Federal Court of Australia

FSM Development Pty Ltd, in the matter of FSM Development Pty Ltd (in liquidation) [2025] FCA 617

ORDERS

THE COURT ORDERS THAT:

1.    The interlocutory process (Process) filed on 5 June 2025 is returnable instanter.

2.    Subject to Order 3 below, pursuant to sections 37AF(1)(b), 37AG(1)(a) and 37AJ 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 paragraphs of the affidavit (Affidavit) of Catherine Margaret Conneely sworn on 5 June 2025, and the following documents (collectively, Documents), are to be marked “Confidential” on the Court’s file and not published, disclosed to or accessed by any person, except pursuant to an order of the Court, until the liquidation of each of the second to sixth plaintiffs is concluded:

(a)    paragraphs 23(j), 25, 26(k), 26(l), 27, 28, 30, 32, 33, 37, 40, 43(c), 43(d), 44(d), 47(c)(ii), 51(d)(iv) and 53 of the Affidavit;

(b)    the Funding Deed at pages 1 to 20 of Exhibit ‘CMC-1’ (Exhibit);

(c)    the Liquidation Funding Deed at pages 26 to 45 of the Exhibit; and

(d)    the plaintiffs’ written submissions filed in support of the Process.

3.    To the extent necessary, Order 2 above, does not prevent the first plaintiffs, the first plaintiffs’ legal representatives or the first plaintiffs’ servants, agents or employees, from disclosing, publishing or accessing the Documents and the information contained therein.

4.    Pursuant to sections 477(2B) and 506(1A) of the Corporations Act 2001 (Cth), the first plaintiffs are granted approval, nunc pro tunc, to enter into the Liquidation Funding Agreement, a copy of which appears at pages 26 to 45 of the Exhibit, on behalf of each of the second to sixth plaintiffs.

5.    The first plaintiffs’ costs of and incidental to this application are costs and expenses in the liquidations of each of the second to sixth plaintiffs and are to be paid out of the assets of each of the second to sixth plaintiffs.

6.    Any person who wishes to modify or set aside these orders have liberty to apply within 14 days of the date of these orders.

7.    By 5.00pm on 13 June 2025, the first plaintiffs provide a copy of these orders to all creditors for whom the first plaintiffs have contact details, in the following manner:

(a)    by email, if the first plaintiffs have a current email address;

(b)    by text message, if the first plaintiffs do not have a current email address but have a current mobile telephone number; and

(c)    by mail, if the first plaintiffs have neither a current email address nor a current mobile telephone number.

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

REASONS FOR JUDGMENT

MOORE J

1    This decision concerns whether liquidators should be granted leave to enter into a contract that will operate for more than three months. On the basis of the matters that have been put before me and drawn to my attention, such leave should be granted.

2    By interlocutory process filed on 5 June 2025 on behalf of the first plaintiffs (the Liquidators) who are the liquidators of the second to sixth plaintiffs, including FSM Development Pty Ltd (FSM) and FSLP Pty Ltd (FSLP), the Liquidators seek an order pursuant to s 477(2B) and s 506(1A) of the Corporations Act 2001 (Cth) (Corporations Act) that the Liquidators be granted approval, nunc pro tunc, to enter into the agreement entitled “Liquidation Funding Agreement 2025”, a copy of which appears at pages 26 to 45 of Exhibit ‘CMC-1’ to the affidavit of Catherine Margaret Conneely affirmed on 5 June 2025 (Liquidation Funding Agreement).

3    Approval is required (either from the Court, or from the committee of inspection or by a resolution of creditors) because the Liquidation Funding Agreement will operate for more than three months: s 477(2B) of the Corporations Act. The Liquidators seek leave of the Court to enter into that agreement.

4    FSM is undertaking a multi-unit mixed-use development in Ashfield, Sydney, which is practically complete. FSLP is undertaking a multi-unit residential development in Lindfield, Sydney, which is largely completed. Other plaintiff companies are involved in these developments.

