Federal Court of Australia

Lombe (liquidator), in the matter of Babcock & Brown Limited (in liq) [2025] FCA 1180

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 477(2B) of the Corporations Act 2001 (Cth) (the Act), approval is granted, nunc pro tunc, for David Lombe as liquidator of Babcock and Brown Limited (in liquidation) (the Company) to enter into the Deed of Global Settlement and Release as between the Plaintiff, the Company, Bookarelli Pty Ltd, Paul Glendon Riik and Richard Kurland in the form of pages 1425 to 1446 of Exhibit DL-2 (the Deed).

2.    Pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations) of the Act, the liquidator was justified in entering into and causing the Company to enter into, and is justified in giving effect to the Deed.

3.    The Plaintiff’s costs of and incidental to this proceeding be costs and expenses in the liquidation of the Company, and paid out of the assets of the Company.

The court declares that:

4.    Pursuant to s 1322(4)(a) of the Act, the Deed is not invalid by reason of it having been entered into 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

JACKMAN J:

Introduction

1    The Plaintiff (the Liquidator) is the liquidator of Babcock & Brown Limited (in liquidation) (the Company), having been so appointed by a resolution of creditors on 24 August 2009. The Liquidator seeks orders pursuant to s 477(2B) of the Corporations Act 2001 (Cth) (Act) and s 90–15 of Schedule 2 to the Act (IPS) in relation to the entry into a settlement deed dated 12 August 2025 that resolves all remaining shareholder proceedings against him and the assets of the Company (the Deed).

2    The Liquidator has executed the Deed and caused the Company to do so. Certain obligations of the parties to the Deed are subject to the Court’s approval, as the Deed contains provisions that may be discharged by performance beyond the period of three months. As such, approval under s 477(2B) is sought (Approval Application). The Liquidator also seeks a direction under the IPS on the basis that he was and is justified in entering the Deed and authorised to carry its terms into effect (Directions Application).

3    There have been six sets of proceedings (Shareholder Proceedings) that have been commenced in respect of the Liquidator’s rejection of various proofs of debt. The first of these proceedings was commenced in 2012, with the latest having been commenced in 2025. The Approval Application and the Directions Application are brought in order to streamline the conclusion of the liquidation of the Company that has been delayed for over ten years, largely by reason of the Shareholder Proceedings.

4    In support of the application, the Liquidator relies on the affidavit of David Lombe sworn 3 September 2025 (Lombe), and Exhibit DL-2 to that affidavit. Unless otherwise stated, capitalised terms in these reasons bear the meaning given to them in that affidavit.

Background

5    The Company has been in liquidation for over sixteen years, with the resolution to wind up the Company having been passed by the creditors of the Company in August 2009: Lombe [11].

6    For almost twelve of those sixteen years, there has been at least one Shareholder Proceeding financed and controlled by Bookarelli (Lombe [21]) which has delayed the finalisation of the liquidation and has prevented the Liquidator from paying a (first and final) dividend to the admitted creditors of the Company: Lombe [180]–[183].

Grant-Taylor Proceeding

7    The first of the Shareholder Proceedings to be financed and controlled by Bookarelli was the Grant-Taylor Proceeding. That proceeding was commenced in December 2012 which alleged that certain shareholders of the Company were creditors of the Company due to the Company failing to disclose to the ASX certain information in relation to the payment of dividends.

8    The Grant-Taylor Proceeding was heard by Perram J in July 2014, who found in favour of the Liquidator in March 2015, dismissing the proceeding with costs: Lombe [26]. That decision was appealed and in April 2016, the Full Court again found in favour of the Liquidator, dismissing the appeal with costs: Lombe [28]. Special leave to appeal against the Full Court’s decision was sought by the unsuccessful applicants/appellants, and the High Court again found in favour of the Liquidator, dismissing the special leave application with costs: Lombe [30]. The Liquidator has had all the costs orders in his favour in relation to the Grant-Taylor Proceeding assessed and those costs have been paid.

Masters, Broome and Wilhelm Proceedings (the Combined Proceedings)

9    In December 2013, and prior to the hearing of the Grant-Taylor Proceeding, Bookarelli caused to be commenced the Masters Proceeding which alleged that certain shareholders of the Company were also creditors of the Company due to the Company failing to disclose to the ASX certain information as to its expected financial performance: Lombe [42]. In September 2014, Bookarelli caused to be commenced the Broome Proceeding which was, in substance the same claim as advanced in the Masters Proceeding: Lombe [46]. Further, in May 2015, Bookarelli caused to be commenced the Wilhelm Proceeding which was, in substance the same claim as advanced in the Masters and Broome Proceedings: Lombe [51].

