Crosbie, in the matter of Hastie Group Limited (in liq) [2016] FCA 1289

Federal Court of Australia|2016-10-31|Before: Moshinsky J

Pursuant to section 477(2B) of the Corporations Act 2001 (Cth), the Court approves the Plaintiffs' entry, on behalf of Hastie Group Limited (in liquidation) and the companies listed in Schedule B, into a funding agreement with Claims Funding Australia Pty Ltd in the form of confidential exhibit CDC-3 to the affidavit of Craig David Crosbie affirmed on 24 October 2016 (varied so as to remove the Liquidators' Success Fee).
Pursuant to section 477(2B) of the Corporations Act 2001 (Cth), the Court approves the Plaintiffs' entry, on behalf of Hastie Group Limited (in liquidation) and the companies listed in Schedule B, into the deed of priority with ANZ Fiduciary Services Pty Ltd in the form of exhibit LDC-1 to the affidavit of Lachlan Davies Currie affirmed on 27 October 2016.
On the ground that it is necessary to prevent prejudice to the proper administration of justice, access to the following materials be restricted to the plaintiffs (and the following materials be marked "confidential" on the Court file) pending further or other order: (a) Confidential exhibits CDC-3 and CDC-4 to the affidavit of Craig David Crosbie affirmed on 24 October 2016 and confidential exhibit CDC-5 to the affidavit of Craig David Crosbie affirmed on 25 October 2016; (b) Tab 17 to exhibit CDC-2 to the affidavit of Craig David Crosbie affirmed on 24 October 2016 (being the letter dated 2 February 2015 from Maurice Blackburn Lawyers to Mr Craig Crosbie); and (c) Paragraphs 12-14 and exhibit NM-3 to the affidavit of Neil Mackay affirmed on 31 October 2016.
The costs of this proceeding be costs in the liquidation of Hastie Group Limited (in liquidation) and the companies listed in Schedule B. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. SCHEDULE B No Company Name ACN 2 Hastie Holdings Pty Limited (receivers & managers appointed) (in liq) 000 533 782 3 ACN 001 702 594 Pty Ltd (receivers & managers appointed) (in liq) (formerly Austral Refrigeration Pty Limited) 001 702 594 4 ACN 100 336 856 Pty Limited (in liq) (formerly Austral Refrigeration Holdings Pty Limited) 100 336 856 5 Border Stainless Steel Pty Limited (in liq) 130 035 399 6 Comcool Refrigeration Pty Limited (in liq) 084 470 913 7 ACN 112 124 919 Pty Ltd (in liq) (formerly D&E Air Conditioning Pty Limited) 112 124 919 8 ACN 008 700 178 Pty Limited (in liq) (formerly Direct Engineering Services Pty Limited) 008 700 178 9 Hastie Australia Pty Limited (in liq) 072 744 248 10 Hastie Finco Pty Limited (in liq) 131 210 583 11 Hastie Group Services Pty Limited (in liq) 098 837 088 12 Hastie Services Pty Limited (receivers & managers appointed) (in liq) 096 628125 13 ACN 121 276 168 Pty Limited (in liq) (formerly Heyday Group Pty Ltd) 121 276 168 14 M&H Air Conditioning Pty Limited (in liq) 115 325 089 15 Medical Gases Pty Limited (in liq) 121 276 079 16 Optimus Pty Limited (in liq) 001 847 785 17 Hastie International Pty Limited (in liq) 116 080 838 18 Hastie Engineering Pty Limited (in liq) 106 000 980 19 Lawrence Refrigeration Pty Limited (in liq) 005 912 