In the matter of Balamara Resources Limited (No 2)

1. [1]

   By Interlocutory Process filed on 30 May 2025, Mr Geoffrey Reidy, Mr Andrew Barnden and Ms Paula Smith in their capacities as the joint and several Liquidators of the Defendant, Balamara Resources Limited (the Company), seek an order pursuant to s 477(2B) of the Corporations Act 2001 (Cth) (Act), approving their entry into:

   1. (1)

      a litigation funding agreement with the Plaintiff, Vulpes Distressed Fund (Cayman Island Company No. 330197) (Funding Agreement);

   2. (2)

      an engagement agreement with Hall & Wilcox; and

   3. (3)

      an engagement agreement with Wilmer Cutler Pickering Hale and Dorr LLP (WilmerHale).

2. [2]

   In addition, the Liquidators seek a direction pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations) (IPSC) that the Liquidators are justified in entering into each of these agreements.

3. [3]

   The Liquidators have provided notice of the application to creditors of the Company, and have served the Interlocutory Process and supporting affidavit of Mr Barnden affirmed 29 May 2025 on the Australian Securities and Investments Commission (ASIC) and on the following persons who were described as the “Directing Creditors”: namely, Mr Derek Lenartowicz, Mr Michael Hale, Mr Jonathan Leung, Mr Michael Ralston, Maxwell Newton Singapore Pte Ltd, Western Mining Pte Ltd, Signature Litigation LLP, Bright Agile Ltd, Ample Skill Ltd, and Spaczynski, Szczepniak, Wickel, Gozdziowska (SSW). The materials served by the Liquidators did not include the Confidential Exhibit to Mr Barnden’s affidavit, which contains legal advice received by the Liquidators and an unredacted form of the Funding Agreement.

4. [4]

   Bright Agile, Ample Skill and Vulpes are the main shareholders of the Company. As outlined below, the Liquidators have previously had communications with each of Bright Agile and Ample Skill regarding alternative funding arrangements.

5. [5]

   Vulpes appeared on the application in support of the relief sought by the Liquidators.

6. [6]

   Ample Skill appeared at a directions hearing on 7 July 2025 and consented to timetabling orders for the filing and service of any notice of appearance and evidence in respect of the Interlocutory Process. However, Ample Skill did not subsequently file a notice of appearance and did not seek to be heard in opposition to the application.

Matters preliminary to the hearing of the Interlocutory Process

1. [7]

   At the hearing of the Interlocutory Process, SSW sought leave to appear in order to oppose the relief sought by the Liquidators.

2. [8]

   SSW is a law firm in Warsaw, Poland, which previously provided legal services to the Company, and is a creditor of the Company.

3. [9]

   SSW’s opposition to the application was, for the main part, based on another proceeding which is pending in the Court of Appeal.

4. [10]

   On 13 June 2025, Black J determined that the Liquidators were justified in declining to convene a meeting of creditors of the Company for the purpose of considering resolutions for the removal and replacement of the Liquidators: In the matter of Balamara Resources Limited (in liquidation) [2025] NSWSC 618 (the June Judgment). This meeting had been requested by the Directing Creditors on 9 December 2024.

5. [11]

   There is an application for leave to appeal from the June Judgment, which is to be heard, concurrently with the appeal, in late November 2025 (the CA Proceeding).

6. [12]

   Initially, SSW sought that the hearing of the Interlocutory Process be adjourned, on the basis that SSW had not been provided with a copy of the Funding Agreement and was therefore unaware whether (and, if so, in what way) the Company might be prejudiced by entry into the Funding Agreement, in the event that the CA Proceeding is resolved in favour of the Directing Creditors, and the Liquidators are subsequently replaced.

7. [13]

   The Liquidators opposed SSW’s application for leave to be heard on the Interlocutory Process.

8. [14]

   I determined that such leave should be given, and that SSW’s legal representatives should be provided with a copy of the Funding Agreement for the purpose of making submissions in respect of the relief sought by the Liquidators. In particular, I indicated that I would be assisted by the submissions of a contradictor in relation to a particular clause of the Funding Agreement concerning the Liquidators’ remuneration, because I was concerned that this clause might give rise to an actual or potential conflict.

9. [15]

   The Liquidators requested a short adjournment to seek instructions. Following this, the Liquidators confirmed that the clause regarding Liquidators’ remuneration, in respect of which I had expressed a concern, had been deleted from the Funding Agreement. The Court was accordingly provided with an amended form of the Funding Agreement, in respect of which the Liquidators sought the relief in the Interlocutory Process (Revised Funding Agreement).

10. [16]

    The Liquidators proposed providing the Revised Funding Agreement to the legal representatives of SSW, with the only matters redacted being the total amount of funding and the percentage figure for the funder’s commission. I accepted the submission of the Liquidators and Vulpes that such redactions to the Revised Funding Agreement are appropriate and standard practice where such an agreement is provided to a person who is a counterparty to litigation, so as not to confer any tactical advantage on that person. (I note that SSW is a counterparty to litigation with the Company, having commenced arbitration proceedings for the recovery of unpaid fees.)

