Federal Court of Australia

Binqld Finances Pty Ltd (in liq) v Binetter (settlement approval) [2025] FCA 811

ORDERS

THE COURT ORDERS THAT:

1.    Mr John Sheahan in his capacity as liquidator of the applicants and of B.C.I. Finances Pty Limited (in liq) (ACN 055 988 531), E.G.L. Development (Canberra) Pty Limited (in liq) (ACN 008 517 646), Erma Nominees Pty Ltd (in liq) (ACN 000 957 040), Ligon 158 Pty Ltd (in liq) (ACN 003 464 015), Ligon 159 Pty Ltd (in liq) (ACN 003 464 024), Milgerd Nominees Pty Ltd (in liq) ACN: 000 957 059 (the applicants and such companies being the Deed Companies) (Liquidator) be joined as the seventh applicant to the proceeding for the purpose of the interlocutory process filed on 7 July 2025, pursuant to rule 9.05 of the Federal Court Rules 2011 (Cth);

2.    The Court approves entry by the Liquidator nunc pro tunc into the deed exhibited at Confidential Exhibit JS-1 to the affidavit of John Sheahan dated 7 July 2025 (Supporting Affidavit) pursuant to s 477(2B) of the Corporations Act 2001 (Cth);

3.    Until the earlier of any further order of the Court, or the death of the Respondent, pursuant to sections 37AF and 37AG(1)(a) of the Federal Court of Australia Act 1976 (Cth), and on the ground that the order is necessary to prevent prejudice to the proper administration of justice, Confidential Exhibit JS-1, paragraphs 22 and 23 of the Supporting Affidavit, paragraph 28 of the Supporting Affidavit up to but excluding "I respectfully request" onwards, and the second sentence of paragraph 30 of the Supporting Affidavit:

(a)    be kept confidential;

(b)    to the extent that such material is held by the Court in paper form, be held with the Court file in envelopes marked “Not to be opened except by leave of the Court or a Judge”;

(c)    to the extent that such material is held by the Court in electronic form, be kept in a confidential section of the relevant Court file;

(d)    not be published, made available (whether electronically or otherwise) or disclosed (by publication or otherwise) to any other person than:

(i)    the Court; and

(ii)    the parties to this proceeding, and their respective legal representatives;

4.    Any application for variation of order 3 is to be heard on not less than 5 business days' notice to the solicitors for the parties; and

5.    The costs of this application be costs in the liquidations of the Deed Companies.

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

REASONS FOR JUDGMENT

KENNETT J:

Introduction

1    This proceeding arose out of audits commenced by the Australian Taxation Office in around July 2006 into the taxation affairs of companies associated with the Binetter family. Those audits led to amended assessments which, in turn, led to various of those companies owing significant tax debts. The applicants in this proceeding are six of those companies, which are now in liquidation. In substance, their only creditor is the Commissioner of Taxation. They sought equitable compensation against the respondent (Mr Binetter), their former director, on the basis of his alleged involvement in implementing the tax avoidance schemes that caused the tax debts to be incurred.

2    The proceeding was listed for a final hearing commencing on 12 June 2025 with an estimate of ten days.

3    In the lead-up to the hearing, the parties engaged in settlement discussions. They reached an in principle agreement on 10 June 2025. The hearing commenced on 12 June 2025 but was immediately adjourned after counsel had informed me of the steps proposed to be taken following the in principle agreement.

4    The parties negotiated the terms of a deed of settlement (the deed of settlement) and executed that deed on 7 July 2025. The parties to the deed of settlement include the liquidator of the applicants, Mr John Sheahan. The terms of the deed of settlement are confidential.

5    Pursuant to s 477(2B) of the Corporations Act 2001 (Cth), Mr Sheahan required the approval of the Court to enter into the agreement embodied in the deed of settlement on behalf of the applicants. That approval was necessary for the deed to come into full effect and for the parties to consent to orders disposing of the proceeding. Section 477(2B) provides as follows.

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.

6    On 7 July 2025 Mr Sheahan filed an interlocutory process seeking:

(a)    joinder to the proceeding as the seventh applicant;

(b)    approval, nunc pro tunc, to enter into the deed of settlement; and

(c)    orders under ss 37AF and 37AG(1)(a) of the Federal Court of Australia Act 1976 (Cth) (the FCA Act) preventing the disclosure of the deed of settlement and of certain passages of his affidavit of 7 July 2025 which refer to its terms.

7    The application for these orders was supported by the existing parties to the proceeding. On 11 July 2025 I made orders in the terms sought by Mr Sheahan, whereupon proposed orders disposing of the substantive proceeding by consent were handed up. I also made those orders.

8    What follows are my reasons for making the orders sought by Mr Sheahan.

Joinder and approval of entry into the deed of settlement

9    Joinder of Mr Sheahan as an applicant in the existing proceeding was an efficient way of bringing his application for approval under s 477(2B) before the Court. There was no reason not to proceed in that way.

