Matrix Group Ltd (in liq) (Trustee) v Oates, in the matter of Matrix Group Ltd

Terms of Oates funding agreement 43 In the Oates funding agreement, the liquidator is the "Insolvency Practitioner". Matrix is the "Company". Mr Oates is "Oates". 44 Clause 1.1 includes the following relevant definitions: CCL UK Claim means: [T]hat part of the Oates Proceedings that has been filed against the third defendant, the English company Consolidated Capital Limited, including without limitation, the relief sought that any order that money or other property be restored to Matrix (whether pursuant to s 1324 of the Act, s 37A of the Conveyancing Act 1919 (NSW) or otherwise), any order for damages, any order for interest, and/or any order for costs, together with all of its (remaining) right, title and interest in any settlement amount against the third defendant, Consolidated Capital Limited in connection with the Oates Proceedings. Costs means: (a) the reasonable fees and disbursements of the Lawyers including fees and disbursements incurred in connection with the preparation of examination summonses, statements of claim or mediation position papers or the preparation of counsel's written opinion; and (b) the reasonable fees and disbursements of the Insolvency Practitioner. Claims means any claims of the Company and/or Insolvency Practitioner in relation to or connected with the Company, including, for the avoidance of any doubt, from or in connection with the Oates Proceedings. Oates Proceedings means proceedings no 2009/290344 in the Supreme Court of New South Wales. Proceedings means any legal proceedings commenced by the Insolvency Practitioner on behalf of the Company (or in his capacity as liquidator of the Company). Resolution means when all or any part of the Resolution Sum is received or where the Resolution Sum is received in parts, a "Resolution" occurs each time a part is received. Resolution Sum means the amount or amounts of money or the value, or the value of goods, services or benefits, for which any or all claims comprising the Claims are settled, or for which judgment is given, in favour of the Company and/or Insolvency Practitioner, including any interest and including any legal costs paid by any respondent or potential respondent. 45 Clause 6.1 of the Oates funding agreement provides: 6.1 Upon Resolution, the Resolution Sum will be paid in the following order: (a) first, to the Insolvency Practitioner for his fees and disbursements in the winding up of the Company, properly and reasonably incurred to date; (b) second, to Oates: (i) an amount equal to the Costs paid under this agreement and any costs in respect of any application to the court for approval of this Funding Agreement by Oates; and (ii) any amount payable in relation to the CCL UK Claim; (iii) an amount equal to 25% of the balance of the Resolution Sum (excluding the CCL UK Claim), after the payments of the amounts referred to in clause 6.1(a) and 6.1(b)(i); and (c) third, to the Company to be distributed or otherwise dealt with in accordance with the Act. 46 Clause 6.2 provides: The Insolvency Practitioner and the Company hereby disposes and assigns to Oates, as Consideration for the financing of the Claims: (a) that part of the Resolution Sum, after payment of the amount referred to in clause 6.1(a), equal to: (i) the amount referred to in clause 6.1(b)(i); and (ii) the amount referred to in clauses 6.1(b)(ii); and (b) any claims and/or rights to recover that the Company and/or the Insolvency Practitioner has against CCL UK. 47 Clause 7 of the Oates funding agreement is entitled "Right to better any other offer". It provides: 7.1 Following the Examinations the Insolvency Practitioner may, in his sole discretion, commence the Proceedings. 7.2 In the circumstances that the Insolvency Practitioner and/or the Company decide to commence (or take steps to prepare to commence) Proceedings, the Insolvency Practitioner and the Company will invite Oates to submit an offer to fund those Proceedings. 7.3 If, in addition to any offer of funding from Oates, the Insolvency Practitioner or the Company receives an offer of funding for the Proceedings from another party and the Insolvency Practitioner or the Company wishes to accept such offer in preference to Oates' offer, then: (a) the Insolvency Practitioner and the Company must first provide Oates with a summary of the terms of the other offer; (b) Oates will be given 14 days (after Oates is provided with a summary of the terms of the offer pursuant to clause 7.3(a)) within which to revise its offer of funding so as to match or better the substantive terms of the other offer; and (c) if Oates provides a revised offer within the 14 [day] period that matches or betters the substantive terms of the other offer, the Insolvency Practitioner and the Company must accept that offer, subject to approval being obtained for the Insolvency Practitioner to enter into the funding agreement with Oates from the creditors, or pursuant to s 477(2B) of the Act. 7.4 The Insolvency Practitioner and the Company will ensure that insofar as their dealings with any other potential funder are concerned there is no limitation or impediment to their complying with clause 7.3(a) above. 7.5 The Insolvency Practitioner and the Company will require any offer of funding from, and any agreement to fund with, any entity other than Oates, in respect of any claim (forming part of the Claims) to include a term that reflects Oates's entitlements under clause 6.1 in respect of the Resolution Sum concerned, and the Insolvency Practitioner and the Company will not agree to any term that is inconsistent with the entitlements of Oates, under clause 6. 48 Clause 8 provides for the retainer of lawyers to provide "Legal Work" to the liquidator and or the company. Clause 8.2 requires the liquidator to "cause the Lawyers to enter into the Lawyers Terms with Oates" in the same form as the document attached at Schedule 1 to the agreement. The "Lawyers" are defined, relevantly, to include Kemp Strang. 49 Clause 10.2 provides: The Insolvency Practitioner will not cause, permit or assert any charge, lien or other encumbrance or right over or otherwise attaching to the Resolution Sum after the date of this Agreement, except in accordance with the terms of this Agreement or with the prior written consent of Oates. 50 In addition, Mr Oates referred to the following provisions: (1) clause 1.2(o), which provides that each paragraph or sub-paragraph in a list is to be read independently from the others in the list; (2) clause 5.2, which provides: Once the Resolution Sum is received by the Insolvency Practitioner, the Insolvency Practitioner will pay the amount owing to Oates under this Agreement to Oates. (3) clause 6.2(a), which (amended to correct the error identified by Mr Oates) provides: (a) that part of the Resolution Sum, after payment of the amount referred to in clause 6.1(a), equal to: (i) the amount referred to in clause 6.1(b)(i); and (ii) the amount referred to in clause 6.1(b)(iii); … (4) clause 15.1, which provides: The Insolvency Practitioner and Oates will: (a) act in good faith toward each other and be just and faithful in their dealings with each other in all matters arising out of or connected with this Agreement; and (b) save as provided [in] this Agreement, not do or permit to be done anything likely to deprive any party of the benefit for which the party entered this Agreement.

Lawyers terms 51 Mr Oates referred to the following provisions of the "Lawyers terms". (1) Recital B, which provides that the lawyers are aware of the terms of the Oates funding agreement and have agreed to act consistently with its terms; (2) Clause 7.5, which provides: Where the fee cap referred to Clause 3 of the Funding Agreement is reached Oates will not be liable to pay any further fees or disbursements of the Lawyers or Insolvency Practitioner in so far as the subject matter of that fee cap is concerned. (3) Clause 8.1, which provides: The Lawyers agree not to seek payment of any amounts outstanding to them in excess of that for which Oates is liable under these Terms in priority to Oates's entitlements pursuant to the Agreement. and (4) Clause 9.3, which provides: If these Terms are terminated pursuant to either term 9.1 or 9.2, the Lawyers remain liable for obligations under these Terms accrued to the date of termination of their appointment, but thereafter all obligations and entitlements of the Lawyers cease except: (a) the obligations to do those things set out in terms 6 and 7, where the Lawyers are not replaced by other solicitors to provide the Legal Work; and (b) those entitlements under term 6 (in respect of Legal Work up to the date of termination) unless the termination of the Lawyers arises out of professional misconduct or negligence of the Lawyers.

