Empire (Aust) Nominees Pty Ltd (in liq) v Vince

Federal Court of Australia|2023-04-06|Before: Mr J, Yates J

Counsel for the Plaintiffs: Mr J C Giles SC and Mr M L Rose

Counsel for Taiping Trustees Limited: Mr H Austin KC

ORDERS NSD 242 of 2023 IN THE MATTER OF SARGON CAPITAL PTY LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (ACN 608 799 873) BETWEEN: ANDREW MCCABE IN HIS CAPACITY AS JOINT AND SEVERAL LIQUIDATOR OF SARGON CAPITAL PTY LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (ACN 608 799 873) First Plaintiff

JOSEPH HAYES IN HIS CAPACITY AS JOINT AND SEVERAL LIQUIDATOR OF SARGON CAPITAL PTY LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (ACN 608 799 873) Second Plaintiff

AND: SARGON CAPITAL PTY LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (ACN 608 799 873) Defendant

order made by: YATES J DATE OF ORDER: 6 APRIL 2023

Pursuant to s 90-15(1) of Sch 2 to the Corporations Act 2001 (Cth), the plaintiffs are justified, and would otherwise be acting reasonably, in: a. commencing and continuing proceeding NSD189/2023 against Diversa Pty Ltd (ACN 079 201 835); b. commencing and continuing proceeding NSD190/2023 against Dean Waters and others, being the partnership trading as KPMG (ABN 51 194 660 183), and KPMG Financial Advisory Services (Australia) Pty Ltd (ACN 007 363 215); and c. commencing and continuing proceeding NSD191/2023 against V Ahuja and others, being the partnership trading as King and Wood Mallesons (ABN 22 041 424 954).
Pursuant to s 90-15(1) of Sch 2 to the Corporations Act 2001 (Cth) the plaintiffs are justified, and would otherwise be acting reasonably, in commencing and conducting examinations, pursuant to ss 596A and 596B of the Corporations Act 2001 (Cth), in respect of the examinable affairs of the defendant, including against: a. Anthony Owen; b. Aron Ping D'Souza; c. Edward Paul Wasserman; d. Fiona Borelli; e. Matthew Simon Nash Kibble; f. Phillip James Kingston; g. Robert John Rankin; h. Stephen Michael Conroy; and i. Charles Matthew Danzeisen; being proceeding NSD1088/2022.
The plaintiffs be granted leave nunc pro tunc, pursuant to s 477(2B) of the Corporations Act 2001 (Cth), to enter into an agreement with Gallande Pty Limited (ACN 139 775 867) trading as ERA Legal for the purposes of undertaking professional services connected to the liquidation of the defendant for the period 22 December 2020 to finalisation of the liquidation at ERA Legal's usual rates, as indicated in paragraph 11 of the affidavit of Blake Joel O'Neill affirmed on 4 April 2023, without any premium, uplift, or similar increase in rates.
The plaintiffs' costs be costs in the liquidation of the defendant.
Pursuant to s 37AF(1) of the Federal Court of Australia Act 1976 (Cth), on the ground that it is necessary to prevent prejudice to the proper administration of justice, the Confidential Affidavit of Blake Joel O'Neill affirmed on 3 April 2023 (including the annexure marked Confidential BJON-1 (Confidential)) be marked "confidential" on the Electronic Court File and not be published or accessed, except pursuant to an order of the Court, until the later of the expiry of any appeal period from orders finally resolving proceeding NSD189/2023 or judgment in an appeal from orders finally resolving proceeding NSD189/2023. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Introduction 1 The plaintiffs are the liquidators of the defendant, Sargon Capital Pty Limited (receivers and managers appointed) (in liquidation) (Sargon). They were appointed as administrators of Sargon by a secured creditor, Taiping Trustees Limited (Taiping), pursuant to s 436C of the Corporations Act 2001 (Cth) (the Act), on 8 March 2020. On 8 April 2020, they were appointed as liquidators of Sargon, by a resolution of creditors. 2 By an originating process filed on 16 March 2023, the plaintiffs seek orders, in reliance on s 90-15 of Sch 2 to the Act (the Insolvency Practice Schedule (Corporations) (the IPS(C)), that they are justified, and would otherwise be acting reasonably, in: (a) commencing and continuing certain proceedings in the Court, including proceeding NSD189/2023 (the Diversa proceeding) against Diversa Pty Ltd (Diversa); and (b) commencing and conducting examinations of nominated individuals in respect of the examinable affairs of Sargon, pursuant to ss 596A and 596B of the Act. 3 The plaintiffs also seek, retrospectively, an order permitting them to enter into an agreement with Gallande Pty Limited, trading as ERA Legal, who are acting as the plaintiffs' solicitors, for the purpose of undertaking professional services connected to Sargon's liquidation for the period 22 December 2020 to finalisation of the liquidation. 4 Initially, the granting of the relief sought by the plaintiffs in the originating process was opposed by Taiping. Taiping no longer presses any objection to the orders that are sought.

