Lewis (liquidator), in the matter of Concrete Supply Pty Ltd (in liq)

• Jurisdiction: Australia Federal only
• Court: Federal Court (Australia)
• Judge: WHITE J
• Judgment Date: 16 June 2020
• Neutral Citation: [2020] FCA 841
• Date: 16 June 2020

FEDERAL COURT OF AUSTRALIA

Lewis (liquidator), in the matter of Concrete Supply Pty Ltd (in liq) [2020] FCA 841

File number:	SAD 72 of 2020
Judge:	WHITE J
Date of judgment:	16 June 2020
Catchwords:	CORPORATIONS – application pursuant to s 477(2B) of the Corporations Act 2001 (Cth) (the Act) for approval for liquidators to enter into a retainer with the solicitors who have represented and continue to represent the largest creditor of company being wound up – application under s 90‑15 of Div 90, Sch 2 to the Act – whether s 477(2B) is applicable to retainer between solicitors and liquidators – whether approval should be given retrospectively – whether there would be prejudice to the liquidator’s independence. ; Held: application granted.
Legislation:	Corporations Act 2001 (Cth) ss 445D, 477, 1322(4)(d) Insolvency Practice Schedule (Corporations) cll 5‑15, 90‑15
Cases cited:	Adelaide Brighton Cement Limited, in the matter of Concrete Supply Pty Ltd v Concrete Supply Pty Ltd (Subject to Deed of Company Arrangement) (No 4) [2019] FCA 1846 Concrete Supply Pty Ltd (Subject to Deed of Company Arrangement) v Adelaide Brighton Cement Limited [2019] FCA 2202 Corporate Affairs Commission v ASC Timber Pty Ltd (1998) 16 ACLC 1642 Empire (Aust) Nominees Pty Ltd v Vince [2000] VSC 324; (2000) 18 ACLC 738 Frigger v Kitay (No 2) [2020] FCA 497 GDK Projects Pty Ltd, in the matter of Umberto Pty Ltd (in liq) v Umberto Pty Ltd (in liq) [2018] FCA 541 In the matter of Hawden Property Group Pty Ltd (in liq) (ACN 003 528 345) [2018] NSWSC 481 In the matter of HIH Casualty and General Insurance Limited (in liquidation and Subject to Schemes of Arrangement) ACN 008 482 291 [2018] NSWSC 1886 In the matter of Kala Capital Pty Limited (in liq) [2012] NSWSC 1073 Re ACN 151 726 224 Pty Ltd (in liq) previously Ridley Capital Holdings Pty Ltd [2016] NSWSC 1801 Re Bell Group Ltd (in liq); Ex parte Woodings as liquidator of The Bell Group Ltd (in liq) [2009] WASC 235 Re Bellafountain Pty Ltd [2017] NSWSC 391 Re HIH Insurance Ltd [2004] NSWSC 5 Re Ji Woo International Education Centre Pty Ltd [2019] NSWSC 93; (2019) 134 ACSR 448 Re Laurie Cottier Productions Pty Ltd (in liq) (1992) 9 ACSR 513 Re MF Global Australia Ltd (in liq) [2012] NSWSC 994 Re Octaviar Administration Pty Ltd (in liq) [2017] NSWSC 1556 Re One.Tel Ltd [2014] NSWSC 457, (2014) 99 ACSR 247 Re Opel Networks Pty Ltd [2013] NSWSC 1245 Re Read [2007] FCA 1985; (2007) 164 FCR 237 Re Spedley Securities Ltd (in liq) (1992) 10 ACLC 1742 Re United Medical Protection (No 4) [2002] NSWSC 516; (2002) 20 ACLC 1647 Smarter Way (Aust) Pty Ltd v D’Aloia [2000] VSC 408; (2000) 35 ACSR 595 Stewart, in the matter of Newtronics Pty Ltd [2007] FCA 1375 Vickers, in the matter of York Street Mezzanine (in liq) [2011] FCA 1028 Warner (Liquidator), in the matter of Sakr Bros Pty Ltd (in liq) [2019] FCA 547
Date of hearing:	Heard on the papers
Registry:	South Australia
Division:	General Division
National Practice Area:	Commercial and Corporations
Sub-area:	Corporations and Corporate Insolvency
Category:	Catchwords
Number of paragraphs:	41
Counsel for the Applicant:	Mr S Foreman
Solicitor for the Applicant:	Lipman Karas