Events following entry into the Oates funding agreement 52 In March 2012, a Registrar of this Court made orders for the examination of nine individuals, including Garrick Hawkins and Scott Tyne, by the liquidator. Mr Hawkins and Mr Tyne are former directors of Matrix. 53 Thereafter, an application was made by four of the proposed examinees (including Mr Hawkins) to discharge the examination summonses. On 28 November 2012, the application was dismissed with costs: Sutherland v Pascoe (No 2) [2012] FCA 1361; (2012) 297 ALR 328. On 18 February 2013, an application for leave to appeal from that decision was dismissed with costs: Sutherland v Pascoe; in the matter of Matrix Group Limited as Trustee for the Matrix Group Unit Trust (in liq) ACN 061 549 371 [2013] FCAFC 15. 54 According to the liquidator, a dispute arose between the liquidator and Mr Oates from around 10 December 2012 in relation to their respective obligations under the Oates funding agreement. According to the liquidator, he ultimately: (1) terminated the Oates funding agreement prior to public examinations of the examinees being conducted; and (2) conducted examinations of six of the examinees over one week in May 2013 at the liquidator's own expense. 55 Mr Oates has asserted, and continues to assert, that the liquidator's termination of the Oates funding agreement was invalid and ineffectual. 56 In May 2015, a judge of the Supreme Court of New South Wales found in Mr Oates's favour in proceedings brought against him by Mr Hawkins and others, and in Mr Oates's favour on a cross-claim against Mr Hawkins: Hawkins v Oates [2015] NSWSC 571. According to the liquidator, an appeal from that judgment did not proceed following a settlement between the parties.