Background 5 On 3 March 2023, the plaintiffs commenced the Diversa proceeding seeking an order, pursuant to s 588FF(1)(c) of the Act, that Diversa pay Sargon the sum of $4,196,607.32. The proceeding was commenced in the face of the imminent expiry of the time to bring claims under that provision. 6 The plaintiffs' claim in the Diversa proceeding relates to the transfer of Sargon's shareholding in Sequoia Financial Group Limited (the Sequoia shares) to Sargon's subsidiary company SC Australian Holdings 1 Pty Ltd (in liquidation) (receivers and managers appointed) (SCAH1); the subsequent sale of the Sequoia shares by SCAH1 to a third party (Canaccord Genuity (Australia) Limited); and the payment of the proceeds of sale (less certain remuneration and expenses) to Diversa. These events took place against the background of another share purchase agreement involving, amongst other parties, Sargon and Diversa, the details of which need not be surveyed in these reasons. It is sufficient for me to note that, subject to one possible matter, the liquidators' investigations have not disclosed any consideration being provided by either SCAH1 or Diversa to Sargon in respect of its transfer of the Sequoia shares. 7 As it happens, on 2 February 2023, the liquidators of SCAH1 commenced proceeding VID58/2023 in this Court against Diversa seeking, amongst other things, recovery of the proceeds of sale of the Sequoia shares under s 588FF(1)(c) of the Act. Those proceedings are being funded by Taiping. 8 The plaintiffs were not aware of the commencement of proceeding VID58/2023 before 10 February 2023. By the same token, Taiping was not made aware of the commencement of the Diversa proceeding until shortly after it was commenced. That said, Sargon's creditors (including Taiping) had been on notice for a long time, that the commencement of the Diversa proceeding was in the plaintiffs' contemplation. 9 As will be apparent, there is now active competition between the plaintiffs, and the liquidators of SCAH1, to receive the proceeds of sale of the Sequoia shares. 10 The plaintiffs sought funding to enable them to advance their claims against various parties (including their claim against Diversa) for the benefit of Sargon's creditors, and to further their investigations by public examinations. To this end, they advanced a number of funding proposals to Taiping. Their attempts to obtain funding from Taiping were unsuccessful. 11 Although the plaintiffs have not received any funding or funding commitment from any of Sargon's creditors, they have received "interest" from private litigation funders with respect to the claim against Diversa, and a claim against Sargon's directors and former directors for insolvent trading (the insolvent trading claim). I have been informed that if the insolvent trading claim is pursued, it may be made against, amongst others, Mr Andy Wang, Taiping's nominee director to Sargon. 12 On 1 April 2022, the plaintiffs convened a meeting of Sargon's creditors to seek their retrospective approval, purportedly pursuant to s 477(2B) of the Act, to enter into an agreement with ERA Legal for the purpose of undertaking professional services connected to the liquidation of Sargon for the period 22 December 2020 to finalisation of the liquidation. The resolution was passed on 27 May 2022. Taiping attended the meeting and voted in favour of the resolution. There is a question as to whether the creditors can grant retrospective approval under s 477(2B). 13 An important matter of background is the fact that, on 10 March 2023, shortly after the plaintiffs commenced the Diversa proceeding, Taiping's solicitors wrote a letter to the plaintiffs' solicitors which was highly critical of the plaintiffs for bringing that proceeding. The letter made a number of accusations, including an accusation concerning the plaintiffs' motives. The letter also, indirectly, called into question ERA Legal's motives in acting for the plaintiffs in that proceeding. 14 Specifically, the letter accused the plaintiffs of breaching their fiduciary duties to act in the interests of Sargon's creditors (of whom Taiping was one) and not to seek to advance their own financial interests ahead of the creditors. The letter stated that the only inference that could be drawn from the circumstances set out in the letter was that the plaintiffs' intention in pursuing the Diversa proceeding was to obtain recoveries for the benefit of the plaintiffs and ERA Legal, as opposed to Sargon's creditors. 15 The plaintiffs have addressed these criticisms in an affidavit made by the first plaintiff, Andrew McCabe, on 16 March 2023. Tellingly, as I have mentioned, Taiping no longer opposes the relief that the plaintiffs seek. 16 It is appropriate that I should also mention that the letter of 10 March 2023 made clear that the same objection was not made in respect of the plaintiffs' commencement of other proceedings in respect of alleged preferences, being proceeding NSD190/2023 against the KPMG partnership and KPMG Financial Advisory Services (Australia) Pty Ltd (together, KPMG), and proceeding NSD191/2023 against the King & Wood Mallesons partnership (KWM). Part of the relief claimed in the present proceeding is an order that the plaintiffs are justified, and would be acting reasonably, in commencing and continuing those proceedings. 17 However, the letter did draw attention to the fact that, in Taiping's view, the engagement of ERA Legal by the plaintiffs should be the subject of an application under s 477(2B) of the Act. As I have already noted, part of the relief claimed in the present proceeding is an order that the plaintiffs be granted leave, retrospectively, to enter into their agreement with ERA Legal for the purposes of undertaking professional services connected with Sargon's liquidation, for the period 22 December 2020 to finalisation of the liquidation. 18 The letter also expressed Taiping's lack of support for the plaintiffs pursuing the public examinations or advancing claims that might be pursued following those examinations. Part of the relief sought in the present proceeding is an order that the plaintiffs are justified, and would be acting reasonably, in commencing and conducting the examinations.

