Federal Court of Australia

Hudson, in the matter of ACB Group Pty Ltd (in liq) [2025] FCA 90

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to section 90-15 of the Insolvency Practice Schedule (Corporations), being Schedule 2 to the Corporations Act 2001 (Cth) (Corporations Act) (IP Schedule), the First Plaintiff (Liquidator) is and was justified and otherwise acting reasonably by utilising funds realised in the winding up of the Second Plaintiff (Company) for the purposes of meeting all costs, expenses and remuneration reasonably necessary to comply with all requirements of or obligations imposed by:

(a)    Environmental Action Notice EAN 00007823 issued to the Company under section 274 of the Environment Protection Act 2017 (Vic) (EP Act) on 19 November 2024; and

(b)    Environmental Action Notice EAN 00007650-1 issued to the Company under section 274 of the EP Act on 3 December 2024, amending the earlier Notice EAN 00007650 issued on 28 October 2024.

2.    Pursuant to section 477(2B) of the Corporations Act, the Liquidator’s entry into, on behalf of the Company, the Consultancy Agreement (Australia) – Q1150 with GHD Australia Pty Ltd, a copy of which appears at pages 318 to 326 of Annexure MCH-1 to the affidavit of Matthew Charles Hudson affirmed on 10 February 2025 and filed in this proceeding is approved nunc pro tunc.

3.    Pursuant to section 37AF 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 pursuant to section 37AG(1)(a) of the FCA Act:

(a)    the Confidential Affidavit of Matthew Charles Hudson affirmed 10 February 2025 and filed in this proceeding, Confidential Annexure MCH-2 to that affidavit, and any copies of that affidavit or annexure provided to and retained by the Court, are to be treated as confidential on the Court file and are not to be accessed for inspection without order of a Judge of the Court, on notice to the Plaintiffs;

(b)    the words contained in the Plaintiffs’ unredacted written outline of submissions dated 12 February 2025 as identified in Schedule 1 and any copies thereof provided to and retained by the Court, are to be treated as confidential on the Court file and are not to be accessed for inspection without order of a Judge of the Court, on notice to the Plaintiffs; and

(c)    the Further Confidential Affidavit of Matthew Charles Hudson affirmed on 13 February 2025 and filed in this proceeding, Confidential Annexure MCH-3 to that affidavit, and any copies of that affidavit or annexure provided to and retained by the Court, are to be treated as confidential on the Court file and are not to be accessed for inspection without order of a Judge of the Court, on notice to the Plaintiffs.

4.    The Plaintiffs’ costs of and incidental to this proceeding be costs in the winding up of the Company.

5.    By 4pm on 17 February 2025 a copy of these Orders shall be sent by the Plaintiffs to:

(a)    the Company’s creditors,

(b)    the Environment Protection Authority Victoria, and

(c)    the Australian Securities and Investment Commission.

6.    Any person affected by these Orders and directions shall have liberty to apply (on not less than 5 days’ written notice to the Plaintiffs by their solicitors Mills Oakley).

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

Schedule 1

REASONS FOR JUDGMENT

BUTTON J:

1    The First Plaintiff (Mr Hudson) is the liquidator of the Second Plaintiff, ACB Group Pty Ltd (in liq) (the Company). He was appointed on 20 December 2024.

2    The Company previously operated a dangerous goods facility specialising in blending and manufacturing chemicals for automotive use, including fuels and additives for racing vehicles and automotive engines. The premises on which the business was conducted were leased from an unrelated third party.

3    Following a very serious fire on 10 July 2024, which resulted from a spark causing an explosion, the Environment Protection Authority Victoria (EPAV) identified extensive and serious environmental issues including “contaminated firewater”; the fire brigade had approximately 180 firefighters battling the blaze, which took over 20 hours and about 3 million litres of water to extinguish. The fire was so severe that a large concrete wall collapsed over an underground high pressure gas line, and there are concerns that remaining chemical waste, fire waste and the potential compromise to the integrity of the gas line, pose an ongoing risk of further fires and explosions, in addition to ongoing environmental pollution risks.

4    At the time of Mr Hudson’s appointment, the Company was in receipt of two statutory notices issued by the EPAV. The first notice was issued on 28 October 2024, and the second notice was issued on 19 November 2024. The EPAV then issued an amended version of the first notice on 3 December 2024. I will refer to the November and December notices collectively as the EPAV Notices. Both notices required the Company to undertake work to remove specified hazardous waste from the premises occupied by the Company, in addition to preparing specified reports. The EPAV Notices are to be complied with by 26 February 2025 (some actions in respect of the second notice) and by 4 March 2025 (reporting obligations in respect of the second notice, and actions and reporting under the amended version of the first notice, issued in December 2024), unless an extension is sought and granted.