Liquidator's dealings with Harbour 57 On 9 July 2015, the liquidator signed and exchanged a "Letter of Intent - Subject to Contract" dated 3 July 2015 with Harbour. Subsequently, the terms of the letter of intent were adopted for seven separate and additional periods of time by way of seven separate letters. The last of these letters was dated 5 April 2016 with the terms of the letter of intent, as adopted in the 5 April 2016 letter, ultimately ceasing to have effect on 30 April 2016. 58 The letters of intent each contained the following clause: Exclusivity. We are undertaking to expend a significant amount of additional time and money to complete our review of the Claim on the explicit understanding that the Harbour Fund will have a period of two (2) months exclusivity from the date you countersign this Letter in order to allow the Harbour Fund to complete a review of the Claim and decide whether the Claim should be approved for funding (the "Exclusivity Period"). During the Exclusivity Period you will not enter into or continue any existing discussions or otherwise encourage anyone to consider or make an alternative proposal with respect to funding your claim. You agree that breach of this term will render you liable, among other things, to repay the Harbour Fund the Consideration Fee (as set out below). If during the Exclusivity Period we determine that we will not be able to offer you funding for your Claim, we will notify you and the Exclusivity Period will terminate early. 59 Around this time, there was a conversation between Mr Oates and a member of the liquidator's team, Glenn Livingstone, regarding the liquidator's proposed proceedings against Mr Hawkins and others. 60 On 10 July 2015, Henry Davis York, lawyers ("HDY"), then acting for Mr Oates, wrote to Kemp Strang, lawyers, who were then acting for the liquidator, referring to the conversation between Mr Oates and Mr Livingstone. HDY requested information to permit HDY to advise Mr Oates "in relation to the proposed funding of the contemplated proceedings". The letter indicated that Mr Oates sought an opportunity to "further contribute in this matter, including by way of matching any other offers of funding". The letter concluded: This request is made pursuant to the general rule that all significant creditors must be given an opportunity to join in funding recovery claims, the law relating to section 564 of the Corporations Act 2001 and the terms of the Funding Agreement between our respective clients dated 6 September 2011, in particular clauses 7, 9 and 11.2. 61 The liquidator submitted that the Court should infer (from the language of the letter) that, in the conversation which led to the 10 July 2015 letter, Mr Livingstone had made an invitation to Mr Oates to submit an offer to fund proceedings for the purposes of cl 7.2 of the Oates funding agreement. By this time, the liquidator had purported to terminate the Oates funding agreement. In the absence of any specific references to such an invitation in the 10 July 205 letter, or evidence from Mr Livingstone, I do not draw the inference sought by the liquidator. 62 By email dated 6 August 2015, Mark Faraday of Kemp Strang sent a draft "Common Interest & Confidentiality Deed" between Mr Oates and the liquidator to Andrew von Konigsmark of HDY. The recitals to the draft deed recorded, relevantly, that: (1) Matrix wished to obtain funding for and commence certain proposed litigation; (2) Harbour had indicated that it wished to provide litigation funding; (3) the parties to the deed wished to enter into communications relating to the "Approved Purpose"; (4) the purpose of the deed was to facilitate co-operation between the parties in relation to the "Approved Purpose" and acknowledge their common interest in the proposed litigation while, at the same time, preserving the parties' claims to client-legal privilege, or any other privilege, in relation to confidential and privileged information. 63 The "Approved Purpose" was defined to mean: (i) the Parties sharing documents and information with each other, and (ii) the Liquidator and his legal representatives sharing documents and information with Harbour, in respect of a possible new funding agreement or agreements involving the Parties and Harbour, which funding is intended to facilitate Matrix pursuing the Proposed Litigation. 64 On 20 August 2015, Mr von Konigsmark responded to Mr Faraday's 6 August 2015 email. Mr von Konigsmark proposed an alternative confidentiality regime. Thereafter, there was further communication about the basis upon which documents might be shared for the "Approved Purpose", on 25 August 2016 and 3 September 2016. 65 By email dated 14 September 2015, Kathy Merrick of HDY referred to "recent confidential discussions regarding the potential for litigation funding to be provided to the Matrix Liquidators by Harbour". Ms Merrick noted that Mr Oates had not yet read opinions and other documents which had been provided on 8 September 2015. Ms Merrick also noted that Mr Oates had not been provided with a copy of the funding proposal or any proposed funding agreement. Against that background, Ms Merrick stated that Mr Oates wished to put a "compromise… vis-à-vis the funding proposal / proposed funding agreement so as to address and resolve [Mr Oates's] existing funding agreement". A compromise, containing three elements, was set out in Ms Merrick's email. 66 On 17 September 2015, Ms Merrick conveyed to Mr Faraday Mr Oates's consent to provide a copy of the Oates funding agreement to Harbour. 67 By email dated 7 October 2015, Mr Faraday proposed a draft deed of settlement and release between Matrix, the liquidator and Mr Oates. It was a term of the draft deed that Mr Oates expressly consented to Matrix and the liquidator entering into the "HF3 Funding Agreement". The "HF3 Funding Agreement" was defined to mean: [A]n agreement between HF3, the Claimant and the Liquidator in relation to, among other things, the provision of litigation funding to the Claimant by HF3 for the purpose of the Claimant pursuing the Causes of Action against the Defendants in the Proceedings. 68 By email dated 22 October 2015, Mr Faraday sent Mr von Konigsmark and Ms Merrick a "working draft of the Funding Agreement with Harbour", noting that it was "in some respects, still being negotiated". Mr Faraday identified cl 3.1 of the document as the most relevant part of the agreement "so far as Mr Oates is concerned" and stated that he did not expect any change to that clause. 69 By email dated 28 October 2015, Mr Faraday informed Mr von Konigsmark that Harbour was content for the liquidator to provide Mr Oates with a draft funding agreement on certain terms. The proposed provision of the draft funding agreement is discussed in the context of the proposed provision to Harbour of a draft settlement deed between Matrix, the liquidator and Mr Oates. 70 By email dated 2 November 2015, Mr Faraday provided Mr von Konigsmark and Ms Merrick with an un-redacted version of a draft funding agreement between Harbour, Matrix and the liquidator. Mr Faraday noted that the document is in Harbour's standard form, and "in a form that we understand to be agreeable to all parties to it". 71 By email dated 3 December 2015, Mr Oates wrote to Mr Livingstone as follows: As requested by Mark, I confirm that if a suitable third party funder cannot be found, I remain open to funding the proceedings myself pursuant to our funding agreement. 72 There followed, on the liquidator's case, negotiations between the liquidator, Harbour and Mr Oates including a proposal put by Mr Oates on 4 December 2015 to amend the Oates funding agreement on certain terms. 73 On 1 February 2016, the liquidator caused demands to be issued to both Mr Hawkins and Pegela Pty Ltd ("Pegela"), a company controlled by Mr Hawkins. Neither Mr Hawkins nor Pegela has made any payment to Matrix in respect of the demands. 74 By email dated 10 May 2016, Mr Faraday wrote to Ms Merrick on behalf of the plaintiffs and Harbour. Mr Faraday stated, relevantly: As you know, Matrix, the Liquidator and HF3 have been involved in extensive negotiations about the possibility of HF3 funding proceedings by Matrix against Garrick Hawkins and Pegela Pty Ltd and potentially others. Mr Oates has been a party to some of these negotiations but to date, no agreement that is satisfactory to Mr Oates (even in principle) has been reached. Matrix and the Liquidator consider that they are in a position to seek the Court's approval of Matrix's entry into a litigation funding agreement with HF3 pursuant to s 477(2B), irrespective of any rights Mr Oates asserts in respect of the Funding Agreement previously entered into by Matrix, the Liquidator and Mr Oates (Oates Funding Agreement). In this regard, we note that Matrix and the Liquidator assert that the Oates Funding Agreement was validly and effectively terminated and that Mr Oates disputes the validity of the asserted termination. However, in order to facilitate the timely commencement of the contemplated proceedings, Matrix, the Liquidator and HF3 wish to offer to resolve all outstanding and potential disputes between those parties and Mr Oates in respect of the potential funding of the contemplated proceedings by HF3. Attached, as follows, are two sets of documents that represent two separate settlement proposals for Mr Oates, which are put on an alternative basis: 1. Settlement Agreement (Oates Buy Out) and Draft Matrix Funding Agreement (Oates Buy Out) (Document Set 1); and 2. Settlement Agreement (HF3 Release) and Draft Matrix Funding Agreement (HF3 Released by Oates) (Document Set 2). As noted above, Document Set 1 and Document Set 2 comprise two alternative proposed agreements between Matrix, the Liquidator, HF3 and Mr Oates in relation to the funding of the contemplated proceedings by HF3. ... Please note that the two alternative versions of the Harbour Funding Agreement attached to this e-mail contain some minor missing information, such as the schedules and the Automatic Termination Date. None of that information ought to concern Mr Oates. On the basis that any missing information in the draft versions of the Harbour Funding Agreement attached to this e-mail can be completed to the mutual satisfaction of HF3, Matrix and the Liquidator, HF3, Matrix and the Liquidator offer to enter into an agreement with Mr Oates that is constituted by either Document Set 1, or alternatively, Document Set 2. The offer contained in the paragraph above is open for acceptance until close of business on 17 May 2016. If the offer is not accepted by this time, the offer will automatically expire without the requirement for further notice and our client will proceed to seek the Court's approval of Matrix's entry into a funding agreement with Harbour. 