Deputy Commissioner of Taxation, in the matter of ACN 154 520 199 Pty Ltd (in liq) v ACN 154 520 199 Pty Ltd

Federal Court of Australia|2019-11-11|Before: Gleeson J

Pursuant to s 477(2B) of the Corporations Act 2001 (Cth), the first plaintiff's entry into the following documents be approved nunc pro tunc: (a) the deed of indemnity dated 28 June 2019, a copy of which is at page 1 of confidential exhibit SDP-2; and (b) the retainer agreement dated 5 August 2019, a copy of which is at page 253 of confidential exhibit SDP-2.
The interlocutory application filed by Tom Michael Oates on 14 October 2019 be dismissed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

GLEESON J: 1 The first plaintiff (liquidator) seeks approval under s 477(2B) of the Corporations Act 2001 (Cth) (Act) of two agreements, both entered into by the liquidator on behalf of the second plaintiff (Matrix). The agreements are: (1) a deed of indemnity (funding deed) that would enable the liquidator to obtain funds to bring proceedings on behalf of Matrix by which the liquidator would seek to recover payments totalling $17,554,113 made to Matrix by the Western Australian Government in 2001, and a substantial sum on account of interest (proposed proceeding); and (2) a retainer with Henry James Lawyers for the conduct of the proposed proceeding (retainer). 2 Court approval is required pursuant to s 477(2B) because both agreements are for a period of more than three months' duration and because neither agreement has been approved by a resolution of creditors. 3 In support of their application, the plaintiffs relied on two affidavits sworn by the liquidator on 27 August 2019. As explained at the end of these reasons, an order was made under s 37AF of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act) to protect confidential material contained in one of the two affidavits. 4 One of Matrix's two creditors, Tom Oates, was granted leave pursuant to r 2.13 of the Federal Court (Corporations) Rules 2000 (Cth) (Corporations Rules) to be heard in the proceeding without becoming a party to the proceeding. That leave was granted in the context of a long standing dispute between the liquidator and Mr Oates about Mr Oates' entitlements under a funding agreement entered into between the liquidator and Mr Oates in about September 2011 (Oates funding agreement). 5 Among other things, the liquidator contends and Mr Oates disputes that the Oates funding agreement was terminated in about 2013. The liquidator argues that, as a result of the termination, Mr Oates has no relevant subsisting rights under the Oates funding agreement. 6 In February 2018, I refused Mr Oates' application for leave to proceed on claims which included claims for relief based on the alleged wrongful termination of the Oates funding agreement: Matrix Group Ltd (in liq) (Trustee) v Oates, in the matter of Matrix Group Ltd (in liq) (Trustee) (No 4) [2018] FCA 22. At that time, Mr Oates had argued that the liquidator would be unlikely to secure funding for the proposed proceeding unless and until the status of the Oates funding agreement was determined. At [94], I concluded that, with one proviso that is not presently relevant, there was no utility in determining whether the Oates funding agreement remains on foot and is binding on the parties. 7 In brief, Mr Oates now contends that the funding deed should not be approved unless it is amended in certain respects, and unless he is afforded the "protection" in the nature of relief sought in his interlocutory application filed on 14 October 2019 (Mr Oates' interlocutory application). The relief sought by Mr Oates is in the following terms (including the italicised words set out in brackets): Application / Request Pursuant to Section 90-10 and 90-20 of Schedule 2 of the Corporations Act 2001 (Cth), as a creditor, funder and assignee, Mr Oates applies for the Court to inquire into the following aspect of the external administration of Matrix, namely the rights, interests and entitlements of Mr Oates under the Oates funding agreement, including as assignee of part of the recoveries from the proposed proceedings, in the context of the Plaintiffs' application under s477(2B) for approval of a new funding agreement. Alternatively, Mr Oates requests that the Court, on its own initiative, during these proceedings before the Court, inquire into the above pursuant to section 90-5 of Schedule 2 of the Corporations Act 2001 (Cth). Sought orders Mr Oates requests that the Court makes the following orders pursuant to Section 90-15(1) of Schedule 2 of the Corporations Act 2001 (Cth) Settlement of the proceedings 1. [In recognition of the fact that Oates has a proprietary interest in any recoveries,] The Plaintiffs shall not settle the proceedings without first consulting with Mr Oates and, in the event of a difference of opinion, resolving that difference of opinion consistent with clauses 8.6 to 8.9 of the Oates funding agreement, assuming for this purpose that that agreement is binding on the Plaintiffs and/or clause 9.3 of the [funding deed], as if Mr Oates had the same rights as [the funder] under that agreement [assuming the Court approves the [funding deed]. Distribution of recoveries 2. [In recognition of the fact that Oates has a proprietary interest in any recoveries,] Where any Resolution Sum, other recoveries or any property whatsoever (including trust property) is recovered, realized or preserved in connection with the proposed proceedings or the [funding deed] [assuming the Court approves the [funding deed]], the Plaintiffs shall immediately notify Mr Oates of the nature and value or amount of the Resolution Sum, recoveries or other property. 3. [In recognition of the fact that Oates has a proprietary interest in any recoveries,] The Plaintiffs shall not distribute, pay, direct or otherwise agree to any recoveries being distributed or paid (ahead of Mr Oates) unless and until Mr Oates agrees or the Court otherwise orders, subject to the following. 4. [Assuming the Court approves the [funding deed]] Despite the above order, the Plaintiffs may enter into the [funding deed] but [consistent with the carve out of the rights of Mr Oates in that agreement, and the findings of Justice Gleeson in NSD1507/2016], the Plaintiffs shall not make or direct any distributions or payments (including to [the funder]) ahead of Mr Oates unless and until Mr Oates agrees or the Court otherwise orders. The Lawyers under the Lawyers Terms 5. The Plaintiffs undertake to forthwith instruct Mr Faraday and Mr Linden of Williams Henry Lawyers to act consistently with these orders and the terms of the Oates funding agreement (and agree not to instruct them to act in any way that is inconsistent with these orders and the terms of the Oates funding agreement), subject to the terms of the [funding deed] [assuming the Court approves the [funding deed]]. 8 In particular, Mr Oates submitted that the funding deed is relevantly similar to the funding agreement that was the subject of Matrix Group Ltd (in liq) (Trustee) v Oates, in the matter of Matrix Group Ltd (in liq) (Trustee) [2016] FCA 1487 (2016 judgment). Mr Oates argued that the Court should not approve the funding deed, having previously found that a relevantly similar funding agreement breached the Oates funding agreement. 9 Mr Oates also contends that it is now timely to "enquire into the likelihood of the effectiveness of" the liquidator's alleged termination of the Oates funding agreement, so that the Court can make orders to protect Mr Oates' interests in the light of that inquiry. 10 Mr Oates relied on an affidavit made on 16 October 2019. 11 The plaintiffs submitted that there is a degree of urgency in commencing the proposed proceeding, primarily because the limitation periods for the relevant causes of action expire around February 2020. In addition, there is evidence that one of the proposed defendants has plans to move to the United Kingdom. 12 The liquidator's opinion, which I accept is reasonably held, is that the funding deed represents the last opportunity to pursue the proposed proceeding with an indemnity and protection in place in respect of adverse costs. Without the Court's approval of the funding deed, Matrix will not be able to commence the proposed proceeding and there will be no prospect of any return to Matrix's creditors. Mr Oates did not dispute these matters.

