RE ROBERT MICHAEL KIRMAN AS JOINT AND SEVERAL LIQUIDATOR OF EYRE KINGSTON PTY LIMITED (IN LIQUIDATION) (ACN 603 038 811) & ORS; EX PARTE ROBERT MICHAEL KIRMAN AS JOINT AND SEVERAL LIQUIDATOR OF EYRE KINGSTON PTY LIMITED (IN LIQUIDATION) (ACN 603 038 811) & ORS [2024] WASC 498 (17 December 2024)

1. In support of the application, the plaintiffs rely on six affidavits: four affidavits of Robert Michael Kirman, two open (filed 9 July 2024 and 13 December 2024) and two confidential (filed 8 July 2024 and 13 December 2024); as well as two affidavits of Nicholas Robert White (a special counsel employed by the solicitors for the plaintiffs) filed on 16 December 2024, attesting to service of the interlocutory process on the Australian Securities and Investments Commission (ASIC) and correspondence with other interested parties.

1. Eyre Kingston Pty Ltd (Eyre Kingston) was a special purpose vehicle established in November 2014 for the purposes of a joint venture between two corporate groups: the DTM Group and the Peet Group. The purpose of the joint venture was the development and leasing of the 'Atria Project' in Kingston in the Australian Capital Territory (the Project).[1]
2. At that time, it was intended that Supabarn Supermarkets Pty Ltd (an entity within the DTM Group) would operate a supermarket at the Project. An agreement to lease to this effect was entered into at that time.
3. Subsequently, disputes arose between the shareholders and directors of Eyre Kingston in relation to the Project and in June 2023, Supabarn commenced proceedings against Eyre Kingston and other entities in the New South Wales Supreme Court.[2]
4. On 13 July 2023, the Federal Court of Australia, with the consent of the shareholders, ordered that Eyre Kingston be wound up on just and equitable grounds. The first plaintiffs were appointed joint and several liquidators.[3]
5. Of the total creditor claims in the liquidation, the majority in value comprises claims by the entities within the DTM and Peet Groups. Within these amounts, the claims are overwhelmingly claims by entities within the DTM Group, which have not yet been adjudicated by the liquidators.
6. On 5 July 2024, the plaintiffs entered into an agreement to assign certain causes of action held by Eyre Kingston to an entity within the DTM Group. Orders were made by Howard J on 10 July 2024, pursuant to s 477(2A) and s 477(2B) of the Corporations Act 2001 (Cth) (Act), approving the compromise of debts and entry into this agreement.[4]
7. At that time, the second plaintiff retained the rights to make certain claims against its former directors, Dezignteam Pty Ltd (Dezignteam), and Construction Control.
8. In November 2024, the first plaintiff invited offers from the DTM and Peet Groups, as well as other potentially interested parties, to acquire the rights held by Eyre Kingston to the directors' duties claims.
9. Offers to acquire these rights, as well as the other rights in respect of the other claims, were made by various parties. Following negotiations, the Deed was executed on 12 December 2024 for the assignment of the directors' duties claims and the Dezignteam claims. The Deed includes a condition precedent that the plaintiffs obtain approval for entry into the Deed and in terms of the minute of proposed orders.[5]

Should approval be given nunc pro tunc for entry into the Deed?

1. The plaintiffs are seeking approval nunc pro tunc to enter into the Deed pursuant to s 477(2A)[6] and s 477(2B)[7] of the Act.
2. These statutory provisions are a fetter on the general power of liquidators and ensure that there is some oversight of liquidators' actions. Once these provisions are enlivened, a liquidator cannot enter into a compromise without the approval of the court, the committee of inspection, or a resolution of creditors.
3. Although s 477(2A) and s 477(2B) of the Act deal with different aspects of a liquidator's power, similar considerations apply under each provision. In considering an application under s 477(2B), particular focus is on ensuring the winding up proceeds as expeditiously as circumstances allow.
4. In considering whether to grant the approval as sought by the liquidators, the usual approach taken by the court is that:[8]

[T]he court pays regard to the commercial judgment of the liquidator. That is not to say that it rubber stamps whatever is put forward by the liquidator but the court is necessarily confined in attempting to second guess the liquidator in the exercise of his powers, and generally will not interfere unless there can be seen to be some lack of good faith, some error in law or principle, or real and substantial grounds for doubting the prudence of the liquidator's conduct. (citations omitted)

1. In controlling the liquidator's exercise of the power to enter into a compromise, the court 'looks to the interests of creditors' and asks whether the compromise is in their interests. Where the majority of creditors have had an opportunity to consider the proposed compromise and do not oppose it, this will be an influential factor. This is because creditors, if properly informed, are in the best position to judge what in their own commercial interests.
2. Other considerations that are relevant to a decision on an application include:

(a) whether the compromise is for the proper realisation of the company's assets and will assist in the winding up;

(b) the delay and uncertainty that is inherent in any alternative options; and

(c) whether the settlement is the result of extensive and detailed negotiations.

