FEDERAL COURT OF AUSTRALIA Walker, in the matter of ZYX Learning Centres Limited (formerly A.B.C. Learning Centres Limited) (Receivers and Managers Appointed) (in Liq) [2015] FCA 146 Citation: Walker, in the matter of ZYX Learning Centres Limited (formerly A.B.C. Learning Centres Limited) (Receivers and Managers Appointed) (in Liq) [2015] FCA 146 Parties: PETER WALKER AND GREGORY MOLONEY IN THEIR CAPACITY AS LIQUIDATORS OF ZYX LEARNING CENTRES LIMITED (FORMERLY A.B.C. LEARNING CENTRES LIMITED) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 079 736 664 AND ZYX DEVELOPMENTAL LEARNING CENTRES PTY LIMITED (FORMALLY A.B.C. DEVELOPMENTAL LEARNING CENTRES PTY LTD) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 010 788 502 AND ZYX LEARNING CENTRES LIMITED (FORMERLY A.B.C. LEARNING CENTRES LIMITED) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 079 736 664 AND ZYX DEVELOPMENTAL LEARNING CENTRES PTY LIMITED (FORMERLY A.B.C. DEVELOPMENTAL LEARNING CENTRES PTY LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 010 788 502 File number: NSD 1035 of 2014 Judge: JAGOT J Date of judgment: 17 February 2015 Catchwords: CORPORATIONS – pooling order Legislation: Corporations Act 2001 (Cth), ss 9, 50, 548A, 579E, 579G Cases cited: Re Lombe (2011) 87 ACSR 84; [2011] NSWSC 1536 Date of hearing: 17 February 2015 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 54 Counsel for the Plaintiffs: M Cashion SC and J Taylor Solicitor for the Plaintiffs: Addisons Lawyers IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1035 of 2014 IN THE MATTER OF ZYX LEARNING CENTRES LIMITED (FORMERLY A.B.C. LEARNING CENTRES LIMITED) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQ) PETER WALKER AND GREGORY MOLONEY IN THEIR CAPACITY AS LIQUIDATORS OF ZYX LEARNING CENTRES LIMITED (FORMERLY A.B.C. LEARNING CENTRES LIMITED) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 079 736 664 AND ZYX DEVELOPMENTAL LEARNING CENTRES PTY LIMITED (FORMERLY A.B.C. DEVELOPMENTAL LEARNING CENTRES PTY LIMITED) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 010 788 502 First Plaintiffs ZYX LEARNING CENTRES LIMITED (FORMERLY A.B.C. LEARNING CENTRES LIMITED) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 079 736 664 AND ZYX DEVELOPMENTAL LEARNING CENTRES PTY LIMITED (FORMERLY A.B.C. DEVELOPMENTAL LEARNING CENTRES PTY LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 010 788 502 Second Plaintiffs JUDGE: JAGOT J DATE OF ORDER: 17 FEBRUARY 2015 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Pursuant to section 579E(1) of the Corporations Act 2001 (Cth) (Act), that the companies in the schedule, being the second plaintiffs, are a pooled group for the purposes of section 579E of the Act. 2. Pursuant to section 579G(1)(d) of the Act, that the application of the Act in relation to the windings up of the companies in the schedule be modified so that section 548A of the Act has effect as if the following additional subsections were included therein: "(6) For the purposes of this section, the "ZYX Group" is the companies listed in the schedule to the orders made by the Federal Court of Australia on 17 February 2015 in proceeding number NSD 1035 of 2014. (7) On and from 17 February 2015 the committee of inspection for the ZYX Group for the purposes of subsection (1) is taken to consist of the persons who, as at 16 February 2015, were members (on behalf of the respective creditors they represent) of the respective committees of inspection of the companies listed in the schedule, or any alternate or successor authorised to represent those respective creditors from time to time, without the need for any meeting". 3. The costs of these proceedings be costs in the pooled windings up of the companies in the schedule. THE COURT NOTES THAT: 4. The documents contained in the exhibit to the affidavit of Gregory Michael Moloney sworn 8 October 2014 and marked "Confidential Exhibit GMM2" contain confidential information and Exhibit GMM2 is to be returned to the first plaintiffs forthwith. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1035 of 2014 IN THE MATTER OF ZYX LEARNING CENTRES LIMITED (FORMERLY A.B.C. LEARNING CENTRES LIMITED) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQ) PETER WALKER AND GREGORY MOLONEY IN THEIR CAPACITY AS LIQUIDATORS OF ZYX LEARNING CENTRES LIMITED (FORMERLY A.B.C. LEARNING CENTRES LIMITED) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 079 736 664 AND ZYX DEVELOPMENTAL LEARNING CENTRES PTY LIMITED (FORMERLY A.B.C. DEVELOPMENTAL LEARNING CENTRES PTY LIMITED) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 010 788 502 First Plaintiffs ZYX LEARNING CENTRES LIMITED (FORMERLY A.B.C. LEARNING CENTRES LIMITED) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 079 736 664 AND ZYX DEVELOPMENTAL LEARNING CENTRES PTY LIMITED (FORMERLY A.B.C. DEVELOPMENTAL LEARNING CENTRES PTY LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 010 788 502 Second Plaintiffs JUDGE: JAGOT J DATE: 17 FEBRUARY 2015 PLACE: SYDNEY REASONS FOR JUDGMENT 1 Before me today is an application under the Corporations Act 2001 (Cth) (the Act) for the making of a pooling order as referred to in s 579E of the Act and ancillary relief under s 579G. 2 This matter first came before Jacobson J on 20 November 2014. His Honour expressed the view that the application should not proceed on an ex parte basis and that, instead, the liquidators should seek to identify a creditor of the companies ZYX Learning Centres Ltd and ZYX Developmental Learning Centres Pty Ltd to ascertain whether one of those creditors would be a suitable contradictor to participate in the application, on the basis that the costs of the contradictor would be paid. 3 The evidence establishes the attempts that the liquidators have made since 20 November 2014 to locate a creditor who would act as an appropriate contradictor. But, as the evidence confirms, despite the fact that the costs of a creditor so acting would be paid, no creditor has come forward to take on that role. In those circumstances, the matter has come before me today some months later with the liquidators still seeking the pooling order, albeit on an ex parte basis by reason of practical necessity, given that no suitable contradictor has been able to be found. 4 I should say something now about the relevant statutory provisions. 5 Under s 579E(1) of the Act, if it appears to the Court that certain conditions are satisfied in relation to a group of two or more companies, the Court may, if satisfied that it is just and equitable to do so, by order determine that the group is a pooled group for the purposes of the section. Relevant circumstances include that each company in the group is being wound up, as set out in subs (a), and that any of certain other sub-paragraphs set out in subs (b) applies, including, in subs (b)(i), that each company in the group is a related body corporate of each other company in the group. 6 In the present case, as I have said, the pooling order is sought in relation to two companies only, who are related bodies corporate, identified as ZYX Learning Centres Ltd (ZYX) and ZYX Developmental Learning Centres Pty Ltd (DLC). 7 Section 579E(2) sets out the consequences of a pooling order, including, in particular, that each company in the group is taken to be jointly and severally liable for each debt payable by, and each claim against, each other company in the group, and debts and claims between companies in the group the subject of the pooling order are extinguished. 8 By s 579E(10), the Court must not make a pooling order in relation to a group if: (a) both: (i) the Court is satisfied the order would materially disadvantage an eligible unsecured creditor of a company in the group; and (ii) the eligible unsecured creditor has not consented to the making of the order; or (b) all of the following conditions are satisfied: (i) a company in the group is being wound up under a members' voluntary winding up; (ii) the Court is satisfied that the order would materially disadvantage a member of that company; (iii) the member is not a company in the group; (iv) the member has not consented to the making of the order. 9 By s 579E(11), there is a standing requirement, namely: The Court may only make a pooling order on the application of the liquidator or liquidators of the companies in the group. 10 By s 579E(12), in determining whether, for the purposes of s 579E(1) it is just and equitable to make a pooling order, the Court must have regard to: (a) the extent to which: (i) a company in the group; and (ii) the officers or employees of a company in the group; were involved in the management or operations of any of the other companies in the group; (b) the conduct of: (i) a company in the group; and (ii) the officers or employees of a company in the group; towards the creditors of any of the other companies in the group; (c) the extent to which the circumstances that gave rise to the winding up of any of the companies in the group are directly or indirectly attributable to the acts or omissions of: (i) any of the other companies of the group; or (ii) the officers or employees of any of the other companies in the group; (d) the extent to which the activities and business of the companies in the group have been intermingled; (e) the extent to which the creditors of any of the companies in the group may be advantaged or disadvantaged by the making of the order; (f) any other relevant matters. 