Plaintiff v Defendants

(a) leave to settle this proceeding on the terms set out in the deed of settlement and release dated 20 January 2026 (Settlement Deed); and

(b) confidentiality orders in respect of some of the materials relied upon for this application for leave.

1. This proceeding was commenced by writ and statement of claim on 8 December 2022[1] on behalf of Barokes after Daiwa Can Company (Daiwa Can) successfully sought derivative leave under the Court's inherent jurisdiction to commence this proceeding in Barokes' name.[2] Daiwa Can is a 60% shareholder and 89.75% creditor of Barokes.
2. The Application was heard on 10 February 2026. Counsel for both parties attended the hearing and made submissions. Creditors of Barokes were given notice of the Application and of the hearing, however none attended the hearing or sought to be heard on the summons.
3. At the conclusion of the hearing, I made the orders sought by the plaintiff granting leave to settle the proceeding, along with other consequent orders, including in respect of confidentiality. I indicated that I would publish my reasons in due course. These are those reasons.

1. On 19 December 2018, James Koutsoukos and David Coyne were appointed as liquidators of Barokes after it was wound up on the just and equitable ground pursuant to s 461(1)(k) of the Corporations Act 2001 (Cth) (Corporations Act). Mr Koutsoukos resigned as a liquidator of Barokes in November 2020, and since that time Mr Coyne has been (and remains) the sole liquidator of Barokes.
2. Prior to its liquidation, Barokes was in the business of producing and marketing canned wine.
3. On 22 November 2022, Daiwa Can was granted derivative leave to bring this proceeding against Mr Koutsoukos and Mr Coyne.[3] The application for derivative leave was made in the Court's inherent jurisdiction. Daiwa Can gave an undertaking to pay Barokes' costs of the leave proceeding and to indemnify Barokes in respect of any liability for costs and expenses ordered against it in this proceeding. Daiwa Can also provided security for that undertaking in the sum of $149,820.
4. In this proceeding, Barokes alleges that the liquidators[4] breached their duties under s 180 of the Corporations Act and at general law when conducting the sale of Barokes' assets. Barokes alleges that the liquidators failed to obtain any value for the foreign patent litigation in Japan and China in which Daiwa Can, or its trading partners, had an interest. Barokes contends that this demonstrates that Daiwa Can would have been willing to purchase the claims from Barokes during the sales process.
5. Barokes sought damages in this proceeding in the range of $500,000 to c.$8 million (plus interests and costs) and in the alternative, damages for loss of opportunity.
6. The liquidators have denied, and continue to deny, that they breached their duties and that Barokes is entitled to the relief sought. The liquidators have also put forward various positive defences.
7. This proceeding was fixed for trial before Attiwill J on an estimate of 10 days commencing on 2 March 2026. A mediation was held on 13 June 2024, which was unsuccessful, but a settlement conference took place between the parties and their solicitors on 17 December 2025, following which Barokes, the defendants and Daiwa Can entered into the Settlement Deed.

1. In support of its Application, the plaintiff relies upon the affidavits of Mr Timothy Randolph Price, a solicitor at YPOL Lawyers sworn on 20 January 2026, 3 February 2026 and 9 February 2026, and its written submissions dated 3 February 2026. YPOL Lawyers are the solicitors for Barokes in this proceeding.
2. The defendants rely upon the affidavit of the second defendant, Mr Coyne, affirmed on 5 February 2026. Amongst other matters, Mr Coyne deposes to the notification he caused to be sent to Barokes' creditors notifying them about the settlement reached between the parties in this proceeding and of the hearing of this Application scheduled for 10 February 2026.

A.3 Issues requiring determination in the Application

1. The following issues require determination in considering the Application:

(a) Is leave of the Court required to settle a derivative proceeding commenced under the Court's inherent jurisdiction?

(b) If leave to settle this proceeding is required, what principles should be applied?

(c) Should leave to settle the proceeding be granted in this case?

