Federal Court of Australia

Albarren, in the matter of TC Build Group Pty Ltd (In Liquidation) [2025] FCA 855

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 477(2A) and s 477(2B) of the Corporations Act 2001 (Cth) (the Act), the plaintiff on behalf of the Company be authorised to enter into the Deed of Agreement and Indemnity dated 12 February 2024 (Agreement) nunc pro tunc.

2.    Pursuant to s 1322(4)(d) of the Act, the time for the plaintiff to bring an application for leave to enter on behalf of the Company into the Agreement contained in Exhibit RA2 to the affidavit of Mr Albarran dated 5 June 2025 is extended.

3.    Pursuant to s 1322(4)(a) of the Act, the Agreement is declared not invalid by reason of it having been executed without the Court's prior approval.

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

REASONS FOR JUDGMENT

Delivered ex tempore, revised from transcript

JACKMAN J:

1    On 24 January 2023, Mr Albarran (Liquidator) was appointed by the Supreme Court of Queensland as liquidator of TC Build Group Pty Limited (Company) on the application of Crane Service Industries Pty Limited (Crane).

2    The Liquidator investigated the affairs of the Company and determined that:

(a)    claims by secured creditors total $22,471.09, of which Crane claims to be owed $7,398.70;

(b)    claims by a number of unsecured creditors total $9,379,225.90, of which Crane claims to be owed $22,643.50 and the Liquidator is advised that the Australian Taxation Office is owed $223,163.30; and

(c)    there are no assets available to be realised, no funds available for a distribution to creditors, and it is not anticipated that a dividend will be paid to creditors in the liquidation of the Company.

3    In November 2023, the Liquidator was approached by the solicitor for Alta Vale Residential Pty Limited (formerly TC Build Pty Limited) (Alta Vale), which claims in the liquidation to be owed $7,749,397.71 by the Company. Alta Vale is the plaintiff in Supreme Court of New South Wales proceedings 2022/229562 (Proceedings) being brought against thirteen defendants. Alta Vale claims, among other things, to be owed money by the defendants in the Proceedings for construction work undertaken on a number of projects on a costs-plus basis. The solicitor for Alta Vale assesses the value of the claim at around $9.6 million.

4    Alta Vale put forward a proposal to the Liquidator whereby, if the Company joined the Proceedings as the second plaintiff and claimed against the defendants as the contracting party, then Alta Vale would run and fund the Proceedings, indemnify the Liquidator and Company against adverse costs orders (noting that security for the defendants' costs is being given), and share 10% of any recovery with the Company. The proposal was designed to defeat an argument by some of the defendants in the Proceedings that the Company, not Alta Vale, was the contracting party entitled to payment for construction work.

5    The Liquidator's staff met with Alta Vale's solicitor, the Liquidator considered the proposal, and negotiated terms on which he would be willing to implement the proposal, subject to the approval of creditors or the court. The solicitor for Alta Vale provided the Liquidator with evidence of having paid into court security for the costs of the defendants in the Proceedings.

6    The Liquidator ultimately formed the view that the proposal would result in minimal risk or expense to the Company, the proposal was in the best interests of creditors as no dividend was expected and the potential return might be between $600,000 and $800,000, and if the Proceedings were not successful, then the creditors would be no worse off.

7    The Liquidator proceeded to execute a deed of agreement and indemnity on 12 February 2024 to give effect to the negotiated terms of the proposal (the Deed).

8    Clause 8 of the Deed makes it conditional upon approval by the creditors or the court under ss 577(2A) and (2B) of the Corporations Act 2001 (Cth) (Act), and requires the contents to remain confidential subject to disclosure of its substance (but not the Deed itself) to creditors for the purpose of obtaining their approval.

9    The substantive terms of the Deed are:

(a)    Alta Vale will act as the Company's agent to bring an action for the Company against the defendants in the Proceedings;

(b)    Alta Vale will seek to join the Company as a plaintiff to the Proceedings, and the Company agrees to be joined:

(c)    Alta Vale will pay the costs of running the Proceedings;

(d)    Alta Vale will provide the Liquidator with updates and any documents he reasonably requires relating to the Proceedings;

(e)    Alta Vale indemnifies the Company and Liquidator in respect of any adverse costs orders, and warrants it has paid $150,000 into court as security for costs and must pay any further security ordered;

(f)    if Alta Vale or the Company settle the Proceedings, obtain a judgment in the Proceedings, or obtain costs orders against the defendants in the Proceedings, they will share the proceeds (after legal fees and disbursements) in the following proportions: 90% to Alta Vale and 10% to the Company.

10    Although the solicitor for Alta Vale is not prepared to share privileged advices on prospects of success in the Proceedings at this stage, he has stated that he believes the Proceedings have good prospects of success.

11    The Liquidator prepared a report to creditors of the Company setting out the substance of the terms contained in the Deed and called a meeting of creditors (Meeting) to seek approval for entering into the Deed.

12    At the Meeting on 13 March 2024, objections were raised to the admitted values of creditor claims for voting purposes, and creditors requested additional information. As a result, the Meeting was adjourned to 26 March 2024. At the adjourned Meeting on 26 March 2024, the possibility of an alternative funding proposal in respect of the proposed action was considered, but no proposal was put forward by creditors. Three creditors separately objected to the admitted values for voting purposes of the claims of a number of other creditors. As a result of the objections, the resolutions at the Meeting were determined by a poll. A majority number voted in favour of entry into the Deed, but a majority in value voted against, which meant that no result was reached. The Chairman declined to exercise a casting vote, and thus the resolution failed. The Liquidator instructed the Chairman not to exercise the casting vote because of the objections that had been raised.

