FEDERAL COURT OF AUSTRALIA

Lewis (liquidator), in the matter of Concrete Supply Pty Ltd (in liq) [2020] FCA 841

ORDERS

THE COURT NOTES THAT ASIC has been served with the Originating Process and supporting affidavit, pursuant to r 2.8 of the Federal Court (Corporations Rules) 2000 (Cth), and that ASIC does not wish to be heard on the application.

THE COURT ORDERS THAT:

1.    The hearing of the Interlocutory Process scheduled for 17 June 2020 at 9.30 am be vacated.

2.    Pursuant to s 477(2B) of the Corporations Act 2001 (Cth), Mr Lewis and Mr Kidman, as the liquidators of Concrete Supply (the Liquidators), have approval nunc pro tunc to enter into the retainer agreement dated 20 December 2019 a copy of which is Annexure ML-1 to the affidavit of Martin Lewis sworn 1 May 2020 (Retainer) on behalf of Concrete Supply.

3.    Pursuant to Insolvency Practice Schedule cl 90-15, the Liquidators would be acting properly and would be justified in:

(a)    entering into, and causing Concrete Supply to enter into the Retainer; and

(b)    performing, and causing Concrete Supply to perform, the Retainer.

4.    The costs of this application are costs in the winding up of Concrete Supply and may be paid of out the assets of that company.

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

REASONS FOR JUDGMENT

WHITE J:

1    On 19 November 2019, the Court made orders pursuant to s 445D of the Corporations Act 2001 (Cth) (the Act) terminating the Deed of Company Arrangement (DOCA) into which Concrete Supply Pty Ltd had entered on 19 December 2017. At the same time, the Court made orders appointing the applicants, Mr Lewis and Mr Kidman, as its joint and several liquidators. Those orders gave effect to the judgment of the Court delivered on 12 November 2019: Adelaide Brighton Cement Limited, in the matter of Concrete Supply Pty Ltd v Concrete Supply Pty Ltd (Subject to Deed of Company Arrangement) (No 4) [2019] FCA 1846 (the Liability Judgment).

2    The Judge stayed the operation of the orders for a limited period so as to give Concrete Supply and the other respondents to the proceedings at first instance the opportunity to appeal. Concrete Supply did commence an appeal and sought a further stay of the operation of the orders until after the hearing and determination of the appeal. On 17 December 2019, the application of Concrete Supply for the stay was refused: Concrete Supply Pty Ltd (Subject to Deed of Company Arrangement) v Adelaide Brighton Cement Limited [2019] FCA 2202.

3    On 20 December 2019, the applicants retained the legal firm, Lipman Karas, to act in connection with the investigation and pursuit of potential claims against the directors of Concrete Supply and against others. The applicants now consider that they should not have entered into the retainer without having obtained, in the manner contemplated by s 477(2B) of the Act, an approval to do so. This judgment concerns their application for such an approval.

4    The applicants also seek a direction pursuant to cl 90-15 of the Insolvency Practice Schedule (Corporations) (IPS) that it is appropriate for them to retain Lipman Karas, despite Lipman Karas having acted for Adelaide Brighton Cement Limited (ABCL) in the proceedings culminating in the Liability Judgment and in the application by Concrete Supply for a stay of the orders made on 19 November 2019. Lipman Karas are also continuing to act for ABCL in relation to its claim against Concrete Supply.

Background to the winding up

5    Between August 2009 and November 2017, ABCL had supplied concrete to Concrete Supply. In October 2017, ABCL discovered that it had been underpaid about $12 million by Concrete Supply and that this underpayment had been disguised in its own records by a series of false entries made by one of its employees. ABCL sought payment of the shortfall from Concrete Supply. However, on 14 November 2017, the directors of Concrete Supply resolved that it was, or was likely to become, insolvent and appointed Messrs Cooper and Cantone at Worrells as administrators. Subsequently, on 19 December 2017, the creditors of Concrete Supply resolved that it enter into the DOCA.

6    ABCL, which had opposed the entry into the DOCA, brought proceedings to have it set aside and to recover the full amount of the shortfall. Following a substantial trial extending over 20 days, in the judgment delivered on 12 November 2019 the Judge found that ABCL’s employee had caused statements of account to be sent to Concrete Supply which significantly understated its indebtedness to ABCL; that two of the directors of Concrete (Rino and Jason Obbiettivo) had recognised that the statements of account were mistaken; that they had sought to take advantage of that situation by various forms of subterfuge so as to prevent ABCL becoming aware of the mistake; that Rino and Jason had not believed that the understatements in the statements of account represented rebates granted by ABCL; and that Concrete Supply was indebted to ABCL.