75 By email dated 24 May 2016, Ms Merrick responded to Mr Faraday's 10 May 2016 email. Relevantly, she wrote: Given recent events (as to which see below), Mr Oates is now in a position to fund the Proceedings and, pursuant to clause 7 of the Funding Agreement dated 6 September 2011, he hereby offers to match the substantive terms of Harbour's offer, as set out in the Draft Harbour Agreement. Mr Oates' offers, as set out in further detail below, remains open for 14 days. For your information, Mr Oates has recently received payment of $450,251.29 under the settlement agreement with Mr Hawkins, pursuant to the judgment and orders of Rein J dated 15 May 2015. As you know, paragraph 25 of Rein J's judgment stated "I am not persuaded that it was a term of the settlement that Mr Oates would not provide funding to the Liquidator". This is a final determination of the matter given that Mr Hawkins has also recently withdrawn his appeal of the above decision. A summary of the terms of Mr Oates' offer is as follows : … Please confirm your clients' acceptance of above offer pursuant to clause 7.3(c) of the Funding Agreement, which provides that: "if Oates ... matches or betters the substantive terms of the other offer, the Insolvency Practitioner and the Company must accept that offer, subject to approval being obtained ... pursuant to section 477(2B) of the Act". 76 Mr Scruby, counsel for the liquidator, noted that the 24 May 2016 offer was the sole offer made by Mr Oates to fund the proposed proceedings. 77 On 26 May 2016, the liquidator rejected Mr Oates's funding offer. 78 By letter dated 1 June 2016 from Ms Merrick to Mr Faraday, HDY protested against the liquidator's response to Mr Oates' funding offer and confirmed that Mr Oates was ready, willing and able to fund the proposed proceedings. HDY invited the liquidator to reconsider his stated intention of applying to the court in relation to any offer of funding from Harbour. 79 On 21 June 2016, Mr Faraday wrote to Ms Merrick. Mr Faraday's letter stated, relevantly: Your client will shortly receive a Report to Creditors from the Liquidator of Matrix in relation to two litigation funding proposals that the Liquidator has received, namely: • An offer from HF3 LP (HF3); and • A proposal from your client. Our client considers that it is appropriate to seek approval of his and Matrix's entry into the HF3 Funding Agreement for the reasons stated in our previous correspondence and in the Report to Creditors. Unless your client's position changes in relation to the HF3 Funding Agreement, the Liquidator considers that it will likely be appropriate for him to seek Court approval of the HF3 Funding Agreement after the meeting of creditors referred to in the Report to Creditors (creditors' meeting). Whilst the Liquidator reserves all rights as previously noted, if your client wishes to proffer an alternative funding proposal to that of HF3, as described in the Report to Creditors, for consideration at the creditors' meeting, he should do so at least 5 days prior to the creditors' meeting. However, we confirm that the Liquidator will only be content for himself and Matrix to enter into a funding agreement where the Liquidator has no doubts about the ability and intention of the funder to meet all of their obligations under the applicable funding agreement. Therefore, in addition to the terms of any funding proposal your client wishes to proffer and having regard to the previous dealings between our respective clients, the Liquidator would require the following information and evidence from your client in support of any funding proposal: • A copy of a proposed policy of insurance in respect of adverse costs that provides cover of not less than $1.5 million together with details of the price of the policy; • A statement of your client's assets and liabilities together with supporting evidence such as bank statements; • A statement from your client that he would be prepared to deposit the full amount to be funded under his proposed funding agreement in our controlled monies or trust account for the duration of the contemplated proceedings and provide us with an irrevocable instruction to the [sic] apply the funds in accordance with the funding agreement. 80 Also on 21 June 2016, the liquidator published his second report to creditors. The executive summary of the report expressed the view that there is no prospect of a dividend to any class of creditor unless some or all of the causes of action outlined in the report are successfully pursued in court proceedings. The report recorded the liquidator's intention, subject to entering into an appropriate funding agreement, to commence proceedings against Mr Hawkins, Pegela and others. 81 The report described the liquidator's efforts to obtain an offer of funding and informed creditors that the liquidator had received an offer to fund proceedings from Harbour. Annexed to the report is a confidential summary of the key provisions of the proposed funding agreement. The report expressed the liquidator's opinion that it was in the interests of creditors that the liquidator enter into the Harbour funding agreement for reasons set out in the report. 82 The report noted that Mr Oates had very recently offered to fund the proposed proceedings. The report stated that Mr Oates's offer purported to mirror the Harbour offer, but that the liquidator considered Mr Oates's offer to be presently incapable of acceptance and in any event inferior to the Harbour offer for reasons which the liquidator set out in the report. 83 By letter dated 5 July 2016, Ms Merrick replied to Mr Faraday's 21 June 2016 letter. Relevantly, HDY wrote: Our client's offer to fund We note that on 26 May 2016 your clients rejected our client's offer to fund dated 21 May 2016 [sic]. After not hearing from you for almost 3 weeks, our client had assumed that your clients' previous rejection of our client's offer to fund stood, despite our letter of 1 June 2016. It is unreasonable to now write, some 3 weeks after our letter of 1 June 2016, giving our client 8 days to procure an adverse costs policy, especially when: (a) you have not provided us with a copy of Harbour's proposed adverse costs policy, despite our specific requests; and (b) ordinarily the party being funded would work cooperatively with the proposed funder in obtaining an adverse costs policy, with the funded party providing information as necessary to respond to enquiries raised by the proposed insurer. That cooperation has not been made available in the present case. In relation to our client's wherewithal, we have previously offered to provide your client with current bank statements of our client. As stated in our letter of 1 June 2016: "Our client is an Australian citizen with liquid funds in Australia well in excess of the proposed funding amount. Current bank statements that confirm the availability of liquid funds to Mr Oates can be made available to your client on a confidential basis on request". That offer to provide your client with current bank statements of our client stands. If you and your clients are prepared to undertake to treat the information as confidential, we can arrange to have banks statements available for your inspection at our offices at a convenient time. In relation to your client's proposal that our client deposit the full amount to be funded into your controlled monies account or trust account for the duration of the contemplated proceeding, such request exceeds Harbour's offer, and no reasonable justification has been provided for now imposing that additional requirement on our client's offer to fund. Proof of debt For voting purposes only at the creditors' meeting on 6 July 2016, our client relies on his previously lodged proof of debt (in accordance with the statement on page 10 of your clients' Second Report to Creditors dated 21 June 2016 under the heading Meeting of Creditors). Special proxy Please refer to our client's attached signed Form 532 - Appointment of Proxy. For a number of reasons our client is against the proposed resolutions, including because your clients' entry into the proposed funding agreement with HR3 is in breach of the terms of the 2011 funding agreement between our clients, and because the HF3 fund agreement is no more favourable to creditors than our client's funding proposal. 84 Attached to the 5 July 2016 letter was a proxy form signed by Mr Oates and dated 4 July 2016 appointing the Chairman to vote against the four proposed resolutions. 85 In circumstances which are unexplained, on 8 July 2016, Mr Oates gave a further proxy which directed the Chair to vote in favour of four resolutions including the following resolution: To authorise the Liquidator to enter into a funding agreement with HF3, the details of which are contained in the Report to creditors, pursuant to s 477(2B) of the Corporations Act. 86 The proxy contained paragraphs entitled "Reservation of Rights Notice" which stated: The Company and the Liquidator acknowledge that Mr Oates is voting in favour of the above resolutions in his capacity as a creditor of the Company but that he otherwise reserves all of his rights, including in relation to the funding agreement entered into between Mr Oates, the Company and the Liquidator in September 2011. By voting in favour of the above resolutions, Mr Oates does not waive any of his rights under that funding agreement, including in relation to his offer to fund dated 24 May 2016, and nor does he waive any other rights arising under any other applicable law. In the absence of the above acknowledgement being accepted unconditionally by the Company and the Liquidator, Mr Oates special proxy dated 4 July 2016 stands with voting being against the 4 resolutions. 87 On 13 July 2016, the Harbour funding agreement was approved at a meeting of the creditors of Matrix.

