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Judgment - EX TEMPORE 1By interlocutory application dated 13 February 2013, Mr Christopher Chamberlain, in his capacity as liquidator ("Liquidator") of Gerard Cassegrain & Co Pty Limited (in liquidation) ("Company"), and the Company apply for an order under s 477(2B) of the Corporations Act 2001 (Cth) approving the Liquidator's entry into, and causing the Company's entry into, a litigation funding agreement with certain persons ("Proposed Funders"). The Liquidator also seeks a direction under s 479(3) of the Corporations Act that he would be justified in entering into that agreement. 2The proposed funding agreement relates to the conduct of two appeals ("Appeals") from a judgment of Barrett J, one of which is brought by the Company in respect of a claim against Ms Felicity Cassegrain, and the other of which is brought by Mr Claude Cassegrain in respect of a judgment against him and in favour of the Company. 3The shareholders of the Company include the Proposed Funders and Mr Claude Cassegrain and Ms Felicity Cassegrain. Mr Claude Cassegrain and Ms Felicity Cassegrain, another body corporate and their legal adviser, have also lodged substantial proofs of debt in the liquidation, as have the Deputy Commissioner of Taxation, Mr Denis Cassegrain, and a firm of accountants. 4There is evidence as to the Company's assets which include a part interest in land, another interest in land which may be held by a subsidiary, and the benefit of judgment of Barrett J in the amount of $3,743,422.06 plus interest and a judgment of Bergin CJ in Eq (for an amount yet to be quantified) in proceedings in this Court. Notwithstanding those assets, the Liquidator's evidence is that the Company currently does not have funds available to prosecute or defend the respective appeals which were commenced prior to his appointment and which are listed for hearing together on 21-22 February 2013. 5An advice by senior and junior counsel as to the prospect of the appeals has been tendered as a confidential exhibit and the Liquidator has expressed the view in his affidavit that it is in the Company's best interests to pursue the appeals to retain the benefit of the judgment against Mr Claude Cassegrain and, if the Company succeeds in its appeal in respect of the claim against Ms Felicity Cassegrain, obtain the benefit of a dairy property that she holds, which is the subject of a claim by the Company. 6The Liquidator's evidence is that he lodged an application for funding for the conduct of the appeal with the Deputy Commissioner of Taxation on 7 December 2012, but has not yet received an offer of funding and, given the proximity of the hearing of the appeals, has withdrawn that application. He also lodged an application with a third party litigation funder on 10 December 2012 and received an offer from that funder on 31 January 2013 and a revised offer on 4 February 2013. On 5 February 2013, the day after that revised offer, he also received an offer from the Proposed Funders to provide funding. The Liquidator expressed the view, based on his experience, that the offer from the Proposed Funders is the best offer he has received, for reasons that he indicates, and expressed the view that it is in the Company's best interests to enter into the proposed funding agreement for reasons he indicates. 7I am conscious that the approach to the Australian Taxation Office for funding was made, on one view, relatively late, although that may be explicable by the fact that Counsels' opinion is dated 29 November 2012, and the approach to the Australian Taxation Office was made shortly after it was received. I have considered whether the relatively short time, having regard to the Christmas break, permitted to the Australian Taxation Office to consider whether to provide funding may have impeded its ability to do so. However, the Australian Taxation Office has been given notice of this application and has not appeared today to contend, for example, that it should be allowed further time to consider the application to fund the proceedings or that it should be permitted to participate in providing funding on the terms that the Proposed Funders have proposed. In my view, I can properly conclude that the Australian Taxation Office would have appeared, had it wished either to provide funding or to be allowed a further opportunity in which to do so. 8Both the third party funding offer and the proposed funding agreement are in evidence and are substantially similarly structured. The funding agreement offered by the Proposed Funders allows a higher amount for legal costs of the conduct of the proceedings and provides for deposit of the funds to the Liquidator's trust account to cover the committed amount, which has in fact occurred. The percentage amount to be paid to the Proposed Funders is less, albeit by a modest percentage, than the amount which would be required by the third party funder. 