Federal Court of Australia

Hird (liquidator), in the matter of Allmine Group Limited (in liq) (No 3) [2022] FCA 732

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 90-15(3) of Schedule 2 Insolvency Practice Schedule (Corporations) to the Corporations Act 2001 (Cth), Mr Neil Cussen, registered liquidator, be appointed as external administrator of Allmine Group Ltd (in liquidation) (the Company) to act as joint and several liquidator of the Company with Mr Hird. 

2.    Pursuant to s 37AF(1) of the Federal Court of Australia Act 1976 (Cth), on the ground that it is necessary to prevent prejudice to the proper administration of justice, the following document is to be marked “confidential” on the Electronic Court File and is not to be published or accessed, except pursuant to an order of the Court, until such time as any litigation (including any appeal) arising out of the winding up and affairs of the Company is concluded: 

(a)    Exhibit MCH-10 to the affidavit of Michael Charles Hird sworn on 14?April 2022.

3.    Any person demonstrating sufficient interest in Order 2 above has liberty to apply on 3 days’ notice.

4.    The costs of the application be costs and expenses in the winding up of the Company. 

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

REASONS FOR JUDGMENT

YATES J:

Introduction

1    By an interlocutory application filed on 14 April 2022, the plaintiff, Michael Charles Hird, who is the liquidator of Allmine Group Ltd (in liquidation) (the company), sought an order pursuant to s 477(2B) of the Corporations Act 2001 (Cth) (the Act) that approval be granted to him retrospectively to enter into, on behalf of the company, a litigation funding agreement (the LFA) with Therium Litigation Finance Atlas AF IC, an incorporated cell registered in Jersey (Therium). Relatedly, Mr Hird sought an order pursuant to s 1322(4)(d) of the Act that the period for making this application be extended.

2    Mr Hird also sought an order, pursuant to s 90-15(3)(c) in Sch 2 to the Act (the Insolvency Practice Schedule (Corporations)) (the IPS(C)) that Neil Cussen be appointed as an external administrator of the company to act as joint and several liquidator with Mr Hird.

3    Finally, Mr Hird sought an order pursuant to s 37AF(1) of the Federal Court of Australia Act 1976 (Cth) (the FCA Act) that the copy of the LFA, and certain paragraphs of affidavits read in support of the application not be published or accessed, without further order of the Court, until such time as any litigation (including any appeal) arising out of the winding up of the company is concluded.

4    On 14 June 2022, I granted some of the relief sought by Mr Hird. I declined to grant other relief. After discussion, some relief was not pressed. These are my reasons for granting some relief and declining to grant other relief.

Background

5    The company is the ultimate holding company for the Allmine Group of Companies, which consists of a number of wholly- and partially-owned subsidiaries incorporated in Australia, Fiji, New Zealand, South Africa, Hong Kong, and Liberia.

6    Mr Hird was appointed as joint and several liquidator of the company on 18 October 2013 with Geoffrey Hancock, pursuant to a creditors’ resolution following a period of administration in which Mr Hird and Mr Hancock acted as the company’s administrators. Mr Hancock ceased to act as a joint and several liquidator on 11 January 2016.

7    On 26 April 2018, Gleeson J made orders pursuant to s 477(2B) of the Act approving the entry by Mr Hird, on behalf of the company, into a litigation funding agreement with Slater and Gordon Ltd (the Slater and Gordon litigation funding agreement) to enable him to conduct public examinations of the company’s directors and auditor regarding the company’s examinable affairs: Hird (Liquidator), in the matter of Allmine Group Limited (in liq) [2018] FCA 781. Those examinations have been conducted.

8    On 21 December 2018, Mr Hird commenced proceedings in the Supreme Court of Victoria against the directors seeking damages based on insolvent trading claims and breaches of duty (the Supreme Court proceeding). An associated company of one of the directors has been joined as a party to that proceeding. Pleadings have been closed and the parties have given discovery. On 12 November 2021, orders were made for the delivery of expert reports and the furnishing of particulars of loss and damage. Orders were also made for mediation.

9    In early 2022, Mr Hird engaged a new firm of solicitors to act for him in the Supreme Court proceeding.

Approval of the LFA

10    In late 2021, Mr Hird sought further funding to facilitate and assist with the prosecution of the Supreme Court proceeding. He liaised with various litigation funders. Eventually, he selected Therium. His reason for doing so was that Therium was willing to provide full funding of the proceeding and an indemnity in the event that an order for security for costs is obtained.

11    Mr Hird’s evidence was that absent the funding provided by the LFA, the company will not have assets to fund the Supreme Court proceeding, including the engagement of an independent expert. There are no other sources of funds available. Mr Hird formed the view that entering into the LFA was in the best interests of the company and its creditors because prosecuting the claims in the Supreme Court proceeding should deliver a return of funds to them. As to this, Mr Hird deposed:

18.     I believe those claims are meritorious and have reasonable prospects of success. One component of the claims is a claim for insolvent trading against the directors under section 588G of the Act. I believe the Defendant directors do not have a credible defence to that claim and, in addition to this, that they may not be able to rely on the Safe Harbour protections under the Act. Other components of the claims arise from breaches by the Defendants of their duties as directors of the Company under sections 180 and 181 of the Act, which caused substantial losses to the Company. I have identified that the Company holds insurance coverage for losses, and I believe that the relevant insurance policies, which remain valid, respond to the claims. I have also identified that the policies in question have a limit of $20,000,000 therefore I am optimistic about making a successful recovery for these claims.