B Is leave of the Court required to settle derivative proceedings initiated under the Court's inherent jurisdiction?

1. Where derivative leave is obtained under Part 2F.1A of the Corporations Act to bring proceedings on behalf of a company, s 240 of the Corporations Act requires leave to also be sought from the Court where the parties want to discontinue, compromise or settle the proceedings.
2. Derivative leave to bring this proceeding was sought and granted under the Court's inherent jurisdiction as Barokes was in liquidation, and Part 2F.1A of the Corporations Act does not apply to companies in liquidation.[5] It is well established that the Court has inherent jurisdiction to grant derivative leave for an appropriate person to bring proceedings on behalf of a company in liquidation.[6]
3. In this Application, a question arises as to whether the parties require the Court's leave to settle this proceeding, where the proceeding has been brought pursuant to derivative leave granted under the Court's inherent jurisdiction. Both counsel who appeared on this Application stated that they had not been able to locate any authorities where leave has been sought to settle derivative proceedings brought in the Court's inherent jurisdiction. My associates and I have also been unable to find any such authorities.
4. In Carpenter v Pioneer Park Pty Ltd (in liq),[7] derivative leave was sought under the Corporations Act to bring proceedings on behalf of a company in liquidation.[8] Although Barrett J did not have to deal with the issue, his Honour said that the prospect of leave being sought to settle a derivative proceeding in the Court's inherent jurisdiction is something which the Court can require when it initially grants leave for a person to bring an action on behalf of a company. His Honour said that: [9]

This provision [s 240] provides a sufficient safeguard. If Mr Carpenter sought leave to enter into a compromise or settlement on behalf of the company, the court might well consider it appropriate that the liquidator have an opportunity to make submissions on the question whether leave should be granted. Section 240 does not apply, of course, where a creditor or contributory sues in the name of a company in liquidation, exercising leave granted by the court pursuant to its inherent power. But the court, in granting leave, can impose a term to the same effect.

(emphasis added)

1. In this case, no such order was sought or made when Attiwill J granted derivative leave to Daiwa Can.
2. The plaintiff submits, and the defendants accept, that leave to settle the proceeding is required here due to the terms of the Derivative Leave Order. Relevantly, the order made was that 'leave is granted to [Daiwa Can] to commence proceedings in the name of the third defendant ...' (emphasis added). I agree with that submission. Leave to 'commence' a proceeding is highly likely to include matters such as 'conducting' the proceeding once it has been commenced, as otherwise the grant of leave would have little practical utility. However, whether leave to 'commence' a proceeding extends to 'settling' the proceeding is not clear. Given the terms of the Derivative Leave Order, I think the better view is that leave is required to settle the proceeding.
3. The plaintiff's submissions go further than this. It submits that leave to settle the proceeding should be obtained for two additional reasons:

(a) The rationale for the requirement for leave to settle, where derivative leave was obtained under Part 2F.1A, is said by the learned authors of Austin & Black's Annotated Corporations Act to be that 'by granting leave, the court has, in a sense, undertaken supervision of the proceedings'.[10]

(b) It is a bespoke feature of this proceeding that the liquidators, who would ordinarily represent the interests of Barokes' body of creditors, are defendants to this proceeding personally. They understandably have an interest in this proceeding being settled. Mr Coyne (since he is now the sole liquidator of Barokes) may therefore be unable to, or may appear unable to, impartially consider the interests of Barokes' creditors as a whole in connection with the settlement of the proceeding against him. To that end, an application for leave to settle the proceeding plays the role of providing an opportunity for individual creditors to apply to be heard if they wish to do so. I note that in making this submission, the plaintiff was not making any criticism of the liquidator.