Background facts 13 Matrix is trustee for the Matrix Finance Group Unit Trust. 14 The liquidator was appointed liquidator of Matrix by this Court on 8 February 2008, on the application of Mr Oates. The winding up was made on the basis of a judgment debt against Matrix in Mr Oates' favour in the sum of $200,748.47. 15 As noted above, Mr Oates is one of Matrix's two creditors. The other creditor is the Australian Taxation Office (ATO), in an amount of $15,683,622. 16 Pursuant to cl 19.2 of the deed establishing the trust, the trustee covenants to procure its retirement as trustee in the event that it is placed into liquidation. Matrix has not retired as trustee. However, no one has sought to remove Matrix as trustee or indicated a willingness to act as trustee instead of Matrix. The liquidator submitted that clauses such as cl 19.2 do not result in immediate removal of the trustee upon liquidation nor do they make the trustee a bare trustee, citing Re Metrobore Australia Pty Ltd [2014] VSC 247 at [10]. Further, the liquidator observed that a liquidator of a company that is the trustee of a trust has power to administer that trust: Re Standsfield DIY Wealth Pty Ltd (in liquidation) [2014] NSWSC 14; (2014) 103 ACSR 401 at [4]-[5]. 17 Matrix has no assets other than the causes of action that would be the subject of the proposed proceeding. The creditors will not receive any dividend if the proposed proceeding is not pursued successfully. 18 The Oates funding agreement provided for funding to the liquidator for conducting examinations under s 596A and s 596B of the Act. It is not disputed that the funding cap in the Oates funding agreement was reached in defending applications to set aside summonses for examinations. Mr Oates has alleged that he provided funding of $379,000 to the liquidator, being an amount which exceeded by $79,000 the funding promised under the agreement. Ultimately, the examinations proceeded unfunded. 19 Mr Oates contends that he has valuable rights under the Oates funding agreement, which fall into the following categories: (1) a right to ensure that any funding agreement between the liquidator and another funder contains terms reflecting and not inconsistent with Mr Oates' entitlements under the Oates funding agreement; (2) rights to be consulted in connection with any proposed settlement of the proposed proceeding; (3) a proprietary right in the "Resolution Sum" being, broadly, any recoveries pursuant to the proposed proceeding; and (4) a right to payment out of the proceeds of the proposed proceedings, if prosecuted successfully. 20 It is necessary to set out in detail only the provisions concerning category (2) above. The relevant clauses of the Oates funding agreement are cll 8.6-8.9, which are as follows: 8.6 In recognition of the fact that Oates has an interest in the Resolution Sum, if the Insolvency Practitioner: (a) wants to settle the Claims or the Proceedings for less than Oates considers appropriate; or (b) does not want to settle the Claims or the Proceedings when Oates considers it appropriate for the Insolvency Practitioner to do so, then Oates and the Insolvency Practitioner must seek to resolve their difference of opinion by referring it to senior counsel for advice on whether, in senior counsel's opinion, settlement of the Claims or the Proceedings on the terms and in the circumstances identified by either Oates or the Insolvency Practitioner or both, is reasonable in all of the circumstances. 8.7 The Insolvency Practitioner and Oates will appoint senior counsel in New South Wales for that purpose. If Oates and the Insolvency Practitioner are unable to agree on the selection of a senior counsel, then the senior counsel will be appointed by the President of the New South Wales Bar Association for that purpose. 8.8 If the difference of opinion referred to in clause 8.7 is not resolved within 7 days of receipt of senior counsel's opinion, then the Insolvency Practitioner, after having taken into account senior counsel's opinion will retain the unfetter power to settle, or not settle, the Claim and the Proceedings. 8.9 Oates will in any event pay the costs of senior counsel providing the opinion referred to in Clause 8.7. 21 In about August 2016, after exploring a wide variety of options for funding the proposed proceeding, the liquidator entered into an agreement with Harbour Fund III, LP, to fund the proposed proceeding. In the 2016 judgment, I declined to give directions to the liquidator under s 479(3) of the Act in connection with that funding agreement. As it was a condition precedent to the funding agreement that the liquidator obtain a direction of the kind sought, the funding agreement did not proceed. 22 On 28 June 2019, the liquidator entered into the funding deed. Confidentiality is claimed over the identity of the funder. If approved, the funding deed would provide for the indemnification of certain costs and expenses of the liquidator in relation to the proposed proceeding.

