Reidy as Trustee for the PR Mining Superannuation Fund v Contained Gold Pty Ltd

Federal Court of Australia|2020-03-04|Before: Mr P, Mr CJ, Jackson J

Leave pursuant to s 532(2) of the Corporations Act 2001 (Cth) (the Act) is granted for Carl Huxtable and Richard Albarran to be appointed as additional liquidators of the first defendant (the Company).
Pursuant to s 90-15 of Division 90 of Schedule 2 of the Act, Carl Huxtable and Richard Albarran (Special Purpose Liquidators) are appointed as additional liquidators to the Company for the following purposes: (a) conducting investigations into any of the matters set out in the Schedule to these orders, including by: (i) inspecting the books and records of the Company, excluding any files and working papers of the second defendant; (ii) conducting public examinations pursuant to s 596A or s 596B of the Act or obtaining orders for production pursuant to s 597(9) of the Act; and (iii) requiring statements to be provided pursuant to s 475(2) of the Act; (b) pursuing any claim, including commencing legal proceedings, that may be available to the Company or the Special Purpose Liquidators in relation to any of the matters set out in the Schedule, including considering and obtaining legal advice in respect of pursuing any such claim; (c) taking any steps in relation to any matters set out in the Schedule, including by commencing legal proceedings, to preserve or to protect the assets of the Company, whether or not in the possession of the Company; (d) exercising any powers conferred on the liquidator of the Company by s 477 and s 506(1)(b) of the Act, including the power to seek relief under s 588FF, s 1317E and s 1317H of the Act, in relation to any matters set out in the Schedule, except for the powers contained in s 477(1)(a) of the Act; and (e) in the event recoveries are made in connection with the matters set out in items 1-8 of the Schedule, and any parties described in items 1-8 of the Schedule lodge formal proofs of debt against the Company, to do all things necessary in connection with adjudication on those claims.
The appointment of the special purpose liquidators, as provided in paragraph 2 above, is conditional on each of Mr Huxtable and Mr Albarran filing with the Court their written consent to be appointed as such.

JACKSON J: 1 This is an application for the appointment of special purpose liquidators to the first defendant, Contained Gold Pty Ltd (in liq) and for the approval of a deed of indemnity related to that appointment. 2 The plaintiff, Padraig Reidy, is a creditor of Contained Gold in his capacity as trustee of the PR Mining Superannuation Fund. He seeks the appointment of Carl Huxtable and Richard Albarran of Hall Chadwick as special purpose liquidators to investigate certain matters and to pursue any claims that may be available in relation to those matters. 3 The second defendant, Simon Coad, is the liquidator of Contained Gold. He does not oppose the orders sought. 4 For the following reasons, the Court will appoint the special purpose liquidators but will not, at present, approve the deed of indemnity.

Background 5 Contained Gold carried on business providing technical and commercial services to help mining ventures to reach pre-production financing. In early 2019 its directors were Sean O'Keefe, Dean O'Keefe and Cornelis Plug. Mr Plug resigned on 25 April 2019 and Dean O'Keefe resigned on 26 May 2019. Sean O'Keefe remains as the sole director. 6 The company is a subsidiary of Angler Mining Pty Ltd, which is a gold explorer. Angler Mining holds just over 90% of Contained Gold's issued shares. Mr Plug was a director of Angler Mining until he resigned, on the same day as his resignation from the board of Contained Gold. Dean O'Keefe is still a director of Angler Mining (along with a second person, Kristina Soloshenko). 7 Mr Reidy advanced $87,500 to Contained Gold pursuant to a secured loan facility agreement and general security deed dated 25 January 2016. The company did not repay the money, and on 26 April 2019 Mr Reidy obtained judgment against it in the District Court of Western Australia in the sum of $109,375 together with interest at the rate of 12% per annum from 1 April 2016 to the date of judgment. The company did not pay the judgment sum and on 16 May 2019 Mr Reidy served a statutory demand. No part of the sum demanded has been paid. Mr Reidy also claims his costs of the District Court proceedings in the sum of $118,731.76 but no taxation of that amount has occurred. 