176 20 Hastie Group Admin Services Pty Limited (in liq) 063 854 839 21 Techni Doors Pty Ltd (in liq) 002 757 735 22 Longley Mechanical Services Pty Limited (in liq) 003 186 249 23 QAL Refrigeration (WA) Pty Limited (in liq) 009 365 137 24 Norfolk Maintenance Holdings Pty Limited (in liq) 123 207 312 25 Hastie Air Conditioning (ACT) Pty Limited (in liq) 125 173 659 26 Sharp & Pendrey Pty Limited (in liq) 006 378 123 27 Watters Electrical (Australia) Pty Limited (in liq) 128 370 570 28 Cooke & Carrick Pty Limited (in liq) 126114556 29 ACN 118 354 331 Pty Limited (receivers & managers appointed) (in liq) (formerly Gordon Brothers Industries Pty Ltd) 118 354 331 30 GTS Plumbing (QLD) Pty Limited (in liq) 130 035 406 31 Hastie Air Conditioning Pty Limited (in liq) 122 613 647 32 ACN 129 953 733 Pty Limited (in liq) (formerly Beavis & Bartels Pty Ltd) 129 953 733 33 AFA Air Conditioning Pty Ltd (in liq) 132 180 584 34 Airducter Pty Limited (in liq) 130 035 380 35 D&E Mechanical Services Pty Ltd (in liq) 133 340 459 36 Hastie Drafting Group Pty Ltd (in liq) 063 854 759 37 Hastie India Pty Limited (in liq) 133 080 949 38 Independent Commissioning Agents Australia Pty Limited (in liq) 152 251 093 39 Nisbet & Durney Pty Ltd (in liq) 131 810 896 40 Rotary Australia Pty Ltd (in liq) 133 081 026 41 ACN 141 619 196 Pty Ltd (in liq) (formerly Direct Engineering 141 619 196 Marine & Offshore Services Pty Ltd) 42 Austral International Pty Ltd (receivers & managers appointed) (in liq) 080 469 165 43 A.C.N. 050 411 179 Pty Ltd (receivers & managers appointed) (in liq) (formerly Spectrum Fire & Security Pty Ltd) 050 411 179 44 Hastie Saudi Arabia Pty Limited (in liq) 133 090 490

Introduction 1 The plaintiffs (the Liquidators) are the joint and several liquidators of Hastie Group Limited (in liquidation) (Hastie) and the companies listed in Schedule B to the originating process by which this proceeding was commenced (the Subsidiaries). The Liquidators apply to the Court under s 477(2B) of the Corporations Act 2001 (Cth) for approval for the Liquidators to enter, on behalf of Hastie and the Subsidiaries (together, the Hastie Group): (a) a proposed funding agreement with Claims Funding Australia Pty Ltd (Claims Funding Australia); and (b) a deed of priority with ANZ Fiduciary Services Pty Limited (ANZ Fiduciary Services), which relates to the proposed funding agreement. 2 The application has been heard on an ex parte basis, as is conventional for such an application: see Jones, Saker, Weaver and Stewart (Liquidators), in the matter of Great Southern Limited (in liq) (Receivers and Managers Appointed) [2012] FCA 1072 at [50] per Gilmour J, citing Re The Bell Group Ltd (in liq); ex parte Woodings [2009] WASC 235 at [58] per Hasluck J. 3 The Liquidators rely on two affidavits of Craig David Crosbie, one of the Liquidators; an affidavit of a solicitor employed by Hall & Wilcox, the firm acting for the Liquidators; and an affidavit of Neil Mackay, the Chief Financial Officer of the incorporated legal practice, Maurice Blackburn Pty Ltd (Maurice Blackburn). 4 For the reasons that follow, approval should be granted as sought by the Liquidators.