Funding deed 23 The key features of the funding deed are as follows: (1) The funder agrees to provide an indemnity to the liquidator in relation to legal costs and expenses and remuneration and fees in connection with the proposed proceeding up to a substantial cap. The obligation to indemnify does not extend to any appeal. (2) The obligation of the funder to provide an indemnity in respect of the liquidator's remuneration and expenses in connection with the proposed proceeding is subject to the operation of Div 60 of Sch 2 to the Act. In summary, no amounts are payable unless remuneration has been determined pursuant to that Division or, if no determination has been made, the amount in question is reasonable and does not exceed the maximum default amount under s 60-5(2) of the Act. (3) A table (annexed to the agreement) breaks down the estimated legal costs of the proposed proceeding and estimated remuneration and expenses of the liquidator in connection with the proposed proceeding. Although it is not entirely clear, by cl 4.2, the liquidator appears to acknowledge that he is satisfied that the indemnities provided for in the deed are sufficient in order to achieve the indemnity purpose. (4) The funder agrees to indemnify the liquidator in a substantial amount in respect of adverse costs orders. The funder is not obliged to provide any sum by way of security for costs, but provision is made in cl 5.2 for the funding deed to be tendered (and hence for this indemnity to be relied on) in resisting any application for security for costs. (5) The liquidator is obliged to repay the funder amounts advanced pursuant to the indemnity in the circumstances set out in cl 10. By cl 10.2, the liquidator's obligation to reimburse the funder is, in substance, only an obligation to reimburse to the extent that the liquidator recovers sufficient funds in the proposed proceeding to do so. (6) There is no entitlement to the payment of a premium upon successful resolution of the proposed proceeding. (7) By cl 11.2, the funder has a substantial (but not unlimited) entitlement to terminate the funding deed at any time. In this event the liquidator is entitled to discontinue the proposed proceeding on the basis that the funder will be liable to indemnify the liquidator for adverse costs up to the limit of indemnity. (8) Clause 10.6 of the funding deed addresses the Oates funding agreement as follows: 10.6 Oates Funding Agreement For the avoidance of any doubt, nothing in this Agreement and clauses 10.1 - 10.4 in particular is intended to be inconsistent with or prevail over the rights of Oates under the Oates Funding Agreement (if any such rights exist, which is not admitted by the Liquidator). (9) Clause 14.3 contains an acknowledgement by the funder that the terms of the funding deed are not intended in any way to fetter the proper exercise of the liquidator's discretion and that any terms that purport to do so are not effective for that purpose. (10) Clause 3.1 deals with the requirement for Court approval. Since the execution of the funding deed, that clause has been amended to delete the words "and perform" by a deed of variation. The effect is that cl 3.1 now provides that, with the exception of specified provisions, the deed has no effect until the liquidator obtains Court approval to enter into the deed. (11) By cl 9.1 and cl 9.2, the liquidator is required to ascertain the views of the funder in relation to any settlement or agreement before acceptance, and to give those views "careful consideration". 24 The liquidator's opinion is that it is clearly in the best interests of the creditors of Matrix that the funding deed is approved principally because, unless that occurs, Matrix will not be able to commence the proposed proceeding and, consequently, the creditors will not receive any dividend from the liquidation.