1. In dealing with such an application, due regard must be had to the commercial judgment of the liquidator and any legal advice that has been received. This is because the approval sought from the court is for permission by the liquidator to exercise his or her independent commercial judgment and is not an endorsement of the proposal. That said, there must be a plausible evidentiary basis for the commercial judgment.
2. Approval for entry into any settlement or compromise should normally be obtained prior to entry into a deed or agreement. However, there is no doubt that the court has power to give approval that operates from the date of entry into the agreement.[9]
3. Some of the evidence I have considered for the purposes of this application is confidential, and for that reason, I am somewhat constrained in the reasons I can give for the orders I propose to make. In considering the application, I have taken into account the evidence in Mr Kirman's confidential, as well as his non-confidential, affidavits. This evidence includes the process that has been undertaken by the liquidators in relation to the proposed assignment of two of the remaining claims of Eyre Kingston, details of the negotiations, and the reasons for the decision that was made.
4. I accept that the terms of the Deed impose obligations on the plaintiffs, which may require performance more than three months after the date of entry into the Deed and that, as a result, approval under s 477(2B) of the Act is required. I also accept that there is a question as to whether approval under s 477(2A) is required, and note that an order is sought under that subsection out of an abundance of caution.
5. On the evidence before me, I do not consider there is any error or ground which calls into question the decision of the liquidators to assign these claims (rather than to pursue them personally) or that would support any inference being drawn that the plaintiffs are not acting in good faith in entering into the Deed. I am satisfied that the plaintiffs are acting properly and are justified in entering into the Deed.
6. In reaching this decision, I have taken into account the following key factors.
7. First, Eyre Kingston has insufficient assets to fund the claims, and litigation funding is unlikely to be available. Second, I accept Mr Kirman's evidence that the terms of the Deed are the best that could reasonably be negotiated in all of the circumstances. The process undertaken by them was reasonable and there is a plausible evidentiary basis for the exercise of the liquidator's commercial judgment. Third, entry into the Deed is expected to lead to an increased dividend to unsecured creditors, will offer certainty, and will enable the liquidation to be finalised earlier than would otherwise be the case.
8. In my view, it is appropriate to grant approval to enter into the Deed nunc pro tunc. The grounds on which the plaintiffs entered into the Deed without seeking prospective approval have been explained and, importantly, the Deed is conditional on court approval being obtained.
9. I am also satisfied that it is appropriate to give the direction sought by the plaintiffs. In the circumstances of this matter, given the history of the liquidation and the disputes between the shareholders, I accept that there is a possibility that an issue may be raised in relation to entry into the Deed, and that this possibility is not merely hypothetical.
10. The orders propose the giving of notice to creditors within a short period of time and that there be a short period of time for any person aggrieved by the orders to apply to set these orders aside. The explanation given for this short period is that there is the potential expiration of a limitation period in respect of one of the assigned claims. I am satisfied on the evidence before me that the parties with the greatest interests in seeking to take advantage of the liberty to apply have been aware of the liquidator's intention to assign the claim since at least May 2024, and have been made aware of this application by a circular dated 12 December 2024. In these circumstances, I am satisfied that the period proposed in the minute of proposed orders is appropriate.[10]

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

[1] Affidavit of Robert Michael Kirman filed 9 July 2024 [19].

[2] Affidavit of Robert Michael Kirman filed 9 July 2024 [21] - [22], 'RMK-21'.

[3] CIC Projects Pty Ltd v Eyre Kingston Pty Ltd [2023] FCA 800.

[4] Orders of Howard J made 10 July 2024.

[5] Affidavit of Robert Michael Kirman filed 13 December 2024, 'RMK-104' p 16 - 42.

[6] In so far as the Deed is compromising a debt in an amount greater than $100,000, pursuant to the Corporations Regulations 2001 (Cth) reg 5.4.02.

[7] In so far as the Deed requires the assumption of obligations that may continue for more than three months.

[8] Re Spedley Securities Ltd (in liq) (1992) 9 ACSR 83, 85 (Giles J); cited with approval in numerous authorities including in Re McDermott and Potts [2019] VSCA 23 [72] (Whelan AP, McLeish and Hargrave JJA).

[9] The recent approach of the court on the precise basis on how retrospective approval should be effected is outlined in cases such as Vickers, Re; York Street Mezzanine Pty Ltd (in liq) [2011] FCA 1028 [38] (Gordon J) and Re Bell Group Ltd (in liq); ex parte Woodings [2013] WASC 409 [35] (Allanson J).

[10] At the conclusion of the hearing, I made orders in terms of Annexure 'A'.