8 On 4 June 2019 the directors of Contained Gold appointed the second defendant, Simon Coad, as administrator of the company under s 436A of the Corporations Act 2001 (Cth). The directors had resolved that the company was insolvent or was likely to become insolvent at some future time. 9 At the time of Mr Coad's appointment as administrator, Mr Reidy also had a claim against Contained Gold for $40,000 for services rendered. That claim was pending in the Magistrates Court of Western Australia. The effect of the administration and subsequent liquidation has been to stay those proceedings. 10 On 14 June 2019 Mr Reidy appointed Mr Huxtable and Mr Albarran as receivers and managers of Contained Gold pursuant to the general security deed. 11 Mr Coad circulated his report to creditors pursuant to s 439A of the Act on 1 July 2019. He identified no assets (other than $268 cash) and an estimated deficiency of assets over liabilities of $203,737.75. There was no proposal for a deed of company arrangement. 12 On 9 July 2019 the creditors of the company resolved that it be wound up, and appointed Mr Coad as liquidator. On 9 October 2019 Mr Coad gave his statutory report to creditors. It confirmed that the company had no assets. There were seven disclosed unsecured creditors, with a balance owing to them of $53,894. There were no employee entitlements with priority in the liquidation. Mr Reidy was noted as a secured creditor in the sum of $149,843.75. 13 On 5 August 2019, after concluding that there were no realisable assets, Mr Huxtable and Mr Albarran retired as receivers and managers of Contained Gold.

Matters sought to be investigated 14 According to Mr Coad's report to creditors as administrator of Contained Gold, there were possible unreasonable director related transactions that were included in a total of $1,053,038 paid to Angler Mining under the description 'cross charges'. These appear to be charges for project management relating to a joint venture in which Contained Gold participated, and for secretarial support and software and insurance charges. Mr Coad said that it appeared that the transactions occurred in the ordinary course of business but they could potentially be unreasonable director related transactions. 15 Mr Coad also reported that the company had entered into an unincorporated joint venture with SR Mining Pty Ltd, a wholly owned subsidiary of Bligh Resources Ltd. A dispute arose which led to a settlement, the proceeds of which, according to the company's books and records, were a total of $1,417,240. Mr Reidy has presented evidence from publicly available sources, including Australian Securities Exchange announcements, suggesting that the proceeds, including the realisation of shares in Bligh Resources, were $1,387,240, and that the sums comprising that amount were received between late 2016 and mid-2017. 16 A profit and loss statement included in Mr Coad's report shows that Contained Gold incurred legal costs of $235,126 for the year ended 30 June 2017, $127,442 for the year ended 30 June 2018 and $317,242 for the period ending 4 June 2019, making a total of $679,810. Other figures, recorded for the year ending 30 June 2016, were 'Evaluation costs expenses' of $100,000 and 'Project Acquisition Fee' of $300,000. 17 The receivers and managers gave Mr Reidy a report on their investigations on 5 July 2019. They investigated the accounting records concerning the net loan balance owing to Angler Mining which, as at 31 May 2019, was recorded as $145,334.66. This included an investigation of the 'cross charges' recorded as paid to Angler Mining. There were five journal entries totalling $675,429.93 in relation to cross charges, four of which were posted on 24 June 2019, after the company went into administration. Due to a lack of records and the fact that the company's directors were yet to provide Mr Coad with any evidence to support the relevant journal entries, the receivers were unable to determine the exact nature of the payments. 18 The receivers also reported that between 1 June 2017 and 5 June 2018 Contained Gold incurred legal expenses totalling $479,810.60. The discrepancy between that and the $679,810 shown in Mr Coad's report resulted from a provision of $200,000, the nature of which was not apparent from the documentation available to the receivers. 19 The receivers also summarised a total of $1,514,061.35 in cash payments that Contained Gold made in the period 1 June 2016 to 4 June 2019. $1,053,038 of that was paid to Angler Mining. 