12    Mr Hird also deposed:

19.    The LFA does not require the contribution of any funds from me and\or the Company in advance and is reliant on making recovery from these claims, whereby the proceeds will be disbursed in the following order of priority:-

(a)    First, to Therium, reimbursement of the litigation costs funded by Therium (including any security for costs posted by Therium).

(b)    Second, payment of any deferred fees and disbursements (including any applicable uplift) relating to the claims payable to the lawyers and me, as Liquidator.

(c)    Third, to Therium, the payment for the success fee (at 3.0x or 30% of the net recovery).

(d)    Fourth, the balance to me (the Liquidator) so that I can then distribute to creditors in accordance with the priorities in section 556 of the Act.

13    It seems that Mr Hird executed the LFA on 13 December 2021. However, the LFA contains a provision that its operation is subject to Mr Hird obtaining, under s 477(2B) of the Act, the creditors’ approval to him executing the agreement. Mr Hird sought and obtained creditor approval on 18 February 2022, from which date the operation of the LFA came into force. Even though the creditors’ approval has been obtained, Mr Hird formed the view that it may be prudent for him to seek the Court’s approval under s 477(2B) of the Act as well.

14    Section 477(2B) of the Act 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.

15    At the hearing, I raised with counsel for Mr Hird the appropriateness of the Court exercising the discretionary power under s 477(2B) when, according to Mr Hird’s evidence, he had already obtained approval that satisfied the requirements of that provision. Counsel was not aware of any reported decision dealing with that circumstance. No suggestion was made that the creditors’ approval that had been given was deficient or otherwise open to be questioned. After some discussion, and a short adjournment to enable instructions to be obtained, counsel informed me that Mr Hird no longer pressed the application for court approval under s 477(2B) or for related relief.

Appointment of Mr Cussen as joint and several liquidator

16    As I have noted, Mr Hancock ceased being a joint liquidator of the company on 11 January 2016. Mr Hird has acted as sole liquidator since that time. Mr Hird deposed to his belief that it would be in the best interests of “all concerned”—meaning the company, its creditors, and the Court—if an additional liquidator were to be appointed with the power to act jointly and severally with Mr Hird.

17    Mr Cussen is a chartered accountant and registered liquidator. On the evidence before me, he has 35 years of experience in insolvency—25 of those as a partner in insolvency firms. He has acted, in various capacities, in over 1,250 external administrations. He is a partner in the same firm as Mr Hird (Cor Cordis). Mr Cussen does not have, and has not had within the preceding 24 months, any relationship with the company, an associate of the company, a former liquidator of the company, a former administrator of the company, or a former administrator of a deed of company arrangement executed by the company. He has executed a consent to act.

18    I was satisfied that it was appropriate that Mr Cussen be appointed as an external administrator of the company to act as a joint and several liquidator with Mr Hird.

Non-publication order

19    Section 37AF of the FCA Act provides:

(1)     The Court may, by making a suppression order or non‑publication order on grounds permitted by this Part, prohibit or restrict the publication or other disclosure of:

(a)     information tending to reveal the identity of or otherwise concerning any party to or witness in a proceeding before the Court or any person who is related to or otherwise associated with any party to or witness in a proceeding before the Court; or

(b)     information that relates to a proceeding before the Court and is:

(i)     information that comprises evidence or information about evidence; or

(ii)     information obtained by the process of discovery; or

(iii)     information produced under a subpoena; or

(iv)     information lodged with or filed in the Court.

(2)     The Court may make such orders as it thinks appropriate to give effect to an order under subsection (1).

20    A non-publication order can be made where it is necessary to do so to prevent prejudice to the proper administration of justice: s 37AG(1)(a) of the FCA Act.

21    The funding of litigation is an aspect of the conduct of litigation that has attracted the imposition of non-publication orders: Onefone Australia Pty Ltd v One.Tel Ltd [2010] NSWSC 498; 78 ACSR 163 at [2]; Robinson, in the matter of Reed Constructions Australia Pty Ltd (in liq) [2017] FCA 594 at [60]; Re Kelly (liquidator), Australian Institute of Professional Education Pty Ltd (in liq) [2018] FCA 642 at [35].

22    I was satisfied that it was appropriate to make a non-publication order in respect of the LFA, subject to an order granting liberty to any person demonstrating sufficient interest to apply to the Court to vary that order.

23    In these reasons, I have referred to some aspects of the LFA. Mr Hird sought a non-publication order in relation to those aspects, and also of certain paragraphs of his affidavits made on 14 April 2022 and 8 March 2018. I declined to grant that relief.

24    First, the aspects of the LFA to which I have referred, including as discussed in the identified paragraphs in Mr Hird’s affidavit of 14 April 2022, had already been disclosed, in substance, in a Liquidator’s Report to Creditors dated 3 February 2022, which Mr Hird had sent to the creditors for the purpose of seeking their approval to him entering into the LFA. Even though some aspects of the LFA are in the public domain, the LFA, as a whole, is not.

25    Secondly, the substance of the matters referred to in the identified paragraphs of Mr Hird’s affidavit of 8 March 2018 had already been referred to in Gleeson J’s published reasons for judgment referred to above.

Associate:

Dated:    24 June 2022