Applicable principles 5 Section 477(2B) of the Corporations Act provides as follows: (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. 6 The principles applicable to an application under s 477(2B) were recently summarised by Edelman J in Hughes, in the matter of Sales Express Pty Ltd (in Liq) [2016] FCA 423 at [20]: The approach to be taken to s 477(2B) is well settled. The principles, based on the authorities cited at the conclusion of this paragraph, concerning the grant or refusal of approval by the Court can be summarised as follows: (1) the role of the Court is to grant or refuse approval. It is not to develop an alternative proposal; (2) the notion of necessity in the power of the liquidator to do "things as are necessary" has a broad meaning and empowers a liquidator to do anything expedient in relation to the beneficial completion of the winding-up of the affairs of the corporation and the distribution of its assets; (3) however, notwithstanding this breadth, the Court must be satisfied that there is a good and solid reason for concluding that the processes of winding up and distribution would be enhanced by the funding agreement, compared with the ordinary deployment of surplus funds. The enhancement must be demonstrated by some informed and independent assessment of the separate and selfish interests of the funding company; (4) although the Court must be satisfied that it is appropriate for the exercise of power under s 477(2B), the Court will not generally review a liquidator's commercial judgment or second guess its decision; (5) circumstances in which the Court will scrutinise a liquidator's decision closely include where there appears to be a lack of good faith, an error of law or principle, or a real or substantial ground for doubting the prudence of the liquidator's conduct; (6) the Court will rarely approve an agreement which has important terms that are unclear; (7) in considering whether the Court's power under s 477(2B) should be exercised, any relevant matter can be considered. Matters that are commonly relevant include: (a) the manner in which the funding or indemnity will be provided under the agreement; (b) the extent to which the liquidator has considered other funding options; (c) the interests of creditors other than the proposed or potential respondents and the extent to which the liquidator has consulted them; (d) the liquidator's prospects of success in the litigation although this factor will rarely be able to be assessed at anything other than a high level of abstraction; (e) possible oppression in bringing the proceedings; (f) the nature and complexity of the cause of action; (g) the risks involved in the claim (including the amount of costs likely to be incurred in the proposed litigation, the extent to which the funder is to contribute to those costs, and the extent to which the funder is to contribute to the costs of the defendant in the event that the action is not successful, or towards any order for security for costs); (h) any particular premium or benefit which is promised in consideration of the provision of the funding or indemnity including whether that benefit is proportionate to the risk undertaken by the funder; (i) whether the liquidator is subject to any control over the conduct of the litigation, other than the usual obligation to keep the funder fully informed of all matters relating to the action; and (j) whether the agreement provides for a clear mechanism for resolving any dispute between the funder and the liquidator about the compromise of the litigation which is funded, see Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher [2015] NSWCA 85; (2015) 295 FLR 13; Sheahan, in the matter of BCI Finances Pty Ltd (in liq) [2015] FCA 121; Re McGrath (in their capacity as liquidators of HIH Insurance Ltd) [2010] NSWSC 404; (2010) 266 ALR 642; Re Ascot Vale Self-Storage Centre Pty Ltd (in liquidation) [2014] VSC 75; Re ACN 076 673 875 Ltd [2002] NSWSC 578. 7 Similar principles were applied by Logan J in Van der Velde (Liquidators), in the matter of Launcells Feedlot Systems Pty Ltd (in liq) [2014] FCA 1309 at [13]-[15], citing Jones, Saker, Weaver and Stewart (Liquidators), in the matter of Great Southern Limited (in liq) (Receivers and Managers Appointed) [2012] FCA 1072 at [29], [30] and [32].

Background facts 8 On 28 May 2012, the Liquidators were appointed joint and several voluntary administrators of the Hastie Group. 9 Hastie was a public company and a disclosing entity listed on the Australian Securities Exchange, and is the ultimate holding company of the Subsidiaries. 10 The Hastie Group: (a) carried on the business of providing mechanical, electrical and plumbing services, including in Australia, New Zealand, the United Arab Emirates, Saudi Arabia, Qatar, the United Kingdom, the Republic of Ireland, Kazakhstan, Gibraltar and the Caribbean; and (b) prior to the Liquidators' appointment, had approximately 7,000 employees, an annual turnover in excess of $1.8 billion, construction work in progress of approximately $2.9 billion over 1,000 sites, and assets with a reported book value of approximately $1 billion. 11 On 28 May 2012, Peter Anderson, Joseph Hayes, Jason Preston and Matthew Caddy (the Receivers) were appointed as receivers and managers of 11 subsidiaries of Hastie. The Receivers remain appointed to five of the Subsidiaries. 