20 On 9 October 2019 Mr Coad gave a statutory report as liquidator. In it, he said he had seen invoices totalling $666,983.67 for the cross charges paid to Angler Mining, which was less than the total sum of $1,053,038 paid to Angler. Mr Coad said it would be open to a liquidator to claim that Angler Mining received a net benefit of $386,054.58 and that the benefit may constitute unreasonable director-related transactions, or involve breaches of obligations imposed on directors by s 180 or s 181 of the Act. 21 Mr Coad said that there were no funds available in the liquidation to meet legal or other costs in relation to those matters. He asked creditors to advise whether they had any interest in funding him to obtain a legal opinion about possible recovery from directors or from Angler Mining. 22 Mr Reidy now seeks the appointment of special purpose liquidators in order to investigate possible claims in relation to a number of specified (and overlapping) matters, namely: (1) the loan balance of $145,334.66 to Angler Mining; (2) the transactions and cross charges to Angler Mining between 30 June 2016 and 4 June 2019, in respect of the sum of $675,429.93; (3) the payments totaling $1,053,038.35 made to Angler Mining between 29 December 2016 to 31 December 2018; (4) any other transactions relevant to Angler Mining, including claims against Angler Mining and the director and former directors Dean O'Keefe, Sean O'Keefe and Mr Plug. (5) assets sold in the year ending 30 June 2016 for $568,880; (6) the project acquisition fees of $300,000 and the evaluation costs of $100,000 for the year ending 30 June 2016; and (7) the company's legal costs between 30 June 2016 and 4 June 2019, including relevant payments related to Angler Mining concerning the Company's legal costs on or about the following dates: 30 June 2017; 31 December 2017; 30 June 2018; 31 December 2018; and 31 May 2019. 23 Mr Reidy also wants the special purpose liquidators to be authorised to investigate any potential breach of duty by a director or former director in relation to those matters, and any involvement in those breaches by other individuals and or entities. He applies for authorisation for the special purpose liquidators to pursue any claim, including by commencing legal proceedings. They will also have incidental powers including the capacity to adjudicate proofs of debt which may be lodged by parties who have been the subject of any recoveries that are contemplated by the orders. The special purpose liquidators will have these powers to the exclusion of Mr Coad's powers as liquidator, unless they give him their prior written consent.

The proposed deed of indemnity 24 Mr Reidy has put in evidence a draft deed of indemnity between himself and the proposed special purpose liquidators. Under it, he will indemnify them in respect of any adverse costs order made against them as a direct result of any proceedings they commence. He will also be obliged to provide security for costs ordered against the liquidators in such proceedings. He will be liable to pay, in effect, any invoice they raise in relation to their costs in relation to any such proceedings or any investigation of the matters I have set out above. 25 The deed of indemnity which Mr Reidy initially proposed contained provisions for the distribution of any recovery proceeds which, in my view, were potentially inconsistent with the statutory order of priorities in s 556 of the Act, and also potentially sought to prejudge any application that might be made under s 564 to modify that order of distribution. Mr Reidy has filed a second affidavit annexing an amended form of proposed deed which removes those concerns by providing that any proceeds will be applied first as required by s 556(1)(a) in payment of the special purpose liquidator's expenses in realising or getting in the proceeds, and the special purpose liquidators will then apply under s 564 in respect of any balance. Given Mr Reidy's status as a secured creditor, it is possible that such an application will not be necessary. 26 The draft deed requires the special purpose liquidators to keep lawyers properly instructed and to enter into a costs agreement with them. It entitles Mr Reidy to progress reports and other information about any proceedings. However it does not purport to give him any power to direct the special purpose liquidators in the conduct of the litigation and it provides that all matters regarding settlement of any proceedings are to be determined by them. 27 Mr Reidy seeks an order under s 477(2B) of the Act for the approval of the deed of indemnity.