10    Given that the Masters, Broome and Wilhelm Proceedings were substantially the same, in December 2015, Foster J ordered that they be heard together: Lombe [52]. Thereafter, the pleadings in each of these Proceedings were amended such that they were identical in all material respects, essentially alleging that the Company had breached the Act and the ASX Listing Rules by failing to disclose five specific pieces of information (the First, Second, Third, Fourth and Fifth Non-disclosures) such that the prices at which the Company’s shares traded on the ASX were higher than they would have been had those disclosures been made. It was alleged that those shareholders suffered a loss by the conduct of the Company and as such claimed to be admitted as creditors of the Company: Lombe [53].

11    The Combined Proceedings were heard by Foster J in October 2016 who found (three years later, in October 2019) in favour of the Liquidator, dismissing the proceedings with costs: Lombe [55]. I note that ill health on the part of Foster J was a factor in that delay. That decision was appealed and in September 2021, the Full Court again found in favour of the Liquidator, dismissing the appeal with costs: Lombe [57]. However, the Full Court found that two of the alleged non-disclosures, being the Fourth and Fifth Non-disclosures, did amount to contraventions, but found that no loss had been established as a result. Special leave to appeal against the Full Court’s decision was sought by the unsuccessful applicants/appellants, and the High Court again found in favour of the Liquidator, dismissing the special leave application with costs: Lombe [58].

12    On 21 November 2024, Cheeseman J ordered that the costs of the trial and the Full Court appeal in the Combined Proceedings be assessed on a lump sum basis and that they be determined by a referee (although Bookarelli sought leave to appeal that order, and that application remains unresolved: Lombe [66]). Nevertheless, the Court proceeded to obtain an assessment of the Liquidator’s costs on a lump sum basis: Lombe at [72]. Those costs remain unpaid: Lombe [73]. The costs awarded to the Liquidator in respect of the High Court proceedings have been paid: Lombe [68].

Pain Proceeding

13    However, prior to Foster J delivering judgment in the Combined Proceedings, in November 2018, Bookarelli caused to be commenced the Pain Proceeding, which sought to advance essentially the same case as that of the Combined Proceedings: Lombe [78]. However, as the Combined Proceedings were still on foot at this time, with the consent of the parties, in October 2019, Gleeson J adjourned the Pain Proceeding generally: Lombe [82].

14    In July 2024, the Liquidator filed an application seeking to permanently stay the Pain Proceeding on the grounds that it was an abuse of process, given that the applicants in the Pain Proceeding could have been joined to the Combined Proceedings: Lombe [99]–[100].

15    The Stay Application was heard by Halley J in October 2024, and in November 2024, his Honour ordered that the Pain Proceeding be permanently stayed and awarded the Liquidator costs of the Stay Application and the Pain Proceeding generally: Lombe [102].

16    In December 2024, an application for leave to appeal Halley J’s decision to permanently stay the Pain Proceeding was filed: Lombe [104]. That application (together with the hearing of the appeal should leave be granted) was due to be heard by the Full Court on 18 August 2025. In the meantime, the Deed had been entered into, and pursuant to the terms of the Deed, the date of the hearing was sought to be vacated by the consent of the parties, which was granted: Lombe [106].

Zsadony Proceeding

17    In March 2025, Bookarelli caused to be commenced the Zsadony Proceeding, which advances a case that is substantively similar to the Combined Proceedings and the Pain Proceeding, except that:

(a)    it only seeks to rely on two alleged non-disclosures (the Fourth and Fifth Non-disclosures) instead of all five as previously advanced; and

(b)    the applicants allege direct (rather than indirect) causation.

18    The Zsadony Proceeding has not progressed substantially beyond the filing of a defence by the Liquidator. That proceeding, and all other extant aspects of the Shareholder Proceedings, are adjourned pending this application.

Further Proceedings

19    If the Liquidator does not obtain approval to enter into the Deed and he successfully defends the Pain and/or Zsadony Proceedings, there is no guarantee that these would be the final shareholder proceedings: Lombe [148]–[149]. If he is unsuccessful, the prospect of further proceedings is almost inevitable: Lombe [149].