12 On 19 June 2012, this Court made orders extending the convening period for the second meeting of creditors of the Hastie Group for up to 150 business days, commencing 25 June 2012. 13 On 16 August 2012, this Court made orders that: (a) two of the Subsidiaries (Hastie International Pty Ltd and Hastie Saudi Arabia Pty Ltd) be wound up; and (b) the Liquidators be appointed joint and several liquidators of these companies. 14 At a second meeting of creditors of the Hastie Group held on 30 and 31 January 2013, the creditors resolved that the Hastie Group be wound up (excluding Hastie International Pty Ltd and Hastie Saudi Arabia Pty Ltd, which had already been wound up). The Administrators subsequently became the Liquidators of the Hastie Group. 15 In a report dated 21 January 2013 of the then administrators (now the Liquidators), it was estimated that as at the date of the administrators' appointment, the Hastie Group had creditors in the sum of approximately $966.9 million, comprising: (a) secured creditors of approximately $529.9 million; (b) priority creditors of approximately $47 million; and (c) unsecured creditors of approximately $390 million. 16 As at 24 October 2016, the date on which Mr Crosbie swore his first affidavit, the position was as follows. Based on present realisable values of all identified assets of the Hastie Group, excluding potential recoveries as a result of the "Claims" (as defined in the proposed funding agreement, discussed later in these reasons) and the proceedings referred to in the proposed funding agreement, the Liquidators: (a) believed that the secured creditors will suffer a total shortfall on their debts of at least $100 million; (b) estimated that priority creditors would suffer a shortfall on their debts of approximately $44 million; and (c) estimated that ordinary unsecured creditors would suffer a shortfall on their debts of approximately $390 million. 17 The following entities (collectively, the Banking Syndicate) are the secured creditors of 41 companies in the Hastie Group: (a) Australia and New Zealand Banking Group Ltd; (b) National Australia Bank Ltd; (c) Commonwealth Bank of Australia Ltd; (d) HSBC Bank Australia Ltd; (e) Hong Kong and Shanghai Banking Corporation Ltd; (f) Ulster Bank Ireland Ltd; (g) BOS International (Australia) Corporation Limited; (h) Bank of Scotland plc; and (i) Westpac Banking Corporation. 18 The Banking Syndicate is represented by a security trustee, ANZ Fiduciary Services. 19 In the course of their appointment as administrators and then liquidators, the Liquidators have conducted a range of investigations into the complex business affairs and collapse of the Hastie Group including the conduct of its directors and officers and its auditors, Deloitte Touche Tohmatsu (Deloitte). 20 The report prepared by the then administrators dated 21 January 2013 includes details of the investigations that had been carried out by that date, including summaries of preliminary findings in relation to potential breaches by the directors and officers and in relation to the conduct of Deloitte. 21 After submitting that report, the Liquidators continued to take steps to identify available assets of the Hastie Group, including potential causes of action available to Hastie or the Subsidiaries in relation to the conduct of the directors and officers and Deloitte. 22 In particular, the Liquidators have: (a) investigated the potential for successful claims to be made against former directors and officers in the Hastie Group, and against Deloitte. This included public examinations which were heard in this Court in Melbourne in 2015 (Public Examinations) (these examinations also had the purpose of investigating whether there were other potential commercial recoveries available to the Liquidators); (b) considered how claims might be framed; and (c) commenced proceedings against the directors and officers in the Hastie Group and Deloitte. 23 The Liquidators have also recovered funds from debtors, bank guarantees, the sale of plant and equipment and income tax refunds, as well as attempted recoveries which are ongoing (for example, claims against large construction companies which may have wrongfully set-off sums from amounts owed to the Hastie Group). 24 The investigations in relation to claims against the former directors and officers and Deloitte have been difficult and time-consuming, due in part to the decentralised nature of the Hastie Group's operations, and the extremely large volume of electronic and paper documents involved. 25 Until early 2015, substantive investigations were limited by: (a) the sheer volume of books and records (including substantial electronic databases) in the possession of the Liquidators; (b) the inability or refusal of key Hastie staff to assist with investigations without a process compelling them to do so; (c) the Hastie Group's deficient, unreliable and potentially manipulated financial records; (d) limited funds and resources available to reconstruct financial records, conduct investigations and public examinations; and (e) attempts to secure litigation funding which did not come to fruition. 