Whether special purpose liquidators should be appointed 28 Mr Reidy's application for the appointment of the special purpose liquidators is made under s 90-15 of Division 90 of Schedule 2 of the Act. 29 Section 90-15(1) provides that the Court may make such orders as it thinks fit in relation to the external administration of a company, which includes a winding up. The Court may exercise that power on its own initiative during proceedings before the Court, or on application under section 90-20: s 90-15(2). 30 Section 90-20(1)(a) provides that a person with a financial interest in the external administration of the company may apply for an order under s 90-15. A creditor of the company is such a person: s 5-30(a)(ii). There is no dispute that Mr Reidy is a creditor of Contained Gold, so he has standing to apply under s 90-15. 31 An example of an order that can be made under s 90-15 is an order that another registered liquidator be appointed as the external administrator of the company: s 90-15(3)(c). This Court has, for example, made orders under s 90-15 for the appointment of special purpose liquidators in GDK Projects Pty Ltd, in the matter of Umberto Pty Ltd (in liq) v Umberto Pty Ltd (in liq) [2018] FCA 541 and Melhelm Pty Ltd, in the matter of Boka Beverages Pty Ltd (in liq) v Boka Beverages Pty Ltd (in liq) [2019] FCA 1184; (2019) 138 ACSR 95. 32 It is difficult to imagine circumstances in which the Court would make such an order unless it was satisfied 'that it would be just, and unless the applicant had demonstrated sufficient utility to the external administration': GDK Projects at [33] (Farrell J). 33 In Melhelm, Gleeson J held (at [57], citing Deputy Commissioner of Taxation, in the matter of Italian Prestige Jewellery Pty Ltd (in liq) v Italian Prestige Jewellery Pty Ltd [2018] FCA 983; (2018) 129 ACSR 115 at [34]): It is appropriate to appoint an SPL if: (1) there are matters that require investigation by a liquidator with a view to possible recovery for creditors; (2) the current liquidators have insufficient funds and insufficient prospects of obtaining funding to pursue an investigation; (3) a creditor is prepared to fund investigations and recovery actions but only on the condition that another liquidator be appointed; and (4) such an appointment would be beneficial to the winding up and the creditors as a whole. 34 In my view, it is appropriate to appoint Mr Huxtable and Mr Albarran as special purpose liquidators of Contained Gold. Mr Huxtable has sworn an affidavit saying that he is a registered liquidator. There is no direct evidence that Mr Albarran has that qualification, but s 418 of the Act required him to be a registered liquidator in order to be appointed to act as a receiver of the company, so I am prepared to infer from that appointment that he too has the necessary qualification. 35 Mr Huxtable and Mr Albarran already have some knowledge of the company's affairs, having performed an investigation in their capacity as receivers and managers. The leave of the Court is required in order for them to be appointed as special purpose liquidators. That requirement arises separately to the power to appoint under s 90-15(1) because, having been receivers and managers of Contained Gold, they were officers of the company within the previous two years: s 532(2)(c)(i) and s 532(6)(b). 36 The guiding consideration in relation to granting leave under s 532(2) is the legislative intention that a liquidator should be free from any potentially conflicting allegiance, unless the Court sees that independent judgment will nevertheless still be available: Re McGrath; HIH Insurance Ltd [2010] NSWSC 404; (2010) 266 ALR 642 at appendix 1, [50] (Barrett J). Given the circumstances of Mr Huxtable's and Mr Albarran's relatively brief appointment as receivers and managers of the company, there is no reason to suppose that they will lack the necessary independence if they are appointed as special purpose liquidators. Leave under s 532(2) will be given. 37 Mr Huxtable's affidavit sworn 23 October 2019 is expressed to be in support of the application to appoint him and Mr Albarran as special purpose liquidators and it says in terms that he and Mr Albarran request the exercise of the discretion under s 532(2). However it does not say in terms that either of them consents to the appointment as special purpose liquidator, and there is nothing directly from Mr Albarran to that effect in evidence. Section 532(9) provides that a person must not be appointed as liquidator of the company unless the person has, before his or her appointment, consented in writing to be liquidator. No written consent in the usual form has been filed with the Court. I will order that the appointment is conditional on each of Mr Huxtable and Mr Albarran filing that consent. 38 There are matters arising from the records of Contained Gold, and the investigations that Mr Coad and Messrs Huxtable and Albarran have conducted to date, which warrant further investigation. I have described those matters above, and it is not necessary to repeat the description. Suffice to say that before Contained Gold went into administration there were substantial outflows of money to Angler Mining which have not been fully and satisfactorily explained. 