ORDERS

		SAD 72 of 2020
IN THE MATTER OF CONCRETE SUPPLY PTY LTD (ACN 007 848 580) (IN LIQUIDATION)
BETWEEN:	MARTIN LEWIS AND DAVID KIDMAN AS LIQUIDATORS OF CONCRETE SUPPLY PTY LTD (ACN 007 848 580) (IN LIQUIDATION) Applicant

JUDGE:	WHITE J
DATE OF ORDER:	16 JUNE 2020

THE COURT NOTES THAT ASIC has been served with the Originating Process and supporting affidavit, pursuant to r 2.8 of the Federal Court (Corporations Rules) 2000 (Cth), and that ASIC does not wish to be heard on the application.

THE COURT ORDERS THAT:

1. The hearing of the Interlocutory Process scheduled for 17 June 2020 at 9.30 am be vacated.

2. Pursuant to s 477(2B) of the Corporations Act 2001 (Cth), Mr Lewis and Mr Kidman, as the liquidators of Concrete Supply (the Liquidators), have approval nunc pro tunc to enter into the retainer agreement dated 20 December 2019 a copy of which is Annexure ML-1 to the affidavit of Martin Lewis sworn 1 May 2020 (Retainer) on behalf of Concrete Supply.

3. Pursuant to Insolvency Practice Schedule cl 90-15, the Liquidators would be acting properly and would be justified in:

   1. entering into, and causing Concrete Supply to enter into the Retainer; and

   2. performing, and causing Concrete Supply to perform, the Retainer.

4. The costs of this application are costs in the winding up of Concrete Supply and may be paid of out the assets of that company.

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

REASONS FOR JUDGMENT

WHITE J:

1. On 19 November 2019, the Court made orders pursuant to s 445D of the Corporations Act 2001 (Cth) (the Act) terminating the Deed of Company Arrangement (DOCA) into which Concrete Supply Pty Ltd had entered on 19 December 2017. At the same time, the Court made orders appointing the applicants, Mr Lewis and Mr Kidman, as its joint and several liquidators. Those orders gave effect to the judgment of the Court delivered on 12 November 2019: Adelaide Brighton Cement Limited, in the matter of Concrete Supply Pty Ltd v Concrete Supply Pty Ltd (Subject to Deed of Company Arrangement) (No 4) [2019] FCA 1846 (the Liability Judgment).

2. The Judge stayed the operation of the orders for a limited period so as to give Concrete Supply and the other respondents to the proceedings at first instance the opportunity to appeal. Concrete Supply did commence an appeal and sought a further stay of the operation of the orders until after the hearing and determination of the appeal. On 17 December 2019, the application of Concrete Supply for the stay was refused: Concrete Supply Pty Ltd (Subject to Deed of Company Arrangement) v Adelaide Brighton Cement Limited [2019] FCA 2202.

3. On 20 December 2019, the applicants retained the legal firm, Lipman Karas, to act in connection with the investigation and pursuit of potential claims against the directors of Concrete Supply and against others. The applicants now consider that they should not have entered into the retainer without having obtained, in the manner contemplated by s 477(2B) of the Act, an approval to do so. This judgment concerns their application for such an approval.

4. The applicants also seek a direction pursuant to cl 90‑15 of the Insolvency Practice Schedule (Corporations) (IPS) that it is appropriate for them to retain Lipman Karas, despite Lipman Karas having acted for Adelaide Brighton Cement Limited (ABCL) in the proceedings culminating in the Liability Judgment and in the application by Concrete Supply for a stay of the orders made on 19 November 2019. Lipman Karas are also continuing to act for ABCL in relation to its claim against Concrete Supply.

Background to the winding up

5. Between August 2009 and November 2017, ABCL had supplied concrete to Concrete Supply. In October 2017, ABCL discovered that it had been underpaid about $12 million by Concrete Supply and that this underpayment had been disguised in its own records by a series of false entries made by one of its employees. ABCL sought payment of the shortfall from Concrete Supply. However, on 14 November 2017, the directors of Concrete Supply resolved that it was, or was likely to become, insolvent and appointed Messrs Cooper and Cantone at Worrells as administrators. Subsequently, on 19 December...