Retainer 25 The retainer in evidence is unsigned. Mr Pascoe's evidence is that he entered into the agreement on behalf of Matrix and in his capacity as liquidator. 26 Mr Pascoe's evidence is that he is satisfied with the provisions of the retainer and is of the view that the rates charged are within the range of typical fees charged by law firms with respect to matters similar to the proposed proceeding. The retainer contains a table breaking down the estimated legal costs and expenses and liquidator remuneration and expenses, in the same terms as the estimate annexed to the funding deed.

Undertakings 27 At the hearing on 23 October 2019, the liquidator proffered an undertaking to the Court that he will not distribute funds recovered from any of the defendants in the proposed proceeding, received as a consequence of the proposed proceeding, without giving Mr Oates 28 days' notice. 28 On 30 October 2019, the matter was re-listed on the liquidator's application. The liquidator proffered the following further undertaking to the Court: 1. I will not distribute any proceeds from the Proceedings (as defined in the Deed of Indemnity the subject of this application) otherwise than in accordance with a Court order or the agreement of both of the following parties: a. The Australian Taxation Office or its authorised representatives; and b. Tom Michael Oates. 29 Additionally, the liquidator proffered an undertaking to Mr Oates that he will notify Mr Oates as soon as is reasonably practicable in the relevant circumstances if: (i) I receive an offer of settlement that is, in my opinion, capable of acceptance from one or more of the defendants in relation to the Proposed Proceedings; or (ii) I intend to make an offer of settlement that is, in my opinion, capable of acceptance to one or more of the defendants in relation to the Proposed Proceedings. 30 Mr Scruby SC, counsel for the plaintiffs, submitted that this undertaking will give Mr Oates the benefit of his rights under cll 8.6-8.9 of the Oates funding agreement, if that agreement is on foot.

