Federal Court of Australia
Kogan, in the matter of Rogulj Enterprises Pty Ltd (in liq) (No 3) [2023] FCA 977
ORDERS
DATE OF ORDER: |
THE COURT ORDERS THAT:
1. Pursuant to section 477(2B) of the Corporations Act 2001 (Cth) the first plaintiffs be granted approval nunc pro tunc to enter into the amending agreement in the form located at pages 217 to 223 of the confidential Exhibit BFK-4 of the affidavit of Barry Frederic Kogan sworn on 26 July 2023.
2. Pursuant to sections 37AF and 37AG of the Federal Court of Australia Act 1976 (Cth) (FCA Act), on the ground that the order is necessary to prevent prejudice to the proper administration of justice, that the following documents be marked confidential on the Court file, not be published, disclosed or accessed except pursuant to the order of the Court and that their contents be suppressed until the conclusion of the liquidation of Rogulj Enterprises Pty Ltd (in liq) ACN 162 207 132:
(a) the affidavit of Barry Frederic Kogan sworn on 26 July 2023;
(b) pages 152 to 223 of the confidential Exhibit BK-4 to the affidavit of Barry Frederic Kogan sworn on 26 July 2023; and
(c) the email marked as Exhibit 1 on the application.
3. Until further order, pursuant to s 37AI of the FCA Act, the written submissions dated 11 August 2023 made in support of this interlocutory application be marked as confidential on the Court file, not be published, disclosed or accessed except pursuant to an order of the Court and that their contents be suppressed until a redacted version of the written submissions is provided for lodgement on the Court file.
4. If the plaintiffs do not regard Order 2(c) to be necessary, they are to notify the Associate to Cheeseman J by 4pm, 21 August.
5. The plaintiffs are to provide to the Associate to Cheeseman J a version of the written submissions with proposed redactions by 4pm, 21 August 2023.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
(Delivered ex tempore, revised from the transcript)
CHEESEMAN J
Introduction
1 On 23 July 2021, I made orders approving nunc pro tunc the entry by the first plaintiffs, as liquidators of the second plaintiff, Rogulj Enterprises Pty Ltd (in liquidation) (the Company), into a funding agreement with a litigation funder: Kogan, in the matter of Rogulj Enterprises Pty Ltd (in liq) [2021] FCA 856 (Rogulj Enterprises (No 1)) (First Approval). On 24 November 2021, I made orders approving nunc pro tunc a variation to that funding agreement (2021 amending agreement): Kogan, in the matter of Rogulj Enterprises Pty Ltd (in liq) (No 2) [2021] FCA 1504 (Rogulj Enterprises (No 2)) (Second Approval). Familiarity with Rogulj Enterprises (No 1) and Rogulj Enterprises (No 2) is assumed in these reasons.
2 The liquidators and the funder have since agreed to a further variation to the funding agreement (the 2023 amending agreement). These reasons concern an interlocutory application dated 28 July 2023 by which the liquidators seek approval under s 477(2B) of the Corporations Act 2001 (Cth) to enter into the 2023 amending agreement.
3 In support of the application the liquidators rely upon:
(1) an affidavit of Mr Kogan sworn on 26 July 2023 (Kogan 3) and the accompanying exhibit BFK-4, of which pages 152 to 223 were tendered as a separate confidential exhibit;
(2) their written submissions dated 11 August 2023;
(3) exhibit 1 being an email from the solicitors for the funder to Mr Jensen and Mr Kogan copied to others dated Thursday, 3 August 2023 at 6.37pm which updated the relevant time for obtaining the Court’s approval under s 477(2B) of the Act;
(4) an affidavit of Mr Kogan sworn on 4 November 2021 (Kogan 2) which was relied upon for the Second Approval; and
(5) an affidavit of Mr Kogan sworn on 5 July 2021 (Kogan 1) and pages 267 to 297 of the accompanying confidential exhibit, exhibit BK-2 which was relied upon for the First Approval.
4 Confidentiality orders pursuant to ss 37AI, 37AF and 37AG of the Federal Court of Australia Act 1976 (Cth) (FCA Act) are sought in respect of Kogan 3, and pages 152 to 223 of exhibit BFK-4 and the written submissions made in support of this interlocutory application.