39 That is in circumstances where Contained Gold was a subsidiary of Angler Mining and two of its directors were also directors of Angler Mining. The payments contributed to a state of affairs whereby, when Contained Gold came to be under Mr Coad's control as administrator, it had no assets. So in the absence of any recoveries, creditors are likely to receive no dividend at all. The company was in that position by mid-2019 at the latest, when some two years earlier the company had received proceeds of approximately $1.4 million as a result of the termination of its joint venture with SR Mining Pty Ltd. It is not clear what activities or events caused the company to lose that much money over that period of time. 40 The result of the investigations may be to reveal satisfactory explanations for the various outflows of funds, and may indicate that no person has breached any duty. But there is potential benefit to the company in investigating those matters. It is not necessary or appropriate in determining an application such as the present one to make findings on the potential claims: Melhelm at [59]. 41 There is no evidence that any particular officer of the company has been party to any improper transaction. At the moment, the most that can be said is that aspects of various identified payments remain unexplained. But given the desirability of investigating those payments, it would be artificial and potentially counterproductive to remove from the special purpose liquidators' remit the investigation of persons who might be responsible for them (if they were uncommercial, unreasonable, improper or otherwise unlawful) or otherwise involved, and the investigation of whether those persons might be liable to the company or to the special purpose liquidators. 42 Mr Coad has himself raised the possibility that a benefit received by Angler Mining may involve unreasonable director-related transactions or breaches of directors' duties. He does not oppose the appointment of Mr Huxtable and Mr Albarran as special purpose liquidators. He has no funds with which to pursue the investigations and any claims. Although Mr Reidy does not say as much in his affidavit, I infer from the draft deed of indemnity, the history of his appointment of Mr Huxtable and Mr Albarran and certain submissions he has made that he is not willing to fund Mr Coad to conduct the investigations. 43 All of that might have left the Court unpersuaded that it would be beneficial to the company or its creditors to appoint the special purpose liquidators, given that investigations and any subsequent proceedings will inevitably come at a cost, including most significantly the special purpose liquidators' fees and disbursements, including legal fees. It is fair to say that the matters to be investigated do not yet raise any compelling case of misconduct or strong prospect of recovery. So the Court would be reluctant to authorise that expenditure if there was any prospect that the costs of the investigations and any proceedings would diminish the return to unsecured creditors. 44 But here, there is no realistic chance of that. Under the proposed deed of indemnity, Mr Reidy will be liable to pay the special purpose liquidators' fees and disbursements. It is true that the deed does not contain any limitation on the ability of the special purpose liquidators to claim their fees and disbursements from the company. But in circumstances where the company has no assets, that is not going to leave unsecured creditors worse off. There is no evidence of any creditor responding to Mr Coad's call for expressions of interest in funding him to investigate. So there will only be any recoveries at all if the special purpose liquidators are appointed. And if the investigations do not result in any recoveries, then the special purpose liquidators will recover their fees from Mr Reidy, or not at all. I have already mentioned how the deed does not disturb the statutory order of priorities or seek to give Mr Reidy any advantage. 45 So the reality is that there will be no dividend to creditors if the special purpose liquidators are not appointed, and at least the possibility of a dividend if they are appointed. I also take into account that the Court ordered all unsecured creditors to be notified of the application and hearing date, and that has been done. No creditor has come forward to oppose (or support) the application. 46 The investigation of transactions warranting investigation, and the recovery of funds for the benefit of creditors, are important aims of the statutory winding up regime: see New Cap Reinsurance Holdings Ltd (ARBN 076 137 249) [2001] NSWSC 835 at [15] (Santow J). I am satisfied that the appointment of the special purpose liquidators will help achieve the first of those aims and holds out at least some prospect of achieving the second. Neither aim will be achieved if they are not appointed. The appointment will not expose unsecured creditors to any additional risk or liability. I am satisfied that it is just, and that Mr Reidy has demonstrated sufficient utility to the winding up, so that it will be beneficial to the winding up and to the creditors as a whole.