11. [17]

    Following the provision of the redacted form of the Revised Funding Agreement to SSW’s legal representatives, and a further short adjournment, Counsel for SSW confirmed that he no longer sought an adjournment of the hearing of the Interlocutory Process. However, he submitted that the Court should not determine the Liquidators’ application until after the determination of the CA Proceeding. I address this submission below when dealing with the s 477(2B) application in respect of the Funding Agreement.

Suppression Order

1. [18]

   The Liquidators sought an order pursuant to sections 7, 8(1)(a) and 8(1)(e) of the Courts Suppression and Non-publication Orders Act 2010 (NSW) that the Confidential Exhibit to Mr Barnden’s affidavit not be disclosed to any person other than the Liquidators, Vulpes, their respective legal representatives and the Court.

2. [19]

   Suppression orders of this type are commonly made where a liquidator has obtained litigation funding for recovery proceedings or to investigate the possibility of available claims in a winding up, so as not to prejudice the liquidators in their pursuit of those potential claims: Jahani, in the matter of Ralan Property Services Pty Ltd (receivers and managers appointed) (in liq) [2023] FCA 738 at [11] and the authorities there cited.

3. [20]

   In Livingstone, in the matter of NewSat (in liq) [2022] FCA 1559 at [70], Stewart J accepted a submission on behalf of the liquidator that information as to a litigant’s financial position is forensically strategic information in the hands of the counterparty to the litigation because it informs the litigant’s appetite to settle. His Honour observed as follows:

4. [21]

   I was satisfied that it would prejudice the due administration of justice if the Liquidators, by applying for approval under s 477(2B) of the Act to enter into the Revised Funding Agreement (and, in support of this application, putting the contents of the Confidential Exhibit before the Court), were to lose confidentiality in the terms of this funding arrangement and in the legal advice which the Liquidators have received in relation to the Company’s Arbitration Claim. That is especially the case where the principal purpose of bringing the s 447(2B) application in relation to the Revised Funding Agreement is to enable the Liquidators to pursue the Company’s Arbitration Claim for the benefit of the Company’s creditors, and the disclosure of this material might be to the forensic disadvantage of the Liquidators in such litigation and therefore to the disadvantage of those creditors. Accordingly, I made the suppression order sought by the Liquidators in respect of the Confidential Exhibit.

Factual background

1. [22]

   The Company was incorporated in New South Wales in 1993 and its registered office was, at the time of the Liquidators’ appointment, located in Western Australia.

2. [23]

   On 17 October 2024, the Court made orders in this proceeding, winding up the Company on the just and equitable ground and appointing the Liquidators.

3. [24]

   The Company owned 100% of the shares in two companies based in the Republic of Poland, namely, Global Mineral Prospects sp. z.o.o. and Coal Holdings sp. z.o.o. (together, the Subsidiaries).

4. [25]

   Mr Barnden deposed that the Company has a claim for compensation against the Republic of Poland, arising out of the failures of the Polish Ministry of Climate and Environment to grant certain mining concessions that had been sought by the Subsidiaries (the Company’s Arbitration Claim).

5. [26]

   In about 2022, Vulpes requested advice in relation to the merits and prospects of the Company’s Arbitration Claim from Salim Moollan KC and Emilie Gonin of Brick Court Chambers. The Joint Opinion of Counsel dated 30 September 2022 and the Joint Supplementary Opinion of Counsel dated 12 November 2022 were provided by Vulpes to the Liquidators and form part of the Confidential Exhibit. Having regard to the suppression order made in relation to the Confidential Exhibit, I will confine my comments regarding these opinions to the matters which were disclosed by Mr Barnden in his affidavit (which has been served on ASIC and the Directing Creditors):

6. [27]

   Mr Barnden gave evidence that (as disclosed in an ASX announcement dated 11 November 2024) a similar claim by another Australian company, Green X Metals Limited, resulted in an award of damages in its favour of approximately $495m after it was held that the Republic of Poland had breached its obligations under several treaties.

7. [28]

   Mr Barnden deposed that, based on those matters, he is of “the opinion that the Company’s Arbitration Claim could result in an estimated recovery of several hundreds of millions of dollars on behalf of the Company’s creditors and shareholders.”

8. [29]

   On 16 December 2024, the Liquidators served a notice of dispute on the Republic of Poland in relation to the Company’s Arbitration Claim. This notice provided for a three-month cooling off period before the Company could commence proceedings against the Republic of Poland. The cooling off period expired on 16 March 2025.

9. [30]

   In addition, Mr Barnden deposed that he has, as part of his investigations into the affairs of the Company, identified various transactions involving Mr Hale and/or Mr Lenartowicz “that may be voidable in nature and require further investigation, together with potential breaches of director’s duties”.