Relief under s 90-15(1) of the IPS(C) 19 Section 90-15(1) of the IPS(C) provides: (1) The Court may make such orders as it thinks fit in relation to the external administration of a company. 20 Section 90-15(3)(a) gives, as an example of such orders, an order "determining any question arising in the external administration of the company". 21 In Goyal, in the matter of Cape Technologies Pty Ltd (admins apptd) [2021] FCA 1654 (Goyal) I expressed the view (at [18] - [20]) that it was not in doubt that the power under s 90-15(1) of the IPS(C) extended to the giving of judicial advice and directions. However, I also observed that this power is not appropriately exercised where the Court is being asked to do no more than sanction the making and implementation of a business or commercial decision in respect of which no particular legal issue is raised or in respect of which there is no potential to bring into question the propriety or reasonableness of the decision. The plaintiffs advance Goyal as summarising the relevant principles to be applied in the present case. 22 In Goyal, I referred to the following explanation given by Goldberg J in In the matter of Ansett Australia Limited and Korda [2002] FCA 90; 115 FCR 409 at [65] - [66] in relation to the former s 447D(1) of the Act, which conferred the power to give directions. Goldberg J's explanation of that power remains pertinent to the corresponding exercise of power under s 90-15(1) of the IPS(C): 65 This review of the authorities satisfies me that the prevailing principle adopted by the courts, when asked by liquidators and administrators to give directions, is to refrain from doing so where the direction sought relates to the making and implementation of a business or commercial decision, either committed specifically to the liquidator or administrator or well within his or her discretion, in circumstances where there is no particular legal issue raised for consideration or attack on the propriety or reasonableness of the decision in respect of which the directions are sought. There must be something more than the making of a business or commercial decision before a court will give directions in relation to, or approving of, the decision. It may be a legal issue of substance or procedure, it may be an issue of power, propriety or reasonableness, but some issue of this nature is required to be raised. It is insufficient to attract an order giving directions that the liquidator or administrator has a feeling of apprehension or unease about the business decision made and wants reassurance. There must be some issue which arises in relation to the decision. A court should not give its imprimatur to a business decision simply to alleviate a liquidator's or administrator's unease. There must be an issue calling for the exercise of legal judgment. 66 The administrators may be correct in their submission that there is no rule of law and no fixed principle that a consideration of commercial issues is precluded, as the jurisdiction of the Court to give directions under provisions such as ss 447D 479(3) of the Act is discretionary. The exercise of that discretion will vary depending upon the nature and novelty of the matters and issues which are brought before the Court. From time to time, the Court is necessarily drawn into a consideration of commercial issues where there is a matter giving rise not only to the need to make a business or commercial decision, but also to issues of propriety, power, reasonableness of conduct, contested issues of legal principle or procedure or challenges to the decision made by the liquidator or administrator. Such a situation arose, for example in Re Codisco Pty Ltd, Sanderson and Re Addstone Pty Ltd (in liq). Nevertheless, there is the well-established principle to which I have referred, namely that a court will not give directions approving of a commercial or business decision made by a liquidator or administrator where the decision is within the power of the liquidator or administrator, and there is no challenge to it or other issue arising in relation to it such as propriety or reasonableness, or calling for the exercise of legal judgment. 