Federal Court of Australia

Wenwii Australia Pty Ltd (in liq) v Montague Estate Pty Ltd [2025] FCA 280

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to r 9.05(1)(b)(iii) of the Federal Court Rules 2011 (Cth), Jerome Hall Mohen and Gregory Bruce Dudley as liquidators of the defendant (Liquidators) are joined as the second and third plaintiffs, respectively.

2.    Pursuant to s 477(2B) of the Corporations Act 2001 (Cth), the Court approves the entry by the defendant and the Liquidators into the litigation funding agreement dated 6 December 2024 at annexure JHM-2 to the affidavit of Jerome Hall Mohen affirmed on 20 December 2024, as proposed to be varied as set out in annexure GBD-7 to the affidavit of Gregory Bruce Dudley, with the approval taking effect as from 6 December 2024.

3.    Pursuant to s 477(2B) of the Corporations Act 2001 (Cth), the Court approves the entry by the defendant and the Liquidators into a proposed retainer agreement with Stacks Davis Lawyers, in the form or substantially in the form of the draft retainer agreement at annexure JHM-3 to the affidavit of Jerome Hall Mohen affirmed on 20 December 2024.

4.    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the proper administration of justice, the following documents will be marked 'Confidential' on the Court file and must not be published, made available (whether electronically or otherwise), disclosed to or accessed by any person or entity other than the Liquidators and their legal representatives until the conclusion of the liquidation of the company or until further order of the Court, whichever is the earlier:

(a)    the unredacted copy of the affidavit of Jerome Hall Mohen affirmed on 20 December 2024;

(b)    the unredacted copy of the affidavit of Gregory Bruce Dudley affirmed on 21 March 2025;

(c)    the unredacted copy of the Liquidators' outline of submissions filed 6 February 2025; and

(d)    the unredacted copy of the Liquidators' outline of submissions filed 21 March 2025.

5.    By 5.00 pm AWST on 28 March 2025, the liquidators must file:

(a)    the affidavit of Jerome Hall Mohen affirmed on 20 December 2024 with paragraphs 22 to 28, annexure JHM-2 and annexure JHM-3 redacted;

(b)    the affidavit of Gregory Bruce Dudley affirmed on 21 March 2025 with paragraphs 16, and 20 to 34, and annexure GBD-7 redacted;

(c)    the outline of submissions filed on 6 February 2025 with paragraphs 5(b) to 5(g) and 6(b) redacted; and

(d)    the outline of submissions filed on 21 March 2025 with paragraphs 10 to 12, 14, 17 to 19, and 22 to 26 redacted.

6.    No person who is not a party to this proceeding may view or receive a copy of the transcript of the hearing of 26 March 2025 without the leave of the Court.

7.    The costs of and incidental to this interlocutory process are costs in the winding up of the first plaintiff.

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

REASONS FOR JUDGMENT

(edited from the transcript)

JACKSON J:

1    In this proceeding, the defendant, Montague Estate Pty Ltd (Company), was ordered to be wound up. Jerome Mohen and Gregory Dudley of RSM Australia are its liquidators.

2    On 6 December 2024, the liquidators and the Company entered into a litigation funding agreement with Pretium Funding Pty Ltd. They also propose that they and the Company will enter into a retainer agreement with Stacks Davis Lawyers.

3    The liquidators now seek the Court's approval of those two agreements. In the case of the litigation funding agreement, that approval is to be retrospective. It will also take into account some proposed revisions, which I will mention soon.

4    In support of the applications, the liquidators rely on an affidavit of Mr Mohen affirmed on 20 December 2024 and an affidavit of Mr Dudley affirmed on 21 March 2025.

5    The liquidators also apply to be joined as parties to the proceeding and they seek suppression orders in relation to certain parts of the affidavits and written submissions that they have filed.

Summary of factual background

6    The application to wind up the Company was made on 7 October 2024. Eight days before that, the Company transferred all the shares that it held at that time in a company called Montague VY Number 1 Pty Ltd.

7    The transferee was an entity called Global Property Group Limited which is registered in the Republic of Seychelles. The Company has commenced proceedings in this Court against Montague VY, Global Property Group Limited, and the Company's director Paul Williams, seeking orders setting the transfer aside, and compensation. The Company has also commenced proceedings in this Court for the winding up of Montague VY. The agreements of which approval is now sought have been entered into an order to permit the Company to pursue those two proceedings against Montague VY and others.

8    The proceedings in respect of the transfer of shares in Montague VY were brought on an urgent basis and are the subject of a decision of Feutrill J granting freezing orders: Montague Estate Pty Ltd (In Liquidation) v Montague VY No1 Pty Ltd, in the matter of Montague Estate Pty Ltd [2024] FCA 1426 (Montague v Montague VY). The litigation funding agreement was entered into on the same day as the application for freezing orders was heard.

9    Mr Mohen deposes to his belief that if the terms of the agreements were to be disclosed to the other parties in the proceedings mentioned above, it could afford them a strategic advantage and so cause prejudice to the proper administration of justice. I am persuaded that this is so, given the nature and contents of the agreements and the way that litigation may ordinarily be expected to be conducted. As such, it would be prejudicial to the proper administration of justice if liquidators and others were to be deterred from entering into agreements of this kind for fear that when the necessary approval is sought, their contents will be disclosed, in particular, to opposing parties to the relevant litigation: see Livingstone; Re NewSat Ltd (in liq) [2022] FCA 1559 at [68]-[69] (Stewart J) and the authorities cited there.

