FEDERAL COURT OF AUSTRALIA Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher [2011] FCAFC 89 Citation: Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher [2011] FCAFC 89 Appeal from: Fletcher and Barnet, in the matter of Octaviar Ltd (Receivers and Managers Appointed) (In Liq) and Octaviar Administration Pty Ltd (In Liq) [2011] FCA 132 Fletcher and Barnet, in the matter of Octaviar Ltd (Receivers and Managers Appointed) (In Liq) and Octaviar Administration Pty Ltd (In Liq) (No 2) [2011] FCA 315 Parties: FORTRESS CREDIT CORPORATION (AUSTRALIA) II PTY LTD (ACN 114 624 958) v WILLIAM JOHN FLETCHER AND KATHERINE ELIZABETH BARNET, OCTAVIAR LTD (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (ACN 107 863 436) and OCTAVIAR ADMINISTRATION PTY LTD (IN LIQUIDATION) (ACN 101 069 390) File number(s): NSD 291 of 2011 NSD 368 of 2011 Judges: EMMETT, NICHOLAS AND ROBERTSON JJ Date of judgment: 25 July 2011 Catchwords: CORPORATIONS – powers of liquidator in winding up – whether company's entry into agreement to fund litigation intended to be commenced by a creditor was expedient for the winding up of the company's affairs and the distribution of its property – whether possible commercial return from sharing in proceeds of litigation adequate to attract s 477(2)(m) of the Corporations Act 2001 (Cth) PRACTICE AND PROCEDURE – application for leave to appeal by non-party – where prospective appellant held charge over the assets of the party to be funded in the litigation, which security would potentially be diminished according to the terms of the litigation funding agreement if that agreement were approved Legislation: Corporations Act 2001 (Cth) ss 471B, 477(1), 477(2)(m), 477(2B), 477(6), 479(3), 1321, 1322(4) Federal Court of Australia Act 1976 (Cth) s 24 Cases cited: Campbelltown City Council v Vegan (2006) 67 NSWLR 372 Commonwealth of Australia v Construction, Forestry, Mining and Energy Union (2000) 98 FCR 31 Cuthbertson v Hobart Corporation (1921) 30 CLR 16 Fletcher and Barnet, in the matter of Octaviar Ltd (Receivers and Managers Appointed) (In Liq) and Octaviar Administration Pty Ltd (In Liq) [2011] FCA 132 Fletcher and Barnet, in the matter of Octaviar Ltd (Receivers and Managers Appointed) (In Liq) and Octaviar Administration Pty Ltd (In Liq) (No 2) [2011] FCA 315 In re Securities Insurance Co [1894] 2 Ch 410 Leigh re AP & PJ King Pty Ltd (in liq) [2006] NSWSC 315 Northbourne Developments Pty Ltd v Reiby Chambers Pty Ltd (1989) 19 NSWLR 434 Re Markham; Markham v Markham (1880) 16 Ch D 1 Re McGrath and Another (in their capacity as liquidators of HIH Insurance Ltd and Others) (2010) 266 ALR 642 Witness v Marsden (2000) 49 NSWLR 429 Date of hearing: 18 May 2011 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 51 Counsel for the appellant: N Hutley SC, CN Bova Solicitor for the appellant: Baker & McKenzie Counsel for the respondents: B Coles QC, S Aspinall, J Taylor Solicitor for the respondents: Henry Davis York IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 291 of 2011 BETWEEN: FORTRESS CREDIT CORPORATION (AUSTRALIA) II PTY LTD (ACN 114 624 958) Appellant AND: WILLIAM JOHN FLETCHER AND KATHERINE ELIZABETH BARNET First Respondents OCTAVIAR LTD (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (ACN 107 863 436) Second Respondent OCTAVIAR ADMINISTRATION PTY LTD (IN LIQUIDATION) (ACN 101 069 390) Third Respondent JUDGES: EMMETT, NICHOLAS AND ROBERTSON JJ DATE OF ORDER: 25 JULY 2011 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Leave to appeal be granted and the appeal be allowed. 2. Order 1 and Direction 5 made by the Court in proceeding NSD 149 of 2011 on 23 February 2011 be set aside. 3. The matter be remitted for further consideration. 4. The respondents pay the appellant's costs of the application for leave to appeal and of the appeal. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 368 of 2011 BETWEEN: FORTRESS CREDIT CORPORATION (AUSTRALIA) II PTY LTD (ACN 114 624 958) Appellant AND: WILLIAM JOHN FLETCHER AND KATHERINE ELIZABETH BARNET First Respondents OCTAVIAR LTD (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (ACN 107 863 436) Second Respondent OCTAVIAR ADMINISTRATION PTY LTD (IN LIQUIDATION) (ACN 101 069 390) Third Respondent JUDGES: EMMETT, NICHOLAS AND ROBERTSON JJ DATE OF ORDER: 25 JULY 2011 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Leave to appeal be granted and the appeal be allowed. 2. Orders 1 and 2, Direction 5 and Declaration 6 made by the Court in proceeding NSD 255 of 2011 on 16 March 2011 be set aside. 3. The matter be remitted for further consideration. 4. The respondents pay the appellant's costs of the application for leave to appeal and of the appeal. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 291 of 2011 BETWEEN: FORTRESS CREDIT CORPORATION (AUSTRALIA) II PTY LTD (ACN 114 624 958) Appellant AND: WILLIAM JOHN FLETCHER AND KATHERINE ELIZABETH BARNET First Respondents OCTAVIAR LTD (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (ACN 107 863 436) Second Respondent OCTAVIAR ADMINISTRATION PTY LTD (IN LIQUIDATION) (ACN 101 069 390) Third Respondent NSD 368 of 2011 BETWEEN: FORTRESS CREDIT CORPORATION (AUSTRALIA) II PTY LTD (ACN 114 624 958) Appellant AND: WILLIAM JOHN FLETCHER AND KATHERINE ELIZABETH BARNET First Respondents OCTAVIAR LTD (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (ACN 107 863 436) Second Respondent OCTAVIAR ADMINISTRATION PTY LTD (IN LIQUIDATION) (ACN 101 069 390) Third Respondent JUDGES: EMMETT, NICHOLAS AND ROBERTSON JJ DATE: 25 JULY 2011 PLACE: SYDNEY REASONS FOR JUDGMENT THE COURT INTRODUCTION 1 Fortress Credit Corporation (Australia) II Pty Ltd (Fortress) has applied for leave to appeal from orders made by a judge of the Court (the primary judge) in two separate proceedings. Leave to appeal is required because Fortress was not a party to either of those proceedings. In each application, Fortress has filed a draft notice of appeal setting out 15 grounds of appeal. The grounds are in substance identical in each application. 