5    The reasons for approving the present application can be stated quite briefly. Funding has been provided by a creditor pursuant to a previous funding deed. The Liquidators propose to enter into a further arrangement, being the Liquidation Funding Agreement. The evidence before the Court, some of which is confidential, reveals that the Liquidation Funding Agreement is necessary to fund various activities that are desirable for the Liquidators to carry out, including the final steps in the completion of the two developments so that the assets which are the product of the developments can be realised, and the getting in of other assets (including the winding up of, and appointment or receivers and managers to, related entities).

6    The principles applicable to the making of an order under s 477(2B) of the Corporations Act were summarised by Gordon J in Stewart, in the matter of Newtronics Pty Ltd [2007] FCA 1375 at [26], and by Stewart J in Thorn (liquidator), in the matter of South Townsville Developments Pty Ltd (in liq) [2022] FCA 143 at [21] – [23]. I will not reproduce the relevant parts of those decisions here.

7    The evidence before the Court on the present application indicates that if further funding is not provided, the Liquidators:

(a)    will be unable to continue the realisation of assets;

(b)    will be unable to discharge their obligations under the Corporations Act; and

(c)    will be unable to take other steps the nature of which is confidential,

which would likely result in a material decrease in the value of the companies’ assets, and a reduced or nil return for the companies’ various creditors. The evidence is also that the absence of funding will delay the completion of the liquidation process.

8    The evidence is also that the Liquidation Funding Agreement is the best available source of funding, and that the entry into the agreement is in the best interests of the creditors of the second to sixth plaintiffs.

9    The terms of the Liquidation Funding Agreement are confidential. However, the key commercial terms appear to be reasonable in the circumstances and do not appear to confer any unusual advantage on the funder.

10    In these circumstances, I am satisfied that the Court should authorise the entry into the Liquidation Funding Agreement. However, given that the present order is sought without hearing from any of the other creditors, I also order that notice of these orders be provided to those creditors for whom the Liquidators have contact details, and that any person who wishes to modify or set aside these orders have liberty to apply within 14 days of the date of these orders.

11    The Liquidators also seek confidentiality orders over certain parts of the evidence, the written submissions, the previous funding deed and the Liquidation Funding Agreement on the basis that it would prejudice the position of the Liquidators in the conduct of the liquidations if this material was revealed.

12    In Australian Securities and Investments Commission v eToro AUS Capital Limited [2025] FCA 100 at [13] – [17], Stellios J usefully collected the relevant principles and supporting authorities governing the making of an order under s 37AF of the Federal Court of Australia Act 1976 (Cth), including on the grounds of preserving commercial confidentiality. His Honour observed as follows:

13    The applicable principles governing the making of an order under s 37AF are “well settled”: Clark v Digital Wallet Pty Ltd [2020] FCA 877 at [19]. For present purposes, it is sufficient to note the following.

14    First, in considering whether such an order should be made, “the Court must take into account that a primary objective of the administration of justice is to safeguard the public interest in open justice”: FCA Act, s 37AE.

15    Secondly, the threshold is necessity; mere desirability will not be sufficient: Chief Executive Officer of the Australian Transaction Reports and Analysis Centre v TAB Ltd (No 4) [2017] FCA 1532 at [9]; Motorola Solutions, Inc. v Hytera Communications Corporation Ltd (No 2) [2018] FCA 17 at [6]. Nor is it sufficient that there will be mere embarrassment, inconvenience, annoyance, or unreasonable or groundless fears: Australian Competition and Consumer Commission v Cascade Coal Pty Ltd (No 1) [2015] FCA 607; 331 ALR 68 at [30]; Chen v Migration Agents Registration Authority (No 1) [2016] FCA 649 at [11]. Consequently, the onus on the applicant is a “very heavy one”, and the threshold to be satisfied by the applicant is high: Australian Competition and Consumer Commission v Valve Corporation (No 5) [2016] FCA 741 at [8], quoting Computer Interchange Pty Ltd v Microsoft Corp [1999] FCA 198; 88 FCR 438, 442 [16]; see also Cascade Coal at [30].