The deed of indemnity 47 Section 477(2B) provides: Except with the approval of the Court, of the committee of inspection or of a resolution of the creditors, a liquidator of a company must not enter into an agreement on the company's behalf (for example, but without limitation, a lease or an agreement under which a security interest arises or is created) if: (a) without limiting paragraph (b), the term of the agreement may end; or (b) obligations of a party to the agreement may, according to the terms of the agreement, be discharged by performance; more than 3 months after the agreement is entered into, even if the term may end, or the obligations may be discharged, within those 3 months. 48 The winding up of Contained Gold, consequent upon a resolution of creditors under s 439C(c), is taken to be a voluntary winding up: s 446A(1)(a) and s 446A(2). Section 477(2B) is taken to apply in relation to a liquidator in a voluntary winding up as if he or she were a liquidator in a winding up in insolvency or by the Court: s 506 (1A). 49 Ordinarily an application for approval under s 477(2B) is made by the liquidator who is proposing to enter into the relevant agreement. Here it is made by Mr Reidy, a creditor of the company and a proposed party to the deed. That raises two questions: whether Mr Reidy has standing to apply; and whether the application is premature because the special purpose liquidators have not been appointed yet. 50 There is no difficulty in giving an affirmative answer to the first question. In Re AT Air Group Pty Ltd (in liq) [2012] NSWSC 1508 at [22], Black J held that there was: no reason, in principle or practice, why such an application could not have been made by the other parties to the agreement, after the additional Liquidator had been appointed and in circumstances that he or she had reached a decision to enter into the indemnity agreement and indicated that he or she sought approval from the court to do so, for example by filing an affidavit in support of the application before the court. 51 I respectfully agree. However the qualification in Black J's observations that the application could be made 'after the additional Liquidator had been appointed' indicates there is more difficulty in giving an affirmative answer to the second question. His Honour referred to Venetian Nominees Pty Ltd v Conlan (1999) 17 ACLC 301 where Master Sanderson held, in circumstances similar to the present matter, that approval for a funding deed could not be sought before the appointment of a special purpose liquidator. Black J said (at [22]): [T]hat case is plainly correct, because no occasion could arise for the grant of approval for an indemnity agreement by the additional Liquidator under s 477(2B) until the additional Liquidator had in fact been appointed, and, as Master Sanderson noted, such approval could only be granted if the additional Liquidator in fact sought to enter into that indemnity agreement and wished to obtain the court's approval to do so. 52 Gleeson JA affirmed the correctness of that analysis in Re 77738930144 Pty Ltd (in liq) (Formerly Commercial Indemnity Pty Ltd) [2017] NSWSC 452 at [24]. In light of those authorities, I will not grant approval of the deed under s 477(2B) before the appointment of the special purpose liquidators, which has not yet occurred. 53 In Re 77738930144 at [21], Gleeson JA solved the problem by permitting the proposed special purpose liquidator to apply for approval of the relevant deed contingent on his appointment, which application would be returnable instanter in the same proceeding. That course has not been taken here. I raised the question of Mr Reidy's standing with his counsel at the hearing and gave him the opportunity to file further written submissions on the subject. Those submissions did not refer to any of the authorities I have mentioned, but they did submit that it would be: both cost effective and in keeping with case management principles to treat Mr Reidy's current application as if it were an application for both the appointment of the additional liquidators and an application by those appointed liquidators for approval of an agreement under s 477(2B). 54 I agree that considerations of cost and efficiency are important, especially in circumstances like the present where there are presently no available assets, and even if there are successful recoveries, the pool will not be large. Plainly Mr Huxtable and Mr Albarran support the proposed deed, because Mr Huxtable has sworn a second affidavit in which he asks the Court to approve it in its amended form. Nevertheless, I do not consider that the Court has power to treat a party as an applicant when in fact he or she is not. 55 In my view, the most cost effective way to deal with the matter in the present circumstances will be for the Court to direct that any renewed application for approval of the deed be made within 14 days of the appointment of the special purpose liquidators taking effect. That renewed application can then be made by Mr Reidy. In order to save costs and time I will direct that the application can be made by providing a minute of proposed orders to my Chambers without the need for a further interlocutory application. I will also direct that the application will be determined on the papers without the need for any appearance. There will be no need for any further affidavits to be filed. 