7    The orders made by the Court on 19 November 2019 to give effect to the judgment of 12 November 2019, included:

(a)    an order pursuant to s 445D of the Act terminating the DOCA and appointing the applicants as joint and several liquidators of Concrete Supply;

(b)    a declaration that Concrete Supply is indebted to ABCL in the sum of $12,457,472.22; and

(c)    a declaration that, between April 2009 and November 2017, Concrete Supply had failed to keep written financial records which complied with s 286 of the Act.

8    In consequence of the Court’s refusal of the application by Concrete Supply for a stay of the operation of these orders pending the hearing and determination of its appeal, the appointment of the applicants as its liquidators took effect from close of business on 17 December 2019.

The retainer

9    On 20 December 2019, the applicants entered into a written retainer with Lipman Karas for it to provide legal services. The retainer comprises a letter from Lipman Karas to the applicants dated 19 December 2019 and the accompanying “Terms of Engagement”. The applicants executed the retainer on 20 December 2019.

10    The subject of the retainer is indicated in the opening paragraph of the letter from Lipman Karas:

Thank you for instructing Lipman Karas to act for you in your capacity as joint and several liquidators of Concrete Supply Pty Ltd ACN 007 848 950 (Concrete Supply).

11    Later, the letter identified particular subject matters on which the applicants may seek the assistance of Lipman Karas in relation to the liquidation and continued:

[9]    These and any other matters arising in your appointment will almost certainly require longer than three months to resolve. Accordingly, it will be necessary for you to obtain Court approval of your entry into this retainer agreement under s 477(2B) of the Corporations Act 2001 (Cth). We are currently preparing this application.

12    The retainer does not contain any express terms concerning its duration. However, as Lipman Karas foreshadowed, it was almost inevitable that the retainer would subsist, as it has in fact, beyond three months. This is particularly so as the applicants have identified a number of potential recovery actions, based on the Court’s findings in the judgment of 12 November 2019. The findings and the potential recovery actions based on them identified by the applicants include:

(a)    the finding that the directors knew that the company was not entitled to rebates gives rise to a prima facie insolvent trading claim, as the company appears to have been insolvent without the alleged rebate;

(b)    the finding that the company was paying rent to one of its directors which was well above a commercial rent appears to give rise to a breach of duty case against the directors;

(c)    the finding that one of the directors was signing cheques without knowledge of the capacity of Concrete Supply to meet those cheques may give rise to a breach of duty claim against the directors; and

(d)    the finding that the company’s former administrators’ investigation of the affairs of the company was “deficient by a substantial margin” may give rise to a recovery action against those administrators.

The application

13    Despite the advice that the applicants should seek approval for the entry into the retainer under s 477(2B) of the Act, the applicants did not bring the present application until 5 May 2020. Mr Lewis attributes the lapse of time between the entry into the retainer and the making of the application to the following matters:

(a)    attention being given to whether Concrete Supply should continue its appeal against the decision of the primary Judge (the appeal was discontinued on 20 January 2020);

(b)    the time taken in negotiating a lease of the business of Concrete Supply pending its sale (an agreement for lease was executed on 23 December 2019);

(c)    the time taken in obtaining a valuation of the assets of Concrete Supply and then negotiating and executing an asset sale agreement; and

(d)    the disruption to normal business activities caused by the Covid-19 pandemic.

14    Mr Lewis has deposed that the applicants seek the approval of the Court under s 477(2B) rather than from the committee of inspection or by resolution of the creditors because Concrete Supply does not have a committee of inspection and its creditors include the directors and officers who are likely to be subject of the investigations and recovery proceedings to be undertaken by Lipman Karas pursuant to the retainer.

Statutory provisions and principles

15    Section 477(2B) provides:

(2B)    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.