2 The respondents to the applications are William Fletcher and Katherine Barnet (the Liquidators), Octaviar Administration Pty Ltd (the Funder) and Octaviar Ltd (the Claimant). The Liquidators are the liquidators of both the Funder and the Claimant. 3 One of the proceedings relates to an agreement (the Investigation Agreement) for the funding of public examinations by the Liquidators, in their capacity as liquidators of the Claimant, of officers of Fortress. The other proceeding relates to a funding and indemnity agreement (the Funding Agreement) for the funding of proceedings against Fortress by the Claimant and the Liquidators, in their capacity as liquidators of the Claimant. In each case the funding is to be provided by the Funder. 4 The Investigation Agreement and the Funding Agreement are subject to confidentiality orders and are not before the Full Court. Presumably, both documents were made between the Funder and the Liquidators in their capacity as liquidators of the Funder, on the one hand, and the Claimant and the Liquidators in their capacity as liquidators of the Claimant, on the other hand. These reasons proceed upon that assumption. THE PROCEEDINGS AT FIRST INSTANCE 5 The Claimant is the ultimate holding company of a complex group of companies (the Octaviar Group), within which the Funder performed the treasury functions. On 13 September 2008, the directors of the Claimant resolved to place the Claimant in voluntary administration. On 12 January 2009, the Claimant entered into a Deed of Company Arrangement. On 31 July 2009, the Liquidators were appointed provisionally as liquidators of both the Funder and the Claimant by the Supreme Court of Queensland and, on 9 September 2009, they were appointed as joint liquidators. 6 The Claimant is indebted to Fortress in a sum of approximately $71 million. Fortress claims to be a secured creditor of the Claimant, as the holder of a fixed and floating charge granted on 1 June 2007 over the assets of the Claimant (the Charge). On 15 September 2008, Fortress appointed Messrs Anthony Sims and Stephen Parbery (the Receivers) as receivers and managers of the property of the Claimant under the Charge. 7 The Funder is indebted to the Claimant. That debt is subject to the Charge and is therefore under the control of the Receivers. The Receivers have caused the Claimant to lodge a proof of debt in the liquidation of the Funder in respect of the debt owing by the Funder to the Claimant. The proof of debt was for a sum in excess of $500 million. 8 On and after 15 December 2009, the Liquidators obtained orders in the Supreme Court of New South Wales for the conduct of public examinations in the winding up of the Funder. More than 50 days of examinations have been conducted in respect of a variety of topics. As a result of the information that was obtained from those examinations, the Liquidators formed the view that it was desirable to examine certain officers of Fortress. 9 On 24 November 2010, the Liquidators obtained orders in the Supreme Court of Queensland for the examination of officers of Fortress in the winding up of the Funder. Fortress applied to set the summonses aside. It asserted that they had been issued for an improper purpose. While the Liquidators did not accept those assertions, they formed the view that, to ensure that the examinations of the relevant officers of Fortress were able to proceed, it was appropriate for public examinations to be conducted also in the winding up of the Claimant. Accordingly, on 6 December 2010, the Liquidators obtained orders for the examination of officers of Fortress in relation to the affairs of the Claimant. 10 The Claimant has only nominal assets and does not have the funds to investigate or prosecute the proposed claims against Fortress. On the other hand, the Funder has assets consisting of cash in excess of $120 million. The Liquidators saw no merit in approaching a commercial litigation funder who would be likely to require a right of first refusal to fund any subsequent claims brought against Fortress. That might have resulted in a significant portion of any recoveries being distributed outside the Octaviar Group and not to the creditors of the Funder and the Claimant. 11 None of the creditors associated with the Claimant's committee of inspection, who represent the Claimant's largest creditors, was prepared to provide funding for the proposed examination of officers of Fortress. In the light of the Claimant's lack of assets and the fact that the Funder had funds available that could potentially be used to fund the examinations in respect of the winding up of the Claimant, the Liquidators asked the members of the committees of creditors of both the Funder and the Claimant to support the funding by the Funder of the investigation of potential claims against Fortress. On 7 December 2010, the Investigation Agreement was made. The general terms of the Investigation Agreement are consistent with the terms that would ordinarily be expected to be provided by a commercial litigation funder. When the Investigation Agreement was made, the Liquidators expected that the examinations in question would be completed no later than 7 March 2011, being the date 3 months after 7 December 2010. 