Affidavit 31 Firstly, Mr Oates' affidavit sets out reasons why he considered it is highly unlikely that the Oates funding agreement has been terminated. 32 Secondly, Mr Oates explains the basis for his belief that he has a proprietary interest in a share of any proceeds of the proposed proceeding, pursuant to the Oates funding agreement. In particular, Mr Oates referred to cl 8.6 of the Oates funding agreement which is set out above. 33 Thirdly, Mr Oates sets out certain matters in support of his contention that his rights under the Oates funding agreement need to be determined by the Court without further delay. These matters comprise events adverse to Mr Oates, which Mr Oates foresees, namely: (1) The liquidator will distribute recoveries in a way that is inconsistent with Mr Oates' rights under the Oates funding agreement. As Mr Oates' put it, on his construction of the Oates funding agreement, for every $100 that the liquidator seeks to pay out ahead of Mr Oates, he is short-changed by $25. (2) The liquidator may not comply with his obligations under cll 8.6-8.9 of the Oates funding agreement in breach of that contract and in disregard of Mr Oates' proprietary interest in the proceeds of the proposed proceeding. (3) The liquidator will settle the proposed proceeding on terms that are disadvantageous to Mr Oates, including by compromising Mr Oates' right to pursue proceedings against Consolidated Capital Limited (a company allegedly controlled by the former directors of Matrix) (CCL) in the United Kingdom. (4) The liquidator will not approach the Court for orders or advice as to the order and priority of payment of any recoveries. (5) The liquidator will not approach the Court to determine the dispute about Mr Oates' rights under the Oates funding agreement. 34 Finally, Mr Oates referred to his contention (disputed by the liquidator) that, in 2012, Mr Faraday and Mr Linden of Kemp Strang became the "new lawyers" under the "Lawyers' Terms". As I understand it, this contention is relevant to Mr Oates' claim for priority payment under the Oates funding agreement.

Tender bundle 35 Mr Oates also relied on a tender bundle comprising, broadly, documents relevant to his dispute with the liquidator.

Legal framework 36 In Carter, in the matter of Australian Vocational Learning Institute Pty Ltd [2019] FCA 1638 at [19]-[21], I set out the following relevant principles: [19] In Robinson, in the matter of Reed Constructions Australia Pty Ltd (in liq) [2017] FCA 594 at [33] to [37], I set out the following relevant principles: [33] In Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher [2011] FCAFC 89; (2011) 85 ACSR 38 ("Fortress") at [40], the Full Court observed that, in considering whether to give approval under s 477(2B), the Court must consider the purposes for which the powers of a liquidator exist. Those purposes include the recovery of funds for the benefit of creditors: McGrath and Another (in their capacity as liquidators of HIH Insurance Limited and Others) [2010] NSWSC 404; (2010) 266 ALR 642 at [13]; Pascoe; re Brentwood Village Ltd (in liq) [2014] FCA 1295, [44]. [34] The standard imposed under s 477(2B) concerns an assessment by the Court that entry into the agreement is a proper exercise of power and not ill-advised or improper on the part of the liquidator, rather than involving the exercise of commercial judgment: Re Gerard Cassegrain & Co Pty Ltd (in liq) [2013] NSWSC 257 ("Cassegrain") at [11] per Black J citing Re McGrath (in their capacity as liquidators of HIH Insurance Ltd) [2010] NSWSC 404; (2010) 266 ALR 642. [35] In Pascoe; re Matrix Group Ltd (in liq) [2011] FCA 1117 ("Pascoe") at [7], Jacobson J cited with approval the following statement by Austin J of the relevant test in Leigh; Re AP and PJ King Pty Ltd (in liq) [2006] NSWSC 315 at [23]: Although the court has the statutory task [under s 477(2B)] of giving "approval" to a liquidator's agreement that may end more than three months after it is entered into, the case law shows that the court undertakes something less than a complete "merits review". As Giles J said in Re Spedley Securities Ltd (in liq) (1992) 9 ACSR 83 at 85-6: ... the court is necessarily confined in attempting to second guess the liquidator in the exercise of his powers, and generally will not interfere unless there can be seen to be some lack of good faith, some error of law or principle, or real and substantial grounds for doubting the prudence of the liquidator's conduct. [36] The Court's task is to satisfy itself, having regard to the liquidator's commercial judgment, that there is no error of law, grounds for suspecting bad faith or any other good reason to intervene: Corporate Affairs Commission v ASC Timber Pty Ltd (1998) 29 ACSR 109 at 118; Stewart, re Newtronics Pty Ltd [2007] FCA 1375. [37] In Fortress, at [24], the Full Court endorsed the following comprehensive list of factors (identified by Austin J in Leigh re AP& PJ King Pty Ltd (in liq) [2006] NSWSC 315 at [25] and Re ACN 076 673 875 Ltd (rec'r & mgr apptd) (in liq) [2002] NSWSC 578; (2002) 42 ACSR 296 at [17]-[34]) relevant to the Court's assessment of a proposed litigation funding agreement: (1) the prospects of success of the proposed litigation; (2) the interests of creditors other than the proposed defendant; (3) possible oppression; (4) the nature and complexity of the cause of action; (5) the extent to which the liquidator has canvassed other funding options; (6) the level of the funder's premium; (7) consultations with creditors; and (8) the risks involved in the claim. [20] The court does not simply "rubber stamp" whatever is put forward by a liquidator: Stewart, in the matter of Newtronics Pty Ltd [2007] FCA 1375 at [26]. [21] The public interest may be a relevant consideration in deciding whether to grant approval of a litigation funding agreement: Buiscex Ltd v Panfida Food Ltd (1998) 28 ACSR 357 at 364; Hall v Poolman [2009] NSWCA 64; (2009) 71 ACSR 139 at [125] and [126]. 37 As the liquidator put it, in summary, the task of the Court is to review a liquidator's proposal, paying due regard to his or her commercial judgment and knowledge of all of the circumstances of the liquidation, satisfying itself there is no error of law or ground for suspecting bad faith or impropriety, and weighing up whether there is any good reason to intervene in terms of the "expeditious and beneficial administration" of the winding up. Put another way, the question posed under s 477(2B) is whether the liquidator's judgment has been infected by a lack of good faith or error of law or principle, or whether there are real or substantial grounds for doubting the prudence of his conduct in seeking to enter into the agreements. 38 Approval can be given nunc pro tunc in appropriate cases: Deputy Commissioner of Taxation, in the matter of ACN 154 520 199 Pty Ltd (in liq) v ACN 154 520 199 Pty Ltd (in liq) (No 2) [2017] FCA 755 at [27]. In this case, such approval is necessary having regard to the fact that both agreements have already been entered into (albeit that the funding deed does not take effect without Court approval).

