The effect of the case last-mentioned seems to be that the transaction is not invalidated on the basis that prior approval was not given but that creditors who are affected by that decision may seek to have the compromise set aside. This is consistent with the principle behind s.377(1), or its equivalent in other statutes, that the authority is required in order to give protection to the company, and accordingly to the creditors, by requiring the decision of the liquidator to be reviewed by the court or committee of inspection or the creditors generally. In my opinion the deed is not invalid and may be considered by the court on an application to approve its terms."
10 It has, in any event, been expressly held that the court may grant retrospective approval under s.447(2B). I adopt, in that respect, the following observations of Warren J in Empire (Aust) Nominees Pty Ltd v Vince (2000) 35 ACSR 167:
"In the ordinary course of insolvency practice the court would ordinarily expect that an official liquidator would be fully mindful of his or her obligations under the Law when acting as liquidator of a company. If a liquidator is unaware or uncertain of his or her obligations then legal advice should be obtained. The court has an expectation that a liquidator will be aware of the obligations and powers particularly those contained under s.477 of the Law. In order to exercise certain powers such as those under s.477(2B) a liquidator ought be aware of the necessity to obtain leave of the court or approval of creditors or the committee of inspection.
Such approval should be obtained in advance of the exercise of the power in question, although the court has the power to give a retrospective sanction in a proper case to action taken without the requisite approval: see Re Associated Travel, Leisure & Services Ltd (in liq) [1978] 1 WLR 547; also, A R Keay, McPherson: The Law of Company Liquidation , 4th ed, LBC Information Services, 1999, p 349."
11 Her Honour went on to discuss analogous cases:
In Re Associated Travel, Leisure & Services Ltd (in liq) Templeman J was concerned with circumstances where a liquidator gave instructions to solicitors who successfully recovered a debt owed to the company. Subsequently, the solicitors' costs were disallowed on the ground that the liquidator did not obtain prior approval of the court before instructing the solicitors. The English statute [ Companies Act 1948 s.245] precluded a liquidator from, inter alia, appointing a solicitor to assist in the winding up of the company without approval of the court or the committee of inspection. Templeman J held that in a proper case such as that before the court where the appointment of solicitors resulted in benefit to the creditors, the court had power to allow the liquidator to retain out of the assets of the company sums to indemnify him against the solicitors' costs. Templeman J (at 549) considered that under the English statute [Companies Act s.246 (3) ] the liquidator could apply to the court for directions in relation to any particular matter arising under the winding up and that either under that section or under its inherent powers the court may authorise the liquidator to make a variety of payments: see also in Re Banque des Marchands de Moscou Koupetschesky [1953] 1 WLR 171.
There is an obvious policy underlying the requirements of s.477(2B) of the Law namely that it is intended to afford some protection against ill-advised or improper actions on the part of a liquidator. Ultimately, the absence of the required sanction is a matter that effects only the relationship between the liquidator and the company or its creditors and cannot be made the subject of objection by a third party: see Re Home Counties Life Insurance Co (1862) 6 LT 374; Re English & Scottish Marine Insurance Co (1870) 23 LT 685; Ali v Premier Timber Co (1952) (1) SA 689; also, Keay, 1999, p 349. It seems that a facilitative approach has prevailed largely in relation to the institution of legal proceedings by the liquidator for which it was formerly necessary to obtain leave or approval: see Dublin City Distillery Ltd v Doherty [1914] AC 823; Waisbrod v Potgieter (1953) (4) SA 502; Re Western Australian Holiday Resorts Ltd (in liq) [1961] WAR 152."
12 In Re HIH Insurance Group Ltd [2001] NSWSC 308, Hamilton J regarded the present question as settled. After referring to Empire (Aust) Nominees, his Honour said, in relation to the question of retrospective approval:
"There is, therefore, no difficulty in my now granting approval to the entry into the subject agreement by the seven companies if minded to do so."
13 Further approval of the approach that had commended itself to Warren J was expressed by Carr J in Registrar of Aboriginal Corporations v Bibelmen Mia Aboriginal Corporation [2001] FCA 136; see also Re Sit Simplex Stulte Pty Ltd [2001] QSC 363.
14 Plainly, it is, as Warren J observed in Empire (Aust) Nominees, ordinarily to be expected that a liquidator, being mindful of his or her obligations, will obtain any necessary s.477(2B) approval in advance of entering into an agreement of the kind with which the section deals. Unless the approval is granted, the liquidator is operating in a manner not sanctioned by the Act and is exposed to potentially adverse consequences. For reasons I have stated, however, I am persuaded by the decided cases that the court may give approval even though a relevant agreement has already been entered into. Moreover, in view of my comments about the particular agreements in this case, approval is appropriate and should be given.
15 The court orders that the following be approved under and for the purposes of s.477(2B) of the Corporations Act 2001 (Cth), namely, the making by Anthony Gregory McGrath and Alexander Robert Mackay Macintosh, as joint liquidators of HIH Casualty and General Insurance Limited, of the following Contracted Services Agreements: