Federal Court of Australia

Nipps (liquidator), in the matter of I-Prosperity Pty Ltd (in liq) [2025] FCA 696

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 477(2B) of the Corporations Act 2001 (Cth), the First to Fifth Plaintiffs (the Liquidators) have approval to enter into, and cause the Sixth to Tenth Plaintiffs (the Companies) to enter into:

(a)    a retainer with the firm Norton Rose Fulbright Australia substantially in the form at Confidential Annexure JN-2 to the affidavit of Jeremy Nipps dated 3 June 2025 (Nipps Affidavit); and

(b)    a retainer with the firm Norton Rose Fulbright Australia substantially in the form at Confidential Annexure JN-3 to the Nipps Affidavit, (together, the NRFA Retainers).

2.    Pursuant to ss 37AF and 37AI of the Federal Court of Australia Act 1976 (Cth), on the ground under s 37AG(1)(a) that the order is necessary to prevent prejudice to the proper administration of justice, the NRFA Retainers be marked confidential on the Court file, not be published, disclosed or accessed except pursuant to an order of the Court and their contents be suppressed until the conclusion of any litigation (including any appeal) arising out of the winding up and affairs of the Companies.

3.    Pursuant to rule 90-15 of the Insolvency Practice Schedule (Corporations), the NRFA Retainers and any documents created as a result of entry into them are confidential and it would not be reasonable for the Liquidators to comply with a request to produce them to the creditor or creditors within the meaning of rules 70-10(2)(a) and 70-15(2)(a) of the Insolvency Practice Rules (Corporations) 2016 (Cth).

4.    The costs of the application filed on 5 June 2025 be costs in the liquidation of the Companies.

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

REASONS FOR JUDGMENT

NESKOVCIN J:

1    By originating process filed on 5 June 2025, the First to Fifth Plaintiffs, Jeremy Joseph Nipps and Barry Wight of Cor Cordis, in their capacity as the joint and several Liquidators of the Sixth to Tenth Plaintiffs (the Companies), sought approval from the Court to enter into, and cause the Companies to enter into, proposed retainer agreements between LCM Funding Pty Ltd, the Liquidators and Norton Rose Fulbright Australia (NRFA) (NRFA Retainers).

2    Court approval is sought for the NRFA Retainers because the terms of the appointments extend beyond three months: s 477(2B) of the Corporations Act 2001 (Cth).

3    In support of the application, the Liquidators relied upon affidavits of Jeremy Nipps dated 3 June 2025 and 11 June 2025. The NRFA Retainers are annexed to the affidavit of Mr Nipps of 3 June 2025 as confidential annexures “JN-2” and “JN-3”.

4    The Liquidators sought interim and final confidentiality orders pursuant to ss 37AI and 37AF of the Federal Court of Australia Act 1976 (Cth) (FCA Act), in respect of the NRFA Retainers.

5    The Liquidators also sought an order that the NRFA Retainers, and any documents created as a result of entry into them, are confidential and it would not be reasonable for the Liquidators to comply with a request to produce or make them available for inspection by creditors under rules 70-10(2)(a) and 70-15(2)(a) of the Insolvency Practice Rules (Corporations) 2016 (Cth).

6    For the reasons set out below, orders will be made substantially in the terms sought by the Liquidators.

background

7    The background to the proceeding is set out in Nipps (liquidator), in the matter of i-Prosperity Pty Ltd (in liq) [2024] FCA 1527 (O’Bryan J) (Nipps (No 1)).

8    Relevantly, the Companies were part of a large and complex corporate group which commenced operations in Sydney in 2005, and engaged in funds management in Australian real estate investments for high net worth foreign investors, some of whom were investors in what is known as the “Significant Investor Visa” program. Many of the entities were directed by Mr Menghong (Michael) Gu or Mr Zhou Zhang (Harry) Huang

9    The Liquidators have investigated potential claims available to the Companies which might result in returns to creditors, including the following:

(a)    claims against Crown Melbourne Limited, relating to sums received by Crown from the Sixth, Eighth and Tenth Plaintiffs (IPP, IPU and Planet Tel, respectively), either directly or through payments made to Mr Gu or Mr Huang which were then passed on to Crown. The potential quantum of the claims is approximately $44.642 million in respect of funds that originated with IPP or IPU and $4.77 million in respect of funds that originated with Planet Tel. The Liquidators have also identified further transactions which may increase the claim value;

(b)    an unfair preference claim against Mr David Gong relating to transfers made from IPP to Mr Gong totalling approximately $18 million and an uncommercial transaction claim for assignment of a loan with a claim value of approximately $2.4 million; and

(c)    claims against related entities of Mr Gong relating to payments made by IPP and IPU for the acquisition of the leasehold for the Chatswood Central Shopping Centre. The quantum of the claims is approximately $5 million.

10    The Liquidators entered into a litigation funding agreement and a priorities agreement for the funding of investigations into the examinable affairs of and pursuit of potential claims available to the Companies, including the claims referred to in paragraph 9 above (the Funding Agreements). Entry into the Funding Agreements was approved by O’Bryan J in Nipps (No 1) at [26] – [27].

11    The Liquidators have sought the assistance of NRFA and Counsel to prosecute the claims referred to in paragraph 9 above on the terms set out in the NRFA Retainers. The Liquidators seek the Court’s approval, under s 477(2B) of the Corporations Act, to enter into the NRFA Retainers.

RElevant principles

12    Section 477 of the Corporations Act grants a liquidator express powers to bring or defend any legal proceedings in the name of and on behalf of the company (s 477(2)(a)) and to appoint a solicitor to assist in their duties (s 477(2)(b)).

13    Section 477(2B) of the Corporations Act provides:

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.

14    The relevant principles in relation to the Court’s role in considering an application under s 477(2B) are set out in Nipps (No 1) at [19] – [20] (O’Bryan J).

15    The application of s 477(2B) to litigation retainer agreements is not clear. In Kitay v Frigger (No 2) [2024] WASC 113 at [79] – [91], Hill J reviewed a number of authorities that considered the question whether retainers and legal costs agreements between liquidators and solicitors are agreements to which s 477(2B) applies. Her Honour concluded, at [91]:

…I consider that approval under s 477(2B) of the Act is required for agreements entered into by the liquidator as agent for or representative of the company, as well as agreements in the name of the company. However, approval is not required for entry into agreements by the liquidator in their own name. In determining whether the agreement has been entered into by the liquidator as agent for or representative of the company or in their own name, it is necessary to consider the substance of the agreement, whether the company is a party to the agreement or appears to have the status of a party under the agreement, and who receives the benefit of the services provided under the agreement.

16    In Nipps (No 1), O’Bryan J expressed some doubt as to whether leave of the Court was required for entry into the retainers in that proceeding: Nipps (No 1) at [32]. Nevertheless, his Honour considered it appropriate to grant approval for entry into the relevant retainer agreements, although the relevant order was made “to the extent required”.

17    The Liquidators submit that unlike the retainer agreements in Nipps (No 1), the Companies are parties to the NRFA Retainers. Accordingly, it was submitted, there can be no doubt that approval under s 477(2B) of the Corporations Act is required in respect of the NRFA Retainers: see e.g. Nipps (Liquidator), in the matter of Dimension Agriculture Pty Ltd (in liq) [2024] FCA 1070 at [26] (Banks-Smith J).

The NRFA Retainers

18    The purpose of the NRFA Retainers is to allow the Liquidators to prosecute claims which are the subject of the Funding Agreements, being the claims referred to in paragraph 9 above, through the engagement of solicitors and counsel. To that end, the purpose for which approval of the NRFA Retainers is sought is to ultimately benefit the Companies.

19    Under the NRFA Retainers, the Liquidators and the Companies agree to retain NRFA to provide advice and legal services to the Liquidators in relation to the actions specified, and on the terms set out, in the NRFA Retainers: see clauses 3 – 16.

20    I consider it appropriate to grant approval under s 477(2B) for entry into the NRFA Retainers for the following reasons:

(a)    the terms of the NRFA Retainers are clear and there is nothing exceptional about them;

(b)    there is nothing in the evidence to suggest that entry into the NRFA Retainers is something other than a proper exercise of the Liquidators’ powers;

(c)    no person has sought to oppose approval of the NRFA Retainers being granted;\

(d)    the entry into the NRFA Retainers will enable the Liquidators to pursue certain claims funded by third party funding under the Funding Agreement, which has been approved by the Court;

(e)    the NRFA Retainers will operate coextensively with the Funding Agreement and will not prolong the liquidation of the Companies.

Confidentiality orders

21    The Liquidators seek interim and final non publication and suppression orders pursuant to ss 37AI and 37AF of the FCA Act with respect to the NRFA Retainers, being confidential annexures “JN-2” and “JN-3” to Mr Nipps affidavit dated 3 June 2025. The orders are sought on the ground under s 37AG(1)(a) of the FCA Act, that it is necessary to prevent prejudice to the proper administration of justice.

22    The schedules to the NRFA Retainers contain the Funding Agreements. The Funding Agreements include, among other things, the identities of the funders and the terms and amounts of litigation funding.

23    In Nipps (No 1) at [34], O’Bryan J stated that:

…It has been accepted that the subject matter of an application for approval to enter into a litigation funding agreement is commercially confidential and sensitive and related to aspects of the litigation that any plaintiff, protecting its own interests and the integrity of the litigation process in which it is engaged, would take particular care to keep from the other party or parties to the litigation: Onefone Australia Pty Ltd v OneTel Ltd [2010] NSWSC 498 at [2]; Robinson, in the matter of Reed Constructions Australia Pty Ltd (in liq) [2017] FCA 594 at [59].

24    I accept the Liquidators’ submission that these principles apply to the Funding Agreements contained in the NRFA Retainers. The ability of the persons the subject of the proposed claims to know the limits of the funding and the terms of that funding would plainly be prejudicial to the Liquidators’ ability to prosecute those claims for the benefit of the creditors. Disclosure of this information would provide significant material and unfair advantage to the potential defendants, including in potential settlement negotiations. Other parts of the NRFA Retainers are confidential and commercially sensitive to the parties, and are subject to legal professional privilege, and should also remain confidential.

25    The Liquidators also seek associated orders that the NRFA Retainers, and any documents created as a result of entry into them, be kept confidential and not be available for inspection by creditors under rr 70-10(2)(a) and 70-15(2)(a) of the Insolvency Practice Rules. I accept that an order should be made in the terms sought by the Liquidators: Nipps (No 1) at [37] (O’Bryan J).

conclusion

26    For the foregoing reasons, orders will be made, pursuant to s 477(2B) of the Corporations Act, that the Liquidators have approval to enter into and cause the Companies to enter into the NRFA Retainers. Confidentiality orders in the terms sought by the Liquidators will also be made.

Associate:

Dated:    27 June 2025

SCHEDULE OF PARTIES