12 The Liquidators subsequently formed the opinion that it is in the interests of the creditors of the Claimant to pursue certain claims against Fortress. The claims include impugning the validity of the Charge. In forming the opinion that it is in the interests of the Claimant's creditors to pursue the claims against Fortress, the Liquidators took into account the opinion of senior counsel concerning the prospects of success of the proposed claims against Fortress. 13 The Liquidators have, therefore, formed the opinion that it is in the interests of the creditors of both the Claimant and the Funder that the Funding Agreement be entered into, whereby funds will be lent by the Funder to the Claimant to prosecute the proposed claims against Fortress. Under the Funding Agreement, the Funder must pay all reasonable legal costs and disbursements incurred in prosecuting the claims against Fortress, must provide any security for costs ordered to be provided by the Claimant, and must pay the Liquidators' fees. The Funder also agrees to indemnify the Liquidators and the Claimant in respect of adverse costs orders and any undertaking as to damages given by the Liquidators. In consideration for providing the funding, the Funder will receive a share of any amount received pursuant to the resolution of any proceeding brought by the Claimant against Fortress, whether by way of settlement or under a Court order. 14 The Funding Agreement also provides that, where amounts paid to the Funder are not sufficient to reimburse it for the amounts paid by it under the Funding Agreement, the Liquidators of the Funder may apply any dividend that is otherwise payable to the Claimant in the winding up of the Funder towards reimbursing the Funder for payments that have been made under the Funding Agreement. That provision has the effect of shifting from the Funder to the Claimant part of the risk of prosecuting the proposed claims against Fortress. That is to say, the debt owing by the Funder to the Claimant would be reduced to the extent of any such reimbursement. If the Charge is valid, that would have the effect of diminishing an asset over which the Charge subsists, to the detriment of Fortress. 15 In forming the opinion that it is in the interests of the creditors of both the Claimant and the Funder to prosecute the proposed claims against Fortress, the Liquidators had regard to the significant overlap in the proofs of debts that had been lodged in the winding up of the Funder and in the voluntary administration of the Claimant. Although proofs have not yet been called for in the winding up of the Claimant, 29 proofs have been lodged in the voluntary administration of the Claimant, with an aggregate value of $2,176,401,756.91, and 82 proofs have been lodged in the winding up of the Funder, with an aggregate value of $2,456,286,361.51. Eleven creditors have lodged proofs in both the winding up of the Funder and the voluntary administration of the Claimant. Of the proofs lodged in respect of the Funder, the common creditors represent 71% of the total proofs lodged and of the proofs lodged in respect of the Claimant, the common creditors represent 80% of the total proofs lodged. 16 The Liquidators commissioned a report from Mr John Williams, a chartered accountant, as to the following issues: Whether it is in the interests of the creditors who stand to receive distributions in the respective windings up of the Funder and the Claimant to enter into and proceed with the Funding Agreement. Whether the interests of the creditors of the Funder are promoted by the Funder committing its funds on the terms set out in the Funding Agreement. Whether the interests of the creditors of the Claimant are promoted by the Claimant committing to pay to the Funder, on the terms of the Funding Agreement, a portion of any sum received by the Claimant on the resolution of proceedings against Fortress. Whether the process of winding up the Funder and the Claimant is likely to be enhanced by the Funder and the Claimant participating in the Funding Agreement. 17 Mr Williams provided to the Liquidators a comprehensive report (the Williams Report) in which he considered the likely outcome and implications for creditors of the Funder and creditors of the Claimant under five different scenarios. The five scenarios encompass every likely outcome of the Funder and the Claimant entering through the Liquidators into the Funding Agreement and commencing proceedings against Fortress, and of their not doing so. The Williams Report shows that, if the Funding Agreement were entered into and the proposed claims against Fortress were to succeed, there would be an improved return for creditors of both the Funder and the Claimant. For that reason, Mr Williams concluded that it was in the interests of the creditors of both the Funder and the Claimant, other than Fortress, that the Claimant prosecute the proposed claims against Fortress and that the Funder provide funding for that purpose. 