20    In the Pain Proceeding, his Honour Halley J found that Bookarelli was likely “holding back” proofs of debts in its possession to obtain a forensic advantage so that it could improve how later cases would be formulated if the earlier cases were unsuccessful: Lombe [161]. Further, Bookarelli has stated as recently as June 2025 that it is always on the lookout for further claims to bring on behalf of shareholders of the Company: Lombe [162].

21    Accordingly, the Liquidator submits, and I accept, that in the event that the Liquidator does not receive approval to enter into the Deed, irrespective of the outcome of the Pain and/or Zsadony Proceedings, it is likely that there will be further shareholder proceedings commenced against the Liquidator, which would have the effect of even further delaying the finalisation of this liquidation, as well as depleting the pool of funds available for distribution to the Company’s creditors.

Costs

22    The Liquidator has been wholly successful at each juncture in all the Shareholder Proceedings to date and has accordingly been awarded costs on every available occasion.

23    However, in relation to the Shareholder Proceedings for which costs assessments have been completed (being the Grant-Taylor, Masters, Broome, and Wilhelm Proceedings) of the almost $3.5 million in legal costs actually incurred (Lombe [122]), the Liquidator has been awarded less than $2.6 million, representing a reduction of over 25%, which is irrecoverable from anyone (including the applicants in those proceedings) and therefore represents a reduction in the overall pool of funds available for distribution to the creditors of the Company: Lombe [124]–[125].

24    It is likely that if the Pain and/or Zsadony Proceedings continue (or other proceedings are commenced), the Liquidator will be unable to recover at least 25% of his legal costs despite being successful. The reduction to the assets of the Company would plainly be more significant if the Liquidator is unsuccessful.

25    Remuneration has also been earned by the Liquidator since 2013, largely in performing work relating to the Shareholder Proceedings, totalling almost $4 million, none of which is recoverable from other parties and must be borne by the creditors of the Company: Lombe [130]. Again, the continuation of the Shareholder Proceedings will mean that these costs will continue and further deplete the assets available to the creditors of the Company.

26    In relation to costs:

(a)    costs have been recovered and paid by Bookarelli in respect of the Grant-Taylor Proceeding (including the appeal and special leave application): Lombe [36]-[38];

(b)    in relation to the Combined Proceedings, costs in the sum of $1,510,010.99 have been ordered, but remain unpaid: Lombe [72];

(c)    in relation to the Pain Proceeding, costs orders in the Liquidator’s favour have been made, but have not yet been formally quantified by the Court. However, the Liquidator has had these costs quantified by a costs assessor at $1,320,960.20: Lombe [108]; and

(d)    in relation to the Zsadony Proceeding, no costs orders in favour of any party have been made.

27    There is also no certainty that all costs (in particular, those costs already quantified by the Court and for which orders have been made) can be recovered, as:

(a)    Bookarelli, Mr Paul Riik (the sole director of Bookarelli) and Mr Richard Kurland have provided the Liquidator with confidential statutory declarations which show that none of these parties (even cumulatively) possess sufficient assets to pay even a material amount of the costs orders already made, to say nothing of the costs of the Pain Proceeding that have yet to be formally quantified: Lombe [167]; and

(b)    whilst payment of these costs orders can be enforced against each applicant in the relevant Proceedings, it is not commercially feasible to pursue all applicants, pursuing only a select group of applicants will be complicated and there is no guarantee that their capacity to pay can be accurately ascertained in any event: Lombe [169]–[173].

28    Further, should the Pain and the Zsadony Proceedings continue, the legal costs to run those matters to their conclusion will likely exceed $2.1 million (Lombe [141]) and may delay the finalisation of the liquidation by a further three years (Lombe [146]).

Previous settlement attempts

29    There have been previous attempts to resolve all the Shareholder Proceedings, all of which have failed: Lombe [185]. The Liquidator submits, and I accept, that it is clear from the conduct of these cases over more than a decade that losses do not deter Bookarelli from gathering, financing and bringing further claims against the Liquidator and the assets of the Company. The Liquidator has had significant success in a relatively short period of time, being the permanent stay of the Pain Proceeding and the quantification of his costs of the Combined Proceedings, which appears to have made entry into the Deed attractive to Bookarelli, and appears to represent the best chance, in over a decade, of this liquidation ending and the Liquidator being able to pay a dividend to the Company’s creditors: Lombe [185].