10    It is clear that the Court has power to approve entry into an agreement retrospectively (Lewis (liquidator), in the matter of Concrete Supply Pty Ltd (in liq) [2020] FCA 841; 145 ACSR 459 at [22] (White J) (Lewis)). Although it has been said that the proper course is for approval to be sought in advance (eg Lindholm (liquidator), in the matter of Aviation 3030 Pty Ltd (in liq) [2021] FCA 1244 at [47] (Anderson J)), in this case the fact that approval was sought only after execution of the deed of settlement was not a reason to refuse approval. There was no significant delay, with the interlocutory process having been filed on the day the deed of settlement was executed, and it was not inappropriate for Mr Sheahan to seek to have the terms of the agreement locked in as between the parties before approaching the Court. Indeed, it was obvious that the parties approached the negotiation of the terms of settlement on the understanding that the approval of the Court would be required before any such terms could be given effect (the point having been mentioned in open court on 12 June 2025). It is not clear that the seeking of approval in these circumstances was retrospective in any meaningful sense.

11    In Lewis at [16] White J set out a number of principles that had become established as applicable to the exercise of the power in s 477(2B) to decide whether to approve an agreement entered into by a liquidator. These were as follows.

(a)    the Court makes its assessment having regard to the purposes for which liquidators’ powers exist, including the serving of the interests of those concerned in the winding up, the achievement of what is necessary for the proper realisation of the assets of the company, and assisting in its winding up: Re HIH Insurance Ltd [2004] NSWSC 5 at [15]; Stewart, in the matter of Newtronics Pty Ltd [2007] FCA 1375 at [26(6)];

(b)    a primary consideration is the impact of the agreement on the duration of the liquidation and whether that is, in all of the circumstances, reasonable in the interests of the liquidation: Re Opel Networks Pty Ltd [2013] NSWSC 1245 at [7]; Re One.Tel Ltd [2014] NSWSC 457, (2014) 99 ACSR 247 at [30];

(c)    the Court’s approval is not an endorsement of the proposed agreement but merely constitutes permission for liquidators to exercise their commercial judgment: Re Bell Group Ltd (in liq); Ex parte Woodings as liquidator of The Bell Group Ltd (in liq) [2009] WASC 235 at [58];

(d)    again, generally, the Court does not refuse an approval unless there can be seen to be some lack of good faith, some error in law or principle or some real and substantial grounds for doubting the prudence of the liquidator’s conduct: Re Spedley Securities Ltd (in liq) (1992) 10 ACLC 1742 at 1745;

(e)    a court may also refuse approval if the terms of the proposed agreement are unclear: Re United Medical Protection (No 4) [2002] NSWSC 516; (2002) 20 ACLC 1647 at [45];

(f)    the role of the Court is to grant or deny approval to the liquidator’s proposal. It is not to develop some alternative proposal which might seems preferable: Corporate Affairs Commission v ASC Timber Pty Ltd (1998) 16 ACLC 1642 at 1649; and

(g)    nevertheless, the Court does not simply “rubber stamp” whatever is put forward by a liquidator: Re Stewart; Newtronics, at [26(1)].

12    It is plain that these “principles” interact with each other, and I will therefore not attempt to work through them seriatim. The following points should be made.

13    First, it is at least normally in the interests of the creditors of a company in liquidation for there to be a settlement of claims advanced on behalf of the company on sensible commercial terms rather than for costs to be incurred on litigation whose outcome is uncertain. Such a settlement coheres with the purposes for which the liquidator’s powers exist and works towards the timely completion of the liquidation process. In this case, had entry into the deed of settlement not been approved, it would have been necessary for the parties to find a new trial date (which would likely have taken some months), complete the hearing and await a judgment.

14    Secondly, the final proposition set out in the extract from Lewis set out above (that the Court does not simply “rubber stamp” whatever is put forward) must be read with the fourth. The Court should not second-guess the liquidator’s judgment as to the wisdom of entering into the agreement; rather, assuming the terms of the agreement are reasonably clear, approval should only be refused if there is some reason to think that the liquidator’s judgment was not made genuinely or conscientiously in the pursuit of the creditors’ interests. There is nothing in the present case pointing to an absence of good faith. Rather, parts of Mr Sheahan’s affidavit (which, in the light of the confidentiality orders, I will not set out here) point to care having been taken in considering the terms of settlement.

15    For these reasons, I was satisfied that the proposed orders relating to joinder and approval of the agreement should be made.

Confidentiality orders

16    Section 37AF of the FCA Act provides a power to make confidentiality orders “on grounds permitted by this part”. The permissible grounds are set out in s 37AG(1) and include, relevantly:

(a) the order is necessary to prevent prejudice to the proper administration of justice; …

17    The word “necessary” sets a high bar, corresponding with the importance of the principle of open justice (which the Court is expressly required by s 37AE to take into account). However, “the proper administration of justice” is a concept that requires attention to be directed beyond the immediate parties to the proceeding. At least generally, disclosure of confidential settlement discussions or the outcome of such discussions is inimical to the “proper administration of justice” because the settlement of a large percentage of disputes by agreement is necessary if the courts are to cope with their workload. For that to occur, it is important that current and future litigants should be able to have confidence that they can agree to settle their disputes without such agreements being subjected to public scrutiny. See, eg, Elliott v Victoria (Dept of Education and Training) [2018] FCA 1029 at [24] (Mortimer J); Tsirigotis v Victoria (Dept of Education and Training) [2020] FCA 1771 at [20] (Anastassiou J); Energy Beverages LLC v Cantarella Bros Pty Ltd (No 2) [2022] FCA 394 at [117] and [126] (Halley J).

18    For this reason, I was satisfied that the proposed confidentiality orders should be made.

Associate:

Dated:    15 July 2025

SCHEDULE OF PARTIES