18 Under s 477(1) of the Corporations Act 2001 (Cth) (the Corporations Act), a liquidator of a company may: carry on the business of the company so far as is necessary for the beneficial disposal or winding up of that business; subject to certain other provisions of the Corporations Act, pay any class of creditors in full; make any compromise or arrangement with creditors or persons claiming to be creditors or having or alleging that they have any claim (present or future, certain or contingent, ascertained or sounding only in damages) against the company or whereby the company may be rendered liable; and compromise any calls, liabilities to calls, debts, liabilities capable of resulting in debts and any claims (present or future, certain or contingent, ascertained or sounding only in damages) subsisting or supposed to subsist between the company and a contributory or other debtor or person apprehending liability to the company, and all questions in any way relating to or affecting the property or the winding up of the company, on such terms as are agreed, and take any security for the discharge of, and give a complete discharge in respect of, any such call, debt, liability or claim. Under s 477(2)(m), a liquidator of a company may do all such other things as are necessary for winding up the affairs of the company and distributing its property. 19 However, under s 477(2B), except with the approval of the Court, of the committee of inspection or of a resolution of the creditors, a liquidator of a company must not enter into an agreement on the company's behalf if the term of the agreement may end, or obligations of a party to the agreement may, according to the terms of the agreement, be discharged by performance, more than 3 months after the agreement is entered into, even if the term may end, or the obligations may be discharged, within those 3 months. 20 Under s 477(6), the exercise by the liquidator of the powers conferred by s 477 is subject to the control of the Court. Any creditor or contributory or the Australian Securities and Investments Commission may apply to the Court with respect to any exercise or proposed exercise of any of those powers. Further, under s 479(3), the liquidator may apply to the Court for directions in relation to any particular matter arising under the winding up. 21 The obligations of the parties under the Funding Agreement will extend beyond three months from its commencement and, accordingly, s 477(2B) of the Corporations Act would apply to it. Hence, on 17 February 2011, the Liquidators, the Funder and the Claimant made an application to the Court under s 477(2B) for approval to enter into the Funding Agreement, and for directions from the Court under s 479(3). As indicated above, Fortress was not a party to and did not appear in the proceeding. 22 Since the Funder is itself in liquidation, an issue arose as to whether the Liquidators, in their capacity as liquidators of the Funder, had power to cause the Funder to enter into the arrangements contemplated by the Funding Agreement. The primary judge had regard to the Williams Report and, in particular, its consideration of the likely outcome and implications for creditors of the Funder and the Claimant if they entered into the Funding Agreement, and its conclusion that, if the claims against Fortress should succeed, there would be an improved return for creditors of both the Claimant and the Funder. 23 The primary judge observed that it is not unusual for a company in liquidation to seek litigation funding in order to proceed against a third party, often a creditor, and that the power of liquidators to enter into such arrangements is well accepted. Her Honour said that, in considering an application for approval to enter into such an agreement, it is not necessary for the Court to be convinced that the company is likely to succeed in the litigation or for the Court to form its own view as to the commercial merits of the agreement. The Court will not interfere unless there can be seen to be some lack of good faith, some error of law or principle, or real and substantial grounds for doubting the prudence of the liquidator's conduct. 24 The primary judge referred to a comprehensive list of factors (see Leigh re AP & PJ King Pty Ltd (in liq) [2006] NSWSC 315 at [25]) that her Honour considered should be taken into account in determining whether there are grounds for doubting the good faith or prudence of a proposed proceeding by a liquidator, as follows: the prospects of success; the interests of creditors other than the proposed defendant; possible oppression; the nature and complexity of the cause of action; the extent to which the liquidator has canvassed other funding options; the level of the funder's premium; consultations with creditors; and the risks involved in the claim. Her Honour considered that, insofar as they were relevant, the Liquidators had considered those factors. Her Honour observed that the proposed proceeding would not be in the interest of Fortress. However, her Honour considered that that was an inevitable result of the Liquidators discharging their obligations to the creditors of the Claimant generally and could not be regarded as oppressive or as a reason for withholding the approval sought. 25 On the basis of the evidence presented at the hearing, much of which her Honour concluded should remain confidential, her Honour was satisfied that the Court should approve the entry of the Liquidators into the Funding Agreement. Accordingly, on 23 February 2011, her Honour: approved, pursuant to s 477(2B) of the Corporations Act, the entry of the Liquidators, in their capacity as the liquidators of the Claimant and the Funder, into the Funding Agreement; and directed that the Liquidators, in their capacity as the liquidators of the Claimant and the Funder, were justified in entering into the Funding Agreement. Fortress was served with the orders, but not until after they had been entered. It applied for leave to appeal soon after the orders were served. 