10. [31]

    As regards the liabilities of the Company, Mr Barnden exhibited to his affidavit a report to creditors dated 14 November 2024, which contained a “Listing of Known Creditors”, with total claims of around $16.342m. A further report to creditors dated 16 January 2025 stated that the Liquidators’ estimate of total liabilities of the Company was around $17.040m. In each report, the list of unsecured creditors includes each of Ample Skill, Bright Agile, SSW and Vulpes.

11. [32]

    The Liquidators have limited funds in the liquidation and, since their appointment, have been investigating potential sources of funding for the Company’s Arbitration Claim, as well as for the liquidation of the Company generally.

12. [33]

    On 14 November 2024, the Liquidators sent a circular to the Company’s creditors, inviting any of them who might be interested in providing funding to put forward a proposal to the Liquidators. In response, the Liquidators received an expression of interest to fund the Company’s Arbitration Claim from Vulpes.

13. [34]

    On 16 January 2025, the Liquidators issued a statutory report to creditors, which repeated the invitation for any of the Company’s creditors who might be interesting in providing funding to put forward a proposal to the Liquidators. This report stated (in bold font) as follows:

14. [35]

    On 30 January 2025, Mr Barnden signed a non-binding term sheet with Vulpes. Because this document (which refers to a proposed funding amount and funding commission) forms part of the Confidential Exhibit, I will confine my description of its contents to the matters disclosed in Mr Barnden’s affidavit:

15. [36]

    In addition, Mr Barnden has engaged in negotiations with Bright Agile and Ample Skill regarding the provision of funding. In early 2025, both of those entities indicated, by letters from their respective solicitors, that they were considering making an offer to fund the pursuit of the Company’s Arbitration Claim.

16. [37]

    On 26 March 2025 and 15 April 2025, Bright Agile provided indicative funding terms, which included that:

    1. (1)

       Bright Agile was prepared to offer funding of US$9m;

    2. (2)

       funding would be limited to the Company’s Arbitration Claim and an application by the Liquidators for Court approval to enter into a funding agreement pursuant to s 477(2B) of the Act (but would not include funding for other costs of the liquidation generally, or for public examinations of the directors of the Company and other related entities); and

    3. (3)

       if the Company’s Arbitration Claim is successful, Bright Agile would receive a return including a multiple of the funds advanced plus a percentage of the net proceeds of any award made in favour of the Company.

17. [38]

    On 5 March 2025, 24 March 2025 and 22 April 2025, Ample Skill provided indicative funding terms, which included that:

    1. (1)

       Ample Skill was prepared to offer funding of US$4.5m;

    2. (2)

       funding would be limited to the Company’s Arbitration Claim and an application by the Liquidators for Court approval to enter into a funding agreement pursuant to s 477(2B) of the Act (but would not include funding for other costs of the liquidation generally, or for public examinations of the directors of the Company and other related entities); and

    3. (3)

       if the Company’s Arbitration Claim is successful, Ample Skill would receive a return including repayment on its investment, plus a multiple of the total investment amount (with such multiple increasing over time).

18. [39]

    On 15 May 2025, the Liquidators’ solicitors requested that each of Bright Agile and Ample Skill provide its “final and best funding offer” by 22 May 2025, on the basis that the Liquidators were in receipt of a funding offer which they regarded as superior (that is, the offer from Vulpes) and that they intended to proceed with this offer in the absence of a more favourable offer.

19. [40]

    Bright Agile did not provide any response to this letter. On 20 May 2025, Ample Skill’s solicitors responded that “it is simply not possible, based on the information disclosed, to make a ‘best and final funding offer’ on commercial terms”.

20. [41]

    In addition to seeking funding from the Company’s creditors, the Liquidators have investigated potential third party sources of litigation funding in respect of the Company’s Arbitration Claim.

21. [42]

    Mr Barnden deposed that:

    1. (1)

       the Liquidators have signed non-disclosure agreements with, and have had discussions with, five third-party litigation funders;

    2. (2)

       four of those funders have informed Mr Barnden that they are not interested in providing funding; and

    3. (3)

       the remaining funder indicated, earlier this year, that it was still assessing the merits of the Company’s Arbitration Claim, but has not subsequently provided any indication of funding or any proposed terms.

22. [43]

    It follows that the only terms for funding which have been received by the Liquidators and which are capable of acceptance by the Liquidators are the terms of the Revised Funding Agreement offered by Vulpes.

23. [44]

    Mr Barnden deposed that he has formed the view, for reasons that are addressed below, that entry into the proposed funding arrangement with Vulpes is in the interests of the Company and its creditors and shareholders as a whole.

24. [45]

    Having regard to the confidential nature of the contents of the Revised Funding Agreement, I have limited my description of its contents to matters disclosed in Mr Barnden’s affidavit. (Although Mr Barnden refers to the “Funding Agreement” rather than the Revised Funding Agreement, the terms which he describes in the paragraphs quoted below are identical in the two forms of the agreement.) Mr Barnden deposes as follows:

25. [46]

    In addition to seeking approval for entry into the Revised Funding Agreement, the Liquidators seek approval for entry into:

    1. (1)

       an engagement agreement with Hall & Wilcox (H&W Retainer); and

    2. (2)

       an engagement agreement with WilmerHale (WilmerHale Retainer)

26. [47]

    The terms of each of the Solicitor Retainers were exhibited to Mr Barnden’s affidavit.