26 Between about early February 2015 and December 2015, the Liquidators took the following investigatory steps (among other steps) in relation to the claims referred to in the proposed funding agreement (although these steps were also taken for the purpose of identifying any other commercial recoveries): (a) issued summonses for production of documents and to attend the Public Examinations to: (i) nine of the relevant partners and employees of Deloitte; and (ii) 22 of the former directors and officers of the Hastie Group; (b) reviewed in excess of 85,000 electronic documents from Hastie Group servers; (c) reviewed hardcopy documents contained in more than 100 archive boxes of Hastie Group books and records; (d) reviewed in excess of 15,000 documents produced in response to the summonses; (e) conducted 18 days of examinations of the former directors and officers of the Hastie Group during the period 28 May 2015 to 16 September 2015; (f) conducted three days of examinations of six of the partners and employees of Deloitte on 27, 28 and 29 October 2015; and (g) had meetings with various former Hastie Group personnel. 27 In April 2015, the Liquidators instructed Hall & Wilcox to engage a qualified audit expert, Chris Westworth, to review Deloitte's audit work papers and assist the Liquidators and their legal advisers in relation to the Public Examinations and the claims and potential claims. 28 The Liquidators have commenced four proceedings in the name of Hastie and some of the Subsidiaries in the Supreme Court of New South Wales. The proceedings are as follows: (a) a proceeding against Deloitte in relation to its audit of the Hastie Group in the 2008 financial year, proceeding no. 2014/247471 (2008 Audit Proceeding); (b) a proceeding against Deloitte in relation to its audit of the Hastie Group in the 2009 financial year, proceeding no. 2015/245237 (2009 Audit Proceeding); (c) a proceeding against Deloitte in relation to its audit of the Hastie Group in the 2010 financial year, proceeding no. 2016/253555 (2010 Audit Proceeding); (collectively, the Audit Proceedings); and (d) a proceeding against eleven former directors and officers of the Hastie Group, proceeding no. 2015/378222 (D&O Proceeding); (collectively, the Proceedings). 29 These proceedings were commenced on various dates from 22 August 2014 to 23 August 2016 in order to prevent claims from becoming statute-barred. 30 The Liquidators intend to commence (if funding is approved and Claims Funding Australia consents) additional proceedings against Deloitte in relation to the audit of the financial statements for the 2011 financial year, or intend to apply to amend the 2010 Audit Proceeding to include the 2011 audit. 31 Aside from the Proceedings and the additional claim referred to in the preceding paragraph, the Liquidators have not identified any further claims against the former directors and officers of the Hastie Group, or against Deloitte (whether in its capacity as auditor or otherwise), that they seek to pursue. 32 The defendants to the Proceedings have recently been served. The defendants have not yet been required to file and serve defences. 33 During 2016, the Liquidators, Hall & Wilcox and counsel for the Liquidators have been engaged in: (a) drawing the statement of claim against the directors and officers of the Hastie Group; (b) drawing amended statements of claim against Deloitte in the Audit Proceedings; (c) further particularising the claims in the Proceedings; and (d) responding to a number of notices to produce issued by Deloitte, engaging in a number of interlocutory contests, and contesting applications by Deloitte to set aside extension orders made in the 2008 and 2009 Audit Proceedings. 34 The parties are engaged in certain interlocutory steps in connection with the Proceedings, including: (a) the Plaintiffs are to provide an initial tranche of security for costs in the D&O Proceeding within 30 days of 30 September 2016 in the amount of $2,500,000 (which is to be distributed equally between four groups of the defendants); (b) the Plaintiffs are to provide an initial tranche of security for costs in the 2010 Audit Proceeding within 30 days of 7 October 2016 in the amount of $500,000; (c) the D&O Proceeding and the 2010 Audit Proceeding return to the Supreme Court of New South Wales on 4 November 2016 for directions; (d) Deloitte has applied to set aside orders that were made by the Supreme Court of New South Wales extending the time for service of the 2008 Audit Proceeding and the 2009 Audit Proceeding. The hearing of the applications is fixed for 10 and 11 November 2016; and (e) there have been a number of notices to produce issued by Deloitte, substantial document production required by the Hastie Group, notices of motion and hearings (including an appeal that is being conducted) on issues about legal privilege. 35 The security for costs orders were made by consent. 36 Mr Crosbie states in his first affidavit that, as a result of the various investigations conducted to date, including the Public Examinations, the liquidators are of the view that the claims against Deloitte as set out in the Audit Proceeding should be conducted for the benefit of creditors. He also states as follows: 72. While further work needs to be undertaken (should funding be approved) to further particularise the claims and quantify damages, the Liquidators estimate the total quantum of the claims against Deloitte to be approximately the same as the quantum of claims against the directors and officers in the D&O Proceeding, which is $177 million. 