11 Section 579G is also relevant. It provides for the making of ancillary orders. Of particular relevance in the present case is s 579G(1)(d), which provides that the Court may, by order, modify the application of the Act in relation to the winding up of the companies in the group. There is another standing requirement which is satisfied in this case – s 579G(2)(a) provides that such an order or direction may only be made or given on the application of the liquidator of a company in the group. In the present case, the modification sought relates to s 548A of the Act, which concerns the constitution of the relevant committee of inspection of the pooled group. In short, what is sought is an order that the members of the committees of inspection of each of the companies be combined to constitute the relevant committee of the pooled group. 12 Without going into unnecessary detail in respect of the complicated facts of the present case, it can be said that the settlement sum which has been received by the liquidators and which is the only source of funds available for distribution is a sum which was paid pursuant to a settlement deed into which the 39 companies, in what is known as the ZYX group, entered in proceedings with a syndicate of banks. Under that deed, the liquidators received a settlement sum from the banks and a further amount from the receivers, it being agreed that the latter amount would be used to pay priority claims in the liquidation of DLC. 13 The purpose of seeking the pooling order in relation to ZYX and DLC is that, if such orders are made, the liquidators will be able to meet the priority claims of employees, it being the case that the employees of the ZYX Group were employed by DLC. On the other hand, the bulk of unsecured creditors, both in quantum and number, are creditors or contingent creditors of the parent company of DLC, being ZYX. This includes claims by shareholders for misleading or deceptive conduct arising from investment in ZYX, which claims are being funded by litigation funder Bentham IMF Limited (IMF). 14 There are two critical facts which should be put on the record immediately because they are of substantial weight in determining that it is just and equitable for the pooling order to be made. 15 First, despite notice and the opportunity to object to and act as a contradictor for the present application on the basis of all costs being paid, no creditor has come forward in those circumstances to appear before the Court today or indicated in any way a willingness to do so. That is a critical factor because such creditors may be presumed to be in the best position to look after their own interests in circumstances where they are on notice, as in this case, of the making of the application, and where they had the opportunity, without being prejudiced in any cost sense, to come before the Court to act as a contradictor. 16 The second critical fact which is disclosed by the evidence is that the receivers have been operating the receivership on a pooled basis for the past six years, and there is considerable evidence that to now attempt to apportion the settlement sum between the numerous claimants against ZYX would be a difficult, timely and expensive exercise and one which might be inferred not to be in the best interests of creditors. 17 Subject to the general observation about those two critical facts, the written submissions in this case, based on the affidavit material which is available, set out in detail the evidentiary foundation for the satisfaction of all of the procedural and substantive statutory requirements to which I have referred. 18 It is appropriate to say something more about the detailed attempts which were made to obtain a contradictor. These attempts are set out in an affidavit of one of the liquidators, Gregory Michael Moloney, dated 12 February 2015. As explained in that affidavit, the creditors that were approached by the liquidator for this purpose were selected on the basis that they are the largest non-priority unsecured creditors of the parent company of which the liquidators were aware, except the Commonwealth Bank of Australia (CBA). CBA was notified of the present application, along with all of the other unsecured creditors, but, in addition, as set out in the affidavit, CBA has representatives on the committees of inspection of both ZYX and DLC, and those representatives have been provided with notices updating the committees regarding the present application. As set out in the affidavit, CBA has given no indication to the liquidators that it wishes to oppose the application. 19 Other than the CBA, the Australia Taxation Office (ATO) has lodged a proof of debt for approximately $52 million in the liquidation of ZYX. Contact was made with the ATO throughout November and December 2014. By a letter dated 8 December 2014, the ATO confirmed that it does not oppose the seeking of the pooling order and did not wish to appear as a contradictor. 20 Communications have also been entered into with Antonio Mastronardo, who lodged two proofs of debt for approximately $15 million in the liquidation of ZYX. Despite attempted communications with that creditor, both by telephone and letter, no response has been received. 21 Contact was also made with representatives of another two creditors, Gateplex Pty Ltd and Filavoy Pty Ltd, who have lodged substantial proofs of debt. Although telephone communications were successful and information provided, as at the date of Mr Moloney's affidavit of 12 February 2015, no contact has been received from those creditors regarding participation today. 22 Another creditor for a significant amount, Judius Pty Ltd (Judius), has been contacted by telephone with information being provided about potentially acting as a contradictor today. On 24 November 2014, however, the liquidators were informed that Judius was not prepared to act as contradictor. 23 Specific contact was also made with Austock Property Management Ltd (Austock) by telephone and by an exchange of emails, including a telephone call to Austock's in-house legal counsel where information was given about the opportunity to act as a contradictor today. However, by an email dated 3 December 2014, Austock declined that opportunity. 24 In addition, since the directions hearing on 20 November 2014, three updates to creditors have been posted on the liquidator's website in relation to the application. 25 It is apparent, therefore, that the liquidators have done all that is practically possible to ensure that creditors are aware of the proposed pooling order and also were made aware of the opportunity to object to the pooling order by notice to the liquidators or, alternatively, by acting as a contradictor appearing before the Court today on the basis of costs being paid. The fact that no creditor has come forward to so object, as I have said, is a weighty matter in favour of the making of the pooling order. 26 Information is available which compares the two positions – that is the position if a pooling order is made and the position if no pooling order is made. This discloses that if the pooling order is made, the priority creditors of DLC – in effect, the employees – will receive a return of 100 cents in the dollar. However, if the pooling order is not made, those priority creditors will receive a dividend of 19 cents in the dollar. Further, if the pooling order is made, the unsecured creditors of ZYX will receive no return. If the pooling order is made, those unsecured creditors of ZYX may receive a return of 0.23 cents in the dollar. 27 For example, CBA is a contingent creditor of ZYX. CBA has brought proceedings against ZYX and other defendants, including ZYX's former auditors as noteholder of certain notes which were issued by ZYX. CBA's claim is for over $505 million. If a pooling order is made, no dividend will be able to be received by CBA. If no pooling order is made, CBA's claim of some $505 million may result in a potential dividend if its claim succeeds of about $1.18 million. 28 The ATO, another major creditor, is owed approximately $52 million by ZYX. Again, if pooled, there would be no dividend payable to the ATO. If not pooled, the 0.23 cents in the dollar would see the ATO's total claim of approximately $52 million yield a dividend of about $120,000. 29 Other non-priority unsecured creditors would also receive proportional claims if not pooled of 0.23 cents in the dollar, compared to no return if the pooling order is made. 30 In terms of the liquidators' fees, there is approximately $712,000 of fees currently unfunded, which has been incurred in relation to DLC. If not pooled, that unfunded claim will remain unfunded. If pooled, that unfunded claim becomes funded. However, what the comparison prepared by the liquidators also shows is that if no pooling order is made, the adjudication of shareholder claims against ZYX which will be necessary to be carried out will incur substantial further liquidators' fees, estimated at this time to be approximately $2.2 million. 