30    In all previous settlement discussions, Bookarelli has insisted on receiving a net payment, and has quantified the amount of that payment relative to the amount of funds held by the Liquidator on behalf of the Company, not by reference to the amount claimed, or strength, of the Pain and/or Zsadony Proceedings, or the various other claims. Even in negotiations regarding this Deed, Bookarelli’s representatives initially asserted that it would not accept anything less than payment to it of $1 million: Lombe [152].

The Deed

31    By the Deed:

(a)    all outstanding Shareholder Proceedings are resolved; and

(b)    any future shareholder proceedings or similar claims by applicants for which Bookarelli acts will not be expected to arise, as explained below.

32    In relation to the current outstanding disputes, the Deed deals with those matters in the following ways:

(a)    all extant proceedings will be dismissed, with each party bearing their own costs of those proceedings; and

(b)    the Bookarelli Parties (as that term is defined in the Deed) will abandon any claims (for costs or otherwise) that they may have against the Liquidator arising out of production orders made in separate but related legal proceedings: Lombe [155].

33    In relation to the prevention of future disputes, the Deed deals with those matters in the following ways (see cll 5.1 and 5.2 of the Deed):

(a)    the Bookarelli Parties undertake that they will not make any further claims, and they also undertake and promise that no claim will be made by any party; and

(b)    the Bookarelli Parties undertake not to fund, solicit, entice, induce or procure any other party to make any further claims.

34    In relation to the mitigation of risks to the Company from the making of any further Shareholder Claims, the Deed deals with those matters in the following ways:

(a)    the Bookarelli Parties indemnify the Liquidator and the Company if any party commences a further claim (including a Shareholder Claim), irrespective of whether the Bookarelli Parties had any involvement in that commencement. If this indemnity is called upon and not satisfied, the Liquidator will be entitled to obtain judgment for the amount of that indemnity, and the Bookarelli Parties will consent to such judgment (see cll 5.3 and 5.5 – 5.8 of the Deed);

(b)    the Bookarelli Parties are not to dissipate their assets or reduce their financial position (other than in the ordinary course of business), noting that the Liquidator has already been provided with Statutory Declarations as to their asset position (see cl 5.4 of the Deed);

(c)    if the Deed is terminated (a choice available to the Liquidator in the event that further Shareholder Claims are brought and not addressed by Bookarelli under the terms of the Deed: cl 5.9 of the Deed) the Liquidator will be entitled to pursue his current outstanding costs orders (being those ordered in the Combined and Pain Proceedings) and the Bookarelli Parties will not prevent the enforcement of those costs orders (see cl 5.10 of the Deed); and

(d)    if the Deed is terminated, rescinded or otherwise expires, all provisions of the Deed that are to the Liquidator’s or the Company’s advantage will survive, however those provisions of the Deed that are to the Bookarelli Parties’ advantage will not survive (see cl 14.11 of the Deed).

35    The prospect that any Shareholder Claim will be made by a party that is not Bookarelli, or is not associated with Bookarelli in any way, appears to be low as it has been over eleven years since the Liquidator received a proof of debt in the liquidation of the Company that was not lodged by Bookarelli: Lombe [182].

36    The necessity for the Approval Application arises because there are some obligations in the Deed that might be performed more than three months from when it is executed, such as:

(a)    the Bookarelli Parties are required to maintain their assets and financial position until the day prior to the date the Company is deregistered (see cl 5.4 of the Deed);

(b)    if any further Shareholder Claim is made against the Liquidator or the Company, the Bookarelli Parties will be required to have that Claim withdrawn or be dismissed within seven days (see cl 5.5 of the Deed);

(c)    in the event that the Bookarelli Parties do not have any further Shareholder Claim withdrawn or dismissed within seven days, the Bookarelli Parties will be obliged (upon demand) to pay to the Liquidator and/or the Company the amount of that Claim (see cl 5.6 of the Deed);

(d)    in the event that any claim or demand (as contemplated by the Deed) is not satisfied by the Bookarelli Parties within the time stipulated, the Liquidator will be entitled to obtain judgment for the amount claimed or demanded, which the Bookarelli Parties will consent to (see cl 5.8 of the Deed); and

(e)    in the Pain Proceeding, there is currently an extant application for leave to appeal from Halley J’s orders permanently staying that Proceeding. If the Court had not vacated the hearing date for this application for leave to appeal, the applicants were to file a notice of discontinuance of that application (see cl 3.3 of the Deed). In fact, the Full Court did vacate the hearing date.