16    The principles which the Court applies when considering an application for approval are well settled:

(a)    the Court makes its assessment having regard to the purposes for which liquidators’ powers exist, including the serving of the interests of those concerned in the winding up, the achievement of what is necessary for the proper realisation of the assets of the company, and assisting in its winding up: Re HIH Insurance Ltd [2004] NSWSC 5 at [15]; Stewart, in the matter of Newtronics Pty Ltd [2007] FCA 1375 at [26(6)];

(b)    a primary consideration is the impact of the agreement on the duration of the liquidation and whether that is, in all of the circumstances, reasonable in the interests of the liquidation: Re Opel Networks Pty Ltd [2013] NSWSC 1245 at [7]; Re One.Tel Ltd [2014] NSWSC 457, (2014) 99 ACSR 247 at [30];

(c)    the Court’s approval is not an endorsement of the proposed agreement but merely constitutes permission for liquidators to exercise their commercial judgment: Re Bell Group Ltd (in liq); Ex parte Woodings as liquidator of The Bell Group Ltd (in liq) [2009] WASC 235 at [58];

(d)    again, generally, the Court does not refuse an approval unless there can be seen to be some lack of good faith, some error in law or principle or some real and substantial grounds for doubting the prudence of the liquidator’s conduct: Re Spedley Securities Ltd (in liq) (1992) 10 ACLC 1742 at 1745;

(e)    a court may also refuse approval if the terms of the proposed agreement are unclear: Re United Medical Protection (No 4) [2002] NSWSC 516; (2002) 20 ACLC 1647 at [45];

(f)    the role of the Court is to grant or deny approval to the liquidator’s proposal. It is not to develop some alternative proposal which might seems preferable: Corporate Affairs Commission v ASC Timber Pty Ltd (1998) 16 ACLC 1642 at 1649; and

(g)    nevertheless, the Court does not simply “rubber stamp” whatever is put forward by a liquidator: Re Stewart; Newtronics, at [26(1)].

Is s 477(2B) of the Act applicable?

17    An initial question is whether s 477(2B) has any application in the present. That question arises because s 477(2B) applies only to agreements into which a liquidator enters “on the company’s behalf”. In this case, the retainer is not stated, at least expressly, to be on behalf of Concrete Supply.

18    Moreover, s 477(2)(b) empowers liquidators to appoint solicitors to assist them in their duty without imposing any requirement for approval. It is a commonplace circumstance in liquidations, in particular those involving litigation, that a solicitor’s retainer will not be completed within three months.

19    The decision of Charlesworth J in Frigger v Kitay (No 2) [2020] FCA 497 at [47]-[51] provides some support for the proposition that an agreement between a liquidator in his or her capacity as liquidator of the company and a firm of solicitors is not an agreement to which s 477(2B) applies.

20    In the absence of argument on the question, I would prefer not to express any concluded view. I propose instead to proceed on the basis that s 477(2B) is applicable. I am doing so for three reasons:

(a)    it is at least reasonably arguable that, by entering into the retainer in their capacity as joint and several liquidators of Concrete Supply, the applicants made it plain that they were doing so as agents for the company;

(b)    the very nature of the services to be provided under the retainer would, at least for the most part, be to, or for the benefit of, Concrete Supply, and not to the applicants personally; and

(c)    on this ex parte application, it is appropriate for the Court to act out of an abundance of caution.

Consideration of approval under s 477(2B)

21    In my view, putting to one side the issue of retrospectivity, it is appropriate for the Court to grant the applicants’ approval to enter into the retainer:

(a)    the applicants have, with the benefit of a detailed judgment of this Court, formed the view that it is appropriate that solicitors be retained to investigate and pursue potential recovery actions;

(b)    the applicants have entered into the retainer for the purpose of fulfilling their duties as liquidators of Concrete Supply;

(c)    the applicant have formed the view, on reasonable grounds, that it is in the interests of Concrete Supply for Lipman Karas to be the legal firm engaged in the matter;

(d)    the terms of the retainer are clear;

(e)    although there is no evidence that the applicants have sought to negotiate the rates proposed by Lipman Karas as may have been possible in the circumstances, Mr Lewis has deposed that those terms and fees are consistent with his experience of the commercial rates and terms of solicitors in Adelaide engaged in the kind of work to be undertaken under the retainer; and

(f)    this is a case in which the very nature of the work to be undertaken, and its expected duration, makes it improbable that the work to be undertaken pursuant to it could be completed within the period of three months.

Should the approval be given retrospectively?