9I was initially troubled by a provision in the funding agreement proposed by the Proposed Funders that provided (at former clause 3.3) for the Liquidator to agree to apply to the Court under s 464 of the Corporations Act for priority in respect of a proof of debt filed by Denis Cassegrain in the amount of $510,666 in the liquidation within twenty-one days of the Repayment Date, as defined. This provision would have made it more difficult to compare the third party funding offer with the Proposed Funders' offer since it might later have been put that such priority was warranted by the provision of funding by the Proposed Funders, and such priority would in turn potentially operate to the disadvantage of other creditors. The difficulty in comparing the two arrangements would have been exacerbated by the fact that the Liquidator had not conducted financial modelling to demonstrate how priority for Mr Denis Cassegrain's claim would affect creditors under possible outcomes of the appeals and, indeed, Counsel for the Liquidator contended that it would be difficult to do so given the range of circumstances and contingencies. This left open the possibility that, on an adverse outcome of the appeals, a priority given to Mr Denis Cassegrain could be significantly disadvantageous to other creditors. It is, of course, possible that a Court dealing with such application would not grant such priority, but the Court's ability to deal with that application would have been potentially prejudiced by the absence of clarity as to the extent to which that provision was an essential term of the commercial bargain that supported the provision of funding for the appeals. 10In any event, it is not necessary for the Court to deal further with this provision because it has, by agreement between the Proposed Funders and the Liquidator, been withdrawn from the proposed funding agreement that the Court is asked to approve. That step, in my view, places the Court in a position that it can more readily compare the funding under the proposed funding agreement with that which would have been available from the third party funder. 11I turn now to the principles applicable to the approval of entry into such an agreement. The Court is not concerned, in granting such an approval, with matters of commercial judgment but is concerned to be satisfied that the entry into the agreement is a proper exercise of power and not ill-advised or improper on the part of the Liquidator: Empire (Aust) Nominees Pty Ltd v Vince [2000] VSC 324; (2000) 35 ACSR 167; Re McGrath & Anor (in their capacity as liquidators of HIH Insurance Ltd) [2010] NSWSC 404; (2010) 78 ACSR 405. 12Previous decisions considering whether litigation funding agreements should be approved under this section include Re HIH Insurance Ltd [2001] NSWSC 308; (2001) 19 ACLC 1102 and Re Leigh; AP and PJ King Pty Ltd (in liq) [2006] NSWSC 315. In the latter case, Austin J summarised relevant factors as including:

• The liquidator's prospects of success in the liquidation;
• The interests of creditors other than the proposed defendant;
• Possible oppression in the bringing of the proceedings;
• 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;
• The liquidator's consultation with creditors; and
• The risk 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 defendant's costs if the action is not successful, or towards any order for security for costs). 13The factors referred to by Austin J in Re Leigh; AP and PJ King Pty Limited (in liq) were in turn referred to by the Full Court of the Federal Court in Fortress Credit Corporation (Aust) II Pty Ltd v Fletcher [2011] FCAFC 89 at [24]; (2011) 85 ACSR 38 and by Jacobson J in Pascoe; Re Matrix Group Ltd (in liq) [2011] FCA 1117 at [14], where his Honour had to consider whether to approve the funding of claims by a party associated with the company. His Honour there noted that the question for the Court was whether: "the liquidator's judgment in this regard has been infected by a lack of good faith or an error of law or principle, and whether there are real or substantial grounds for doubting the prudence of the liquidator's conduct in seeking to enter into the funding agreement." 14Turning now to the factors referred to in those decisions, I can readily be satisfied as to the basis of the prospect of success in the appeals, having regard to counsels' opinion put before me on a confidential basis. It seems to me that the granting of approval is in the interests of creditors other than the opposing parties in the appeals, so as far as the conduct of the appeals plainly has the capacity to preserve the assets of the Company to the extent that they include the existing judgment in its favour and to increase these assets, if the appeal in respect of Ms Felicity Cassegrain is successful. There is nothing to suggest any possible oppression in the conduct of the appeals, noting that one of them was commenced by Mr Cassegrain as against the Company. 15The Liquidator has canvassed other funding options, including funding by the Australian Taxation Office or a commercial funder. The former has not been available as I noted above. I am satisfied that, with the exclusion of former clause 3.3, the funding offer by the Proposed Funders is more favourable to the company than that offered by the third party funder. I can also conclude that the funding premium contemplated by the arrangement is appropriate, both because it is in the range of funding premiums commonly seen in complex commercial litigation and because the funding premium sought by the Proposed Funders is less than that sought by an arm's length funder to provide a higher level of comfort to the Liquidator. 