26 It subsequently became apparent that, for various reasons, the Investigation Agreement would be in operation for a period of longer than 3 months. Hence, on 8 March 2011, the Liquidators, the Funder and the Claimant made a second application to the Court under s 477(2B) and s 479(3), as well as under s 1322(4)(a) of the Corporations Act, for approval, nunc pro tunc, to enter into the Investigation Agreement, for directions by the Court, and for a declaration that the Investigation Agreement was not invalid by reason of its having been entered into without prior approval under s 477(2B). 27 On 14 March 2011, the primary judge directed that the application and the accompanying affidavit be served on Fortress and the Receivers, and adjourned the hearing to enable Fortress and the Receivers to seek leave to be heard, if they so wished. At the adjourned hearing, Fortress and the Receivers sought and were granted leave to appear. Fortress opposed the application and applied for an adjournment pending the resolution of its application for leave to appeal from the earlier orders of 23 February 2011. Her Honour refused to adjourn the hearing. In her Honour's view, it was preferable to deal with the proceeding expeditiously and leave it to Fortress to seek leave to appeal should it not succeed in opposing the application for approval of the entry into the Investigation Agreement. 28 The Liquidators requested that the Court approve their entry into the Investigation Agreement, nunc pro tunc, given the allegations made by Fortress that the Investigation Agreement had not been validly approved, and the fact that it was then clear that obligations under it would extend beyond 3 months. The primary judge considered that the application raised the same issues of principle as were considered in the earlier proceeding in relation to the Funding Agreement. The examinations to be funded under the Investigation Funding Agreement were preliminary to the proposed claims to be funded under the Funding Agreement. As a result, her Honour said, the considerations relevant to the Investigation Agreement were, in general terms, the same as those relevant to the Funding Agreement. 29 No separate expert evidence was presented in the second proceeding. The Liquidators, in written submissions to the primary judge, asserted that the risks and benefits of the Investigation Agreement had not been the subject of expert analysis since the risks and benefits are fairly clear. The risk to the Funder is that it will be liable for the costs of conducting the public examinations. In the event that the proposed claims against Fortress fail, the Funder will have received no benefit because, under the Funding Agreement, in all likelihood, it will have to indemnify the Claimant for its costs and any damages. On the other hand, if the proposed claims against Fortress succeed, then the benefit to the Funder of the Investigation Agreement is that it will have the benefit of an entitlement to a proportion of the proceeds of any judgment under the Funding Agreement and, under the Investigation Agreement, will be further entitled to be reimbursed, from the amount recovered, for any amounts paid under the Investigation Agreement, so long as the amount recovered is sufficient. 30 The primary judge considered that that was a fair summary of the risks and benefits, although it was necessary to consider the specific terms of the Investigation Agreement. Her Honour took into account the submissions made on behalf of Fortress and the Receivers but concluded that most of the submissions expressed opposition to the Funding Agreement, in respect of which there was an extant approval. On 16 March 2011, her Honour: ordered, pursuant to s 1322(4)(d) of the Corporations Act, that the period for the making by the Liquidators of an application for the Court's approval under s 477(2B) of the Corporations Act, in respect of the Investigation Agreement, be extended to 16 March 2011; approved nunc pro tunc, pursuant to s 477(2B) of the Corporations Act, the Liquidators' entry into the Investigation Agreement; directed, pursuant to s 479(3) of the Corporations Act, that the Liquidators, in their capacity as the liquidators of the Claimant and the Funder, could act on the Investigation Agreement as though they had entered into it with the prior approval of the Court under s 477(2B) of the Corporations Act; and declared, pursuant to s 1322(4)(a) of the Corporations Act, that the Liquidators' entry, in their capacity as liquidators of the Claimant and the Funder, into the Investigation Agreement was not invalid by reason of the Liquidators' having entered into it without the Court's prior approval under s 477(2B). THE APPLICATIONs FOR LEAVE 31 Section 24 of the Federal Court of Australia Act 1976 (Cth) provides, relevantly, that the Court has jurisdiction to hear and determine appeals from judgments of the Court constituted by a single judge exercising the original jurisdiction of the Court. However, it is common ground that, while the orders made by the primary judge are final orders, Fortress, as a non-party, requires leave to appeal (see Commonwealth of Australia v Construction, Forestry, Mining and Energy Union (2000) 98 FCR 31 at 37). 32 A person who was not a party to a cause can obtain leave to appeal from orders made in the cause. A person who, without being a party, is either bound by an order, or is aggrieved by it, or is prejudicially affected by it, or is sufficiently interested in it can appeal, but only with leave. It does not require much for such a person to obtain leave (see In re Securities Insurance Co [1894] 2 Ch 410 at 413-414). Leave to appeal is given, as a rule, if the person applying, though not a party to the proceeding, might properly have been made a party (see Cuthbertson v Hobart Corporation (1921) 30 CLR 16 at 25). 