The Deed is in the best interests of the creditors of the Company

37    The Deed:

(a)    disposes of all extant proceedings against the Company, being the Pain and Zsadony Proceedings (and the outstanding application in the Combined Proceedings, referred to above). These outstanding matters have prevented the finalisation of the liquidation and have prevented a dividend being paid to the creditors of the Company for over a decade: Lombe [157];

(b)    contains adequate protections to prevent further Shareholder Claims, and places the risk of any further such Claims on the Bookarelli Parties: Lombe [161]–[163];

(c)    whilst compromising substantial costs orders in favour of the Liquidator, the recoverability of those costs from Bookarelli, Mr Riik or Mr Kurland is questionable (Lombe [167]) and the recoverability of those costs from the individual applicants may be complicated (Lombe [171]–[172]). Further, in any event, compromise of the costs orders is considered by the Liquidator to be appropriate, having regard to the considerable benefits provided by the Deed: Lombe [184]-[185]; and

(d)    will not delay the finalisation of the liquidation of the Company, but rather will shorten that time, potentially by as much as three years: Lombe [146], [180]–[183].

38    The Liquidator and his solicitor worked closely in the preparation of the Deed and, as part of that process, the Liquidator received confidential advice from his solicitor and Senior Counsel as to the appropriateness of the terms of the Deed and the compromise of the costs entitlements: Lombe [153].

39    In all the circumstances, the Liquidator considers that it is in the best interests of the creditors of the Company as a whole that he enters into the Deed (Lombe [153], [157] and [186]).

Section 477(2B) Approval: The Relevant Principles

40    The reason that approval is required in respect of agreements which may operate, or involve obligations that extend beyond three months is that such agreements tend to cut across the general expectation that the winding up of a company will proceed expeditiously: Re HIH Insurance Ltd [2004] NSWSC 5 (HIH) at [15] (Barrett J); Re Golden Sands Hospitality Pty Ltd (In Liq) (No 2) [2017] NSWSC 450 at [17] (Gleeson JA); Hundy (Liquidator), in the matter of 3 Property Group 13 Pty Ltd (in liquidation) (No 2) [2023] FCA 173 at [18] (Wigney J). As Brereton J said in Re FAI Film Distribution Pty Ltd [2014] NSWSC 1904 at [18]:

Section 477(2B) is concerned with long term agreements which might protract the liquidation and has the effect that the liquidator cannot enter such agreements without the approval of the committee of inspection, the creditors, or of the court. Its rationale is that the interests and wishes of those affected, particularly creditors, should be highly influential in determining whether the liquidator should assume a contractual obligation which would interfere with the expeditious completion of the winding up [Re GA Listing and Maintenance Pty Limited (1994) 15 ACSR 308; Re CIC Insurance Ltd (provisional liquidator appointed) [2001] NSWSC 438; Re HIH Insurance Ltd, [15]]. Thus in considering giving approval under s 477(2B), the main consideration is the impact of the agreement on the duration of the liquidation and whether that is in all the circumstances reasonable in the interests of the administration [Re Opel Networks Pty Ltd [2013] NSWSC 1245; In the matter of Re One.Tel Ltd, [30]].

41    The principles in relation to s 477(2B) (and s 477(2A)) of the Act, are well established, and were summarised by Barrett J in HIH at [15] as follows:

This brings me to the approach that the court is to take in deciding whether to grant approval under s 477(2A) or s 477(2B). Although the two provisions deal with different aspects of a liquidator’s powers, both are concerned 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. The court’s assessment must be made in light of the purposes for which liquidators’ powers exist. One overriding purpose is to serve “the interests of those concerned in the winding up – here the creditors” (Re Spedley Securities Ltd (1992) 9 ACSR 83 per Giles J); the other is to do whatever needs to be done “for the proper realisation of the assets of the company” or to assist its winding up (Re G A Listing & Maintenance Pty Ltd (1994) 15 ACSR 308 per Young J). The court does not concern itself with the commercial desirability of the transaction. As Giles J said in the Spedley Securities case (above):

“The court pays regard to the commercial judgment of the liquidator. That is not to say that it rubber stamps whatever is put forward by the liquidator but, as is made clear in Re Mineral Securities (Australia) Ltd [1973] 2 NSWLR 207 at 231–2, the court is necessarily confined in attempting to second guess a liquidator in the exercise of his powers, and generally 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.”

