27 Importantly, for present purposes, it has been held that a liquidator is not necessarily required to give creditors, or the defendant or respondent in proceedings that are to be funded by the agreement in respect of which approval is sought, notice of an application for approval of an agreement pursuant to s 477(2B): Re Bell Group Ltd (in liq) ACN 008 666 993 [2009] WASC 235 at [58]; Jones, Saker, Weaver and Stewart (Liquidators), in the matter of Great Southern Limited (in liq) (Receivers and Managers Appointed) [2012] FCA 1072 at [50]; Onefone Australia Pty Ltd v One.Tel Pty Ltd (2010) 78 ACSR 163; [2010] NSWSC 498 at [11]-[13], upheld on appeal in Deloughery & Ors v Weston (2010) 79 ACSR 180; [2010] NSWCA 148 at [36] (Giles JA and Handley AJA, with Spigelman CJ agreeing); Kogan, in the matter of Rogulj Enterprises Pty Ltd (in liq) [2021] FCA 856 at [35]; Thorn (liquidator), in the matter of South Townsville Developments Pty Ltd (in liq) [2022] FCA 143 at [52]-[57]. 28 It must follow that creditors in proceedings in respect of which funding approval is sought have no standing in, or right to be heard on, a liquidator's application for approval under s 477(2B) of the Corporations Act. At most they have a right to apply for leave to be heard pursuant to r 2.13(1) of the Rules. The position of defendants to proceedings in respect of which funding approval is sought is even more tenuous. Such persons have "no legitimate expectation of influencing decisions about how the winding up should be conducted and what the liquidators should or should not do in order to progress it": Fortress at [151] (Barrett JA, with whom Macfarlan and Meagher JJA relevantly agreed). Nor are such persons entitled to seek leave to be heard pursuant to r 2.13 of the Rules simply because of their target status. It should be noted in this context that in Re City Pacific Ltd [2017] NSWSC 784, a case heavily relied on by the intervening parties, certain persons were permitted to appear and oppose an application under s 477(2B) of the Corporations Act on the basis that they were creditors and contributories, not simply because of their target status: see City Pacific at [8]-[9]. 29 The Court's power under r 2.13 of the Rules to grant leave to, relevantly, a creditor, claimed creditor or officer of a creditor of a company is plainly discretionary. That discretion is relevantly unfettered. Considerations which may be relevant to the exercise of the discretion would include the nature of the relevant proceeding in respect of which the applicant wishes to be heard, the nature and extent of the applicant's interest in the outcome of that proceeding, and the extent to which the applicant's participation in the proceeding would assist the Court in the resolution of the proceeding. 30 Where, as here, the proceeding in respect of which the applicant seeks leave to be heard is the approval of a funding agreement, it is relevant to note that such proceeding might fairly be characterised as involving "a discretion to permit an administrative step to be taken which would otherwise be prohibited" (cf Brown v DML Resources Pty Ltd (in liq) (2001) 52 NSWLR 685; [2001] NSWSC 590 at [55]). It is also relevant to note that, as discussed earlier, the liquidator is generally not required to put creditors, or the defendant or respondent in the funded proceeding or prospective proceeding, on notice of an application for approval of a funding agreement. Indeed, such applications are typically dealt with ex parte.

SHOULD THE INTERVENING PARTIES BE GRANTED LEAVE TO BE HEARD? 31 Having regard to the principles that have just been outlined, the intervening parties do not, strictly speaking, have standing or a right to be heard in respect of the liquidator's applications under s 477(2B) of the Corporations Act. At best, they have a right as creditors, or persons who claim to be creditors or officers of creditors, to seek leave to be heard pursuant to r 2.13 of the Rules. It is ultimately for the intervening parties to persuade the Court that the discretion conferred by r 2.13 of the Rules should be exercised in their favour given the nature of the proceeding and any relevant interest they may have in it. 32 It may perhaps be accepted that, to the extent that they are creditors, or claim to be creditors or officers of creditors, of 3 Property and Be Athletic, the intervening parties might, at least hypothetically, have some interest in the outcome of the liquidator's applications. If the funding agreements in respect of which retrospective approval is sought are ill-advised, or improper, or are the product of a lack of good faith, or some error of law or principle on the part of the liquidator, the approval of the funding agreements may have a potentially adverse effect on the returns that may be available to them in their capacity as creditors or claimed creditors. 33 For the Court to exercise the discretion in r 2.13 of the Rules in their favour, however, it is not sufficient for them to simply rely on their status as creditors, or claimed creditors, or officers of creditors. If that were so, every creditor, or claimed creditor, or officer of a creditor, might reasonably expect that they would be granted leave to be heard in respect of any application by a liquidator for approval of a funding agreement, or indeed any agreement, pursuant to s 477(2B) of the Corporations Act. The authorities, considered earlier, strongly suggest that that is not the case. 34 In all the circumstances, in order to persuade the Court to exercise the discretion in r 2.13 of the Rules in their favour, the intervening parties must, at the very least, demonstrate that there is at least some evidentiary basis, beyond mere assertion or speculation, for it to be reasonably suspected that the funding agreements are or may be ill-advised, or improper, or the product of bad faith, or involve an error of law or principle on the part of the liquidator, or that the intervening parties may otherwise be prejudiced or disadvantaged for some other reason if the funding agreements are approved. It might also be expected that the intervening parties would have to persuade the Court that their participation in the hearing would assist the Court in considering the liquidator's approval applications: cf Thorn at [59]. 