22    As is apparent from its terms, s 477(2B) requires the approval to which it refers to be sought before a liquidator enters into an agreement, but the Court has power to give the approval retrospectively, in an appropriate case: Empire (Aust) Nominees Pty Ltd v Vince [2000] VSC 324, (2000) 18 ACLC 738 at [10]; Vickers, in the matter of York Street Mezzanine (in liq) [2011] FCA 1028 at [27].

23    The time which elapsed between the entry into the retainer and the making of the application for approval is longer than one would ordinarily expect. However, there is no reason not to accept the explanation proffered by Mr Lewis. I take into account in particular the disruptions caused by the Covid-19 pandemic which can be taken to have been operative from at least mid-March 2020.

24    I will direct that the approval take effect as from 20 December 2019.

The application for the extension of time

25    The Originating Application indicates that the applicants seek, if and to the extent that it is required, an extension of the time for the making of the present application. There are different views in the authorities as to whether an extension of time is required in circumstances like the present. Orders granting such an extension have been made in a number of cases, including Empire (Aust) v Vince, at [15]-[16]; and in Re Stewart; Newtronics, at [30]. However, in Re Read [2007] FCA 1985; (2007) 164 FCR 237, French J suggested at [33] and [39] that s 1322(4)(d) has no application in the present circumstances and disagreed with the authorities in which a different view had been taken.

26    In the absence of submissions, I would prefer not to express any concluded view. For the moment, I am inclined to the position expressed by French J in Re Read. In particular, the granting of the approval retrospectively has the effect of making an extension of time unnecessary. Following these matters being raised with the applications, they did not press the application for an extension of time. Accordingly, I will not make an order to that effect.

The application for the IPS cl 90-15 direction

27    The applicants seek a direction from the Court, pursuant to cl 90-15 of the IPS, that it is appropriate for them to retain Lipman Karas, despite Lipman Karas having acted for ABCL in the proceedings culminating in the Liability Judgment, and continuing to do so.

Statutory provisions and principles

28    Clause 90-15 in the IPS provides (relevantly):

90-15 Court may make orders in relation to external administration

Court may make orders

(1)    The Court may make such orders as it thinks fit in relation to the external administration of a company.

…

Examples of orders that may be made

(3)    Without limiting subsection (1), those orders may include any one or more of the following:

(a)    an order determining any question arising in the external administration of the company;

…

Matters that may be taken into account

(4)    Without limiting the matters which the Court may take into account when making orders, the Court may take into account:

(a)    whether the liquidator has faithfully performed, or is faithfully performing, the liquidator's duties; and

(b)    whether an action or failure to act by the liquidator is in compliance with this Act and the Insolvency Practice Rules; and

(c)    whether an action or failure to act by the liquidator is in compliance with an order of the Court; and

(d)    whether the company or any other person has suffered, or is likely to suffer, loss or damage because of an action or failure to act by the liquidator; and

(e)    the seriousness of the consequences of any action or failure to act by the liquidator, including the effect of that action or failure to act on public confidence in registered liquidators as a group.

29    Concrete Supply is a company under external administration for the purposes of cl 90-15 given the appointment of the applicants as its liquidators – see cl 5-15(c) of the IPS.

30    The principles applied by the courts in the exercise of the power under cl 90-15 are, in effect, the same as those which were applied in the exercise of the power under the former s 479(3) (in the case a court-ordered winding up) or under s 511 (in the case of a voluntary winding up) of the Act: In the matter of HIH Casualty and General Insurance Limited (in liquidation and Subject to Schemes of Arrangement) ACN 008 482 291 [2018] NSWSC 1886 at [4]-[5]; Warner (Liquidator), in the matter of Sakr Bros Pty Ltd (in liq) [2019] FCA 547 at [18]. In In the matter of Hawden Property Group Pty Ltd (in liq) (ACN 003 528 345) [2018] NSWSC 481, Gleeson JA noted at [8], that the power under cl 90-15 to “make such orders as it thinks fit in relation to the external administration of a company” (cl 90-15(1)), including “an order determining any question arising in the external administration of the company” (cl 90-15(3)(a)), is wider than s 479(3) and accommodates the determination of substantive rights. His Honour noted that the Court would not make a determination of substantive rights without affording potentially affected parties an opportunity to be heard: ibid.