5    Mr Hudson seeks:

(1)    An order under s 90-15 of the Insolvency Practice Schedule (Corporations) (the IP Schedule), which is Sch 2 to the Corporations Act 2001 (Cth) (the Act) that he, in his capacity as liquidator of the Company, is and was justified in taking steps to comply with the EPAV Notices. Directions are sought on that matter principally because compliance will be costly, and will use funds that would otherwise have been available for distribution to the Company’s creditors.

(2)    An order under s 477(2B) of the Act seeking approval of the Court, nunc pro tunc, for the Company to enter into a contract with an environmental advisory consultant, to assist in the process of complying with the EPAV Notices and related tasks. Mr Hudson executed, on behalf of the Company, an agreement with GHD Australia Pty Ltd (GHD) on 8 January 2025. It has become apparent that, due to the time required to take steps to comply with the EPAV Notices and liaise with the EPAV and other stakeholders (including in relation to seeking an extension of time for compliance), the contract with GHD may be on foot for more than three months, hence the application under s 477(2B) for retrospective approval. Mr Hudson has also pre-paid for some work to be done by GHD, whose remit has also been expanded beyond the terms of the original agreement.

6    The application came before me as Commercial and Corporations Duty Judge, on an urgent basis, given the forthcoming deadlines for compliance with the EPAV Notices.

7    I made orders substantially in the form sought by the Plaintiffs on 14 February 2025, with reasons to follow. These are my reasons for making those orders.

8    The application was supported by two affidavits sworn by Mr Hudson on 10 February 2025, and one affidavit sworn on 13 February 2025. A suppression and non-publication order is sought over one of the 10 February 2025 affidavits, and also the 13 February 2025 affidavit (as well as portions of the written submissions that replicate information in either of those affidavits). The Plaintiffs also relied on an affidavit of Alex Myers (solicitor) which addressed some final matters (including communications with ASIC, the EPAV and creditors (referred to below)) concerning Mr Hudson’s application. Both ASIC and the EPAV took a neutral position on the application and did not wish to appear and make any submissions on it.

9    The principles guiding the application of s 90-15 of the IP Schedule and s 477(2B) of the Act are well known. Of present relevance is that the power to give directions is to be utilised when it is “just and beneficial to do so” (eg Re CuDeco Ltd (Receivers and Managers Appointed) (in liq) (2020) 14 ARLR 239; [2020] FCA 1661 (CuDeco) at [98] (Banks-Smith J)). Ordinarily a court will refrain from directions that relate to a liquidator’s (or administrator’s) business or commercial decisions, but may give directions on legal issues of substance or procedure, or an issue concerning power, the propriety or reasonableness of actions: eg Re Ansett Australia Ltd (No 3) (2002) 115 FCR 409 at [44] (Goldberg J) cited, inter alia, by Banks-Smith in CuDeco at [98]; see also Re Force Corp Pty Ltd (in liq) (2020) 149 ACSR 451; [2020] NSWSC 1842 at [18]-[19] (Gleeson J).

10    As to the application under s 477(2B) of the Act, the purpose served by the requirement that agreements that extend beyond three months be approved by the Court, the Committee of Inspection (if there is one) or a resolution of the creditors, is to ensure there is some scrutiny of entry into such arrangements, as they tend to cut across the general expectation that the winding up of a company will proceed expeditiously: Hundy, Re 3 Property Group 13 Pty Ltd (in liq) [2022] FCA 1216 (Hundy) at [23] (Wigney J), citing Re HIH Insurance Ltd [2004] NSWSC 5 at [15] (Barrett J) and Re Golden Sands Hospitality Pty Ltd (in liq) (No 2) [2017] NSWSC 450 at [15] (Gleeson JA). Court approval may be given retrospectively: Hundy at [26] (Wigney J); Hutchison v Hillcrest Litigation Services Ltd [2010] NSWSC 934 at [25] (White J); McCabe, Re Sargon Capital Pty Ltd (Receivers and Managers Appointed) (in liq) [2023] FCA 345 at [42] (Yates J); Stewart, Re Newtronics Pty Ltd [2007] FCA 1375 (Newtronics) at [25] (Gordon J); Vickers, Re York Street Mezzanine Pty Ltd (in liq) (2011) 196 FCR 479; [2011] FCA 1028 at [27] (Gordon J); Hird (Liquidator), Re Allmine Group Ltd (in liq) [2018] FCA 781 at [33] (Gleeson J).