31 It has been said in submissions that if the pooling order is made there is the potential for a faster conclusion of the entirety of the matter as the claims of non-priority unsecured creditors will not need to be dealt with. However, the proceedings by the CBA may impact upon the potential for that speed. If no pooling order is made, then it is said that the resolution of the entirety of the matter will be slower and more expensive – this refers to the estimated $2.2 million which will be likely to be incurred if the claims of the non-priority, unsecured creditors of ZYX must be dealt with. 32 Turning to the pre-conditions to the exercise of power to make a pooling order and the relevant discretionary considerations, as noted in the written submissions, it was established in Re Lombe (2011) 87 ACSR 84; [2011] NSWSC 1536 at [7] that there are six questions that need to be asked by reason of the statutory provisions, namely: (1) Is there a "group of 2 or more companies"? (2) Is each corporation in the group being wound up? (3) Is at least one of the conditions in subparagraphs (i) to (iv) of section 579E(1)(b) satisfied? (4) What does the evidence show with respect to the matters in section 579E(12) as they may affect the answer to the following question 5? (5) Is it just and equitable that the order sought be made (section 579E(1)(b) concluding words)? (6) Does section 579E(10) preclude the making of a pooling order? 33 In effect, question one – is there a group of two or more companies – may be answered in the affirmative. As stated in the written submissions, the companies described in the schedule to the application constitute a group of two or more companies for the purposes of s 579E. As also noted in the written submissions, there are sound reasons for confining the pooling order to ZYX and DLC. First, the only funds or assets of the ZYX group available for distribution to the creditors relate to those two companies. While there are intercompany accounts between certain companies in the ZYX Group, there are no longer any assets in those companies that would be realisable in cash by the liquidators. Secondly, ZYX and DLC are the only companies in the group that have priority and unsecured creditor claims. 34 The second question – whether each company in the group is being wound up – may also be answered in the affirmative. The companies were placed in voluntary liquidation on 2 June 2010, and subsequently orders were made that they be wound up in insolvency on 5 April 2012. 35 Question three, which relates to the conditions in s 579E(1)(b), is satisfied in that at the least each company in the group, that is ZYX and DLC being the relevant group, is a related body corporate as set out in subs (i) having regard to the definition provisions in both ss 9 and 50 of the Act. In short, DLC is a wholly owned subsidiary of ZYX and there is no doubt that they are related bodies corporate. 36 In terms of s 579E(12), with which question four deals, the section sets out a detailed set of considerations to which the court must have regard. The evidence relevantly is as follows. First, the relevant companies in the group to be pooled had common directors and officers. Second, before the liquidation, the ZYX group, of which ZYX and DLC form part, in effect operated as one business. Specifically, employees who performed duties for companies in the group were wholly or predominantly employed by DLC and the companies were managed as a whole by company management. It may also be noted in this regard that throughout the liquidation it appears that the receivers have effectively managed the business by carrying on the receivership through the one company, DLC. Third, while ZYX was the main borrower under the group's banking facilities, DLC and other companies in the group were guarantors of ZYX's debts to the bank. Fourth, ZYX received revenue from subsidiaries of the ZYX group and the ZYX group was consolidated for tax purposes, ZYX being the head entity of the consolidated group for this purpose. Fifth, DLC was the main operational company within the Australian group of the ZYX group. Sixth, DLC carried most parent debtors and revenue for all of the Australian child care centres, paid most expenditure for those centres, and the ZYX group's head office received the Australian Government funding subsidy for child care fees, entered into development agreements with developers, employed all child care centre workers and head office staff and, for this reason, recorded all of the employee entitlement liabilities and held most of the group's Australian tangible property and plant and equipment. Seventh, ZYX effectively operated as the treasury company for the group, with group management treating all of the cash of the various company bank accounts as available to ZYX. Eighth, ZYX had significant intercompany loan receivables from other entities in the ZYX group. 