42    In Re FAI Film Distribution Pty Ltd [2014] NSWSC 1904 at [16]–[17], Brereton J in turn noted:

The role of the court is to grant or deny approval to the liquidator’s proposal, not to reconsider every issue considered by the liquidator, nor to develop some alternative proposal which might seem preferable. In reviewing the liquidator’s proposal, the court pays due regard to his or her commercial judgment and knowledge of all of the circumstances for the liquidation, but satisfies itself that there is no error of law or grounds for suspecting bad faith or impropriety, and evaluates whether the proposal is consistent with the expeditious and beneficial administration of the winding up.

Importantly, the court’s approval is not an endorsement of the proposed agreement, but merely permission for the liquidator to exercise his or her own commercial judgment in the matter. Thus the approval completes the liquidator’s power to enter into the transaction, but does not amount to the court approving the transaction itself …

43    Approval under s 477(2B) can be granted nunc pro tunc: Vickers v Australian Securities and Investments Commission [2011] FCA 1028; (2011) 196 FCR 479 at [27] (Gordon J).

Section 477(2B) Approval: Application of Principles

44    Whilst the liquidation of the Company is a voluntary winding up (see Lombe [11]), subss 477(2A) and (2B) of the Act apply to the Company: s 506(1A) of the Act.

45    There is no prospect that the Deed will increase the length of the liquidation of the Company. On the contrary, the Deed will expedite the finalisation of the liquidation: Lombe [180]–[183].

46    The obligations of the parties to the Deed that may be discharged by performance more than three months from the date of the execution of the Deed are summarised above and in the evidence at Lombe [154]. Each of those obligations is reasonable in the circumstances in that they:

(a)    protect the assets of the Company;

(b)    shift the risk of further claims against the Company and the Liquidator to Bookarelli;

(c)    provide an indemnity in favour of the Company and Liquidator; and

(d)    permit the earlier finalisation of the liquidation.

47    The entry into and performance of the Deed will reduce the cost of the liquidation of the Company and thus provide for a more immediate and enhanced distribution to the creditors of the Company than would be the case if the Deed was not entered into and the remaining Shareholder Proceedings continued (quite apart from the possibility of new such proceedings): Lombe [156]–[160], [162]–[163], [179] and [184].

48    The entry into the Deed resolves all remaining Shareholder Proceedings and all but eliminates the prospect of future such claims: Lombe [155], [157], [163] and [184].

49    It is true that, under the Deed, the Liquidator has compromised various costs orders: Lombe [164]. Those costs are in excess of $2.5 million (Lombe [165]–[166]). However, apart from the fact that the recovery of those costs is not straightforward and will bring further risks and costs to the liquidation of the Company (Lombe [167]–[173]), the benefits of the Deed, in the circumstances, are such that it is in the creditors’ interests in any event: Lombe [184]–[185].

50    As I have indicated above, the Deed was entered into only after obtaining appropriate legal advice: Lombe [153].

51    The Liquidator is very experienced (Lombe [2]), has been the liquidator of the Company for over sixteen years (Lombe [11]) and concluded that the entry into the Deed, and the transactions contemplated by it, are in the best interests of the creditors of the Company: Lombe [153], [157] and [186]. I see no basis for questioning the Liquidator’s commercial assessment in this regard.

52    In forming his view that the entry into the Deed is in the best interests of the creditors of the Company, the Liquidator has only had regard to relevant considerations (and no irrelevant considerations) including:

(a)    the resolution of all extant Shareholder Proceedings;

(b)    the costs savings to the Company and thus the enhanced dividend to creditors of the Company;

(c)    the ability to finalise the liquidation of the Company and pay a dividend to all admitted creditors (including subordinated Noteholders);

(d)    the various protections and indemnities in the Deed that reduce (and almost eliminate) the risk of further claims against the Company;

(e)    the complications and risks associated with the enforcement of any extant costs orders in favour of the Liquidator; and

(f)    obtaining legal advice.

