FEDERAL COURT OF AUSTRALIA Robinson, in the matter of Reed Constructions Australia Pty Ltd (in liq) [2017] FCA 594 File number: NSD 616 of 2017 Judge: GLEESON J Date of judgment: 1 May 2017 Date of publication of reasons: 8 June 2017 Catchwords: CORPORATIONS – winding up – application by a liquidator under s 477(2B) of the Corporations Act 2001 (Cth) for approval of litigation funding agreement with litigation funder – application for retrospective approval – factors relevant to the exercise of the Court's discretion – application granted Legislation: Corporations Act 2001 (Cth) Federal Court of Australia Act 1976 (Cth) Cases cited: Buiscex Ltd v Panfida Foods Ltd (in liq) (1998) 28 ACSR 357 Corporate Affairs Commission v ASC Timber Pty Ltd (1998) 29 ACSR 109 Empire (Aust) Nominees Pty Ltd v Vince [2000] VSC 324; (2000) 35 ACSR 167 Emu Brewery Developments Pty Ltd; re Emu Brewery Developments Pty Ltd [2009] FCA 1212 Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher [2011] FCAFC 89; (2011) 85 ACSR 38 Hamilton, re ACN 101 634 146 Pty Ltd (in liq) [2014] FCA 687 Hughes, re Sales Express Pty Ltd (in Liq) [2016] FCA 423 Leigh; Re AP and PJ King Pty Ltd (in liq) [2006] NSWSC 315 Re McGrath (in their capacity as liquidators of HIH Insurance Ltd) [2010] NSWSC 404; (2010) 266 ALR 642 One.Tel Network Holdings [2001] NSWSC 1065; (2001) 40 ACSR 83 Onefone Australia Pty Ltd v One.Tel Ltd [2010] NSWSC 498; (2010) 78 ACSR 163 Pascoe; re Brentwood Village Ltd (in liq) [2014] FCA 1295 Pascoe; re Matrix Group Ltd (in liq) [2011] FCA 1117 Re ACN 076 673 875 Ltd (rec'r & mgr apptd) (in liq) [2002] NSWSC 578; (2002) 42 ACSR 296 Re HIH Insurance Group Ltd [2001] NSWSC 308; (2001) 19 ACLC 1102 Re Octaviar Administration Pty Ltd (in liq) [2014] NSWSC 344 Re Gerard Cassegrain & Co Pty Ltd (in liq) [2013] NSWSC 257 Stewart, re Newtronics Pty Ltd [2007] FCA 1375 Date of hearing: 1 May 2017 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 61 Counsel for the Plaintiffs: Mr J Hynes Solicitor for the Plaintiffs: K & L Gates ORDERS NSD 616 of 2017 IN THE MATTER OF REED CONSTRUCTIONS AUSTRALIA PTY LTD (IN LIQUIDATION) ACN 003 340 878 MARK ROBINSON IN HIS CAPACITY AS LIQUIDATOR OF REED CONSTRUCTIONS AUSTRALIA PTY LTD (IN LIQUIDATION) ACN 003 340 878 First Plaintiff REED CONSTRUCTIONS AUSTRALIA PTY LTD (IN LIQUIDATION) ACN 003 340 878 Second Plaintiff JUDGE: GLEESON J DATE OF ORDER: 1 May 2017, as varied on 26 May 2017 THE COURT ORDERS THAT: 1. Pursuant to section 477(2B) of the Corporations Act 2001 (Cth) ("Act"), the entry by the plaintiffs into the litigation funding deed ("Agreement") appearing at pages 1 to 26 of the "Confidential Exhibit MJR-1" is approved. 2. Pursuant to section 479(3) of the Act, the first plaintiff is justified in acting on the Agreement as though it had been approved pursuant to section 477(2B) of the Act prior to 21 April 2017. 3. Pursuant to section 1322(4)(d) of the Act, the period for making an application under section 477(2B) of the Act for approval of the entry by the plaintiffs into the Agreement is extended to 24 April 2017. 4. Pursuant to section 37AF of the Federal Court of Australia Act 1976 (Cth), on the ground that the order is necessary to prevent prejudice to the proper administration of justice, the contents of the following documents be suppressed until further order of the Court: (a) the exhibit marked "Confidential Exhibit MJR-1" to the affidavit of Mark Julian Robinson sworn 24 April 2017; (b) pages 361 to 380 of the exhibit marked "Exhibit MJR-1" to the affidavit of Mark Julian Robinson sworn 24 April 2017; (c) paragraphs 37 to 50, 74, 76 to 80, 83(a), 83(d), 83(e), 83(h) to 83(j), 84, 85 and the first sentence of 87 to the affidavit of Mark Julian Robinson sworn 24 April 2017; (d) any transcript of the hearing of this proceeding; and (e) the Liquidator's Outline dated 1 May 2017. 5. The costs of this proceeding be costs in the liquidation of the Company. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT GLEESON J: 1 On 1 May 2017, I made an order pursuant to s 477(2B) of the Corporations Act 2001 (Cth) ("Act") approving the plaintiffs' entry into a litigation funding agreement as well as ancillary orders. 2 These are my reasons for making those orders. Background facts 3 The first plaintiff ("liquidator") was appointed as liquidator of the second plaintiff ("Reed") by an order of the Supreme Court of New South Wales ("Supreme Court") on 9 July 2012. By affidavit sworn 24 April 2017, the liquidator deposed to the following background facts. 4 Prior to liquidation, Reed was in the business of construction. In 2008, Reed secured projects valued at around $370 million in respect of school projects from the Australian Government's stimulus package for "Building the Education Revolution", an Australian government program designed to provide infrastructure to Australian schools. Reed was engaged to undertake this work by the New South Wales Department of Education and entered into a contract ("BER contract") with the Minister for Education for the State of New Sought Wales ("Minister"). 5 Reed also secured significant contracts for construction works with the New South Wales Roads and Maritime Services ("Roads and Maritime Services"). 6 In late 2011, queries were raised by both the Minister and Roads and Maritime Services about the quantum of claims being made by Reed under their respective contracts. Ultimately, the Minister and Roads and Maritime Services rejected Reed's contract claims. 