73. This figure does not take into account any impact of proportionate liability and any limitation of liability that may apply (whether pursuant to Deloitte's contract with Hastie or at law) as those matters are complex and the outcome dependent on numerous factors. 74. In relation to whether Deloitte would be able to meet a judgment or settle the Proceedings, Deloitte is a well-known worldwide accounting firm of substance. 75. In addition, as part of the examination process, the Liquidators' legal representatives were able to inspect Deloitte's insurance coverage in relation to the Claims [as defined in the proposed funding agreement] (including the Audit Proceedings). 37 Mr Crosbie also states in his first affidavit that, as a result of the various investigations conducted to date, including the Public Examinations, the Liquidators are of the view that the claims against the directors and officers in the D&O Proceeding should be conducted for the benefit of creditors. He also states: 77. The Liquidators have identified the quantum of the claims against the directors and officers at $177 million. 78. Hastie has two directors' and officers' insurance policies which respond to the claims. The limit of liability set out in the policies is inclusive of defence costs. 38 Mr Crosbie states in his affidavit that the Banking Syndicate is the only creditor likely to benefit from the successful prosecution or settlement of the Proceedings (and other claims referred to in the proposed funding agreement). He states: 31. The Banking Syndicate is the only creditor likely to benefit from a successful prosecution or settlement of the Claims and proceedings referred to in the Funding Agreement (and further below in this Affidavit). This is because: (a) I believe it has at least a $100 million shortfall in the security interests; (b) I believe that each of the Claims against Deloitte and the former directors and officers of the Hastie Group referred to in the Funding Agreement are non-circulating assets of the Hastie Group, and hence presently subject to the security interests of the Banking syndicate; and (c) I believe it is unlikely that an amount exceeding the shortfall referred to above would be recovered by the Liquidators. 39 In relation to the Hastie Group's financial position, and its ability to fund the Proceedings or the Claims (as defined in the proposed funding agreement), Mr Crosbie states in his first affidavit: 80. As referred to earlier above in this Affidavit, at the time of liquidation the Hastie Group owed a significant amount of money to its creditors (approximately $966.9 million). 81. The vast majority of Hastie Group's assets were subject to the Banking Syndicate's security interests, and were realised by the Receivers (and hence unavailable to the Liquidators). To date, the Liquidators have not received any payments from the Receivers and, as mentioned above, I believe that the Banking Syndicate will suffer a shortfall on its debt exceeding $100 million. 82. The Liquidators currently control Hastie Group funds of approximately $2 million. All funds under the control of the Liquidators are subject to the Banking Syndicate's circulating security interests, and there are priority creditors. 83. The Liquidators are not able to fund the Proceedings or the Claims from the resources of the Hastie Group itself. 40 Mr Crosbie details steps that have been taken by the Liquidators to secure funding for the Proceedings. It is unnecessary to set out the details of those steps. It is clear that a number of alternative funding avenues have been explored.

Proposed funding agreement 41 Exhibited as a confidential exhibit to Mr Crosbie's first affidavit is the proposed funding agreement between the Liquidators, Hastie, the Subsidiaries and Claims Funding Australia. The funding agreement has been executed by Claims Funding Australia but not yet by the Liquidators. 42 Claims Funding Australia and the Liquidators have agreed in principle (subject to Court approval) to vary the terms of the funding agreement to remove the success fee for the Liquidators. The removal of the success fee was a requirement of the secured creditors. 43 It is a condition precedent of the funding agreement that the secured creditors agree to give priority, in relation to any proceeds of the litigation, to Claims Funding Australia for payment of costs and commission. 44 The Banking Syndicate has agreed, in principle, to the arrangement set out in the funding agreement (subject to the removal of the success fee) and has agreed to enter into a deed of priority with the Liquidators and the Hastie Group in relation to the funding agreement. The proposed deed of priority is exhibited to the affidavit of the solicitor from Hall & Wilcox. It has been executed by ANZ Fiduciary Services but not yet by the Liquidators. The terms are agreeable to the Liquidators. 