11    The task of the Court (as summarised by Gordon J in Newtronics at [26], by reference to several earlier authorities) is not to reconsider the issues weighed by the liquidator and substitute its determination for that of the liquidator, but to review the liquidator’s proposal to satisfy itself there is no error of law or ground for suspecting bad faith or impropriety and considering whether there is any good reason to intervene in terms of the expeditious and beneficial administration of the winding up.

12    Turning to the circumstances of the present application, having received the affidavits referred to above (which address the matters covered in detail) I am satisfied that:

(1)    There is significant complexity in the environmental clean up task, and it is appropriate that Mr Hudson have access to a suitably qualified environmental advisory firm to:

(a)    aid in understanding the nature and extent of the issues;

(b)    assist in appropriately scoping the works to be procured from a clean up business with suitable qualifications, experience and personnel;

(c)    assist in evaluating proposals received from clean up businesses;

(d)    assist in concluding a contract with the chosen clean up business; and

(e)    assist with engaging with the EPAV and other stakeholders in connection with compliance with (and likely applications to extend the dates for compliance with) the EPAV Notices.

(2)    GHD is a firm with appropriate expertise to assist Mr Hudson in these tasks.

(3)    Mr Hudson gave due consideration to the qualifications of the environmental advisory consultant firm he appointed (and another firm whose proposal he considered), as well as the need to obtain value for money in concluding the terms of the engagement.

(4)    Mr Hudson has, with the assistance of his staff and GHD, engaged widely with clean up businesses operating in the hazardous waste sector. That engagement has had regard to relevant considerations including cost, expertise and personnel.

13    It is appropriate for funds controlled by Mr Hudson as liquidator of the Company to be expended on compliance with the EPAV Notices.

14    In addition to the importance of not leaving the waste in place — with the attendant risks to the community and environment (including further fires, explosions and/or further pollution of local creeks) — it should be noted that the obligations imposed by the EPAV Notices are not relieved by the Company’s entry into liquidation. On the contrary, provisions of the Environment Protection Act 2017 (Vic) (EP Act), to which Mr Hudson referred in his affidavit (and which provisions were set out and analysed in the Plaintiffs’ written submissions), expose the Company to penalties for non-compliance with the EPAV Notices.

15    In addition, Mr Hudson would also be personally exposed to penalties as an officer of the Company, if the EPAV Notices are not complied with, and may further be exposed to penalties as a person concerned in, or party to, the Company’s contraventions if the Company does not abide by the EPAV Notices. Provisions of the EP Act also allow for the EPAV to, in effect, re-direct notices to natural persons where (inter alia), the Company has not complied with the notice.

16    Mr Hudson deposed that, faced with these risks, if he cannot obtain directions from the Court that he would be justified and acting reasonably by using funds realised in the winding up of the Company (mostly from insurance policies) to meet the expenses associated with complying with the EPAV Notices, he may have to resign the appointment.

17    Mr Hudson advised creditors, in an “Initial Notice to Creditors” dated 8 January 2025, of his intention to make an application of the kind that he has brought. The notice asked that any creditor with queries or comments regarding the use of funds in the proposed manner or for the proposed purposes contact his office by 17 January 2025. Mr Hudson deposed that neither he, nor his staff, has received any correspondence or contact querying, commenting on, or objecting to the proposed use of funds, or objecting to this application. However, it should be noted that Mr Hudson’s notice also said “I will keep creditors informed regarding the filing and listing of the application and will provide a separate notice to confirm the hearing date once known.” After the application was filed, I had my chambers write to Mr Hudson’s solicitors concerning notification of the creditors of the hearing date fixed and providing links to non-confidential material. A circular was thereafter sent by Mr Hudson to creditors on 11 February 2025, providing those details and links to the material referred to. Mr Myers deposed that he was informed that no creditor had contacted Mr Hudson’s office with any concerns or queries. No creditor appeared to oppose the orders sought.

18    Having regard to the impact that expenditure on environmental clean up costs will have on the pool of funds available for distribution to creditors, I am satisfied that this is a proper occasion for Mr Hudson to seek directions under s 90-15 of the IP Schedule. I am also satisfied, having regard to the matters set out above, that Mr Hudson is justified and acting reasonably in utilising funds realised in the winding up of the Company in order to comply with the EPAV Notices, including costs relating to the appointment of the environmental consultancy firm, and the costs of contractors undertaking the physical clean up works.