35 The intervening parties have not, on balance, established any sound basis upon which the Court should exercise its discretion to allow them to be heard further in respect of the liquidator's applications. Indeed, there are a number of sound reasons for not permitting the intervening parties to participate any further in the applications. 36 First, the voluminous evidence that the intervening parties have adduced in support of their applications for leave to be heard does not give rise to any reasonable suspicion, let alone inference, that the liquidator has acted otherwise than in good faith in entering into the funding agreements. The evidence also does not establish any sound or reasonable basis for inferring or suspecting that, in entering into the funding agreements, the liquidator acted improperly or on the basis of any error of law or principle. Indeed, much of the evidence amounted to little more than assumption, speculation or bare assertion on the part of Mr Kelly and Mr Farrelly. 37 That is not to say that, when it comes to actually determining the liquidator's application, the Court will not in any event carefully consider whether the liquidator has in fact acted in good faith and in the absence of any error of law or principle. The point is that the voluminous evidence adduced by the intervening parties in support of their applications for leave to be heard does not materially advance their case that they should be heard in opposition to the liquidator's applications. 38 Second, much of the evidence adduced by the intervening parties, and many of the submissions advanced in support of their application for leave to be heard, appeared to be primarily directed at the broader allegation that the liquidator has not been acting impartially and objectively in the discharge of his duties as liquidator to date. The evidence and submissions were not squarely directed at the narrower and more confined question as to whether the funding agreements should be approved, which is the ultimate question for determination in the liquidator's applications. It follows that the intervening parties' evidence and submissions tended to distract, rather than assist, the Court in respect of the issue for determination. 39 The intervening parties' main complaint appeared to be that the liquidator has not fairly, objectively or impartially considered or investigated whether the companies have any claims against Stone. Putting to one side the fact that the evidence adduced by the intervening parties does not appear to provide any reasonable basis for that serious allegation, the more significant point for present purposes is that, if the intervening parties genuinely wish to pursue serious allegations concerning the liquidator's conduct in the winding up of 3 Property and Be Athletic generally, it would be open to them to apply, for example, for an inquiry to be conducted into the conduct of the liquidator (see cl 90-10 of Sch 2 to the Corporations Act) and seek to have the liquidator removed and replaced by another liquidator (see cl 90-15(3)(b) and (c) of Sch 2 to the Corporations Act). The liquidator's approval proceedings under s 477(2B) of the Corporations Act are not the appropriate forum in which to pursue those broader allegations. 40 Third, the proposed participation of the intervening parties in the hearing of the liquidator's application for approval of the funding agreements is complicated by the fact that Mr Kelly and Mr Farrelly, who would appear to be the directing minds of the other intervening parties, are defendants or respondents in the proceedings commenced by the liquidator which are funded by the funding agreements in question. The complication is that much of the evidence adduced by, and many of the submissions advanced by, the intervening parties appeared to be directed at or driven by the interests of Mr Kelly, Mr Farrelly and companies associated with them as defendants to the substantive proceedings, as opposed to the interests of the intervening parties as creditors, or claimed creditors, of 3 Property and Be Athletic. To put it bluntly, it is perhaps not at all surprising that, as defendants to the funded proceedings, Mr Kelly and Mr Farrelly would wish to oppose the approval of the funding agreements. That is because the evidence suggests that if the funding agreements are not approved, it is unlikely that the liquidator would be able to prosecute the substantive proceedings. 41 Fourth, and related to the previous points, much of the evidence adduced by the intervening parties in support of their application for leave to be heard concerned the conduct of Stone and the merits of the substantive proceedings. The factual issues raised by that evidence are likely to be addressed in the substantive proceedings. That is the proper forum for the resolution of those issues. 42 Fifth, if the intervening parties are permitted to be heard further in respect of the liquidator's applications, complications will undoubtedly arise concerning their access to much, if not all, of the material relied on by the liquidator in support of his applications. The evidence relied on by liquidators in support of applications for the approval of litigation funding agreements is often "of a commercially confidential and sensitive kind, related to aspects of the litigation that any plaintiff, protecting its own interests and the integrity of the litigation process in which it is engaged, would take particular care to keep from the other party or parties to the litigation": Onefone at [2]. It is for that reason that confidentiality orders of some kind are usually made in respect of the liquidator's evidence in support of the approval of a litigation funding agreement. 43 The confidentiality of the material relied on by the liquidator will have to be grappled with in any event. The point is that it cannot be assumed, at this stage at least, that the intervening parties will be granted access to the liquidator's evidence. It is at best unclear, in those circumstances, that the intervening parties will be able to materially advance their opposition to the approval of the funding agreements beyond the submissions that they have already advanced. 