37 While it is true that ZYX and DLC lodged separate accounts and were separate entities for GST purposes and have independent creditors, the eight factors to which I have referred, summarised from the written submissions, favour the making of a pooling order. 38 It is also relevant that the evidence of Mr Moloney about the reasons for the collapse of the ZYX group includes the following: One of the main reasons for the collapse of the ZYX Group was substantial trading losses incurred by DLC. Prior to FY2008, DLC had incorrectly recorded fee guarantee payments from child care centre developers are revenue. The Draft FY2008 ZYX consolidated financial statements disclosed, for the first time, that the underlying business operated by DLC was unprofitable. ZYX was reliant on the cash flow of DLC in its Australian operations in order to meet its debt and interest obligations. The cash flow that DLC provided to ZYX was recorded through an intercompany loan account. In addition, child care centre developers ceased fee guarantee payments to DLC from around February 2008 (around $10 million per month at that time) and the resultant collapse in DLC's cash flow meant that it was unable to pay its own creditors or provide liquidity to ZYX. 39 For this reason, I accept the submission that "the fate of the companies was intertwined and the failure of both companies is directly attributable to common factors, including common officers and directors", this being a relevant consideration weighing in favour of the making of a pooling order, having regard to s 579E(12)(c) in particular. These matters also must be taken into account having regard to the terms of s 579E(12)(d), which I have referred to above. In particular, I accept the submission put by the liquidators in favour of the making of the pooling order that: The position is even stronger having regard to the events that have occurred during the receivership. The Receivers have intermingled the activities and business of the companies, and have generally operated a single bank account in the name of DLC with all of the Group's assets (including the tax refunds) from which trade creditors were paid regardless of which company incurred the relevant debts. Again, this tends in favour of a pooling order. 40 Section 579E(12)(e) is a critical consideration in terms of the obligation to have regard to the extent to which creditors of any of the companies in the group may be advantaged or disadvantaged by the making of the pooling order. As set out in the written submissions, there is no doubt that the priority creditors are substantially advantaged. If a pooling order is made, they will be paid in full. If a pooling order is not made, their return has been assessed to be 19 cents in the dollar. There is also no doubt that there are identified disadvantages to unsecured creditors of ZYX, in that, if the pooling order is made they will not receive any return in respect of their claims. If a pooling order is not made they may obtain a return of 0.23 cents in the dollar. While it is true that some of the claims are large and thus 0.23 cents in the dollar does not yield an insignificant amount, what must be taken into account are two factors. First, the return is is less than 1 cent in a dollar. Second, as noted, the unsecured creditors have been given the opportunity to come here today to object to the making of the pooling order and have not done so. 41 Moreover, in the case of the CBA, it is a contingent unsecured creditor, its claim depending upon proceedings against ZYX and the former auditors of ZYX. The evidence is that the proceedings are at an early stage, making it difficult to predict the outcome of those proceedings and the likelihood of the claim being able to be successfully pursued. As the written submissions for the liquidators disclose and I accept: Given the early stage of the proceedings in which their claim [CBA's claim] is being articulated, it is difficult to conclude that they are materially disadvantaged. In those circumstances, it is significant that [CBA] has not objected to the proposed pooling orders, despite being given an opportunity to do so. 42 It seems to me that, as set out in the written submissions, it is difficult in the circumstances to conclude that there would be material disadvantage to any creditor. While it is possible that there may be disadvantage, the extent of that possibility for disadvantage in circumstances where no objection has been made by the relevant unsecured creditor, is simply not sufficient to weigh against the potential advantages which have been identified by the making of the pooling order. 