23 In Goyal, I also referred to the following statements by Farrell J in Hill, in the matter of Autocare Services Pty Ltd (admins apptd) [2021] FCA 167 at [42] - [44] as informing the exercise of power under s 90-15(1): 42 Section 90-15(3)(a) confers a broad power on the Court to make "an order determining any question arising in the external administration of the company". Where judicial advice is sought in the context of an administration, the only statutory constraint on the exercise of that power is the need to consider whether or not the provision of that advice advances the objects of Part 5.3A set out in s 435A of the Corporations Act and is not inconsistent with the objects of the IPSC set out in s 1-1(2) with respect to administrations. 43 Courts commonly take some guidance from principles applied to the provision of judicial advice under previous regimes. It is uncontroversial that powers of this kind are intended to facilitate the performance of an external administrator's functions and should be interpreted widely to give effect to that intention where it is advantageous to the administration, but Courts will generally be reluctant to give directions concerning the making or implementation of a business or commercial decision: see In the matter of Octaviar Administration Pty Ltd (in liq) [2017] NSWSC 1556 (Black J) at [9]. Further, the protection afforded by such an order must be predicated on the external administrator having made full and fair disclosure of all relevant facts and circumstances to the Court: see Re Ansett Australia Ltd (No 3) [2002] FCA 90; (2002) 115 FCR 409 at [44] (Goldberg J). 44 Some care should be taken with the application of principles derived from the statutory predecessors of ss 90-15(1) and (3)(a) to ensure that the power conferred by those provisions is not constrained by limitations imposed by no longer enacted requirements. As noted by Gleeson JA in In the matter of Hawden Property Group Pty Ltd (in liq) (ACN 003 528 345) [2018] NSWSC 481; (2018) 125 ACSR 355 at [8], unlike the now repealed ss 479(3) and 511 of the Corporations Act, s 90-15(3)(a) accommodates the determination of substantive rights, provided appropriate notice has been afforded to potentially affected parties. Having said that, as I remarked in GDK Projects Pty Ltd, in the matter of Umberto Pty Ltd (in liq) v Umberto Pty Ltd (in liq) [2018] FCA 541 at [33]: "despite the breadth of s 90-15(1), it is difficult to envisage circumstances where the power would be exercised if the Court could not be satisfied that it would be just and unless the applicant had demonstrated sufficient utility to the external administration". 24 The plaintiffs submit that, in the present case, the relief they seek under s 90-15(1) of the IPS(C) is warranted, given the accusations and other statements made in Taiping's solicitors' letter of 10 March 2023. The letter alleged that, by commencing and pursuing the Diversa proceeding, the plaintiffs were acting improperly, in breach of their fiduciary duties to Sargon's creditors, and Taiping in particular. 25 The plaintiffs submit that this is precisely the type of circumstance in which a liquidator ought be able to proceed, in the interests of all creditors, with their proposed actions in the liquidation without fear of allegations of breach of duty, or of unreasonable or improper conduct (that have been made) where the liquidator's actions are justified. I accept that submission. 26 Further, by the letter of 10 March 2023, Taiping also made clear that "it does not support the pursuit of public examinations or claims that may be pursued by the liquidators following the examinations". The context in which this statement was made suggests more than a mere lack of support. It suggests opposition, possibly extending to a claim of unreasonable or improper conduct on the part of the plaintiffs in conducting their examinations and pursuing claims based on those examinations. 27 Further, although the letter of 10 March 2023 distinguished the preference claims against KPMG and against KWM from the preference claim in the Diversa proceeding, it nevertheless expressed Taiping's lack of support for those proceedings as well. In expressing that lack of support, the letter allied that lack of support, obliquely, to "your clients' and your actions to-date", meaning, respectively, ERA Legal's and the plaintiffs' actions canvassed in the letter. 