Liquidator 39 The liquidator made the following submissions concerning the relief sought, contrasting the application with the case the subject of the Harbour Fund judgment: (1) The liquidator's application is made under s 477(2B) only and is not one for orders under s 90-15 of the Insolvency Practice Schedule (Corporations), being Sch 2 to the Act (IPS), or for judicial advice that the liquidator is justified in entering into the agreements. The liquidator is not seeking the protection that such advice can give. The plaintiffs are only seeking the judicial approval necessary to complete the power conferred on the liquidator under s 477(2)(m) of the Act to enter into those agreements. (2) The liquidator's application seeks approval for entry into the agreements. It does not seek approval for their performance. Nor can such approval be given under s 477(2B). (3) No declaratory relief about the effect of the agreements is sought and Mr Oates has not been joined as a party. Approval of the agreements will not bind Mr Oates or affect any rights that he may have under the Oates funding agreement or the question of whether that agreement is in force. 40 The liquidator submitted that the Court should approve the plaintiffs' entry into both the funding deed and the retainer for the following reasons: (1) The funding deed is obviously beneficial in the sense that it is more favourable than most commercial funding agreements. (2) Approval is required for any recoveries to be obtained for the benefit of creditors. (3) Prosecuting the proceeding will prolong an already lengthy liquidation. However, the circumstances that have prolonged the liquidation are exceptional and the only feasible alternative is to terminate the winding up. (4) Having regard to the nature of the proposed claims, which involve claims of fraud and serious misconduct, there is a public interest in them being pursued. (5) The liquidator has received legal advice, including from senior counsel, that the proposed proceeding has good prospects of success. (6) There is a risk that the assets of some or all of the proposed defendants may not be sufficient to satisfy any judgment, however, the liquidator submits that this is a matter for his commercial judgement and the funder. (7) The liquidator has control over the work to be undertaken pursuant to the agreement subject only to various reporting requirements and specific restrictions that the liquidator considers to be reasonable. 41 So far as Mr Oates is concerned, the liquidator's position, in summary, is: (1) The Oates funding agreement has been terminated and that Mr Oates has no subsisting rights to obtain sums under that agreement; (2) Even if Mr Oates has subsisting rights he is not prejudiced by approval being granted under s 477(2B), having regard in particular to the undertakings offered by the liquidator; and (3) The question of whether the Oates funding agreement is on foot or, if so, how any funds recovered in the proposed proceeding are to be dealt with, having regard to it and to the funding deed, does not need to be dealt with at this time and determining these issues now would be detrimental to Matrix because of the pending expiry of limitation periods and the need to utilize the indemnity in the funding deed in the most efficient way. 42 The liquidator submitted that Mr Oates' claim for an order requiring the liquidator to follow the procedures in cll 8.6-8.9 of the Oates funding agreement is misconceived because, if the agreements are approved, the central and only substantive tasks of the liquidator in the liquidation will be to: (a) prosecute the proposed proceeding with a view to obtaining the best result in the circumstances for Matrix and its creditors; and (b) deal with the proceeds of any successful outcome. 43 The liquidator noted that Mr Oates is protected in relation to (b) by the undertaking not to distribute any recoveries without Mr Oates' consent. 44 As to (a), the liquidator noted his position as an officer of the Court, owing duties to it and to Matrix' creditors in the conduct of the proposed proceeding. 45 The liquidator argued that it is not possible to suppose, in these circumstances, that Mr Oates' involvement or supervision is necessary to prevent the liquidator from acting otherwise than in the best interests of Matrix and its creditors in the conduct of the proposed proceeding. 46 In the above circumstances, the plaintiffs submitted that Mr Oates' position is sufficiently protected by the undertaking proffered to him. 47 The plaintiffs also submitted that, in these circumstances, there is no utility or proper basis in dealing further with Mr Oates' interlocutory application. In particular, the liquidator noted the following matters: (1) Mr Oates seeks an inquiry into the external administration of Matrix under s 90-10 and/or s 90-20 of the IPS. There is no basis for, or utility in, any such inquiry: the only extant issue is whether two agreements should be approved under s 477(2B) and Mr Oates has been given leave to be heard on that application. (2) Mr Oates seeks in addition five orders purportedly under s 90-15. It is doubtful whether this section (which replaces the powers to give directions under the former s 479 and s 536) confers jurisdiction to make orders of the kind sought. In any event, it would not be appropriate as a matter of discretion to exercise such power if it exists in circumstances where there is an extant application for approval under s 477(2B) on which Mr Oates has been given leave to be heard. Mr Oates has not given the Australian Securities and Investments Commission reasonable notice of his application, as required by r 2.08 of the Corporations Rules and the orders he seeks have the potential to affect the rights of the Commonwealth, who has not been joined to the application.