Harbour funding agreement 88 The agreement is between Harbour, referred to as "HF3", Matrix, referred to as the "Claimant" and the liquidator, referred to as the "Liquidator". 89 Recital D to the agreement records that the Claimant, the Liquidator and the Legal Representative have entered into the Retainer. 90 Clause 1.1 of the agreement contains the following relevant definitions: "Legal Representative" means Kemp Strang Lawyers, or such other lawyers as appointed from time to time in accordance with cl 6.1(c). "Retainer" means the agreement between the Claimant, the Liquidator and the Legal Representative for the provision of legal services in relation to the Proceedings. "Proceedings" means any legal proceedings (or steps taken in contemplation of legal proceedings) and all forms of alternative dispute resolution issued by or taken over by the Claimant (or any other person who has or may have the Causes of Action) in relation to any of the Causes of Action). "Causes of Action" means each and every claim that the Claimant may seek to assert against the Defendants or any other person, arising out of or related to breaches of fiduciary duty by former directors of the Claimant and/or the receipt of funds or property in connection with the same and includes any statutory, legal or equitable causes of action, whether to be made in Australia or in any other jurisdiction that are or may be vested in the Claimant against the Defendants or any other person. "Defendants" means Mr Garrick Hawkins, Mrs Evelyn Hawkins, Pegela Pty Ltd and any party subsequently joined to the Causes of Action including as co-defendant, additional party, cross-defendant or otherwise. 91 Recital E records Harbour's agreement to pay the "Claimant's Litigation Costs" up to a specified commitment, pursuant to the terms of the agreement. 92 The "Claimant's Litigation Costs" is defined, by cl 1.1, to include "Liquidator's Fees" (being the remuneration of the Liquidator incurred in connection with the Proceedings) up to a maximum amount. Recital F records Matrix's agreement to pay to Harbour from the "Proceeds" certain amounts described as the "HF3 Investment" and "any amount due to HF3 in its capacity as a Trust Beneficiary". 93 Clause 2 of the Harbour funding agreement provides, in full: 2 Conditions Precedent 2.1 This Agreement has no force or effect (other than clauses 2, 7 and 18-28) prior to the following conditions precedent being satisfied or in the case of the condition precedent in clauses 2.1(b), waived by HF3: (a) that HF3 has obtained Adverse Costs Insurance; (b) that HF3 has received a written legal opinion that satisfies HF3 in relation to the merits of the Causes of Action; (c) the Claimant's entry into the Agreement has been approved by the Creditors of the Claimant or the Court; and (d) The Claimant and the Liquidator have either: (i) obtained an acknowledgment by Oates that satisfies each of the parties that no claim will be made by Oates in respect of any of the parties conducting themselves in accordance with this Agreement, including but not limited to the making and/or receipt of payments in accordance with clause 8; or (ii) obtained a direction or order from the Court that satisfies each of the parties that no successful claim can be made by Oates in respect of any of the parties conducting themselves in accordance with this Agreement, including but not limited to the making and/or receipt of payments in accordance with clause 8. 2.2 If the conditions precedent in clause 2.1 have not been satisfied or waived by HF3 prior to the Automatic Termination Date, the Agreement automatically terminates. 94 The "Automatic Termination Date" is 31 December 2016. 95 The conditions precedent in cl 2.1(a), (b) and (c) either have been met or will be met. 96 Clause 8 of the Harbour funding agreement provides: 8 Application of Proceeds and Interim Recoveries 8.1 Proceeds from Success in Proceedings and Interim Recoveries (a) The Claimant authorises the Legal Representative to apply any Proceeds received as a result of Success in the Proceedings and any Interim Recoveries, and which it holds on trust for the benefit of the Trust Beneficiaries, in the following order immediately upon receipt of such Proceeds: (i) deduct all stamp duties, bank charges and currency exchange costs payable by the Claimant relating to or arising out of any such Success in the Proceedings or Interim Recovery; (ii) pay HF3 the HF3 Investment; (iii) pay to HF3 the multiple of the HF3 Investment payable to HF3 in accordance with Schedule 1; (iv) pay the Claimant an amount of $500,000 which the Claimant shall receive in its capacity as Trust Beneficiary to be distributed by the Claimant in accordance with the Corporations Act 2001 (Cth); (v) in the case of Interim Recoveries, retain an amount on trust for HF3 in respect of the Remaining Budgeted Costs; (vi) pay to HF3 the difference between the amount paid to HF3 in 8.1(a)(iii) and the percentage of the Proceeds payable to HF3 in accordance with Schedule 1 where the percentage of the Proceeds payable to HF3 in accordance with Schedule 1 exceeds the amount paid to HF3 under 8.1(a)(iii); (vii) pay to the Claimant any remaining amounts which the Claimant shall receive in its capacity as Trust Beneficiary to be distributed by the Claimant in accordance with the Corporations Act 2001 (Cth). (b) Until such time as all amounts payable to HF3 under this Agreement have been paid, the Claimant shall not be entitled to deduct from Proceeds received as a result of Success in the Proceedings any Taxes incurred by any other party including the Defendants in connection with the Proceedings unless such fees fall within the definition of Claimant's Litigation Costs. Nor shall the Claimant be entitled to apply any set-off in relation to monies owed to the Defendants whether or not owed to the Defendants in relation to the Proceedings. 8.2 Payment of Proceeds and Interim Recoveries The Claimant acknowledges and agrees that Proceeds received as a result of Success in the Proceedings and any Interim Recoveries are to be received by the Legal Representative and held in a designated trust account on bare Trust for the benefit of HF3 and the Claimant and to the extent of their interests as Trust Beneficiaries. 8.3 Third Party Recoveries If, despite clause 8.2, the Claimant receives any Proceeds as a result of Success in the Proceedings or any Interim Recoveries, the Claimant shall pay such sums to be Legal Representative in accordance with clause 8.2 and until so paid, will hold such monies on bare Trust for the benefit of HF3 and the Claimant and to the extent of their interests as Trust Beneficiaries. 97 By cl 1.1: (a) "Proceeds" means any amount of money or the value of any goods, services or benefits, recovered or received by the claimant as a result of Success in the Proceedings and/or Settlement (including the present value of any goods, services or benefits to be paid in the future and the present value of any new commercial arrangements entered into with, or at the direction of, the Claimant or otherwise), including interest and any sums recovered in the Proceedings by way of legal costs and ex gratia payments). Proceeds shall be the gross amount prior to any set-off or counterclaim exercised by the Defendants and prior to any deduction for Tax payable to any Governmental Agency. (b) "Trust" means the trust created under, or referred to in, the applicable provisions of the Harbour funding agreement. 98 Clause 13.1 provides relevantly: In the event that the Claimant: (a) commences or continues with the Proceedings after exercising its rights under clause 5.2 to abandon, withdraw or discontinue the Proceedings after the HF3 Termination Date, Claimant Termination Date or the Discretionary Termination Date (Relevant Date); and (b) subsequently has Success in the Proceedings; the Claimant agrees that: (c) It will hold all Proceeds on Trust absolutely for the benefit of the Claimant and HF3 and to the extent of their interests as Trust Beneficiaries, and such Proceeds will be kept separate from the Claimant's own funds; (d) As the trustee of the Trust, the Claimant will pay to HF3 an amount equal to the HF3 Investment …