43 Some reference should also be made to the position of IMF, the litigation funder in the proceedings which led to the entry into the settlement deed with the banks which yielded the settlement sum now available for distribution between the creditors of ZYX and DLC. What is relevant here relates to a possible uplift of fees to IMF under the funding agreement and the consequential paying over to IMF of what was referred to as the "resolution sum". According to the calculations carried out by the liquidators, if a pooling order is not made then there may be an additional sum of $441,633 receivable by IMF pursuant to the funding agreement. It follows that if a pooling order is made the creditors of ZYX are advantaged in a corresponding amount. 44 What is put by the liquidators is that it is arguable that IMF is not a creditor of ZYX or DLC because of the way in which IMF's potential entitlement to a portion of the resolution sum arises. In any event it is also said that if IMF is a creditor it is not an unsecured creditor for the purposes of s 579E(10). More importantly, perhaps, than either of those arguments, is that IMF has informed the liquidators that they may proceed with the application for pooling orders without IMF's consent and have authorised payment of the whole of the resolution sum to the liquidators. I accept the submission put that I should conclude that the possible disadvantage to IMF in these circumstances is not material so as to prevent the making of the pooling order. 45 There is pointed out in the written submissions that only one creditor has objected to the proposed pooling orders, a Mr Philip Page, said to be on behalf of the Moss Beach super fund. Moss Beach Pty Ltd was a shareholder of ZYX when it went into administration. Mr Page, however, was not a shareholder and it seems that Moss Beach Pty Ltd has been deregistered. I accept the submission, accordingly, that it cannot be said that Mr Page is disadvantaged or that the deregistered entity, Moss Beach Pty Ltd, would suffer any disadvantage as a consequence of the pooling order. 46 Section 579E(12)(f) refers to other matters. As I have already noted, the liquidators will be in a better position by at least the amount of $712,000 if the pooling order is made. I do not see this as a matter which outweighs the other factors to which I have referred. In particular, it must be noted that if no pooling order is made there has been a calculation of additional fees that would be payable for the adjudication of shareholder claims of some $2.2 million. 47 Overall I accept the submissions which have been put and which are summarised as follows. 48 First, the making of the pooling order entitles priority creditors to be paid in a timely manner, which is consistent with the legislative policy underlying the Act. 49 Second, the receivers have been operating the receivership on a pooled basis for over six years and it would be difficult and arbitrary for the liquidators now to attempt to apportion the settlement sum between the different companies in the ZYX group. Further, it is demonstrated by the evidence to which I have referred that it will not be in the interests of creditors to do so, given the substantial fees which will necessarily be incurred in that regard. 50 Third, leaving aside IMF for the moment, the potential disadvantages to unsecured creditors, principally the ATO and CBA, in all of the circumstances, do not amount to a material disadvantage. 51 Fourth, and related to the third point, is that the best return that could be hoped for in a non-pooled scenario would be less than one cent in the dollar and in this regard the adjudication of unsecured claims in the non-pooled event would be likely to be extremely costly. I accept that this would be uneconomical and not in the interests of creditors as a whole. 52 Fifth, I accept that: …pooling represents the most practical means of advancing the liquidations, so that all employees can be paid in full (or almost in full) rather than using the limited funds to allocate a very small return to the large number of creditors who have lodged proofs in ZYX's winding up. 53 In these circumstances, I am satisfied that all of the procedural requirements set out in ss 579E and 579G, insofar as relevant, have been satisfied and that, as to the fifth question identified in Re Lombe, the substantive considerations mean that it is just and equitable by order to determine that ZYX and DLC is a pooled group for the purposes of s 579E. Section 579E(10), relating to material disadvantage, does not preclude the making of the order, for the same reasons as set out above in the context of s 579E(12). 54 I make orders accordingly. I certify that the preceding fifty-four (54) numbered paragraph are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot. Associate: Dated: 2 March 2015