27. [48]

    WilmerHale is to be engaged to advise the Company in connection with the Company’s Arbitration Claim. This engagement does not extent to representing the Company in any other matter.

28. [49]

    WilmerHale has set out various “milestones” for this engagement, and has provided estimates of its fees for each such milestone. Mr Barnden deposes that WilmerHale’s overall estimate is lower than the estimate provided, in respect of the same scope of works, by the solicitors who had previously been engaged on a limited basis (namely, Candley Limited).

29. [50]

    It is proposed that Vulpes will be a signatory to the WilmerHale Retainer. The WilmerHale Retainer provides that WilmerHale will send its invoices both to the Liquidators and to Vulpes, and that: “By signing below, Vulpes Distressed Fund is agreeing to pay these invoices on the Company’s behalf.”

30. [51]

    Charging under the WilmerHale Retainer will be on a time-cost basis. The hourly rates for WilmerHale’s professional and support staff are specified in the WilmerHale Retainer.

31. [52]

    Hall & Wilcox are to be retained to provide advice and representation in relation to the liquidation of the Company, including, in particular, in respect of matters such as the proposed public examinations, any proceedings arising from such examinations (including, for example, voidable transaction or insolvent trading claims), the proceeding brought against the Company by SSW, and matters such as liaising with WilmerHale regarding the Company’s Arbitration Claim, securing the Company’s assets, obtaining books and records, and dealing with security interests registered over the Company’s property.

32. [53]

    Hall & Wilcox have provided estimates for each of these categories of work, and have also provided estimates for Counsel fees.

33. [54]

    Fees will be charged on a time-cost basis. The H&W Retainer identifies the main personnel who will be working on this engagement, and the hourly rates for professional and other staff. Mr Barnden has reviewed those rates and has confirmed that, based on his experience, “they are consistent with firms of the same size and expertise required for a matter of this nature”.

34. [55]

    The H&W Retainer provides as follows (emphasis added):

35. [56]

    Mr Barnden deposed that there is some urgency to this application.

36. [57]

    Mr Yaw (who is sole director of Ample Skill) has commenced an international arbitration claim against the Republic of Poland which arises from substantially the same facts as the Company’s Arbitration Claim.

37. [58]

    Mr Barnden is concerned that Mr Yaw’s claim may compete with the Company’s Arbitration Claim such that, if the former succeeds, any award in respect of the latter may be reduced.

38. [59]

    Accordingly, Mr Barnden has formed the view that it is in the best interests of the Company for the Company’s Arbitration Claim to proceed without delay.

Application for approval under s 477(2B) of the Act

1. [60]

   Section 477(2B) of the Act provides that:

2. [61]

   Approval under s 477(2B) is required in the present case as the term of each of the Revised Funding Agreement, the H&W Retainer and the WilmerHale Retainer may end, and obligations under each of those agreements may be discharged by performance, more than three months after the date of entry into those agreements.

3. [62]

   The principles pursuant to which the Court exercises the discretion under s 477(2B) are well settled.

4. [63]

   It is convenient to refer to the following summary of the relevant principles by Gleeson JA in In the matter of 77738930144 Pty Limited (in liq) (formerly Commercial Indemnity Pty Ltd) [2017] NSWSC 452 at [53]-[54] (upon which the Liquidators relied, and which SSW embraced):

5. [64]

   I was also referred to the recent summary of the relevant principles by Owens J in Clifford Constructions Pty Ltd (in liq) v Lucca Rd Pty Ltd [2025] FCA 897 at [13] (citations omitted):

6. [65]

   In Leigh re King Bros [2006] NSWSC 315 at [25], Austin J identified the following list of matters to be considered where a liquidator seeks approval for entry into a funding agreement:

7. [66]

   This list of considerations was cited with approval in Wigmans v AMP Ltd (2021) 270 CLR 623; [2021] HCA 7 at [112] per Gageler, Gordon and Edelman JJ, and has been regularly cited and applied in subsequent decisions: see, for example, in Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher [2011] FCAFC 89 at [24] (Emmett, Nicholas and Roberston JJ).

8. [67]

   Mr Barnden deposed that, in forming the view that the Funding Agreement was in the interests of the Company and its creditors and shareholders as a whole, he has taken the following provisions of the Funding Agreement into account (which are identical to the corresponding provisions of the Revised Funding Agreement).

   1. (1)

      First, the Funding Agreement provides for an amount of funding that is significantly greater than the amount of funding that had been proposed in the indicative offers of Bright Agile and Ample Skill. Mr Barnden explains that “the estimated legal fees obtained from several international law firms reveal that the indicative offers of funding [from Bright Agile and Ample Skill] would be insufficient to meet the legal fees and disbursements, other professional fees and expert costs in running the Company’s Arbitration Claim, together with the Liquidator’s fees and other disbursements”.