Question (a): Would any payments to Harbour under the Harbour funding agreement be "disbursements in the winding up of the Company, properly and reasonably incurred to date" within the meaning of clause 6.1(a) of the Oates funding agreement? 99 As appears from cl 8.1 of the Harbour funding agreement set out above, the payments required to be made to Harbour under the agreement comprise: (1) the "HF3 Investment", being the aggregate amount of the "Claimant's Litigation Costs" that Harbour has paid or incurred; (2) the "multiple of the HF3 Investment", which is an amount calculated in accordance with Schedule 1 to the Harbour funding agreement; (3) the difference between the "multiple of the HF3 Investment" and the percentage of the "Proceeds" payable to Harbour in accordance with Schedule 1 where the percentage of the "Proceeds" payable to Harbour in accordance with Schedule 1 exceeds the "multiple of the HF3 Investment". 100 The payments are required to be made in the order set out in cl 8.1. 101 The liquidator argued that any amounts payable to Harbour under the Harbour funding agreement can be accommodated within the terms of cl 6.1(a) of the Oates funding agreement because they would be "disbursements" within the meaning of that clause.

Mr Oates's submissions 102 Mr Oates did not contest the general proposition that a liquidator of a company which is the trustee of a trading trust and has no other activities is entitled to be paid their costs and expenses for administering the trust assets out of the trust assets: cf Re Independent Contract Services (Aust) Pty Ltd (in liq) (No 2) [2016] NSWSC 106; (2016) 305 FLR 222 at [27], citing Alphena Pty Ltd (in liq) v PS Securities Pty Ltd atf Joseph Family Trust [2013] NSWSC 447; (2013) 94 ACSR 160; In the matter of AAA Financial Intelligence Ltd (in liquidation) ACN 093 616 445 [2014] NSWSC 1004 at [13]; Bastion v Gideon Investments (No 2) [2000] NSWSC 959; (2000) 35 ACSR 466 at [70]. 103 Nor did he appear to dispute that the costs of realising an asset in the form of the proposed proceedings, including the costs of funding the proceedings may be expenses properly incurred by a liquidator in the course of winding up a trustee company: cf IMF (Australia) Ltd v Meadow Springs Fairway Resort Ltd (in Liquidation) [2009] FCAFC 9; (2009) 253 ALR 240 at [73] and [80]. 104 Mr Oates's contention was that the word "disbursements" in cl 6.1(a) is not co-extensive with expenses but, rather, refers to that sub-set of expenses which have been paid by the liquidator. In support of his argument, Mr Oates contended that the relevant "disbursements" must be different in character from the liabilities that are the subject of cl 6.1(b) being the funding costs incurred by the liquidator to Mr Oates himself. 105 Mr Oates contended that the word "disbursements" should be given its ordinary meaning which, he contended, is "the payment of money from a fund". Mr Oates did not identify what expenses, if any, are "disbursements" within the meaning in cl 6.1(a) or any particular fund from which disbursements would have been paid or would be paid. However, Mr Oates specifically rejected the proposition that any liability or payment to a third party funder could be a relevant disbursement. 106 Beyond the language of the Oates funding agreement, Mr Oates referred to the Code of Professional Practice for Insolvency Practitioners, 3rd edition, published by the Insolvency Practitioners Association of Australia ("Code of Practice"). Section 14.10 of the Code concerns disbursements. Section 14.10.1 provides: What is a Disbursement? The Practitioner needs to determine whether the claim for payment is in the nature of a Disbursement, or whether it represents remuneration. Disbursements are: • costs paid from the Administration's bank account directly to third parties; or • costs paid to third parties by the Practitioner and later claimed back from the Administration; or • costs claimed by the Practitioner for non-professional services provided by the Firm and/or outlays incurred by their staff in the proper conduct of the Administration. 107 Mr Oates also drew attention to the fact that cl 8 of the Harbour funding agreement is expressed as an authorisation by Matrix directed to the "Legal Representative" to apply monies "which it holds on trust for the benefit of the Trust Beneficiaries". This trust is created pursuant to cl 8.2 of the Harbour funding agreement. 108 Mr Oates's contention was that the payment obligation to Harbour was incurred by Matrix and not the liquidator, referring to cll 8 and 13.1(d) of the Harbour funding agreement, and, accordingly, cannot be a disbursement of the liquidator.

Liquidator's submissions 109 The liquidator referred to circumstances, particularly in the context of provision of legal services, in which the word "disbursements" has been construed to include unpaid liabilities. 110 An example given was Lewis v Doran [2008] NSWSC 186 ("Lewis v Doran"). In that case, the Court considered whether an expense calculated by reference to an hourly rate for the defendant's substantial activities in preparing for the successful defence of claims against him was capable of being a disbursement within the meaning of s 4(1) of the Legal Profession Act 2004 (NSW). At [48], Hammershlag J identified the following principle: [T]raditionally, disbursements have been either payments made, or liabilities incurred, by a practitioner acting for the party in whose favour a costs order is made which the practitioner is bound to pay, or payments which by established custom or practice of the profession the practitioner is bound to pay: Re Remnant [1849] EngR 776; (1849) 50 ER 949; Ly v Jenkins [[2001] FCA 1640] at 247. Such disbursements can include witnesses' expenses: Re Felton [(1942) 60 WN (NSW) 16] at 16; 111 The liquidator referred only to the general principle stated by Hammershlag J in the passage above. However, it may be relevant to consider Hammershlag J's reasoning. His Honour rejected the submission that the proposed claims were disbursements within the meaning of s 4(1) of the Legal Profession Act, saying (at [53]-[55]): The term "disbursements" in the definition in s 4(1) of the Act is a term of expansion intended to comprehend amounts payable, or which may become payable, to the law practice beyond amounts only for the provision of legal services. However, it remains a requirement that those disbursements actually be or potentially be charged for, or be or become a liability to the law practice. Section 364 of the Act is not intended to govern the assessment process in respect of costs which fall within an order but are not "legal costs" within the definition of s 4(1). The assessment process for those costs is governed by s 367A of the Act. The proposed claims which are the subject of Mr Doran's affidavit evidence, and the terms of the principal declaration sought which the evidence of Mr Doran is intended to sustain, do not have the quality of amounts having been charged for and they do not appear to me to be susceptible to being charged for by the solicitor so as to become a liability of the defendants to him. 112 The liquidator also referred to Ly v Jenkins [2001] FCA 1640 ("Ly v Jenkins") at [27], where Moore J stated: Traditionally, disbursements have been either payments made or liabilities incurred by the practitioner (representing the party in whose favour the costs order is made) which the practitioner is bound to pay or payments which, by established custom and practice of the profession, the practitioner is bound to pay: see Re Remnant [1849] EngR 776; (1849) 11 Beav 603 and Browne v Barber [1913] 2 KB 553. Such disbursements can include witnesses' expenses: see Re Felton (1942) 60 WN (NSW) 16. 113 In that case, the question was whether witnesses' expenses could be included in a costs order made by a magistrate following a conviction on a prosecution conducted by a police prosecutor. 114 The liquidator drew attention to r 40.18 of the Federal Court Rules 2011, which recognises that "disbursements incurred" may include unpaid disbursements. 115 The liquidator submitted that a construction of "disbursements" that was confined to payments actually made would result in making a distinction that would serve no identifiable commercial purpose and work commercial inconvenience. The liquidator gave the following example: assume that during the proposed proceedings, the defendants made a without prejudice offer that was open for acceptance for 24 hours (or some other relatively short period). A construction of "disbursements" confined to actual payments could make consideration and acceptance of such an offer difficult for the liquidator in circumstances where he had large unpaid liabilities to solicitors and counsel. Further, the liquidator argued, this example illustrates that a construction of "disbursements" confined to amounts paid would make the question of what expenses were captured by cl 6.1(a) a matter that was determined by factors outside the parties' control. That was said to be a highly unlikely result and one which would work commercial inconvenience. 116 The liquidator noted that the Oates funding agreement provided funding only for examinations under s 596A and s 596B of the Act. It did not oblige Mr Oates to fund legal proceedings and, in cl 7, expressly contemplates that third party funding for such proceedings might be required. I accept the liquidator's submission that the parties must have recognised that, in order for any money to be realised for the benefit of any party or creditors, it (a) would probably be necessary to commence legal proceedings after the examinations; and (b) may be necessary to seek third party funding for those proceedings. 117 It may be correct, as the liquidator submitted, that a third party funder would be less likely (or even far less likely) to fund the proceedings if it had to do so on terms that Mr Oates's entitlement to a percentage share of recoveries took priority. The liquidator argued that an obstacle to attracting third party funding in circumstances where Mr Oates was not prepared to fund would be a highly commercially inconvenient result for both parties. 118 In oral submissions on behalf of the liquidator, Mr Scruby submitted that the payments required by cl 8.1 are, in substance, liabilities incurred by the liquidator. Mr Scruby referred to Liberty Industrial Pty Ltd v Donald McArthy Trading Australia Pty Ltd [2013] NSWSC 443; (2013) 276 FLR 121 ("Liberty Industrial"), in which Black J held that costs ordered against a company in liquidation were expenses properly incurred by the liquidator in carrying on the company's business within the meaning of s 556(1)(a) of the Act. Similarly, in Lofthouse, in the matter of Riverside Nursing Care Pty Ltd (subject to deed of company arrangement) [2004] FCA 93; (2004) 22 ACLC 215 ("Lofthouse") at [28], Finkelstein J held that costs ordered against a company in a proceeding which is begun or defended on the instruction of the administrator are properly characterised as costs incurred by the administrator. 119 Mr Scruby argued that, by analogy with those cases, it is only the liquidator who can bring about the payments under cl 8.1 and they are therefore the liquidator's disbursements within the meaning of cl 6.1(a).