19    The Plaintiffs’ submissions addressed, in detail, the basis upon which it could be said that the provisions of the EP Act are such that there is a present financial liability on the liquidator (cf merely a pre-liquidation obligation on the Company) and where the expenses to be incurred would fit under the priorities set out in s 556 of the Act. However, counsel for the Plaintiffs also submitted that it is not necessary for the Court to conclude that there is a present financial liability on Mr Hudson in order to grant the relief sought, and explained that the portion of the submissions addressing the basis upon which such a liability could be said to exist were included out of an abundance of caution. On that basis, it is not necessary to address that matter further. The Company is obliged to comply with the EPAV Notices notwithstanding its entry into liquidation, and the terms of the EP Act place Mr Hudson at significant peril if he does not ensure that the Company, which he now controls as liquidator, complies with those notices.

20    I am also satisfied, having regard to the circumstances set out above, that Mr Hudson’s entry into the contract with GHD, on the Company’s behalf, should be approved under s 477(2B) of the Act. The need for assistance of the kind to be provided by GHD arises from the complexities involved in the environmental issues with which Mr Hudson, on behalf of the Company, must grapple, the time that finalising compliance with the EPAV Notices will take, and the need for assistance by a consultant such as GHD in relation to those matters.

21    The last matter to deal with is the suppression and non-publication order that has been sought over the confidential affidavits. The confidential affidavits contain information about the following:

(1)    Valuations of the Company’s remaining plant and equipment, which Mr Hudson intends to try to realise by sale. The ability to realise the best possible price for those items (or other arrangements such as removal on an “as is, where is” basis) clearly may be compromised, to the detriment of the Company’s creditors, if the confidential valuation information, and Mr Hudson’s expectations of the practical realisable value, were available to potential purchasers.

(2)    Proceeds realised from insurance policies, including the details of potential further insurance claims (both in relation to the 2024 fire, and also an earlier fire in 2023).

(3)    An unredacted copy of the contract with GHD and its expected fees.

(4)    The proposals of five clean up contractors received by Mr Hudson, following his engagement with 14 potential contractors, and Mr Hudson’s comments on the suitability of each contractor. Mr Hudson identified, with GHD’s assistance, a preferred contractor, and recently signed an agreement with that contractor in respect of the works necessary to comply with the most urgent of the EPAV Notices. However, the final ambit of the works required in order to comply with both notices has not yet been concluded. If information concerning the identity of, and proposals submitted by, other clean up contractors, and Mr Hudson’s comments on them, were publicly available that may compromise (again to the ultimate detriment of creditors) the Company’s negotiating position in concluding an agreement with the chosen contractor (or another contractor in respect of the works required under the other EPAV notice).

22    Suppression and non-publication orders may be made under s 37AF on any of the grounds set out in s 37AG of the Federal Court of Australia Act 1976 (Cth). Section 37AG(1)(a) relevantly provides that such an order may be made where it “is necessary to prevent prejudice to the proper administration of justice”. Having regard to that statutory language, and as the authorities (including Country Care Group Pty Ltd v Director of Public Prosecutions (Cth) (No 2) (2020) 275 FCR 377; [2020] FCAFC 44 at [8]-[9] (Allsop CJ, Wigney and Abraham JJ)) make clear, suppression and non-publication orders are not to be made lightly. Commercial sensitivity can, however, constitute an appropriate basis for making such orders in appropriate circumstances, particularly where the integrity of the litigious process could be jeopardised by other commercial parties obtaining information (often disclosed by compulsion) in legal proceedings: eg Steelforce Trading Pty Ltd v Parliamentary Secretary to the Minister for Industry, Innovation and Science (No 2) [2018] FCAFC 47 at [4] (Perram, Pagone and Bromwich JJ) citing Motorola Solutions, Inc v Hytera Communications Corporation Ltd (No 2) [2018] FCA 17 at [8]-[9] (Perram J).

23    If the information over which the order has been sought were publicly available, the liquidator’s ability to realise the Company’s assets to best advantage, to procure the services of environmental consultants and contractors without market-participants knowing about the quotes of their competitors, and to pursue further insurance claims without revealing the extent of funds available to him, would all be compromised. That would be to the prejudice of the interests of the Company’s creditors, and would undermine some of the objects of the winding up regime, namely the conduct of the winding up expeditiously and in a manner suited to achieving the favourable realisation of assets and the avoidance of unnecessary costs. Accordingly, in the present case, I consider that the proper administration of justice necessitates the making of a suppression and non-publication order.

Associate:

Dated:    17 February 2025