1. I agree with the submission referred to at paragraph 22(a) above. I see no appreciable difference between the Court's role in determining whether leave to settle a proceeding should be given based on whether the derivative leave was granted pursuant to the Corporations Act or under its inherent jurisdiction.
2. Insofar as the submission referred to at paragraph 22(b) is concerned, I would express it differently. It seems to me that where the liquidator of the plaintiff company is a defendant to the proceeding, the liquidator is placed in a somewhat difficult position so far as aspects of the litigation are concerned. A court-appointed liquidator, as the liquidators here were, has duties to the court as an officer of the court, and the liquidator also has duties to the company and its creditors, amongst other matters. I have no doubt that a liquidator who is also a defendant to a proceeding brought by the company in respect of which they are the liquidator would do their best to meet all of their duties. In this regard, I note that it is commonly accepted that leave is required to settle derivative proceedings brought under the Corporations Act so as to:

ensure that the court[s] have the opportunity to prevent any collusion between the plaintiff and defendant in the particular circumstances, and ... to oversee the question whether the proposed resolution is in the best interests of the company.[11]

1. In my view, this rationale applies equally to derivative proceedings brought pursuant to the Court's inherent jurisdiction.
2. Such an approach is consistent with the principles applicable when granting derivative leave in the Court's inherent jurisdiction in the first place.[12] As was noted by Lyons J (as his Honour then was) in El-Saafin, the inherent jurisdiction to grant leave for an appropriate person to bring proceedings on behalf of a company in liquidation arises from the Court's jurisdiction over liquidators and survives the enactment of Part 2F.1A of the Corporations Act.[13]
3. Echoing Barrett J in Carpenter v Pioneer Park, Lyons J went on to identify three principal factors identified by the authorities when considering whether the jurisdiction should be exercised. These three principal factors are:[14]

(1) whether the proposed claims have some solid foundation in that they exhibit such a degree of merit as to be neither vexatious nor oppressive and present a reasonable prospect of success;

(2) the attitude of the liquidator to the proposed proceedings; and

(3) whether practical considerations support the initiation of the proceeding, with particular reference to the financial protection of the liquidator and the assets of the company by means of indemnity and, if indicated, security.

1. There may well be instances where leave to settle a derivative proceeding brought under the Court's inherent jurisdiction is not required, however I consider that ordinarily, leave ought be sought to settle such proceedings.
2. Accordingly, for these reasons, leave to settle this proceeding is required.

C With leave being required to settle this proceeding, what principles should apply?

1. Given the lack of case law on the question of leave to settle derivative proceedings in the Court's inherent jurisdiction, it seems to me that suitable guidance can be obtained from cases considering s 240 of the Corporations Act.
2. It is well established that the following principles apply in respect of applications under s 240:

(a) the discretion under s 240 is unconfined, except insofar as may be discerned from the subject matter, scope and purpose of the Act;[15]

(b) those statutory indications relevantly include the considerations governing the grant of derivative leave under s 237 of the Act,[16] foremost of which is the best interests of the company;[17]

(c) where the company is solvent, the best interests of the company will predominantly reflect the interests of the shareholders;[18]

(d) in the context of settlement of a proceeding, the Court will be concerned to ensure that there has been no collusion between the parties and that the proposed resolution is at arm's length;[19] and

(e) the Court may permit those whose interests may be affected to be heard before deciding whether to grant leave to settle a statutory derivative leave proceeding.[20]

1. Barokes submits that where the company is insolvent, the interests of the company's creditors ought also to be taken into account. I accept this: creditors' interests are likely to figure prominently in such an assessment. Further, taking creditors' interests into account is consistent with the approach taken by courts when determining whether to grant derivative leave to a company in liquidation in the first place.

D Should the Court grant leave to settle this proceeding?