5 In Rogulj Enterprises (No 1) and Rogulj Enterprises (No 2) I made confidentiality orders in respect of the evidence relied upon in those applications. In the present application, Mr Kogan has deposed to similar concerns raised in Rogulj Enterprises (No 1) and Rogulj Enterprises (No 2). In the circumstances, I am satisfied that the confidentiality orders sought should be made under ss 37AF and 37AG of the FCA Act on the ground that the order is necessary to prevent prejudice to the proper administration of justice and accordingly will make an order substantially in the form sought.
6 In the course of revising my ex tempore reasons, I formed the view that the confidentiality order should extend to Exhibit 1 on the application as it is necessary to prevent prejudice to the proper administration of justice. Accordingly, I revised the order to include reference to Exhibit 1. In the event that the plaintiffs do not regard that it is necessary for the confidentiality orders to extend to Exhibit 1, they are to notify my Associate by no later than 4pm, on 21 August.
7 With respect to the written submissions, I will make an interim confidentiality order and make a direction that the first plaintiffs provide a redacted version of the written submission that redacts only those parts of the written submissions which properly attract an order under s 37AF on the grounds in s 37AG of the FCA Act and are truly necessary to be kept confidential or suppressed. The redacted version of the written submissions is to be provided by email to my Associate by 4pm, 21 August 2023.
8 For the reasons that follow, I am satisfied it is appropriate to grant approval nunc pro tunc to the liquidators under s 477(2B) of the Act to enter into the amending agreement noting that such approval is required because the term of the agreement is likely to exceed three months.
Background
9 The background to this application and the circumstances in which the original funding agreement and the 2021 amending agreement were entered into is summarised at paragraphs [2] to [14] of Rogulj Enterprises (No 1) and paragraphs [5] to [7] of Rogulj Enterprises (No 2). I will not repeat those summaries here.
10 In broad terms, the 2023 amending agreement provides for a change to the quantum of funding and a change to the structure of the provision of the funding. Mr Kogan deposes in Kogan 3 to the events that have transpired since the Second Approval. In essence, due to delays not anticipated by the plaintiffs, the liquidators and the funder have agreed to change the funding agreement to make allowance for those unforeseen and unaccommodated circumstances.
Legal Principles
11 The applicable legal principles are summarised at paragraphs [15] to [19] of Rogulj Enterprises (No 1) and paragraphs [8] to [12] of Rogulj Enterprises (No 2). I adopt and apply those principles here.
Consideration
12 I am satisfied, having regard to Mr Kogan’s evidence and in reviewing the funding agreement, as varied by the 2021 amending agreement, that approval under s 477(2B) ought to be granted for the following reasons.
13 First, Mr Kogan, who is a registered liquidator with over 20 years of experience in insolvency and restructuring, has deposed to his view that the entry into the amending agreement is in the Company’s interest in the present circumstances, taking into account the interest of creditors. I note in particular that the amending agreement significantly increases the funds available to the liquidators to conduct the litigation. In my view, the amending agreement is directed at advancing the interests of creditors insofar as the increased funding will enable the liquidators to prepare and prosecute claims which may result in relatively substantial recoveries for creditors.
14 Secondly, the 2023 amending agreement does not change the order of priorities but reflects an altered commission structure that is commensurate with the increased risk borne by the funder in the circumstances that have eventuated. The evidence demonstrates that the liquidators have been conscientious in seeking to obtain the best outcome for creditors within the constraints of the circumstances with which they are faced and the terms of the original funding agreement.
15 Thirdly, there is no suggestion that the liquidators’ entry into the amending agreement is not a proper exercise of the liquidators’ powers or is otherwise ill-advised. In any event, approval under s 477(2B) does not operate as approval of the underlying agreement itself, such that the approval does not exonerate the liquidator from any liability he or she may have in respect of the transaction: In the matter of One.Tel Limited [2014] NSWSC 457; (2014) 99 ACSR 247 at 254 [26] (Brereton J).
Conclusion
16 Accordingly, I am satisfied that it is appropriate to make orders substantially in the form sought by the liquidators approving entry into the amending agreement.
I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Cheeseman. |