16    Thirdly, it has been accepted “that commercial sensitivity can be an appropriate basis for making a suppression or non-publication order” by reason of s 37AG(1)(a): Motorola Solutions at [8]-[9], quoted in 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); see also Hogan v Australian Crime Commission [2010] HCA 21; 240 CLR 651 at [38]-[39]; Clark v Digital Wallet at [21]; Australian Competition and Consumer Commission v Air New Zealand Limited (No 3) [2012] FCA 1430 at [35]. In Motorola Solutions at [9], Perram J explained that the reasons for this are “generally associated with preserving the integrity of the litigious process, likely to be jeopardised if commercial competitors could benefit from court ordered production of trade secrets by parties to a suit”: quoted in Steelforce Trading at [4]. As Katzmann J said in Australian Competition and Consumer Commission v Origin Energy Electricity Ltd [2015] FCA 278, at [148] (ACCC v Origin Energy), “[i]t is in the interests of the proper administration of justice that the value of confidential information not be destroyed or diminished”: see also Kilgour v Commissioner of Taxation [2022] FCA 1487 at [29]; Australian Competition and Consumer Commission v Cement Australia Pty Ltd (No 2) [2010] FCA 1082 at [23] (ACCC v Cement Australia). Conversely, “[i]t is not in the interests of the administration of justice that proceedings ‘become a vehicle for advantaging or prejudicing trade rivals’”: ACCC v Origin Energy at [148], quoting ACCC v Cement Australia at [23]; see also In-N-Out Burgers, Inc v Hashtag Burgers Pty Ltd [2020] FCA 193; 377 ALR 166 at [373]; Australian Competition and Consumer Commission v Oscar Whylee Pty Ltd (No 2) [2020] FCA 1361 at [20].

17    Fourthly, not only must the circumstances justify an order by reason of s 37AG(1)(a), but the scope of the order must be confined to what is necessary to prevent prejudice to the proper administration of justice. As a Full Court said in Ogawa (formerly Ms PD) v President of the Australian Human Rights Commission (Pseudonym) [2022] FCAFC 160; 294 FCR 221 at [30] (Rares, Perry and Hespe JJ), “[i]f the Court decides that it is necessary in order to do justice in the proceeding to derogate from the principle of open justice, it must craft an order or procedure that limits the derogation only to the extent necessary to ensure that justice will be done”. Relatedly, s 37AJ(2) of the FCA Act provides that “[i]n deciding the period for which an order is to operate, the Court is to ensure that the order operates for no longer than is reasonably necessary to achieve the purpose for which it is made”.

13    The making of confidentiality orders in the context of applications for approval under s 477(2B) of the Corporations Act, in particular to preserve the confidentiality of the terms of funding agreements and the limits of available funding, is well recognised: Vickers, in the matter of J M Kelly Builders Pty Ltd (in Liquidation) [2019] FCA 2141 at [20] per Greenwood J; Krejci (liquidator), in the matter of Community Work Pty Ltd (in liq) [2018] FCA 425 at [61] – [62] per Gleeson J; Pascoe (Liquidator), in the matter of Matrix Group Ltd (in liq) (Trustee) [2019] FCA 1844 at [60] per Gleeson J; Hird (Liquidator), in the matter of Allmine Group Limited (in liq) [2018] FCA 781 at [47] – [48] per Gleeson J; Pogroske, in the matter of Bower Projects Australia Pty Ltd (in liq) [2019] FCA 1688 at [21] – [23] per Markovic J.

14    In the present case, I accept that there is a danger that the revelation of the material sought to be protected would prejudice the position of the Liquidators in carrying out the liquidations, including because it would reveal confidential aspects of the Liquidators’ plans and their financial resources, and that the revelation of the material in the context of a leave application under s 477(2B) of the Corporations Act would prejudice the administration of justice. I am satisfied that the suppression of the specified material is necessary to prevent prejudice to the administration of justice, and that it should remain supressed until the conclusion of the liquidations.

15    I make orders accordingly.

Associate:

Dated:    12 June 2025

SCHEDULE OF PARTIES