53    In the circumstances, in my view, the Liquidator has made out a clear basis for approval pursuant to s 477(2B) of the Act.

54    Given the overwhelming benefit of the Deed to the creditors of the Company, the Liquidator and the Company considered it appropriate to execute the Deed to bind Bookarelli. The obligations of the Deed are conditional on the Court’s approval and as such, there is no basis for criticising the Liquidator for executing the Deed prior to approval. Further, the leave to appeal hearing (and the appeal itself to be heard concurrently) were to be heard on 18 August 2025 and the terms of the Deed were agreed only six days before then, and thus it was desirable to enter into the Deed before that hearing date. As I have said above, approval may be granted nunc pro tunc.

55    Different Courts have taken different approaches as to whether a s 1322(4)(a) declaration should be made, that a relevant agreement is not valid by reason of it being entered into without prior Court approval. In Vardy v Linz, In the matter of Bondi Pizza Pty Ltd (in liq) [2021] FCA 530 at [22]–[23], Halley J noted the divergence of opinion, and stated that for an abundance of caution it may be prudent for the Court to order that the approval be granted nunc pro tunc and potentially also to make a declaration under s 1322(4)(a). In those circumstances, out of an abundance of caution the Liquidator seeks such a declaration, which I make.

Section 477(2A) Not Engaged

56    Section 477(2A) prohibits the compromise of a debt due to a company in liquidation if that debt is over the prescribed amount of $100,000: see reg 5.4.02 of the Corporations Regulations 2001 (Cth).

57    By the Deed (cl 4.1), the Liquidator agrees not to enforce any of the unpaid costs orders in his favour.

58    The Company was not a respondent to the Combined Proceedings and Pain Proceedings, where there remain unpaid (and in respect of the Pain Proceedings, unassessed) costs orders. Given those proceedings related to an appeal in respect of the adjudication of proofs of debt, the Liquidator (not the Company) was the proper respondent to those proceedings.

59    The Liquidator (and not the Company) has the benefit of the following unpaid costs orders:

(a)    in respect of the Combined Proceedings, a total of $1,510,010.99: Lombe [72]. Those costs orders have been assessed on a lump sum basis; and

(b)    in respect of the Pain Proceedings, the approximate sum of $1,320,960.20: Lombe [108]. However, those costs have not been assessed.

60    Given that the costs orders in the Combined Proceedings have been assessed and are the subject of an order of this Court, they are a debt due to the Liquidator (but not the Company). The costs in the respect of the Pain Proceedings are not yet the subject of assessment and thus do not constitute a debt due to the Liquidator.

61    In the above circumstances, the Liquidator submits, and I accept, that s 477(2A) is not enlivened by the operation of cl 4.1 of the Deed, given that no compromise is being made by the Company. The compromise is being made by the Liquidator (even though the Company also makes a promise not to seek recovery of those costs). There is therefore no need to grant the Liquidator relief under s 477(2A) of the Act.

Section 90-15 Directions: The Relevant Principles

62    The relevant principles in relation to applications for directions under s 90-15 are also well established and were summarised by Rees J in In the matter of Courtenay House Capital Trading Group Pty Ltd (in liq) [2020] NSWSC 780; (2020) 147 ACSR 1 at [6] as follows:

The principles in relation to applications for directions were summarised by Black J in Re Octaviar Administration Pty Ltd (in liq) [2017] NSWSC 1556 at [7]–[9] and Gleeson JA in Re Hawden Property Group Pty Ltd (in liq) (2018) 125 ACSR 355; [2018] NSWSC 481 (Hawden Property Group). The Court may give directions where it will be “of advantage in the liquidation”: Dean-Willcocks v Soluble Solution Hydroponics Pty Ltd (1997) 42 NSWLR 209 at 212; (1997) 24 ACSR 79 at 81 per Young J. The Court will not generally give a direction where the matter relates to the making or implementation of a business or commercial decision, when no legal issue is raised or where there is no attack on the propriety or reasonableness of the liquidator’s decision but may do so where there is the prospect of such an attack: Re 7 Steel Distribution Pty Limited (in liquidation) (recs and mgrs apptd) [2013] NSWSC 669 at [20] per Black J; Re Dungowan Manly Pty Limited (in liq) [2018] NSWSC 1083 at [17]. A direction protects the liquidators from liability for breach of duty or unreasonable behaviour if full disclosure is made to the Court: Re Daniel Efrat Consulting Services Pty Ltd (rec apptd) (in liq); Ex parte Hawke (1999) 91 FCR 154; 162 ALR 429; 30 ACSR 640; [1999] FCA 412 at [13]; Re Ansett Australia Ltd (2001) 39 ACSR 355; [2001] FCA 1439 at [59]–[62] per Goldberg J; Re Dungowan Manly Pty Ltd (in liq) (2017) 124 ACSR 218; [2017] NSWSC 1771 at [3] per Black J.