Mr Oates 48 Mr Oates submitted that: (1) The Court should enquire into his rights and entitlements under the Oates funding agreement. (2) The Court should clarify that, by approving the funding deed, it is not approving or confirming the liquidator's power to distribute property under or pursuant to the funding deed because such property is trust property. (3) The funding deed contains terms which, if performed, would place the liquidator in breach of his obligations to Mr Oates under the Oates funding agreement in the following respects: (a) The deed provides for the liquidator to settle the proposed proceeding without consulting with Mr Oates, contrary to cl 8.6 of the Oates funding agreement. Moreover it provides for consultation with the funder. (b) The deed provides for the funder to be paid ahead of Mr Oates, inconsistently with Mr Oates' proprietary rights in any recovery arising out of the Oates funding agreement and depriving him of amounts to which he is entitled under the agreement. (4) As part of any settlement it is likely that the defendants will seek a release from all claims in connection with Matrix, which will affect Mr Oates' claims against CCL which were assigned to Mr Oates by Matrix. (5) The undertaking proffered by the liquidator prior to the hearing on 23 October 2019 is inadequate and the liquidator already has a duty to keep Mr Oates, as a creditor, informed as to such important matters as a proposed distribution of recoveries. The undertaking is substantially less than the undertaking referred to at [152] of the 2016 judgment: That any amount realised from the proposed proceeds is to be held on terms that permit the resolution of any claims that Mr Oates might seek to make under the Oates funding agreement before it is otherwise distributed. (6) In June 2019, the liquidator promised to acknowledge the validity of the Oates funding agreement in return for Mr Oates' discontinuance of his application for leave to have the status of the funding agreement resolved. However, shortly after, on 8 July 2019, the liquidator proposed a deed of settlement and release which merely noted that Mr Oates disputes the validity of the termination of the Oates funding agreement, "inviting a release in cl 2.1 'Oates must not take any steps or seek to enforce any provisions of the Oates Funding Agreement'" and putting Mr Oates at the bottom of the waterfall for payments from any recoveries. (7) Mr Oates' contribution to the liquidation, by providing funding in 2011 and 2012, is relevant "[i]n terms of what is fair and reasonable". (8) The funding deed does not conform to the finding in the 2016 judgment at [139], that cl 7.5 of the Oates funding agreement should be construed as imposing two separate requirements, namely: (a) the inclusion of a term that reflects Mr Oates' entitlements under cl 6.1; and (b) no agreement to any term that is inconsistent with the entitlement of Mr Oates under cl 6.