45 In relation to the proposed funding agreement, I note the following matters (without disclosing confidential material): (a) the recitals are to the effect that the parties have agreed that the funder (Claims Funding Australia) will provide financial assistance to the Hastie Entities (as defined) in connection with the prosecution of the Claims; (b) "Claims" is defined as meaning "the claims the Hastie Entities and/or the Liquidators have against some or all of the Respondents"; (c) "Respondents" is defined as meaning: (a) Trevor Bourne, David Harris, Christopher Woodward, Phillip Anderson, John Gaskell, Harry Boon, David Martin, Anne Griegg, David Hammond, Robert Galvin and Joseph Farrugia in Supreme Court of New South Wales proceeding number 378222 of 2015; and (b) Bruce Ivan Moore and the partners of Deloitte Touche Tohmatsu in Supreme Court of New South Wales proceeding numbers 247471 of 2014 and 245237 of 2015, and any Other Parties joined as defendant(s) in the Proceedings subsequent to the Date of Commencement. (d) "Proceedings" is defined as meaning "any legal proceeding to prosecute the Claims, including the proceedings in the Supreme Court of New South Wales numbered 378222 of 2015, 247471 of 2014, 245237 of 2015 and 253555 of 2016"; (e) provision is made for Claims Funding Australia to fund the costs of the Proceedings and to receive a commission from any proceeds; (f) Claims Funding Australia agrees to pay adverse costs orders in the Proceedings; (g) Claims Funding Australia agrees to provide, or procure a third party to provide, security for costs in the Proceedings; (h) there are several conditions precedent to the Agreement, including Court approval of the funding agreement and that the funder procure Maurice Blackburn to execute a guarantee of its obligation to pay any adverse costs order. 46 Pursuant to the retainer between the Liquidators and Hall & Wilcox, Hall & Wilcox have agreed to defer 40% of their fees, to be paid from the proceeds of the litigation (if any) along with a 25% uplift on the amount of the unfunded legal fees (see s 182 of the Legal Profession Uniform Law). 47 Mr Crosbie expresses the following views in relation to the proposed funding agreement and costs arrangement in his first affidavit: 105. The terms of the Funding Agreement represent in my assessment a commercial approach to funding the Proceedings for the likely benefit of the secured creditors. The range of the commission [Claims Funding Australia] might receive is consistent with industry rates in similar arrangements that I have seen. 106. [Claims Funding Australia] is not in my view being given a benefit that is disproportionate to the risk [Claims Funding Australia] is accepting by entering into the agreement; which is the risk of paying significant amounts for costs to conduct the Proceedings, significant amounts of security for costs, and significant adverse costs orders, which may not be recoverable. 107. Similarly, the uplift for Hall & Wilcox is in [sic] not in my view a benefit that is disproportionate to the risk the firm accepts in allowing 40% of their fees to be at risk. 48 Mr Mackay's evidence supports the proposition that Claims Funding Australia will have the capacity to meet its funding obligations as set out in the proposed funding agreement, including its obligations to pay any adverse costs order, because Maurice Blackburn will guarantee Claims Funding Australia in relation to all funding obligations. 49 The evidence also includes a confidential opinion of senior and junior counsel on the prospects of success and recovery in relation to the Proceedings.

Disposition of the applications 50 For the following reasons, approval will be given to the Liquidators to enter into the proposed funding agreement and proposed deed of priority. 51 First, the opinion of the Liquidators is that the Proceedings "should be conducted for the benefit of creditors". I do not have any reason to question the opinion that the Liquidators have formed. Indeed, the facts and matters referred to above support the reasonableness of the Liquidators' opinion. 52 Secondly, unless the proposed funding agreement is entered into, the Liquidators are unlikely to be able to fund the Proceedings. They cannot fund them from the resources of the Hastie Group itself. They have pursued other avenues for funding but to no avail. 53 Thirdly, the secured creditors, which for practical purposes are the only creditors affected by the proposed funding agreement, have agreed to the proposed agreement being entered into (subject to removal of the success fee component). They have, therefore, agreed to the terms of funding, including the commission that the funder will derive if the proceedings are successful, either at trial or by way of earlier settlement. 54 Fourthly, the proposed funding agreement contains terms which, in the Liquidators' opinion, represent "a commercial approach to funding the Proceedings" and the range of the commission "is consistent with industry rates in similar arrangements". The Liquidators consider that the benefits to the funder are not disproportionate to the risks it is undertaking. I accept these opinions of the Liquidators. 55 Fifthly, adequate arrangements are made for the funder to be liable for any adverse costs orders and in relation to security for costs. 56 In these circumstances, I am satisfied that there is a good and solid reason for concluding that the processes of winding-up and distribution would be enhanced by the funding agreement and associated deed of priority being entered into by the Liquidators. I will therefore make orders substantially in the terms proposed by the Liquidators. I certify that the preceding fifty-six (56) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moshinsky.

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