28 Although, presumably, this reference does not extend to an allegation of breach of fiduciary duty (as with the commencement and pursuit of the Diversa proceeding), it does suggest some unspecified, but nevertheless extant, criticism of the plaintiffs in commencing and pursuing the other two preference proceedings, which Taiping obviously considered worthy of bringing to the plaintiffs' attention in the context of its more serious allegations in respect of the Diversa proceeding. 29 Importantly, none of the allegations made in the letter of 10 March 2023 have been withdrawn, even though Taiping has not chosen to pursue those allegations in this proceeding and, as I have said, no longer presses any objection to the orders that are sought. 30 My assessment of the material before me suggests that the preference claims which the plaintiffs have commenced, and wish to pursue, are not without merit. 31 In his affidavit of 16 March 2023, Mr McCabe deposed to his opinion that: (a) on the basis of his investigations to date, Sargon was likely insolvent from 20 December 2018, and certainly by the date of the transfer of the Sequoia shares to SCAH1 and the receipt by SCAH1 of the proceeds of sale of those shares; (b) at that time, Diversa was an unsecured creditor of Sargon; (c) this transaction resulted in Diversa receiving from Sargon more than Diversa would have received from Sargon if the share transfer and/or Diversa's subsequent receipt of the proceeds of sale were set aside, and Diversa were to prove for the amount of the benefit of the transaction(s) ($4,196,607.32) in Sargon's winding up; (d) so far as Mr McCabe is aware, there is no defence available to Diversa in respect of this claim. 32 With respect to the other preference claims, Mr McCabe deposed that: (a) as stated above, on the basis of his investigations to date, Sargon was likely insolvent from 20 December 2018 and, in any event, by the date that each of the payments were made by Sargon to KPMG and KWM, the subject of those claims; (b) at the time that each of the impugned payments was received, KPMG and KWM were unsecured creditors of Sargon (each having provided professional services to Sargon for reward); (c) the effect of the payments by Sargon was, in Mr McCabe's opinion, that KPMG and KWM received more than they would have received were those transactions to be set aside and KPMG and KWM were to prove in Sargon's winding up; (d) so far as Mr McCabe is aware, there are no defences available to KPMG and KWM in respect of these claims (Mr McCabe having considered whether there may have been any continuing business relationship that may reduce, whether in whole or in part, those claims, and whether any good faith defences may be available). 33 I have been provided with a confidential opinion of counsel, which considers the merits of the claim in the Diversa proceeding. Further, Taiping's funding of proceeding VID58/2023 positively supports the merit of that claim. 34 In relation to the public examinations, Mr McCabe deposed to his belief that there may be a case against Sargon's directors and former directors for insolvent trading based on his provisional view that Sargon was insolvent from 20 December 2018. At this stage, Mr McCabe's review of Sargon's books and records indicate that debts were incurred in the sum of at least $100 million, and possibly as high as $140 million, during the relevant period. It is Mr McCabe's intention to conduct a "first round" of examinations to test the financial position of the directors and former directors who may be subject to the insolvent trading claim, and to ascertain their capacity to meet a judgment debt of the magnitude noted above. Depending on the information that is gathered in that regard, it is Mr McCabe's intention to conduct a more extensive "second round" of examinations to test whether any defences may be available to the directors and former directors. 35 I am satisfied that the relief that the plaintiffs seek under s 90-15(1) of the IPS(C) should be granted, in all the circumstances of the case.