31    The established principles indicate:

(a)    the power to give directions is intended to facilitate the performance of the liquidator’s functions and should be interpreted widely to give effect to that intention: Re Octaviar Administration Pty Ltd (in liq) [2017] NSWSC 1556 at [9];

(b)    the power is available to give a liquidator advice as to the proper course of action to be taken in the liquidation: Re Bell at [47]; Re MF Global Australia Ltd (in liq) [2012] NSWSC 994 at [7];

(c)    the Court may give directions that provide guidance on matters of law and the reasonableness of a contemplated exercise of discretion but will usually not do so when the subject of the directions sought relates to the making and implementation of a business or commercial decision and when there is no particular legal issue raised and no attack on the proprietary or reasonableness of the decision: Re MF Global at [7];

(d)    the Court does not interfere with or seek to second guess the liquidator’s judgment unless there is evidence of a lack of good faith, an error of law or principle, or real and substantial grounds for doubting the prudence of the liquidator’s conduct or when the Court considers that the liquidator’s decision is not a proper and reasonable one: Re One.Tel at [36]; Re Bell at [31], [47] and [50]; Re Octaviar at [10];

(e)    the effect of a direction is to sanction a course of conduct on the part of the liquidators so that, providing full disclosure has been made to the Court, the liquidator may adopt the course free from the risk of personal liability for breach of duty: Re Bell at [47]; Re One.Tel at [32]; and

(f)    the directions do not bind third parties, and do not determine substantive matters in dispute between the liquidator and third parties: Re Bell at [47].

32    As already indicated, the matter which prompts the applicants’ request for directions is that Lipman Karas acted for, and continue to act for, ABCL.

33    There are authorities which indicate that it is generally inappropriate for a liquidator to obtain legal advice from a lawyer who acts for a party interested in the liquidation: Re Laurie Cottier Productions Pty Ltd (in liq) (1992) 9 ACSR 513 at 518; Smarter Way (Aust) Pty Ltd v D’Aloia [2000] VSC 408; (2000) 35 ACSR 595 at [26]; In the matter of Kala Capital Pty Limited (in liq) [2012] NSWSC 1073 at [29]; Re ACN 151 726 224 Pty Ltd (in liq) previously Ridley Capital Holdings Pty Ltd [2016] NSWSC 1801 at [51]; and Re Bellafountain Pty Ltd [2017] NSWSC 391 at [40]. The underlying rationale is that a liquidator must, in the performance of his or her duties, not only be independent, but also be seen to be independent: Re Ji Woo International Education Centre Pty Ltd [2019] NSWSC 93; (2019) 134 ACSR 448 at [39].

34    However, there is no absolute rule precluding a liquidator from engaging solicitors who act for a substantial creditor. In Re Ridley Capital Holdings, Black J gave the following summary:

[51]    … [t]he courts have regularly cautioned against an insolvency practitioner engaging the solicitors who act for a substantial creditor, although there is no absolute rule preventing that course. Those cautions have been put in strong terms. In Smarter Way (Aust) Pty Ltd v D’Aloia [2000] VSC 408; (2000) 35 ACSR 595 at [26], Byrne J observed that an administrator’s engagement of the solicitors retained by the appointing chargee “is, in general, undesirable”, where creditors are entitled to an administrator’s independent opinion. In Commonwealth Bank of Australia v Fernandez [2010] FCA 487; (2010) 81 ACSR 262 at [89], Finkelstein J observed that:

“In Smarter Way … Byrne J spoke about the undesirability of an administrator engaging solicitors who act for a secured creditor: at [26]. He said that such a course was undesirable. I would go one step further than did Byrne J. Not only should an administrator not appoint solicitors retained by the secured creditor, they should not appoint solicitors who are on the secured creditor’s panel of solicitors. I think that solicitors on a secured creditor’s panel are just as likely to be perceived as loyal to the secured creditor as is the solicitor who happens to be retained by the secured creditor.”

[52]    In Re Kala Capital Pty Ltd (in liq) above, although I reached the result on which Mr Johnson relies, I also observed (at [29]) that:

“I accept that it is generally undesirable for a liquidator to engage solicitors who act for a substantial creditor … This is, however, not an absolute rule… .”