   2. (2)

      Secondly, whereas the indicative proposals of Bright Agile and Ample Skill related only to funding of the Company’s Arbitration Claim, the scope of work covered by the Funding Agreement extends more broadly to cover matters such as any proposed public examinations of the directors of the Company, any proceedings against the directors and/or their associates in respect of voidable transactions, breaches of directors’ duties, insolvent trading or other similar claims, and the costs of the liquidation generally.

   3. (3)

      Thirdly, the Funding Agreement provides coverage against an adverse costs order against the Liquidators. Mr Barnden deposed that neither of the indicative offers from Bright Agile and Ample Skill was “clear as to whether the Liquidators would be protected against an adverse costs order”.

   4. (4)

      Fourthly, funding is provided for 65% of the remuneration of the Liquidators and their staff, with the remaining 35% payable only if a Resolution Sum (being the proceeds of a successful outcome) is achieved. Mr Barnden noted that this means that not only will the Liquidators have sufficient funding to progress the liquidation, including the Company’s Arbitration Claim and any other claims that may be identified (see paragraph [30] above), but a larger proportion of the funding will be reserved for the progression of the funded claims, including legal proceedings and associated legal costs, rather than paying the Liquidators’ remuneration in full. Importantly, Counsel for the Liquidators confirmed to the Court that no amount would be paid pursuant to the Revised Funding Agreement in respect of the Liquidators’ remuneration, without the Liquidators first obtaining the approval of the Court or of creditors for the quantum of their remuneration.

   5. (5)

      Fifthly, although the Liquidators have obligations under the Revised Funding Agreement to consult with Vulpes and to disclose certain information, the control of the liquidation (including the Company’s Arbitration Claim and any other proceedings, such as public examinations or recovery proceedings) remains with the Liquidators.

   6. (6)

      Sixthly, the Revised Funding Agreement otherwise includes terms which Mr Barnden, based on his experience in entering into funding agreements, considers to be ordinary commercial clauses, including the granting of a security interest to secure the Company’s obligations to Vulpes, and a provision for the resolution of disputes (including any dispute with respect to the settlement of a claim).

9. [68]

   Further, in considering the funding commission that is payable to Vulpes under the Revised Funding Agreement, Mr Barnden has had regard to:

   1. (1)

      the range of commissions which, in his experience, are sought by funders (namely, 25% to 45%);

   2. (2)

      the factors which, in his experience, are relevant to the level of the commission (with commissions at the higher end of the range being proposed where there is protracted litigation or a lower probability of obtaining a favourable judgment or achieving a material recovery);

   3. (3)

      the amount of funding that Vulpes is prepared to commit; and

   4. (4)

      the complexities and duration of the anticipated proceedings against the Republic of Poland, and the risks associated with the recovery of any award in those proceedings.

10. [69]

    In addition to those matters, Mr Barnden has taken into account the contents of an email from Vulpes dated 22 January 2025, which is part of the Confidential Exhibit. In this email, Vulpes outlines the reasons for the particular level of funding commission which it has proposed. Mr Barnden deposed that, on the basis of the factors set out above and the contents of this email, he has formed the view that the amounts payable to Vulpes under the Revised Funding Agreement are “reasonable and proportionate to the Company’s potential recovery in the event that the Company’s Arbitration Claim is successful”.

11. [70]

    Mr Barnden has considered the likely recovery in the liquidation if the Company’s Arbitration Claim is established and the Liquidators are successful in such other claims as they may bring. He has formed the view that, after taking into account the funding commission payable to Vulpes, legal costs, and the Liquidators’ remuneration and disbursements, there would be sufficient funds to pay creditors in full and to make a distribution to shareholders of the Company.

12. [71]

    Having regard to the commercial judgment made by Mr Barnden and the reasons for forming that judgment (and without independently appraising the commercial desirability or commercial terms of the funding transaction), I am satisfied that it is appropriate for the Court to grant approval to enter into the Revised Funding Agreement.

13. [72]

    Entry into the Revised Funding Agreement will not unduly prolong the liquidation. Instead, entry into this agreement is necessary in order to fund the Company’s Arbitration Claim (as well as any other claims) and to fund the costs of the liquidation, and is therefore necessary to realise the assets of the Company or otherwise to assist in the winding up of the Company.

14. [73]

    I am also satisfied that, in forming his view that entry into the Revised Funding Agreement is in the best interests of creditors, Mr Barnden has taken into account the prospects of the Company’s Arbitration Claim; the nature and complexity of that claim; the risks involved in that claim; the level of the funder’s commission; and the other funding options available.

15. [74]

    In opposing the Liquidators’ application, SSW raised four issues in their written submissions (only one of which was the subject of oral address by Counsel for SSW).

