FEDERAL COURT OF AUSTRALIA

Vickers, in the matter of J M Kelly Builders Pty Ltd (in liquidation) (No 2) [2019] FCA 1789

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 477(2B) of the Corporations Act 2001 (Cth), the second to thirteenth applicants be granted approval on behalf of the companies in respect of which they are appointed joint and several liquidators to enter into the amendment deed at annexure “DCV-1” to the affidavit of Derrick Craig Vickers sworn on 22 October 2019, between the Commonwealth of Australia (acting through the Attorney-General’s Department ABN 92 661 124 436), the applicants and the companies in respect of which they are appointed joint and several liquidators.

2.    Pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth), on the ground that the order is necessary to prevent prejudice to the proper administration of justice, until further order:

(a)    the information comprising the following documents be kept confidential and not be provided or disclosed to any person other than the applicant and their solicitors:

(i)    the affidavit of Derrick Craig Vickers sworn on 22 October 2019;

(ii)    each of the annexures to the affidavit of Derrick Craig Vickers sworn on 22 October 2019;

(iii)    the written submissions on behalf of the applicants filed on 30 October 2019 in support of the interlocutory process filed on 22 October 2019;

(iv)    any transcript of the hearing of the interlocutory process filed on 22 October 2019; and

(b)    the documents at (a)(i) to (iv) (inclusive) above be marked “confidential” on the electronic court file, not to be published or accessed by any party other than the applicants and their solicitors except pursuant to an order of the Court.

3.    Any person demonstrating sufficient interest in order 2 above have liberty to apply on 7 days upon notice.

4.    The second to thirteenth applicants’ costs of this interlocutory process be costs in the liquidation of the companies in respect of which the second to thirteenth applicants are appointed joint and several liquidators.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

(Revised from transcript)

FARRELL J:

1    Derrick Craig Vickers and Michael Owen are the joint and several liquidators of thirteen companies in what might broadly be called the J M Kelly group and they are, in that capacity, the first to thirteenth applicants named in an interlocutory process filed on 22 October 2019.

2    On 24 May 2019, Reeves J made orders pursuant to s 477(2B) of the Corporations Act 2001 (Cth) granting approval to the liquidators in their capacity as the second to thirteenth applicants, to enter into a funding agreement with the Commonwealth, acting through the Department of Jobs and Small Business ABN 54 201 218 474. His Honour also made orders under s 37AF of the Federal Court of Australia Act 1976 (Cth): see Vickers, in the matter of J M Kelly Builders Pty Ltd (in liquidation) [2019] FCA 918.

3    In those reasons, Reeves J:

(1)    Noted that the committee of inspection of J M Kelly Builders Pty Ltd (in liquidation) (JMK Builders) had already approved the liquidators enter into the proposed funding agreement.

(2)    Set out the terms of s 477(2B) of the Corporations Act and the principles applicable to gaining the Court’s approval as outlined by Edelman J in Hughes, in the matter of Sales Express Pty Ltd (in liq) [2016] FCA 423 (Hughes) at [20].

(3)    Set out relevant background to the application.

4    The liquidators now seek approval to enter into a deed amending the funding deed (amendment deed) for the purposes set out in written submissions dated 30 October 2019 at [27]. In his affidavit sworn on 22 October 2019 at [21], Mr Vickers explains why the liquidators seek the approval of the Court rather than from the committee of inspection or the creditors of companies of which they are the joint and several liquidators, other than JMK Builders.

5    In support of their application, the liquidators point out that:

(1)    The Court has already sanctioned entry into the funding agreement by the orders made on 24 May 2019. No one has challenged those orders.

(2)    The variations to the funding agreement to be effected by the amendment deed give no reason for the Court to believe that the funding agreement (as amended) is no longer appropriate.

(3)    The terms of the funding agreement remain clear and appropriately calibrated for the purposes of enabling the liquidators to undertake the “Agreed Work”.

(4)    The amendment deed is a product of discussions between the liquidators and the Commonwealth.

(5)    The committee of inspection of JMK Builders has already approved entry by the liquidators into the amendment deed (and that is the reason why the interlocutory application does not seek approval on behalf of that company).

(6)    It is the considered judgment of the liquidators that the amendment deed is appropriate and that it would aid the just and beneficial winding up of the companies in liquidation for the liquidators to enter into the amendment deed so as to facilitate the gathering of evidence and information for the purpose of prospective valuable claims that may be available against the directors of the companies and/or third parties with a view to enlarging the pool of assets available for distribution amongst the unsecured creditors.

(7)    There is no reason to doubt the liquidators’ judgment on the basis of a lack of good faith, an error of law or principle, or a lack of prudence. There are sound reasons for concluding that, as a result of entry into the amendment deed, the process of winding up and distribution will be enhanced for the reasons set out in the submissions at [28(e)(iv)].

6    Having regard to these matters and the principles discussed by Edelman J in Hughes at [20], the Court was satisfied that orders approving the liquidators’ entry into the amendment deed should be made.

7    The Court is satisfied that it is necessary to prevent prejudice to the proper administration of justice that the orders sought by the applicants under s 37AF of the Federal Court of Australia Act be made, having regard to that fact that information covered by the orders is sensitive and disclosure may be adverse to the conduct of the liquidation. There is a clear public interest in the due and beneficial administration of the estates of insolvent companies for the benefit of creditors and to that end commercially confidential information should be protected. While it may be that not every part of the material the subject of the confidentiality order is of a commercially confidential and sensitive nature, it would not serve the interests of justice to require the liquidators to spend time and money to identify particular portions of the material that should be the subject of the order. This is the approach adopted by this Court in Deputy Commission of Taxation v Italian Prestige Jewellery Pty Ltd [2018] FCA 983 at [57]-[63] (Markovic J) relying on Deputy Commissioner of Taxation v ACN 154 520 199 Pty Ltd (No 2) [2017] FCA 755 at [37]-[42] (Gleeson J).

8    The Court notes that the party through whom the Commonwealth acted when it signed the funding agreement was the Department of Jobs and Small Business, whereas it is proposed that the Commonwealth act through the Attorney-General’s Department in relation to the execution of the amendment deed. That reflects changes in Administrative Arrangements Orders as made by the Governor-General from time to time.

Associate:

Dated:    31 October 2019

SCHEDULE OF PARTIES