Consideration 120 In Mount Bruce Mining Pty Limited v Wright Prospecting Pty Limited [2015] HCA 37; (2015) 256 CLR 104, French CJ, Nettle and Gordon JJ summarised the principles relevant to the interpretation of a commercial contract, of which the Oates funding agreement is an example, as follows (at [46] to [51]): The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose. In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract. Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning. However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating". It may be necessary in determining the proper construction where there is a constructional choice. The question whether events, circumstances and things external to the contract may be resorted to, in order to identify the existence of a constructional choice, does not arise in these appeals. Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties' statements and actions reflecting their actual intentions and expectations. Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption "that the parties ... intended to produce a commercial result". Put another way, a commercial contract should be construed so as to avoid it "making commercial nonsense or working commercial inconvenience". These observations are not intended to state any departure from the law as set out in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales and Electricity Generation Corporation v Woodside Energy Ltd.(footnotes omitted). 121 The word "disbursements" is not defined in the Oates funding agreement. Apart from cl 6.1(a), it is also used in the definition of "Costs". In that context "disbursements" of the lawyers include disbursements "incurred in connection with the preparation of examination summonses, statements of claim or mediation position papers or the preparation of counsel's written opinion". In my view, that reference does not assist in determining the scope of "disbursements" in cl 6.1(a), beyond indicating that the parties agreed that the identified matters are "disbursements", at least for the purpose of the definition of "Costs". 122 The Macquarie Dictionary defines "disbursement", relevantly to mean: "2. that which is disbursed; money expended". 123 The Oxford English Dictionary defines "disbursement", relevantly, in similar terms, as follows: "2. That which has been disbursed; money paid out; expenditure". 124 I accept the liquidator's submission that, as a matter of language, the word "disbursement" is capable of referring to liabilities incurred but not paid. However, in my view, that is not sufficient to produce the result that payments of the kind contemplated by cl 8 of the Harbour funding agreement are "disbursements" within the meaning of cl 6.1(a) of the Oates funding agreement. 125 Clause 7.5 of the Oates funding agreement explicitly contemplates the prospect that there will be a funder other than Mr Oates for the proposed proceeding. In that context, if it was intended that "disbursements" would include liabilities to a third party funder, in my view, the Oates funding agreement would have said so. I do not accept that it is necessary to interpret "disbursements" in the manner proposed by the liquidators in order to avoid it making commercial nonsense or working commercial inconvenience. Nor do I accept that it is necessary to produce a commercial result. In my view, one of the objects secured by the Oates funding agreement was Mr Oates's entitlement to a share of the "Resolution Sum" payable next after the payment to the liquidator of his fees and disbursements in the winding up. The priorities in cl 6.1 are not inconsistent with the general rule that the expenses of the administration will be paid from the trust assets, or with the Universal Distributing principle (from In Re Universal Distributing Company Limited (in liquidation) [1933] HCA 2; (1933) 48 CLR 171). Rather, they provide explicitly for priority payment of three elements of those expenses, being the liquidator's fees, disbursements and Mr Oates' entitlements under cl 6.1(b). 126 I accept Mr Oates's argument that the language of cl 6.1 draws a distinction between "disbursements", which are the subject of c. 6.1(a) and other costs of funding the winding up, which are the subject of cl 6.1(b). 127 Mr Oates' interpretation gives ample meaning to "disbursements" in cl 6.1(a), including the kinds of expenses which are identified as disbursements in the Code of Practice. For example, in In the matter of AAA Financial Intelligence Ltd (in liquidation) ACN 093 616 445 (No 2) [2014] NSWSC 1270 ("AAT Financial Intelligence"), Brereton J considered that the liquidator of a trustee company was justified in distributing trust assets in payment of disbursements comprising paid legal costs, commission management fees and debt collection costs. 128 The cases of Liberty Industrial and Lofthouse illustrate that there may be expenses incurred by a liquidator in a winding up that are not aptly described as "disbursements". Thus, in AAT Financial Intelligence, Brereton J drew a distinction between the disbursements identified above and the payment of costs incurred in connection with the proceeding. 129 To the extent that Mr Oates's entitlements operate as an obstacle to obtaining further funding, in my view, that is a matter that has been left by the Oates funding agreement for future negotiation between the parties. It does not compel an interpretation of "disbursements" that would subordinate Mr Oates's entitlements to whatever funding arrangements might subsequently be secured. 130 Nor does Mr Oates's interpretation require a conclusion that other unpaid liabilities of the liquidator, which might include legal costs, cannot fall within the meaning of "disbursements": cf Lewis v Doran at [48]; Ly v Jenkins at [27]; Federal Court Rules 2011 r 40.18(a) and (b).

Disbursements incurred "to date" 131 The liquidator made written submissions, in anticipation that Mr Oates would submit that the words "to date" in cl 6.1(a) mean "to the date of the Oates Agreement". The plaintiffs submitted that the words "to date" mean "to the date of payment of the Resolution Sum". 132 Mr Oates did not make this submission, rather, he accepted that "to date" in this context meant "to the date of payment of the Resolution Sum". To the extent that it is necessary to deal with it, I accept the liquidator's submission that there are several other provisions indicating that the parties referred to "the date of this Agreement" to signify the date on which the Oates Agreement was made: see cll 10.1, 10.2, 11.1 and 11.2 contain warranties "as at the date of this Agreement". Further, the date of execution of the Oates funding agreement is a defined term in that agreement. "Date of Commencement" is defined in cl 1.1 to mean "the date set out above which is the date this Agreement is signed by the parties". Clause 12.1 provides that the agreement commences on the Date of Commencement. 133 I accept that, had the parties intended that the fees and disbursements to which cl 6.1(a) applied be limited to those incurred up until the date of the Oates funding agreement, they would have either used the defined term Date of Commencement or the language in cl 10.1, 10.2, 11.1 and 11.2. Instead, they used the open ended expression "to date", indicating that they were referring to a date in the future not then known, namely the time of payment of the Resolution Sum.