16. [75]

    First, SSW complained that there was a lack of transparency in respect of the essential terms of the Funding Agreement affecting creditor recoveries, and that the hearing of the Interlocutory Process should be adjourned until such material was provided. This submission was advanced prior to SSW’s legal representatives being given a redacted copy of the Revised Funding Agreement. After being provided with this document, SSW did not, in oral address, press for any further disclosure and did not press any submission that the hearing of the Liquidators’ application should be adjourned.

17. [76]

    Secondly, SSW submitted that there was a “potential for conflicts of interest” because “Vulpes is both funder and major shareholder, giving rise to potential for divided loyalties”. This “potential conflict” was not developed in submissions. SSW’s concern appears to have been partly tied to the lack of transparency regarding the terms of the Funding Agreement, in particular as regards the extent of any control given to Vulpes in respect of the Company’s Arbitration Claim. No such concern was developed in oral address after the provision of the redacted Revised Funding Agreement.

18. [77]

    In any case, there is an alignment between the interests of Vulpes as the funder and the interests of shareholders (including Vulpes), insofar as the successful pursuit of the Company’s Arbitration Claim is key to the extent of any recovery by both the funder and shareholders.

19. [78]

    Further, SSW’s submission fails to take account of the fact that the Liquidators sought, unsuccessfully, funding proposals from third party funders and that the only funding proposals which were received were from shareholders (namely, Vulpes, Bright Agile and Ample Skill).

20. [79]

    Thirdly, SSW complained that they had “not been meaningfully consulted in respect of the prosecution or funding of the claim”. In this regard, SSW relied on an affidavit of their managing partner, Mr Piotr Spaczynski.

21. [80]

    Mr Spaczynski deposed to the steps which SSW had taken in the past to try to secure funding for the Company’s Arbitration Claim. In short, these attempts led to a formal terms sheet being proposed by Fortress Credit Corp in November 2022, which did not result in any concluded agreement due to a dispute between the shareholders of the Company. Mr Spaczynski did not identify what terms had been proposed by Fortress. Further, in light of Mr Barnden’s evidence of the Liquidator’s unsuccessful attempts to obtain offers of third party funding, it does not appear that there are currently any funding terms available from a third party funder, let alone any such terms which are comparable or superior to the Revised Funding Agreement.

22. [81]

    Fourthly, SSW submitted that the Liquidators’ authority to make any funding decision “is under direct challenge as the appointment of the Liquidators is the subject of an appeal”, and entry into the Revised Funding Agreement might “create irrevocable obligations that would undermine the appeal or render it nugatory”. This issue was the focus of SSW’s oral submissions.

23. [82]

    SSW accepted that the statement that “the appointment of the Liquidators is the subject of an appeal” is incorrect. There is currently no proceeding challenging the appointment of the Liquidators. Instead, there is an application for leave to appeal from the June Judgment, which is listed to be heard concurrently with the appeal. If leave is granted and the appeal is successful, the result will not be that the Liquidators are removed from office, but rather that the Liquidators were not justified in refusing to call a meeting of creditors of the Company for the purpose of considering resolutions to remove and replace them. In order for the Liquidators to be removed, there would then need to be a fresh meeting called, and resolutions would need to be put to creditors. There is no evidentiary basis to make an assessment as to the likely outcome of any such meeting. This was acknowledged by Counsel for SSW, as follows:

24. [83]

    SSW expressed a concern that, if the Liquidators are removed and if a replacement liquidator forms the view that the Revised Funding Agreement was not in the best interests of creditors, the replacement liquidator would not be able to terminate the Revised Funding Agreement (with only Vulpes having an express right of termination under clause 14 of that agreement).

25. [84]

    The position of SSW on this issue was ultimately put as follows:

26. [85]

    It may be accepted that “there is a counterfactual that would see effectively that [the Liquidators are] replaced” (with the probability of such counterfactual not being capable of assessment on the evidence). However, there is always the possibility, particularly in a lengthy liquidation, that a liquidator may, for example, retire through ill-health and be replaced.

27. [86]

    Further, the possibility that a replacement liquidator (if any) might form a different view as to the commercial merits of the Revised Funding Agreement is no reason for refusing leave under s 477(2B) of the Act, particularly where:

    1. (1)

       the Liquidators have formed the view that it is in the best interests of creditors that the Revised Funding Agreement be entered;

    2. (2)

       the Liquidators have explained the commercial considerations which have led to this conclusion; and

    3. (3)

       there is no suggestion of any lack of good faith on the part of the Liquidators, or some error in law or principle, or some real and substantial grounds for doubting the prudence of the Liquidators’ conduct.

28. [87]

    Finally, the Liquidators have explained that there is some urgency in resolving the funding position, so that the Company’s Arbitration Claim can be pursued at this point in time.

29. [88]

    Having regard to those matters, I have determined that the Court should not defer the determination of the Liquidators’ application, but should grant, pursuant to s 477(2B) of the Act, approval for the Liquidators to enter into the Revised Funding Agreement.

30. [89]

    The Liquidators noted that there is, on the authorities, an issue as to whether s 477(2B) of the Act applies to the entry by a liquidator into a costs agreement with a solicitor.