16The Liquidator has consulted with a major creditor, the Australian Taxation Office, in the manner that I have noted; it is not surprising that he has not consulted with other creditors who are other parties in a contrary interest in the appeals, and I do not consider that is a reason not to approve the funding application, noting that he has placed them on notice of this application brought before the Court. 17Having regard to all those matters, it seems to me that there is no reason, on the material before me, to conclude that the Liquidator's judgment involved any lack of good faith or error of law or principle and also no reason to doubt the Liquidator's prudence in proposing to enter into the proposed funding agreement and cause the Company to do so. Accordingly, I should grant the approval which is sought under s 477(2B) for entry into that agreement. 18The Liquidator also seeks a direction under s 479(3) of the Corporations Act that he will be justified in entering into the proposed agreement of the kind given by Jacobson J in Pascoe; Re Matrix Group Ltd (in liq) above. Section 479(3) allows a liquidator to apply to the Court for directions in relation to a matter arising in a winding up. The function of a liquidator's application for directions under that section is to give the liquidator advice as to the proper cause of action for him or her to take in the liquidation; Re Ansett Australia Ltd (admins apptd) v Korda [2002] FCA 90; (2002) 115 FCR 409; (2002) 40 ACSR 433 at [46]. The Court will typically not give such a direction where a matter relates to the making and implementation of a business or commercial decision, where no particular legal issue is raised and there is no attack on the propriety or reasonableness of the decision, but may do so where a legal issue or an attack on the propriety of the decision is raised: Re G B Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674 at 686-687; (1991) 5 ASCR 673; Re Ansett Australia Ltd at [65]. For example, the Court gave a direction to a liquidator that he would be acting properly in discontinuing appeals in Re Addstone Pty Ltd (in liq) (1997) 25 ACSR 357, where Mansfield J observed at 363 that one circumstance in which such a direction may be given is, "where the liquidator's proposed decision is the subject of criticism by a particular creditor or creditors as being unreasonable or mala fides." In Pascoe; Re Matrix Group Ltd (in liq) above, Jacobson J observed that such a direction could be made, inter alia, where there was a legal issue of substance or procedure such as the propriety or reasonableness of the particular course. A liquidator is protected against a claim for breach of duty if he or she acts in accordance with a direction given by the Court under s 479(3) and he or she made full disclosure to the Court in the relevant application. 19In this case, it is plain that the proceedings which have led to the appeals are complex and have been fully contested; several parties to them, and their legal representatives, claim to be creditors of the company and may have an interest in challenging the propriety of entry into the litigation funding agreement; and the funding agreement is out of the ordinary, at least in the sense that it is entry into with other contributors and not a third party litigation funder. In those circumstances, and given the view I have expressed above, it seems to me appropriate to give the direction sought under s 479(3) as to the entry into the proposed funding agreement, so that the Liquidator has, subject to the adequacy of the information put before the Court, protection in respect of the entry into that agreement. 20Finally, the liquidator has sought confidential orders in respect of several documents which were tendered in the proceedings. I am satisfied that the confidential orders should be made in respect of those documents. The Court's power to make such an order in an appropriate case is well established; Onefone Australia Pty Ltd v One.Tel Ltd [2010] NSWSC 498; (2010) 78 ACSR 163 at [5]. 21In these circumstances, I make orders in accordance with the short minutes of order initialled by me and placed in the file, which are amended as follows from the orders originally provided to the Court. Paragraph 2 is amended by deleting the "s" at the end of the word "sections" in line one and deleting the words "and section 479(3)"; the words "and direction" in line 2 are deleted and the words "in or substantially in the form" are inserted in line 4 after the word "agreement"; and a defined term "Funding Agreement" is inserted at the end of the paragraph. 22A new order 2A is inserted as follows: "Pursuant to s 479(3) of the Corporations Act, a direction that the first plaintiff would be justified in entering into an agreement in or substantially in the form of the Funding Agreement."