1. Aspects of the Settlement Deed are confidential to the parties to the deed, and I have already made orders to preserve that confidentiality. Therefore, in these reasons I can only refer to the Settlement Deed in general terms, although I have taken the whole of the deed into account. In broad terms, without an admission of liability, the defendants have agreed to pay a specific sum to Barokes (Settlement Amount) and a specific amount in respect of costs to Daiwa Can (Compromised Costs Amount) in return for the proceeding being dismissed and mutual releases.
2. In support of the Application, Mr Price's affidavit of 9 February 2026 exhibits advices obtained by Barokes from its counsel in this proceeding in respect of the proceeding and the settlement (Counsel's Advice). Those advices are confidential and subject to legal professional privilege, and I have already made orders to preserve that confidentiality. It is not at all uncommon, in fact, it is usual, for counsel retained in a proceeding to provide an independent opinion to the court where leave is sought to approve a settlement of the proceeding. It is a routine aspect of such applications in group proceedings,[21] judicial advice to trustees[22] or liquidators,[23] and where a party is under a disability,[24] for example. It is also routine to preserve confidentiality and legal professional privilege. As I said in Andrianakis, the Court is generally assisted by full and frank disclosure of all relevant information when considering approval applications, including opinions from counsel, and enabling the Court to have access to that material without the risk of disclosure is in the interests of justice.[25] While I cannot reveal the content of Counsel's Advice here, I have read these materials and taken them into account when considering whether to grant leave to settle this proceeding.
3. Barokes submits that there are six reasons why it should be granted leave to settle this proceeding on the terms set out in the Settlement Deed.
4. First, Barokes submits that the settlement is in the best interests of the company. The Settlement Amount will be paid to Barokes, and once received by it, will be available in Barokes' liquidation for distribution in accordance with the Corporations Act for the benefit of all creditors (including but not limited to Daiwa Can). Barokes submits this is reasonable and appropriate where the claim advanced by it in this proceeding was that the liquidators had breached their duties under s 180 of the Corporations Act and at general law. Those duties are said to be owed to Barokes, not to any individual member or creditor, and therefore any damages payable for such claim ought to be payable to Barokes.
5. Second, the provision in the Settlement Deed for payment of the Compromised Costs Amount directly to Daiwa Can is not a reason to refuse leave. Having provided an indemnity for Barokes' costs of the proceeding, as well as any adverse costs order made against it, and security for costs, Daiwa Can was economically responsible for funding the proceeding. Further, by funding and prosecuting the proceeding, Daiwa Can has caused Barokes to become entitled to the Settlement Amount. In addition, had the proceeding run to trial and the defendants required to pay damages to Barokes, Daiwa Can would be entitled to apply for reimbursement of its costs incurred in bringing derivative proceedings.[26]
6. Third, Barokes submits that leave should be granted because the dispute the subject of this proceeding has been ongoing since the conclusion of the sale process undertaken by the liquidators in 2019. The derivative leave application was filed in July 2021 and determined in November 2022 and this proceeding has been ongoing since December 2022. The winding up for Barokes is, but for this proceeding, able to be concluded expeditiously. This means that the settlement here provides a more prompt resolution of Barokes' liquidation than if the proceedings were to proceed to trial and judgment.
7. Fourth, Barokes submits that further costs will be avoided by the proceeding settling before trial. Mr Price estimates that a further $700,000 (excluding GST) in costs and disbursements will need to be incurred by Barokes to prepare for and conduct the trial, and that an equivalent amount may be incurred by the defendants.
8. Fifth, Barokes submits that this proceeding and the various settlement discussions have been conducted at arms-length. Both parties have been represented by senior and junior counsel and solicitors during the course of the proceedings and have agreed to terms of settlement after extensive negotiations.
9. Sixth, notice of the Application was given to Barokes' creditors, such that they have had an opportunity to be heard if they wished. Relevantly, Daiwa Can is the largest unsecured creditor admitted in Barokes' liquidation by a considerable margin. Clearly, it has endorsed the settlement.
10. I accept these submissions. Leave should be granted for Barokes to settle this derivative proceeding on the terms of the Settlement Deed.
11. Further, in my view, it is in the best interests of Barokes, in particular its creditors, that leave to settle the proceeding be granted. Doing so will enable the liquidation of the company to be concluded, as it is only the existence of this proceeding which has been preventing that. Mr Coyne's evidence is that the company's only priority creditor has already been paid in full, and that there are 63 unsecured creditors with an estimated value of $12,065,610.56. From his affidavit, it can be seen that of the estimated balance available for unsecured creditors, approximately 50% of that will be comprised of the Settlement Amount. Clearly, the settlement serves the interests of creditors. Further, it is apparent that Barokes' shareholders have no discernible interest in the outcome of the Application: Mr Coyne deposes that regardless of the outcome of the proceeding, that is, whether Barokes was wholly successful, or the defendants were wholly successful, or a settlement was achieved, once payment of a final dividend had been made to creditors, there would not have been (and will not be) any funds available to pay a dividend to shareholders.
12. It is trite to say it, but a settlement on arms-length terms negotiated by experienced parties and practitioners, is usually likely to advantage the parties over the uncertainty and risks associated with a trial. In this instance, based on Counsel's Advice and the other evidence before the Court, I am satisfied that this is the case.