31. [90]

    The WilmerHale Retainer states that Mr Barnden, “as authorized on behalf of [the Company]”, has asked WilmerHale “to serve as counsel to [the Company]”, and that WilmerHale’s “client in this matter will be [the Company]”. The signature page provides for the document to “Acknowledged and Agreed to by and on behalf of the [Company]”.

32. [91]

    In contrast, the H&W Retainer states that Hall & Wilcox “are acting for Geoffrey Reidy, Andrew Barnden and Paula Smith (together, the Liquidators) in their capacities as joint and several liquidators of [the Company]”, and the signature page provides for each of Mr Reidy, Mr Barnden and Ms Smith to sign and thereby “accept the Engagement Agreement”.

33. [92]

    In Frigger v Kitay (No 2) (2020) 143 ACSR 655; [2020] FCA 497 at [47]-[51], Charlesworth J expressed the view that:

    1. (1)

       to the extent that a costs agreement is between a solicitor and a liquidator of a company in his or her capacity as such, then s 477(2B) of the Act has no application to it; and

    2. (2)

       the question as to whether s 477(2B) of the Act applies to a costs agreement with a solicitor “arises insofar as [the liquidator] has entered into the agreement on [the company’s] behalf or otherwise caused [the company] to enter into the agreement”.

34. [93]

    Her Honour did not consider it necessary to express a concluded view as to whether s 477(2B) applied to the particular agreement in that case, stating (at [51]) that:

35. [94]

    In Lewis (liquidator), in the matter of Concrete Supply Pty Ltd (in liq) [2020] FCA 841, White J noted (at [19]) that the decision of Charlesworth J in Frigger v Kitay (No 2) provides “some support for the proposition that an agreement between a liquidator in his or her capacity as liquidator of the company and a firm of solicitors is not an agreement to which s 477(2B) applies”. His Honour, however, preferred not to express any concluded view on that issue, and instead stated (at [20]) that he would proceed on the basis that s 477(2B) was applicable, for three reasons:

36. [95]

    Williams J in In the matter of Mudgee Dolomite & Lime Pty Ltd (No. 4) [2021] NSWSC 393 at [51] accepted a submission “that the better view is that the costs agreement to be entered into by the Liquidators in the name of and on behalf of [the company] is an agreement to which s 477(2B) applies” (referring to Frigger v Kitay (No 2) and Lewis).

37. [96]

    More recently, in Kitay v Frigger (No 2) [2024] WASC 113 at [91], Hill J made the following observations:

38. [97]

    This proposition was quoted with approval by McGrath J in In the matter of Jewels of Sydney Pty Ltd (in liquidation) [2024] NSWSC 538 at [41].

39. [98]

    Mr Barnden has explained that it is necessary, in order to pursue the Company’s Arbitration Claim, to engage solicitors with experience in international arbitration, and that he has, for this purpose, negotiated the WilmerHale Retainer.

40. [99]

    In addition, the Liquidators require ongoing legal advice and representation in relation to the liquidation of the Company, including public examinations and any claims in respect of voidable transactions, insolvent trading, or breaches of directors’ duties that may be identified as a result of such examinations, and Mr Barnden has negotiated the H&W Retainer for this purpose.

41. [100]

    Mr Barnden has given evidence of the terms of the WilmerHale Retainer and the H&W Retainer. He has formed the commercial judgment that the terms of each of those retainers are fair and reasonable.

42. [101]

    I am satisfied that the Solicitor Retainers relate to the proper realisation of the assets of the Company or otherwise assist in the winding up of the Company, and are therefore in the interests of the creditors of the Company.

43. [102]

    SSW did not advance any submissions in opposition to approval being granted in respect of the entry into these retainers.

44. [103]

    For those reasons, and having regard to the current state of the authorities, I accept the Liquidators’ submission that the appropriate course is for the Court to make an order under s 477(2B) approving, to the extent necessary, the entry by the Liquidators into each of the Solicitor Retainers.

Application for directions under section 90-15

1. [104]

   The Liquidators also seek a direction pursuant to s 90-15 of the IPSC that they are justified in entering into and performing, and causing the Company to enter into and perform, the obligations set out in the Revised Funding Agreement and the Solicitor Retainers.