Relief under s 477(2B) of the Act 36 In his affidavit, Mr McCabe deposed that, as at 27 March 2020, he was without funding and that, on or about 29 March 2021, he engaged ERA Legal to assist him in identifying and contacting private litigation funders who may have been interested in funding one or more of the claims. 37 Between 29 March 2021 and around 10 December 2021, Mr McCabe was in contact with, and had a number of meetings with, private funders. It was around December 2021 that he considered it likely that ERA Legal's assistance, in relation to negotiations with private funders, would extend beyond three months. Further, ERA Legal had indicated their willingness to act more broadly for the plaintiffs, on a so-called "speculative" basis, including in relation to public examinations to assist in testing the claim now made in the Diversa proceeding and the prospective insolvent trading claim. 38 On 1 April 2022, the plaintiffs convened a meeting of creditors to approve, retrospectively, the plaintiffs' engagement with ERA Legal. On 27 May 2022, Sargon's creditors passed the following resolution: That creditors retrospectively approve pursuant to section 477(2B) of the Corporations Act 2001 (Cth), Andrew McCabe and Joseph Hayes in their capacity as Joint and Several Liquidators of Sargon Capital Pty Limited (Receivers and Managers Appointed) (In Liquidation), entering into an agreement with ERA Legal for the purposes of undertaking professional services connected to the Liquidation of the Company for the period 22 December 2020 to finalisation of the Liquidation. 39 Section 477(2B) provides: (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. 40 The purpose of the requirement for approval under s 477(2B) is to ensure that the transaction to be entered into is for the proper realisation of the company's assets or to assist in the winding up: Re GA Listing & Maintenance Pty Ltd (1994) 15 ACSR 308 at 311; Hutchison v Hillcrest Litigation Services Ltd [2010] NSWSC 934 at [23]. In Empire (Aust) Nominees Pty Ltd (in liq) v Vince [2000] VSC 324; 35 ACSR 167, Warren J (at [12]) said that the provision is intended to afford some protection against ill-advised or improper actions on the part of a liquidator. 41 There are two matters to note about the application of s 477(2B) in the present case. 42 First, the provision does not empower a company's creditors to grant retrospective approval. However, it is well-established that this Court can grant retrospective approval, in appropriate circumstances: Read, in the matter of Forestview Nominees Pty Ltd; Australian Securities & Investments Commission v Forestview Nominees Pty Ltd ACN 063 440 102 (recs and mgrs. apptd) (in liq) [2007] FCA 1985; 164 FCR 237 at [40]; see also Vickers, in the matter of York Street Mezzanine Pty Ltd (in liq) [2011] FCA 1028; 196 FCR 479 at [27] and the cases there cited. 43 Secondly, the provision is directed to agreements entered into on the company's behalf. It is not directed to agreements entered into by a liquidator on his or her own behalf in respect of which the company does not have status as a party: see, in this connection, the observations of Charlesworth J in Frigger v Kitay (No 2) [2020] FCA 497; 143 ACSR 655 (Frigger) at [47] - [50]; see also the observations of White J in Lewis (liquidator), in the matter of Concrete Supply Pty Ltd (in liq) [2020] FCA 841; 145 ACSR 459 (Lewis) at [17] - [20]. 44 As I have noted above, in the letter of 10 March 2023 Taiping advanced the contention that ERA Legal's retainer by the plaintiffs did require approval under s 477(2B). Indeed, the implicit suggestion in the letter was that the application for approval, which the plaintiffs now make, should be brought. 