10    I will therefore make suppression orders over parts of the affidavits and written submissions that disclose those details, on the ground that to do so is necessary to prevent prejudice to the proper administration of justice. The parts suppressed will not be as extensive, however, as the liquidators have sought.

Legal principles

11    Section 477(2B) of the Corporations Act 2001 (Cth) relevantly requires liquidators of companies to obtain the approval of the Court before entering into an agreement on the company's behalf where the term of the agreement may end more than three months after the agreement is entered into. Both of the agreements of which approval is sought meet that description.

12    The purpose of s 477(2B) is 'to ensure that the court exercises some oversight of the liquidator's actions and, in effect, confers or completes the necessary power only where it sees that a case for exercise of the power in the particular circumstances has been sufficiently shown': Re HIH Insurance Ltd [2004] NSWSC 5 at [15] (Barrett J).

13    The central issue is whether any prolongation of the winding up that may be caused by the proposed agreement is warranted by the offsetting benefits that would flow from it: Re City Pacific Ltd [2017] NSWSC 784 at [13], [29] (Brereton J). That is in the context of a general expectation that winding up will proceed expeditiously: see HIH Overseas Holdings [2001] NSWSC 426 at [5]; Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher [2011] FCAFC 89 at [40] (Emmett, Nicholas and Robertson JJ).

14    In Fortress Credit at [40] the Full Court said:

In considering whether to give approval under s 477(2B) and to give directions under s 479(3), the Court must consider the purposes for which the powers of a liquidator exist. One overriding purpose is to serve the interests of those concerned in the winding up, relevantly, in the present circumstances, the creditors. Another purpose is to do whatever needs to be done for the proper realisation of the property of the company or to assist its winding up …

15    The Court should not act as a rubber stamp for the liquidator, but it is not the role of the Court to appraise the commercial desirability or terms of the transaction. Generally, the Court will not interfere unless there can be seen to be some lack of good faith, some error in law or principle, or real and substantial grounds for doubting the prudence of the liquidator's conduct: see Re Spedley Securities Ltd (in liq) (1992) 9 ACSR 83 at 85-86 (Giles J); State Bank (NSW) v Turner Corporation Ltd (1994) 14 ACSR 480 at 483 (Tamberlin J); HIH Insurance at [15]; Pascoe; Re Matrix Group Ltd (in liq) [2011] FCA 1117 at [7] (Jacobson J).

16    Approval under s 477(2B) may be granted retrospectively in an appropriate case: Vickers and Others v Australian Securities and Investments Commission [2011] FCA 1028; (2011) 196 FCR 479 at [27] (Gordon J).

Consideration

17    I am satisfied that pursuing the two proceedings described above may reasonably be seen to be in the interests of the Company’s creditors overall. Mr Mohen has deposed to his belief that the claims are available to the Company and that, if successful, they may improve significantly the prospects of a return to creditors.

18    I note that in his reasons for granting the freezing orders, Feutrill J considered (at [8]) that the Company had established that there was a serious question to be tried. Mr Dudley has also presented evidence to suggest that if judgment is entered against Montague VY, at least, there may be assets against which that judgment could be executed.

19    Mr Mohen and Mr Dudley have also provided evidence of their belief that the entry into the litigation funding agreement has permitted they and the Company to pursue the two proceedings mentioned above and will facilitate the ongoing prosecution of those proceedings. In his affidavit, Mr Mohen provides evidence as to the appropriateness of the commercial terms of the litigation funding agreement. I see no basis on which to doubt the commercial judgment of the liquidators in this regard. I am satisfied in particular that the return to Pretium should the litigation result in some recovery is not disproportionate to the risks it is undertaking by entering into the agreement.

20    At the first return of this application, I made certain observations as to how the effect of the litigation funding agreement could be clarified. The liquidators have since proposed amendments to take account of those observations. Mr Dudley's evidence is that Pretium will agree to those amendments. This reinforces the conclusion that the terms of the litigation funding agreement are appropriate.

21    It follows that no lack of good faith or error or grounds for doubting the prudence of the entry into the litigation funding agreement is disclosed on the face of the evidence before the Court.

22    Given the urgency with which the injunctions granted on 6 December 2024 were sought, that is an evident basis for making it appropriate to grant the Court's approval retrospectively.

23    As for the retainer agreement with Stacks Davis Lawyers, Mr Mohen and Mr Dudley have each given evidence as to its appropriateness. Once again, there is no reason to doubt the opinions of the liquidators in that regard.

24    The liquidators have presented evidence to the effect that creditors have been notified that the current applications were to be brought, and that no creditor has expressed any opposition.

25    It is therefore appropriate to make the orders under s 477(2B) of the Corporations Act as sought.

26    It is also appropriate in the present circumstances to join the liquidators as parties to this proceeding: see Re Riverside Spares Pty Ltd (in liq) [2020] NSWSC 839 at [8] (Emmett AJA).

27    For those reasons, the orders sought (with modifications to the scope of the suppression order) will be made

Corrigendum

The first sentence of [6] is 'The application to wind up the Company was made on 7 October 2024', instead it should be 'The winding up order was made on 26 November 2024'.

Associate:

Dated:    28 March 2025