44 Sixth, no doubt because the intervening parties have not had access to the funding agreements in issue, many of their submissions concerning the terms of the funding agreements were purely speculative. In particular, the intervening parties' submission that "there is some benefit conferred on the funder [Stone] that it will receive a priority to be paid the funding amount, and possibly its debt as a creditor" is pure speculation. The Court will, in any event, carefully scrutinise the funding agreements in question. Speculation on the part of the intervening parties is unlikely to assist in that regard. 45 Seventh, the intervening parties' contention that the funding agreements should not be approved because they were not given the same opportunity to fund the liquidator's proceedings is lacking in merit. It is, with respect, somewhat bizarre to suggest that Mr Kelly, or Mr Farrelly, or companies that they control, are likely to enter into funding agreements with the liquidator to fund proceedings against themselves. 46 Eighth, the length, complexity and cost to the liquidator of the proceedings to approve the funding agreements will almost certainly be significantly increased should the intervening parties be granted leave to be heard further in respect of the proceedings. The granting of leave to the intervening parties would also most likely result in a delay in the resolution of the liquidator's applications. That would be all the more so if the intervening parties sought to supplement their evidence, or sought access to some or all of the materials in respect of which the liquidator has sought confidentiality orders, or sought to cross-examine the liquidator. While it is at first blush difficult to see why cross-examination should be permitted in an application for approval pursuant to s 477(2B) of the Corporations Act, it is equally difficult to see how some of the factual issues that appear to emerge on the evidence could be satisfactorily resolved in the absence of at least some cross-examination. 47 Ninth, the conduct of the leave applications on behalf of the intervening parties does not instil great confidence that the further participation of the intervening parties will assist the Court in any material way in resolving the question whether the funding agreements should be approved. 48 As can be seen, the discretionary considerations all tend to weigh against the Court exercising its discretion to grant leave to the intervening parties to be heard further in respect of the liquidator's applications for approval of the funding agreements. The intervening parties have failed to identify any relevant considerations which weigh in favour of granting them leave to be heard further in respect of the liquidator's approval applications. Their applications, pursuant to r 2.13 of the Rules, for leave to be heard in the liquidator's applications pursuant to s 477(2B) of the Corporations Act should accordingly be dismissed, at least to the extent that the intervening parties seek to be heard further in relation to the liquidator's applications. 49 Does it follow that the intervening parties' applications should simply be dismissed? If the applications were dismissed, it would appear to follow that, strictly speaking, the evidence that has been adduced by the intervening parties' and the submissions that they have advanced should be entirely disregarded. Indeed, the intervening parties' opposition to the approval of the funding agreements would, strictly speaking, have to be disregarded if their applications for leave to be heard were simply dismissed. 50 It would be somewhat unrealistic and artificial for the Court to proceed to hear the liquidator's approval applications as if they were effectively unopposed, or on the basis that the evidence and submissions upon which the intervening parties relied in support of their applications for leave to be heard should be entirely disregarded. Judges are, of course, frequently required to put out of their minds information and material that has not been accepted into evidence. The question, however, is whether it would be appropriate to proceed in that way in the particular and somewhat unusual circumstances of this case. 51 The appropriate course, in all the circumstances, is to grant leave to the intervening parties to be heard in respect of the liquidator's approval applications, but only on the limited basis that the intervening parties be permitted to rely on the written submissions that they have filed in support of their leave applications, along with those parts of the affidavit and documentary evidence that are specifically identified in the written submissions. The Court may also have regard to such other parts of the evidentiary material that is necessary to consider to understand those parts of the evidence that are specifically referenced in the written submissions. The limits on the grant of leave mean that the intervening parties will not be permitted to appear at or take part in the hearing of the liquidator's approval applications. Nor will they be permitted to file any further evidence or make any further submissions, written or oral. It should be noted, for more abundant caution, that the affidavit evidence filed by the intervening parties to date will be received and read on the basis that it has not been tested. It will not be read uncritically or as if it has not been disputed.

COSTS 52 The final issue to address is the question of costs. 53 The intervening parties failed to establish any sound basis upon which the Court should exercise its discretion to allow them to be heard further in respect of the liquidator's applications. While the intervening parties achieved a measure of success, in that they have been granted leave to be heard on a very limited basis, that was essentially a by-product of the fact that, in dealing with their applications for leave to be heard, the Court effectively received evidence and heard the intervening parties' reasons for opposing the liquidator's applications. The intervening parties are to play no further part in the hearing of the liquidator's applications. In all the circumstances, I consider it appropriate to order that the intervening parties pay the liquidator's costs of their applications to be heard. I certify that the preceding fifty-three (53) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Wigney.