33 For example, leave to appeal may be given to a person who had not been heard and who was a potential beneficiary under a will (Re Markham; Markham v Markham (1880) 16 Ch D 1). Further, the recipient of a subpoena, being subject to a court order, has standing to apply for leave to appeal against a trial judge's refusal of a request for pseudonym orders, and such a refusal is an order against which an appeal can be brought (see Witness v Marsden (2000) 49 NSWLR 429; Campbelltown City Council v Vegan (2006) 67 NSWLR 372 at [62]). The witness has a direct interest in the matter sought to be challenged. 34 Fortress's claim that it was aggrieved or sufficiently interested, for the purposes of the grant of leave, is that Fortress is a creditor of the Claimant, for approximately $71 million. The Funder is not a creditor of the Claimant. A major asset of the Claimant is the debt that the Funder owes to the Claimant. The Charge, if it is effective, covers that debt. By approving the Funding Agreement, and thereby permitting the Funder to fund the proposed claims against Fortress, the assets that would otherwise be available for distribution in the liquidation of the Funder would be reduced. That reduction would include a reduction in the value of the debt owing to the Claimant by the Funder, being an asset over which the Charge subsists. Thus, Fortress contends, the approval of the Funding Agreement has the result that the value of Fortress's security would or could be diminished. 35 On an application for leave to appeal by a non-party, bearing in mind the widely different circumstances in which an application by a non-party for leave to appeal may be made, several matters are likely to be relevant to the exercise of the discretion, as follows: first, the nature and subject matter of the proceeding, including whether it concerns public rights or private rights and, if the latter, whether only personal remedies or proprietary remedies are involved; secondly, whether at first instance the applicant could have but did not seek to be made a party or to be heard, and whether the applicant could or should have been made a party; thirdly, the rights, interests, liabilities and duties of the applicant that would be affected, and the nature and extent of the effect on the applicant of the orders appealed from; fourthly, whether the applicant could commence a separate proceeding for the relief claimed and, if so, whether there would or might be a procedural or substantive difficulty arising from the existence of the judgment in respect of which leave to appeal is sought; and fifthly, whether the proposed grounds of appeal are at least arguable, in the sense that there is a reasonable prospect of success. 36 The Liquidators, however, point to several factors that they say tell against the grant of leave. First, Fortress does not fall within the limited class of persons who have a statutory right to apply to the Court under s 477(6). However, while s 477(6) may be relevant, it is not an exhaustive statement of standing, especially where the issue is the scope of the statutory powers of a liquidator. The grounds that Fortress wishes to agitate involve questions as to the powers of the Liquidators under s 477. Although s 477(2B) is triggered in circumstances where an agreement might last for more than three months, in considering an application under that provision, the Court should be satisfied that an agreement in question is, as a matter of law, within the liquidator's powers. The position might be different, of course, if Fortress's grounds involved no more than a challenge to the Liquidators' commercial decision. 37 Secondly, the Liquidators point to s 1321 of the Corporations Act, and the limitations on standing to make an application under that provision (see Northbourne Developments Pty Ltd v Reiby Chambers Pty Ltd (1989) 19 NSWLR 434). However, it is necessary to focus on the particular ground sought to be raised by Fortress, which is a question as to the powers of the Liquidators under s 477. The mere fact that Fortress is not a person aggrieved within s 1321 does not mean that the Court should exercise its discretion against granting leave. 38 Thirdly, the Liquidators contend that Fortress requires, but has not obtained, leave under s 471B of the Corporations Act. Section 471B relevantly provides that, while a company is being wound up in insolvency or by the Court, or a provisional liquidator of a company is acting, a person cannot begin or proceed with a proceeding in a court against the company or in relation to property of the company, except with the leave of the Court and in accordance with such terms (if any) as the Court imposes. However, neither of the present proceedings is within s 471B. In substance, they are proceedings against the Liquidators in relation to their powers. They are not proceedings against the Funder or the Claimant or their property. There is no need for leave under s 471B. THE PROSPECTS OF SUCCESS IN THE APPEAL 39 The main substantive question in the appeal is whether the Funding Agreement is necessary for winding up the affairs of the Funder and distributing its property, within the meaning of s 477(2)(m) of the Corporations Act. The word necessary in s 477(2)(m) is not synonymous with essential or indispensable. That is to say, the power conferred by s 477(2)(m) is not confined to matters without which the winding up of the affairs and distribution of the property of a company cannot proceed. Rather, the test is what may be thought expedient with reference to the assets of the company. Thus, s 477(2)(m) enables a liquidator to do anything expedient with reference to, or conducive to, the beneficial pursuit of completion of the winding up of the affairs of the company and the distribution of its property. 