1. For these reasons, I made orders on 10 February 2026 granting leave to Barokes to settle the proceeding on the terms set out in the Settlement Deed, together with confidentiality orders and other consequential orders.

[1] An amended statement of claim was later filed on 21 November 2024.

[2] Re Barokes Pty Ltd (In Liq) [2022] VSC 642 (Attiwill J) (Derivative Leave Reasons).

[3] See order made by Attiwill J on 22 November 2022 (Derivative Leave Order).

[4] Although Mr Koutsoukos was not liquidator of Barokes at the time the proceeding was commenced, he was a liquidator of the company at the time when the events the subject of the proceeding took place. Accordingly, both he and Mr Coyne are defendants to this proceeding.

[5] Chahwan v Euphoric Pty Ltd t/as Clay & Michel [2008] NSWCA 52; Pentridge Village Pty Ltd (in liq) v Capital Finance Australia Ltd [2018] VSC 633, [297]-[307].

[6] See eg, El-Saafin v Franek (No 2) [2018] VSC 683 (Lyons J).

[7] [2004] NSWSC 1007; (2004) 211 ALR 457.

[8] This case was decided prior to Euphoric.

[9] Carpenter v Pioneer Park, 470 [42].

[10] RA Austin and A Black, Austin & Black's Annotated Corporations Act, (LexisNexis Australia), [2F.240].

[11] Rafferty v National Australia Bank Ltd [2011] FCA 169, [10] (Mansfield J).

[12] In the Derivative Leave Reasons, Attiwill J comprehensively surveys these principles at [115]-[119].

[15] JF Investment Holdings Pty Ltd (Trustee), in the matter of Golden Mile Milling Pty Ltd v Hargrave [2025] FCA 713, [7] (Longbottom J).

[17] Nation Energy (Australia) Pty Ltd v Paltar Petroleum Limited (Administrators Appointed) [2019] FCA 1473, [15] (Stewart J).

[19] Rafferty, [10]; Lantouris v 22 Park Street Pty Ltd (Rec and Mgrs Apptd) [2021] VSC 247, [36]-[37] (Connock J).

[20] Rafferty, [10]; 22 Park Street, [37].

[21] See, for example, Andrianakis v Uber Technologies Inc [2024] VSC 733.

[22] See, for example, Re Estate Late Chow Co-Poon (2013) 10 ASTLR 251, [113].

[23] See, for example, Re McDermott and Potts (in their capacities as joint and several liquidators of Lonnex Pty Ltd (in liq)) (ACN 097 786 751) [2019] VSCA 23 (Whelan AP, McLeish and Hargrave JJA).

[24] These being applications under r 15.08 of the Supreme Court (General Civil Procedure) Rules 2025 (Vic). For discussion about obtaining counsel's opinion, see, LexisNexis Australia, Civil Procedure: Victoria, [15.08.5].

[26] Carpenter v Pioneer Park, [39].