63    The discretion exercised under s 90-15 to grant a direction is broadly identical to the discretion exercised under the repealed s 473(3) of the Act. In respect of the latter, Barrett J in HIH at [19] stated:

I turn now to the application for directions under s 479(3). It is to be emphasised again here that it is not the function of the court to pass an opinion on the liquidators’ commercial judgment. Generally speaking, such directions are appropriate only where there is some doubt or difficulty going beyond the question of what is commercially desirable. Goldberg J put the matter thus in Re Ansett Australia Ltd (2002) 115 FCR 409:

There must be something more than the making of a business or commercial decision before a court will give directions in relation to, or approving of, the decision. It may be a legal issue of substance or procedure, it may be an issue of power, propriety or reasonableness, but some issue of this nature is required to be raised. It is insufficient to attract an order giving directions that the liquidator or administrator has a feeling of apprehension or unease about the business decision made and wants reassurance. There must be some issue which arises in relation to the decision. A court should not give its imprimatur to a business decision simply to alleviate a liquidator’s or administrator’s unease. There must be an issue calling for the exercise of legal judgment.

64    Liquidators frequently seek directions in relation to the compromise of legal proceedings, which is commonly viewed as a legitimate subject for directions. In Re A.C.N 004 410 833 Limited (formerly Arrium Ltd) (in liq) [2021] NSWSC 799 at [14] Black J observed that the Court may give directions in relation to settlement of litigation where there is an element of potential controversy in respect of the compromise; a settlement has a substantial element of compromise about it; or it involves not only the exercise of a commercial judgment by the liquidator but also the exercise of a legal judgment as to the assessment of the merits of the settlement against the prospects of success in the proceeding. That was followed in Gothard (Liquidator), in the matter of Halifax Investment Services Pty Ltd (in liquidation) v Loo [2024] FCA 323 at [11] (Markovic J).

65    Section 90–15(4) provides some of the matters that may be taken into account by a Court in making an order under s 90-15. Sub-paragraphs (a), (b) and (d) are relevant in the present case, as referred to below.

Section 90-15 Directions: Application of Principles

66    The case for a direction arises in circumstances where the duty of a liquidator is to protect and realise the assets of the Company. Whilst the costs orders made and assessed in the Combined Proceedings and made in the Pain Proceedings (and yet to be assessed) are in favour of the Liquidator (and not the Company), the recovery of those costs would form part of the assets of the Company and thus be available to the creditors of the Company.

67    The Liquidator is satisfied that forgoing the costs orders in his favour in return for the benefits obtained by the Deed is in the best interests of creditors, and has provided ample reasons for that opinion. In all the circumstances, the decision to enter into the Deed was an appropriate and proper decision.

68    In addition, having regard to the relevant matters listed in s 90-15(4):

90-15(4)(a)    there cannot be any doubt that the Liquidator has faithfully performed his duties in entering into the Deed;

90-15(4)(b)    there has been no failure by the Liquidator to comply with the Act or the IPS; and

90-15(4)(d)    the enforcement of costs awards in favour of the Liquidator would not be simple and without risk (Lombe [167]–[173]), however, there would be real cost savings in the settlement of all the Shareholder Proceedings (Lombe [141], [159] and [160]). Further, the Deed eliminates the prospect of any further shareholder claims and facilitates the distribution of the Company’s property to creditors such that it could not be said that the Company (or its creditors) would suffer loss by the Liquidator’s conduct.

69    In the circumstances, the Liquidator submits, and I accept, that the Liquidator is entitled to be protected from an attack on the propriety and reasonableness of his decision to enter into and perform the Deed.

Costs

70    It is appropriate that the costs of the application be paid out of the assets of the Company.

Conclusion

71    Accordingly, I make orders in the form provided by the Liquidator.

Associate:

Dated:    23 September 2025