Approval to enter into funding deed and retainer 49 I accept each of the reasons given by the liquidator why the funding deed and the retainer should be approved, none of which was disputed by Mr Oates. In particular, it is plain that the funding deed is in the best interests of Matrix's creditors and should be approved, subject only to the question of whether it might operate in a manner adversely to Mr Oates' claims under the Oates' funding agreement. 50 Further, I am satisfied that the undertakings proffered by the liquidator are adequate to ensure that any rights which Mr Oates may have under the Oates funding agreement can be protected. Having regard to those undertakings, I am satisfied that there is no want of good faith on the part of the liquidator in seeking approval of the funding deed and the retainer. Rather, I am persuaded that the liquidator is seeking to achieve the best outcome for the creditors having regard to the complications which arise from the unresolved disputes about the effect of the Oates funding agreement. 51 In particular, Mr Oates' rights are protected by cl 10.6 of the funding deed, which provides that nothing in the funding deed is intended to prevail over any rights that Mr Oates may have under the Oates funding agreement. Thus, the funding deed does not impose obligations upon the liquidator that are inconsistent with the liquidator's obligations, if any, under the Oates funding agreement. 52 The Court's approval of the funding deed says nothing about the liquidator's power to distribute any recoveries which may be received pursuant to the proposed proceeding. In any event, the liquidator has curtailed his power of distribution by the undertaking given to the Court not to distribute any recoveries except with the consent of Mr Oates. The undertaking proffered on 30 October 2019 amply addresses the complaint made by Mr Oates about the undertaking, as originally formulated. 53 As Mr Scruby SC noted orally, the liquidator is not in a position to prejudice Mr Oates' claims against CCL. 54 Otherwise, the matters raised by Mr Oates do not provide a principled basis for declining to approve the funding agreement and the retainer.

Relief sought by Mr Oates 55 Mr Oates has not identified any good reason why the Court should inquire into the external administration of Matrix pursuant to s 90-5, s 90-10 or s 90-15 of the IPS. To the contrary, in my view, such action would be a significant distraction from the efficient prosecution of the proposed proceeding, which is the only avenue for achieving recoveries in this liquidation. 56 The concerns that underpin Mr Oates' claim for relief under those provisions are adequately addressed by the undertakings proffered by the liquidator. 57 It is sufficient to note that, if evidence comes to light that causes Mr Oates reasonably to apprehend a threatened breach of his asserted contractual rights under the Oates agreement, it may be necessary to resolve the disputes concerning whether the Oates funding agreement has been terminated.

Confidentiality 58 Section 37AF of the Federal Court Act provides: (1) The Court may, by making a suppression order or non-publication order on grounds permitted by this Part, prohibit or restrict the publication or other disclosure of: (a) information tending to reveal the identity of or otherwise concerning any party to or witness in a proceeding before the Court or any person who is related to or otherwise associated with any party to or witness in a proceeding before the Court; or (b) information that relates to a proceeding before the Court and is: (i) information that comprises evidence or information about evidence; or (ii) information obtained by the process of discovery; or (iii) information produced under a subpoena; or (iv) information lodged with or filed in the Court. (2) The Court may make such orders as it thinks appropriate to give effect to an order under subsection (1). 59 By s 37AG(1)(a), the Court may make a suppression order or non-publication order on the ground that the order is necessary to prevent prejudice to the proper administration of justice. By s 37AG(2), a suppression order or non-publication order must specify the ground or grounds on which the order is made. 60 I made an order under s 37AF in respect of the entirety of the liquidator's affidavit marked "Confidential", following the approach in In the matter of Octaviar Administration Pty Ltd (in liquidation) [2014] NSWSC 344 at [14]-[21], applied in Krecji (liquidator), in the matter of Community Work Pty Ltd (in liq) [2018] FCA 425 at [64]. The affidavit contains, among other things, a copy of the funding deed which contains commercially confidential terms and copies of legal advice provided to the liquidators. I was satisfied that it was appropriate to make an order of the kind sought to preserve the confidentiality of those materials and the liquidator's related evidence.

Conclusion 61 I will grant the approval sought by the liquidator. Mr Oates' interlocutory application will be dismissed. I certify that the preceding sixty-one (61) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gleeson.

Corporations Act 2001(Cth)ss 477(2)(m), 477(2B), Sch

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