40 In considering whether to give approval under s 477(2B) and to give directions under s 479(3), the Court must consider the purposes for which the powers of a liquidator exist. One overriding purpose is to serve the interests of those concerned in the winding up, relevantly, in the present circumstances, the creditors. Another purpose is to do whatever needs to be done for the proper realisation of the property of the company or to assist its winding up. Section 477(2B) focuses attention on the need to ensure that provisions of a contract entered into by the company at the behest of its liquidator do not cut across the general expectation that the winding up will proceed in as expeditious a fashion as circumstances allow. 41 One of the considerations that the Court must take into account in determining whether to make an order under s 477(2B) giving approval to a particular contract, or to give directions under s 479(3) that the liquidator may be justified in causing the company to enter into a particular contract, is whether the contract is in the best interests of the creditors. However, it does not necessarily follow from a conclusion that a proposed contract is in the best interests of creditors, or a group of creditors, of the company, that the contract is necessary for winding up the affairs of the company and distributing its property within the meaning of s 477(2)(m). 42 The primary judge considered the question of whether the Liquidators, in their capacity as liquidators of the Funder, had power to cause the Funder to undertake the obligations contemplated by the Funding Agreement. Her Honour referred to the Williams Report and also had regard to the fact that the committees of inspection of both the Claimant and the Funder had approved the entry into of the Funding Agreement, subject to the approval of the Court. On the basis of that evidence, her Honour was satisfied that the Court should approve the entry of the Liquidators into the Funding Agreement and directed the Liquidators that they would be justified in entering into it and performing the obligations under it. However, her Honour did not determine positively that the Funding Agreement was authorised by s 477(2)(m), although that conclusion is implicit in the decision to make the orders that were made. 43 The substance of the Funding Agreement is that the Funder will lend money to the Claimant, or grant accommodation of one sort or another, in return for a promise to repay the amount of the money lent or accommodation granted, together with interest and a premium, if success is achieved in the proposed proceeding against Fortress. The Corporations Act does not give to a liquidator an explicit power to lend money, much less an explicit power to enter into a litigation funding agreement such as that now contemplated. The arrangements could only be authorised by s 477(2)(m). 44 Section 477(2)(m) would not support the provision of litigation funding by a liquidator to an entirely unrelated litigant, simply on the prospect of obtaining the return that might be generated by the arrangements. Such arrangements would not, without something more, be necessary for the winding up of the affairs of the company and distributing its property. There would need to be something over and above the possibility of a commercial return from arrangements such as are proposed. For example, where the funding company is a creditor of the accommodated company, the possibility of augmenting the distribution from the accommodated company to the funder might well make it expedient for the liquidator of the funding company to enter into a funding arrangement. Further, if the funding company were also a prospective claimant, such that claims by the funding company and the accommodated company would be heard together, it might be expedient, for the purposes of winding up the affairs of the funding company and distributing its property, for funding to be made available to the other company (see Re McGrath and Another (in their capacity as liquidators of HIH Insurance Ltd and Others) (2010) 266 ALR 642 at Appendix 1, [18]-[21]). 45 In the present case, eleven creditors have lodged proofs with both the Funder and the Claimant. As indicated above, of the proofs lodged with the Funder, the common creditors represent about 71 percent of the total proofs lodged, and in relation to the proofs lodged with the Claimant, the common creditors represent approximately 80 percent of the total proofs lodged. However, the primary judge did not explain how commonality of proofs of debt is relevant or significant. Thus, her Honour did not indicate whether the Funder and the Claimant are jointly and severally liable or, perhaps more probably, whether one is a surety in respect of the principal liability of the other. 