45 I have been informed that there is no written retainer agreement in respect of the services that have been provided by ERA Legal to date. In those circumstances, it is not clear to me whether the agreement is simply one between the plaintiffs and ERA Legal or one that has been entered into with ERA Legal by the plaintiffs as agents for, and on behalf of, Sargon. There has been no argument on that question and, given the criticism advanced, in this regard, in the letter of 10 March 2023, I propose to proceed on the basis that s 477(2B) does apply. I note that in Frigger and Lewis the same caution was exercised by the Court. 46 Proceeding on that basis, the question is whether approval should be given. In considering that question, I will proceed on the principles summarised in Frigger at [52], namely that: (1) the Court's role is to determine whether the entry into the agreement is a proper or bona fide exercise of the liquidator's powers: 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 (ACN 154 520 199 Pty Ltd) at [22]); (2) the Court is not concerned with matters of commercial judgment, but is concerned that the entry into the agreement is not ill-advised or improper on the part of the liquidator: Re 7 Steel Distribution Pty Limited (in liq) (recs and mgrs apptd) [2013] NSWSC 669 at [17]); (3) the question for the Court is whether the liquidator's judgment had been infected by a lack of good faith, or an error of law or principle, and whether there is a real or substantial ground for doubting the prudence of the liquidators conduct: Pascoe; Re Matrix Group Ltd (in liq) [2011] FCA 1117 (Pascoe) at [14]); (4) the task of the Court is not to reconsider all of the issues which have been weighed up by the liquidator in deciding to enter into the agreement and to substitute its determination for the liquidators, in a hearing de novo, but rather: … simply to review [the agreement], paying due regard to [the liquidator's] commercial judgement and knowledge of all of the circumstances of the liquidation, satisfying itself that 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'. See Stewart, Re Newtronics Pty Ltd [2007] FCA 1375 at [26(4)]); and (5) the Court undertakes something less than a merits review: Pascoe at [7]. 47 On the evidence before me, I accept that entering into an agreement with ERA Legal to provide legal services in respect of Sargon's liquidation is a proper exercise of the plaintiffs' powers. I do not doubt that the plaintiffs require legal assistance. The agreement with ERA Legal is at commercial rates, which do not involve any premium, uplift, or similar increase conditioned on any successful recovery by the plaintiffs. It is an agreement which the creditors have approved, albeit not in a way that satisfies s 477(2B) itself. Further, as I have already noted, the preference proceedings are not without merit, and I have no reason to doubt that the examinations which are to be conducted are for a proper purpose, consistent with the plaintiffs exploring the viability of bringing the insolvent trading claim they believe exists, based on their present investigations. 48 In all the circumstances, approval under s 477(2B) of the Act should be granted.

Costs 49 At the hearing, the plaintiffs sought an order that Taiping pay their (the plaintiffs') costs. After hearing argument on that question, I was not satisfied that such an order was appropriate. I certify that the preceding forty-nine (49) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Yates.

Corporations Act 2001(Cth)ss 436C, 447D, 477, 588FF, 596A, 596B, Sch

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