56 In those circumstances, it is appropriate that I indicate my view as to whether the deed of indemnity as amended should be approved. 57 Approval has frequently been granted under s 477(2B) for funding agreements between a liquidator and a third party, including when the company is not a party to the agreement: see e.g. Stewart, in the matter of Newtronics Pty Ltd [2007] FCA 1375 (Gordon J). 58 In what follows I draw on the comprehensive summary of the well-settled principles in relation to applications for such approval, and matters that are commonly relevant in such applications, which Edelman J gave in Hughes, in the matter of Sales Express Pty Ltd (in Liq) [2016] FCA 423 at [20]. It is convenient to state in italics such of those principles and matters as are relevant here, and to briefly discuss how they apply to the present application. (1) The Court must be satisfied that there is a good and solid reason for concluding that the processes of winding up and distribution would be enhanced by the funding agreement, compared with the ordinary deployment of surplus funds. I have already dealt with that above. In the absence of the proposed deed of indemnity, there will be no surplus funds. (2) The manner in which the funding or indemnity will be provided under the agreement. Here the manner in which the funding and indemnity will be provided is straightforward. Mr Reidy indemnifies the special purpose liquidators against adverse costs orders. He is obliged to provide any security for costs ordered against them, by bank guarantee. They will bill him for their fees and disbursements. (3) The extent to which the liquidator has considered other funding options. I have already noted that Mr Coad sought expressions of interest from creditors to fund his investigations and, I infer, received none. There is no suggestion in the evidence that the investigations are at a stage that would attract the interest of a commercial litigation funder. (4) The interests of creditors other than the proposed or potential respondents and the extent to which the liquidator has consulted them. I have addressed that above. Neither Mr Coad nor Messrs Huxtable or Albarran have consulted the small group of the company's creditors, apart from Mr Reidy. But the creditors have been notified of this application and have not come forward to show any interest in the outcome. (5) The risks involved in the claim (including the amount of costs likely to be incurred in the proposed litigation, the extent to which the funder is to contribute to those costs, and the extent to which the funder is to contribute to the costs of the defendant in the event that the action is not successful, or towards any order for security for costs). As I have described, Mr Reidy is, effectively, taking on all of those risks. (6) Any particular premium or benefit which is promised in consideration of the provision of the funding or indemnity including whether that benefit is proportionate to the risk undertaken by the funder. No specific premium is proposed in the deed. The extent that Mr Reidy will be entitled to an advantage over other creditors in consideration of the provision of funding will be determined by an application under s 564 of the Act at the appropriate time. (7) Whether the liquidator is subject to any control over the conduct of the litigation, other than the usual obligation to keep the funder fully informed of all matters relating to the action. As I have noted, here the special purpose liquidators will not be subject to such control. (8) Whether the agreement provides for a clear mechanism for resolving any dispute between the funder and the liquidator about the compromise of the litigation which is funded. It is clear from the deed of indemnity that the views of the special purpose liquidators will prevail. 59 For those reasons, I am satisfied that it will be appropriate to approve the entry into the deed of indemnity in the form annexed to Mr Reidy's second affidavit, if application is made after the appointment of the special purpose liquidators takes effect.

Orders 60 There will be orders for the appointment of the special purpose liquidators in the terms sought by Mr Reidy and directions concerning, but not giving, approval of the deed of indemnity, as I have indicated above. I certify that the preceding sixty (60) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jackson.

Corporations Act 2001(Cth)s 477(2B), ss 180, 181, 418, 436A, 439A, 439C, 446A, 477, 506, 532, 556, 564, Schedule

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