[53]    In Re Colorado Products Pty Ltd (in prov liq) [2013] NSWSC 1613 at [14], I similarly observed that:

“… liquidators and provisional liquidators to remain conscious of the reservations expressed by Byrne J in Re Smarter Way … at [26] as to the retainer by an insolvency practitioner of solicitors who act for a secured creditor. On the other hand, I accept that in some circumstances it may be appropriate for a liquidator or provisional liquidator to retain solicitors who have previously been engaged by a secured creditor to act for a company in liquidation in proceedings, although considerable care needs to be taken in that regard and the liquidator will need to remain alert both to his obligations as an officer of the Court and to the possible need for independent advice …”

(Citations omitted)

35    The authorities indicate that the critical question concerning the appropriateness of a liquidator retaining the solicitors who act for a creditor turns on the prejudice to the liquidator’s independence: Re Ji Woo at [40].

Consideration

36    A number of matters make the selection of Lipman Karas as the solicitors to assist the liquidators in the present case a sensible course. First, having acted for ABCL in the substantial litigation resulting in the judgment of 12 November 2019, Lipman Karas has considerable accumulated knowledge which can be applied to the benefit of the liquidation. I take into account in this regard that:

(a)    the trial leading to the judgment was a substantial trial involving the tender of a substantial volume of documentary evidence;

(b)    Mr Lewis has deposed that the applicants selected Lipman Karas by reason of their familiarity with the matters which require investigation. If the applicants were to retain a firm with no prior involvement of the matter, the new solicitors would have to spend considerable time becoming familiar with both the oral and documentary evidence and this would involve significant time and cost;

(c)    a number of matters indicate that it would not be appropriate for the applicants to retain any of the other firms who acted in the litigation. There would, for example, be a number of potential conflicts, especially given that some of the causes of action contemplated by the applicants involved the persons for whom the other firms acted (the administrators and the directors of Concrete Supply);

(d)    there is a significant degree of common interest between ABCL and Concrete Supply, given that ABCL is Concrete Supply’s largest creditor (it holds 90% by amount of the total of the creditors’ claims) and pursued the action which led to the winding up order being made;

(e)    although ABCL is a substantial creditor of Concrete Supply, there is no dispute between it and Concrete Supply as to its indebtedness, as this was determined by the Liability Judgment; and

(f)    Mr Lewis has deposed that the applicants intend to seek independent advice in the event that a conflict between the interests of Concrete Supply and the interests of ABCL arises during the course of the liquidation. That is not a mere platitude, as is indicated by the action which the applicants took in relation to the discontinuance of the appeal by Concrete Supply against the Liability Judgment. Before making the decision to discontinue, the applicants did obtain independent advice. The applicants can be expected to seek independent advice again if a circumstance of conflict arises.

37    The practical advantages in the applicants retaining Lipman Karas in the circumstances of the present case are an important consideration. I note that in GDK Projects Pty Ltd, in the matter of Umberto Pty Ltd (in liq) v Umberto Pty Ltd (in liq) [2018] FCA 541, Farrell J regarded as relevant that the lawyers acting for the creditor had “an intimate knowledge of the available materials” and that the liquidator’s engagement of them would “almost certainly reduce the costs associated with conducting any further investigations and commencing proceedings as compared [with] the costs which would necessarily be incurred if another firm were to be engaged”, at [53].

38    In my opinion, the evidence shows that the applicants, who are experienced liquidators, are conscious of the potential for conflict and of the need for them to be independent of ABCL. It can be taken that Lipman Karas have the same consciousness. The practical benefits for the liquidation if Lipman Karas are able to act in connection with the liquidation despite continuing to act for ABCL indicate that this is a case in which the Court may direct that it is appropriate for the applicants to retain Lipman Karas to act on behalf of Concrete Supply in the liquidation.

A declaration of validity

39    By [4] of the Originating Application, the applicants seek, pursuant to s 1322(4)(a) of the Act, a declaration that the retainer is not invalid by reason of having been entered into without the Court’s prior approval under s 477(2B).

40    Declarations to similar effect have been made in some of the authorities. However, given the character of a declaration as a binding determination of rights, I consider that it would be inappropriate to make such a declaration without giving those who may be affected by it the opportunity to be heard. When this was pointed out to the applicants, they did not persist with this part of the application, and it need not be considered.

Conclusion

41    I will make orders appropriate to give effect to these reasons.

Associate:

Dated:    16 June 2020