Conclusion 134 For the reasons given above, I am not satisfied that payments made to Harbour under cl 8.1 of the Harbour funding agreement would be "disbursements in the winding up of the Company, properly and reasonably incurred to date" within the meaning of clause 6.1(a) of the Oates funding agreement.

Question (b): Is any term of the Harbour funding agreement inconsistent with any entitlement of Mr Oates under cl 6.1 of the Oates funding agreement? 135 It follows from the reasons set out above that cl 8.1 of the Harbour funding agreement is inconsistent with Mr Oates' entitlements under cl 6.1 of the Oates funding agreement because it provides for payments that do not fall within the scope of cl 6.1(a) ahead of the payments required to be made to Mr Oates under cl 6.1(b).

Question (c): Have plaintiffs breached clause 7 of the Oates funding agreement, by entering into the Harbour funding agreement or the agreement referred to as the "Letters of Intent"? 136 Mr Oates put two arguments. The first was that the plaintiffs breached cl 7.3 by rejecting Mr Oates' matching offer to fund and instead (or subsequently) proceeding with the Harbour funding agreement. For the reasons given below, I reject that contention. 137 Secondly, Mr Oates contended that entry into the Harbour funding agreement was in breach of cl 7.5 of the Oates funding agreement because the agreement does not: (1) include a term that reflects Mr Oates's "entitlements under cl 6.1 in respect of the Resolution Sum concerned", and (2) contains terms that are inconsistent with his entitlements under cl 6. 138 The liquidator acknowledged that the Harbour funding agreement does not contain any express term referring to Mr Oates' entitlements under cl 6.1. On his behalf, it was submitted that cl 7.5 does not require the inclusion of an express term. Rather, it was said to be sufficient that the Harbour funding agreement "reflects" Mr Oates's entitlements because it provides for a sum to be paid to Matrix on which there are no restrictions preventing it from being paid to Mr Oates. 139 I do not accept the liquidator's construction of cl 7.5 on this point, which would make the first part of cl 7.5 redundant. In my view, cl 7.5 should be construed as imposing two separate requirements, namely: (1) the inclusion of a term that reflects Mr Oates's entitlements under cl 6.1; and (2) no agreement to any term that is inconsistent with the entitlements of Mr Oates, under cl 6. 140 In my view, the words "include" and "reflects" indicate that the former requirement involves an express provision that identifies Mr Oates's entitlements. In the absence of such a provision, entry into the Harbour funding agreement involved a breach of the first requirement of cl 7.5. 141 As to the second requirement of cl 7.5, for the reasons given above, it was breached by the plaintiffs' agreement to cl 8.1, being a term that is inconsistent with Mr Oates's entitlements under cl 6. 142 In his submissions, Mr Oates referred to the restriction on the imposition of a charge over the "Resolution Sum" in cl 10.2 of the Oates funding agreement. In my view, the Harbour funding agreement is inconsistent with that provision to the extent that it provides for the imposition of a trust on the "Proceeds". 143 Mr Oates ultimately did not make any specific submissions concerning the letters of intent. I do not accept that the mere acceptance of the letters of intent involved any breach of cl 7.

Question (d): Has Mr Oates made an offer that the plaintiffs were required to accept? 144 The fourth separate question is whether Mr Oates has made any offer that the plaintiffs were required to accept (subject to the approvals referred to in cl 7.3(c)), under cl 7.3 of the Oates funding agreement. 145 The offer which Mr Oates relied on was the offer made on 24 May 2016. Mr Oates argued that his offer matched or bettered the substantive terms of an offer of funding that the plaintiffs wished to accept, being an offer in the terms of the draft funding agreement that formed part of "Document Set 1" attached to Mr Faraday's 10 May 2016. 146 I do not accept that Mr Oates's 24 May 2016 was an offer that the plaintiffs were required to accept under cl 7.3 for the following reasons: (1) the circumstances in which cl 7.3 would operate had not arisen at the time of the 24 May 2016 offer. In particular, there had been no invitation to Mr Oates to submit an offer to fund the proposed proceedings in accordance with cl 7.2 and there had been no offer of funding from Mr Oates of the kind contemplated by the introductory words of cl 7.3; (2) further, there is no evidence that the plaintiffs had received an offer of funding for the proposed proceedings on the terms of the draft funding agreement that formed part of "Document Set 1" attached to Mr Faraday's 10 May 2016 email. The most that can be inferred from that email is that Harbour had made an offer of funding on terms that included the terms of the "Settlement Agreement (Buy Out)" between the plaintiffs, Mr Oates and Harbour. Mr Oates did not point to any evidence that Harbour had made an offer to fund the proposed proceedings on the terms set out in the "Draft Funding Agreement (Buy Out)" regardless of whether Mr Oates agreed to the accompanying settlement agreement; (3) accordingly, the 24 May 2016 offer was not an offer that matched or bettered the substantive terms of any offer by Harbour. 147 The liquidator submitted that, by his vote at the meeting of creditors on 13 July 2016, Mr Oates irrevocably elected not to pursue any rights he had to require the liquidator to accept his 24 May 2016 offer. As I have found that Mr Oates had no such rights, it is unnecessary to consider this submission. In submissions, Mr Scruby acknowledged that any waver would not extend to any right that Mr Oates might have to sue for damages for breach of the Oates funding agreement. 148 The liquidator did not submit that Mr Oates' vote effected a waiver of Mr Oates' rights under cl 7.5.

Conclusions 149 I will not make declarations in the form sought by Mr Oates because they pre-suppose the continuing operation of the Oates funding agreement, which is disputed. 150 For the reasons given above, I will refuse to make orders in accordance with paras 1, 2 and 3(a) and (b) of the further amended originating process, or declarations to that effect. 151 As to para 3(c) of the further amended originating process, I have found that Mr Oates has not made any offer that the plaintiffs were required to accept under cl 7.3 of the Oates funding agreement, assuming that agreement still to be effective. I am not satisfied that there is utility in making a direction to the effect sought by para 3(c) where I have refused to make the declaration sought by prayer 1D of Mr Oates's "Notice of further amended order 1 of cross-claim". Accordingly, I will not make a direction of the kind sought by para 3(c), or a declaration to that effect. 152 As to para 5 of the further amended originating process, in my view, the liquidator was justified in entering into the Harbour funding agreement because that act was authorised by the creditors of Matrix, including Mr Oates. In my view, the agreement's inconsistencies with the Oates funding agreement do not preclude a conclusion that the liquidator was so justified when Mr Oates gave his authorisation knowing of those inconsistencies. There are separate questions whether, in the event that the Oates funding agreement has not been terminated, Mr Oates has a right to damages for breach of the Oates funding agreement or a right to relief arising out of the assignment in cl 6.2 of the Oates funding agreement. In those circumstances, I would not give a direction in the form sought by para 5 without an undertaking from the liquidator 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. 153 I will make directions for the provision of written submissions on the question of whether any further orders should be made to give effect to these reasons and on costs. I certify that the preceding one hundred and fifty-three (153) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gleeson.

Associate: Dated: 13 December 2016 SCHEDULE OF PARTIES NSD 1507 of 2016 Cross-Respondents Third Cross-Respondent THE PARTNERS OF KEMP STRANG