2. [105]

   In Re Force Corp Pty Ltd (in liq) [2020] NSWSC 1842 at [18]-[19], Gleeson JA observed as follows (emphasis added, citations omitted):

3. [106]

   Similarly, in Re Montpac Pty Ltd (in liq) and Global Network Link Pty Ltd (in liq) [2020] NSWSC 1237 at [8], Black J stated as follows (emphasis added):

4. [107]

   In Krejci (liquidator), Re Community Work Pty Ltd (in liq) [2018] FCA 425 at [48]-[49], Gleeson J made the following remarks regarding the provision of a direction under s 90-15 in respect of a decision to enter into a funding agreement:

5. [108]

   The function of a judicial direction that a liquidator is “justified” in taking some course of action is not to determine any rights or liabilities arising out of a particular transaction, but to confer a level of protection on the liquidator. In Re Minken Pty Ltd (in liq) [2019] VSC 288 at [23]-[24], Connock J observed that:

6. [109]

   One of the authorities cited by Connock J in support of these propositions was the decision of Brereton J in In the matter of One.Tel Ltd (2014) 99 ACSR 247; [2014] NSWSC 457. His Honour there reviewed the relevant authorities and provided the following summary of the applicable principles (at [35], citations omitted):

7. [110]

   This passage has been frequently cited and applied in subsequent decisions concerning s 90-15 applications, such as In the matter of Rubix Investments Group Pty Ltd (in liq) [2018] NSWSC 1184 at [33] (Gleeson JA); Re Kelly, in the matter of Halifax Investments Services Pty Ltd (in liq) (No 8) [2020] FCA 533 at [56] (Gleeson J); Kerr, in the matter of Octaviar Limited (in liquidation) [2019] FCA 1614 at [69] (Farrell J).

8. [111]

   The Liquidators submitted that a direction should be given under s 90-15 of the IPSC having regard to the following matters:

   1. (1)

      the liquidation has a litigious history, having regard, in particular, to the Directing Creditors’ application for leave to appeal from the June Judgment;

   2. (2)

      there “is a very real prospect that one or more of those appealing parties may seek to impugn the Liquidators’ actions in entering into the [Revised] Funding Agreement and/or the Solicitor Retainers”; and

   3. (3)

      this “real prospect of criticism” was “borne out” by the fact that SSW sought leave to be heard in order to oppose the Liquidators’ application.

9. [112]

   Of the Directing Creditors who challenged the Liquidators’ decision to refuse to call a meeting to consider resolutions for their removal and replacement, SSW is the only one which sought leave to appear at the hearing in order to oppose the Liquidators’ application for approval to enter into the Revised Funding Agreement.

10. [113]

    SSW did not, in opposing this application, attack the propriety of the Liquidators’ decision to enter into the Revised Funding Agreement, and did not make any submissions which might form the basis for such an attack. There was no suggestion by SSW of any misconduct on the part of the Liquidators.

11. [114]

    Nor did SSW, by reference to the terms of the Revised Funding Agreement, make any criticism of the reasonableness of the Liquidators’ decision to enter into that agreement.

12. [115]

    Nor did SSW raise any particular legal issue in respect of the Liquidators’ decision.

13. [116]

    Instead, the thrust of SSW’s opposition to the Liquidators’ s 477(2B) application was that if the Liquidators are replaced, and if a replacement liquidator forms a different view on the commercial merits of the Revised Funding Agreement, the replacement liquidator will not be able to terminate that agreement (and accordingly, the determination of the approval application should be delayed until after the determination of the CA Proceeding).

14. [117]

    Further, SSW did not make any criticism of the Solicitor Retainers or advance any submissions in opposition to the Liquidators’ application for approval to enter into the Solicitor Retainers.

15. [118]

    The Liquidators have made a commercial assessment of the Revised Funding Agreement and the Solicitor Retainers and, on the basis of that assessment, have formed the view that it is in the best interests of creditors to enter into those agreements. It is not the role of the Court to carry out an independent appraisal of the commercial merits of those transactions. The Court’s decision to grant approval, pursuant to s 477(2B), for the Liquidators to enter into the Revised Funding Agreement and the Solicitor Retainers is not an endorsement of the Liquidators’ commercial judgment in respect of those agreements, but merely constitutes permission for the Liquidators to act upon their commercial judgment.

16. [119]

    If there had been, for example, an attack on the propriety of the Liquidators’ conduct, it would have been necessary for the Court, in considering whether to give a direction which would exonerate the Liquidators from personal liability, to undertake a closer examination of the Liquidators’ decision than was necessary in respect of the s 477(2B) application. In particular, this may have required consideration by the Court of the issue (referred to in paragraphs [14]-[15] above) as to whether a proposed clause of the Funding Agreement regarding remuneration gave rise to an actual or potential conflict. Such consideration was, as far as the s 477(2B) application was concerned, unnecessary because the relevant provision was not part of the Revised Funding Agreement in respect of which the Liquidators ultimately sought approval under s 477(2B) of the Act. Accordingly, the Court did not have the benefit of any submissions on this issue.

17. [120]

    In those circumstances, I decline to exercise the discretion to give a direction under s 90-15 of the IPSC regarding the Liquidators’ decision to enter into the Revised Funding Agreement and the Solicitor Retainers.

18. [121]

    For those reasons, I make the following orders.

    1. (1)

       An order, pursuant to section 477(2B) of the Corporations Act 2001 (Cth):

    2. (2)

       An order that the Applicants’ costs of the Interlocutory Process filed on 30 May 2025 be costs in the liquidation of the Defendant.

    3. (3)

       The Interlocutory Process filed on 30 May 2025 be otherwise dismissed.