46 There is no reason why each common creditor could not prove for the full amount of its debt in each winding up. Of course, such a creditor could not recover more than 100 percent of its debt. Thus, it follows that, unless the Funder or the Claimant was likely to distribute 100 cents in the dollar, there is no basis for concluding that assisting a realisation of an asset of the Claimant would in any way benefit any creditor of the Funder in that creditor's capacity as a creditor of the Funder, rather than in its capacity as a creditor of the Claimant. Indeed, so far as the reasons of the primary judge are concerned, the inference is open that assets of the Funder that will be used to fund the Claimant's proceeding against Fortress will be put at risk for the benefit of some of the creditors of the Funder, albeit 71 percent of the total proofs, at the expense of the other creditors of the Funder, representing 29 percent of the proofs. Her Honour made no finding as to how, apart from the commercial return by reason of success in the proposed litigation, the proposed arrangements are in the interests of the creditors of the Funder as a whole, as distinct from being in the interests of a particular group of creditors of the Funder. 47 Because the Williams Report has not been made available to Fortress, the Full Court has not considered it. However, the Liquidators did not suggest, when invited to do so in the course of the hearing, that the Williams Report propounds any benefit to the creditors of the Funder as a whole, in their capacity as creditors of the Funder, beyond the possible commercial return by reason of success in the proposed claims against Fortress. That is to say, the clear inference to be drawn is that the Liquidators of the Funder are proposing to enter into the proposed agreement in order to obtain that possible commercial benefit. That of itself, without more, would not be authorised by s 477(2)(m). 48 In making the orders sought in the second proceeding, the primary judge observed, as indicated above, that the risks and benefits of the Investigation Agreement had not been the subject of expert analysis, since the risks and benefits were "fairly clear". Her Honour accepted the submission, put on behalf of the Liquidators in that proceeding, that the risk to the Funder is that it will be liable for the costs of conducting the public examinations. In the event that the claims against Fortress fail, the Funder will have received no benefit. On the other hand, if the claims against Fortress succeed, then the benefit to the Funder would be that the Funder would have the benefit of an entitlement to a proportion of the proceeds of any judgment under the Funding Agreement. Her Honour considered that that was a fair summary of the risks and benefits of the Investigation Agreement. That reasoning tends to confirm the inference to be drawn that the only possible benefit for the creditors of the Funder, in their capacity as creditors of the Funder, is that of sharing in the possible proceeds of the claims intended to be pursued by the Claimant against Fortress. 49 Thus, the primary judge did not make a finding that there is a benefit to the creditors of the Funder from entering into the Funding Agreement beyond the possible commercial return to be earned as consideration for lending money or granting accommodation to the Claimant to prosecute its claims against Fortress. That is to say, it appears that the primary judge, in concluding that it was appropriate to make an order under s 477(2B) and to give directions under s 479(3), assumed, rather than determined, that the arrangements contemplated by the Funding Agreement were within s 477(2)(m). Alternatively, her Honour either concluded, erroneously, that the possible commercial return to the Funder was adequate to attract s 477(2)(m) or omitted to make a finding as to the basis upon which the conclusion was drawn that the entry into the Funding Agreement by the Liquidators was expedient for the winding up of the affairs of the Funder and distributing its property. To that extent, her Honour erred. Accordingly, there are good prospects of success in the appeals, if leave were to be granted. CONCLUSION 50 Taking into account the following matters, Fortress should have leave to appeal from the orders made on 23 February 2011 and 16 March 2011: Fortress wishes to agitate a question as to the statutory powers of the Liquidators that is at least reasonably arguable. Fortress is a secured creditor of the Claimant, and its interests in that regard could be affected by the expenditure of the funds of the Funder under the Funding Agreement. Fortress was not a necessary party to the proceedings at first instance, but could have been joined as a party. Once it had notice of the second proceeding before the primary judge, Fortress participated in that proceeding, albeit in a limited way. Fortress could commence a fresh proceeding to challenge the power of the Liquidators under the Corporations Act to enter into and perform their obligations under the Funding Agreement, and there would be the possibility of a conflict between the orders made at first instance, to which Fortress was not a party, and orders made in such a fresh proceeding. 51 The orders made by the primary judge in each proceeding should be set aside. Both proceedings should be remitted for further consideration of the question as to whether the entry into and performance of the obligations under the Investigation Agreement and under the Funding Agreement is necessary for winding up the affairs of the Funder and distributing its property within the meaning of s 477(2)(m). The Liquidators should pay Fortress's costs of the applications for leave and of the appeal. I certify that the preceding fifty-one (51) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Emmett, Nicholas and Robertson. Associate: Dated: 25 July 2011