13    On 17 April 2024, Alta Vale commenced proceedings in this Court challenging the admission of proofs of debt for voting purposes at the Meeting and sought an order that the resolution to approve the Deed be taken to have been passed at the Meeting. Those proceedings were dismissed by consent on 15 May 2025.

14    On 3 July 2025, the Proceedings were set down for hearing commencing on 25 May 2026. The remaining $100,000 in security for costs is required to be paid by Alta Vale 28 days before then.

15    As the creditors of the Company did not approve the Deed being executed and the proceedings which were brought by Alta Vale in this Court have been dismissed, the Liquidator now applies to the court for orders nunc pro tunc under s 477(2A) and (2B) of the Act authorising him to enter into the Deed on behalf of the Company, together with ancillary orders.

16    In relation to the order under s 477(2A) of the Act, that order is sought for abundant caution as it is not clear whether entering into the Deed might ultimately result in the Company compromising a "debt" of more than $20,000 if the Company joins the Proceedings and they are ultimately settled, and where the Deed contemplates a split of any proceeds between the Company and Alta Vale. Seeking an order under s 477(2A) of the Act in the circumstances is an acceptable course, to the extent it is required, where it is not clear that what is recoverable is in fact a "debt": Vardy (liquidator), in the matter of Bondi Pizza Pty Ltd (in liq) v Ruck [2022] FCA 287 (Bondi Pizza) at [19] (Halley J). The court has power to give approval that operates from an earlier time under ss 477(2A) and (2B): Bondi Pizza at [20].

17    The ancillary orders being pursued under subss 1322(4)(a) and (d) of the Act are sought to overcome the issue that the Deed has already been executed (despite being subject to court approval), and to avoid the possibility of the Deed being invalid. The applicant submits, and I accept, that if the court is prepared to authorise the execution of the Deed, it would be appropriate for an abundance of caution to make the declaration and order sought under those provisions of the Act: see Bondi Pizza at [21]. As Lindgren J noted in Chamberlain v RG&H Investments Pty Limited, in the matter of Hardy Bros (Earthmoving) Pty Limited (in liq) (No 2) [2009] FCA 1531; (2009) 76 ACSR 415 at [24], such excessive caution does no harm.

18    The Liquidator has served the application on the known creditors of the Company given that they did not approve the Deed being executed.

19    In an application for approval under ss 477(2A) and (2B), the court does not concern itself with the commercial desirability of the transaction in question. The court will generally not interfere unless there is some lack of good faith, error of law or principle, or a real or substantial ground for doubting the prudence of the Liquidator's conduct.

20    The applicant submits, and I accept, that while the Deed requires Alta Vale to pay the costs of the Proceedings in which it is intended the Company will be a party, the Deed is not a funding agreement in the conventional sense whereby a third party with no interest in the action funds the Company in liquidation. In the present circumstances, Alta Vale, being the funder, is a party to the Proceedings and has a direct interest in them. Further, the costs which Alta Vale will be required to pay will include costs incurred in the prosecution of its own action, not just the alternative case to be brought by the Company. It is not apparent that there will be any significant cost incurred in prosecuting the Company's case which Alta Vale would not otherwise incur in the Proceedings, apart from seeking leave to join the Company and amending the pleading accordingly. Under the Deed, Alta Vale will not only fund the action, but it will bring the Proceedings for the Company as its agent.

21    The proposal is not lacking in good faith or prudence. There is nothing improper in an agent bringing proceedings for a principal: see Emanuele v Hedley (1998) 179 FCR 290 at [44] (Wilcox, Miles and R D Nicholson JJ).

22    In the present case, the Liquidator has sought approval in good faith from the Company's creditors. Regrettably, in the context of disputes among creditors about voting rights, approval was not able to be obtained from the creditors of the Company.

23    The Liquidator has negotiated the terms of the Deed with Alta Vale and ensured the terms of the Deed placed the creditors to the Company in a position where, on the Liquidator's assessment, there is no downside to the Company or its creditors in joining the Proceedings. The Liquidator has also informed the creditors of the Company of the substantial terms of the Deed and provided his recommendation, engaged in correspondence with the creditors who have raised issues in relation to the Deed, and adjourned the Meeting so the creditors could give further consideration to the proposal. In addition, the Liquidator has satisfied himself that security for the costs for the defendants in the Proceedings has been given to reduce the risk of the Company having any costs liability in the Proceedings.

24    Ultimately, as the applicant submits, the worst that can happen to the Company and its creditors, even if the indemnity given by Alta Vale has no value and the security paid into court is not sufficient to meet the defendants’ costs, is that the defendants in the Proceedings join the pool of unsecured creditors in the liquidation of the Company. If that were to happen, there would be no detriment suffered by the current unsecured creditors because, as matters stand, they will not be paid a dividend from the winding up of the Company in any event.

25    In short, the Liquidator has been presented with an unexpected commercial opportunity which might result in him being able to pay a dividend to the Company's creditors, which is something he is not presently able to do. Consistently with his duty to realise assets for the beneficial winding up of the Company, the Liquidator is acting on that opportunity. Accordingly, it is appropriate to grant the relief sought by the Liquidator.

Associate:

Dated:    24 July 2025