7 Thereafter, Reed, the Minister and Roads and Maritime Services attempted to settle their disputes before agreeing to enter into an expert determination process. The expert determination process commenced on 16 April 2012 and an interim determination was provided on 21 May 2012. 8 Thereafter, Reed ceased its operating activities and made 70 staff redundant on 5 June 2012, and was unable to pay their outstanding wages and entitlements totalling $5,200,000. On 15 June 2012, the directors of Reed resolved to appoint administrators to the company. 9 The liquidator was appointed by the Supreme Court on the application of SCE Group Pty Ltd. 10 A committee of inspection of Reed was formed on 2 August 2012. Claims sought to be pursued by the liquidator 11 The liquidator has identified claims available to be pursued, and has pursued certain claims with funding from a litigation funder, but has been without funding to pursue claims against the Minister. 12 The dispute between Reed and the Minister involves claims by each party. Reed has claimed $36,200,000 from the Minister and the Minister has notified the liquidator of counterclaims of $12,445,272. There are also additional potential claims that Reed may have against the Minister in connection with representations made concerning the BER contract, and in relation to work undertaken in connection with the BER contract that may give risk to a quantum merit claim. 13 The liquidator has assessed the dispute, including by meeting with representatives of the Minister in an effort to resolve the dispute and by considering the work required, on alternative scenarios, to resolve the dispute. 14 The liquidator identified potential statute of limitation issues which may have required proceedings to be commenced before the end of April 2017 in order to preserve certain claims. 15 The liquidator has engaged solicitors and counsel to consider the viability of potential claims against the Minister. Senior counsel has given advice on the availability of claims against the Minister. 16 The liquidator has investigated funding options to pursue the claims against the Minister through discussions with the committee of inspection. He has also sought funding from litigation funders for the same purpose. 17 In 2016, discussions about pursuing the expert determination process led to a proposal from Sydney Funders Pty Ltd ("Sydney Funders"). These discussions led to terms of funding being agreed with Sydney Funders. Creditors' approval of funding agreement 18 At a meeting of creditors on 6 April 2017, creditors passed a resolution authorising the liquidator to enter into a funding agreement for the specific purpose of pursuing a claim for works performed on the "Building the Education Revolution" program. A report to creditors disclosed the following information about the proposed funding agreement: As set out earlier in this report, I have received a proposal from a third party, Sydney Funders Pty Limited (funder), introduced by Mr Reed, to provide funding to pursue the disputes that existed between the company and the Department of Education and Communities (the BER Claims). The funder has provided the following offer: 1. In consideration of the Funder agreeing to provide financial accommodation to the Liquidator, the Liquidator agrees to pay to the Funder an amount not to exceed 85% of the aggregate of any amounts recovered less costs incurred to pursue the action. 2. The Funders agree, by way of separate agreement to pay from the Funder's Recovery (i.e. the 85%) the following amounts: • 10% to unsecured subcontractor creditors of the Company who have claims in respect of the BER contract • 5% to QBE Insurance • 5% to Vera Insurance • 10% to RBG Services Pty Limited The Funder retains up to 55% (i.e. 85% less the above amounts) of any amounts recovered less costs incurred to pursue the claim. As liquidator I believe that the offer is worthy of consideration for the following reasons: • I am without funds to pursue the claim, nor do I have sufficient resources to meet any application for security for costs; • No creditor or other third party has agreed to provide me with funding to pursue the claims despite my requests and inquiries; • The funder has agreed to meet my ongoing professional and legal costs of pursuing the claim; • The funding agreement includes an indemnity for adverse costs; • In the absence of funding no monies would likely be recovered from these various proceedings • Should the claim not be pursued prior to end April 2017, the claim may be subject to statute of limitation provisions i.e. if the claim is not commenced by this date, the claim may no longer be available. • Entering the funding agreement will provide the Liquidation with $1,500,000, being the revised offer to settle the existing Debt between the Company and RBG (Section 6.1.1) 19 The last bullet point is explained below. Debt from RBG Holdings Group Pty Ltd ("RBG") and other related entities 20 The liquidator provided details of inter-company loan accounts, as at the date of his appointment, totalling $114,858,519 ("Reed group debt"). Of this amount, $113,540,472 is apparently owed by RBG. 21 According to the liquidator, the debt resulted from loans made over a period of nine years and includes $21,300,000 on account of interest. 22 The liquidator has recovered $125,000 from RBG in relation to its loan account and nothing from the other related entities. In July 2014, Geoffrey Vere Reed, on behalf of RBG, provided a settlement offer in respect of the debt, together with an upfront payment of $25,000 which enabled the liquidator to review the terms and provide it to the committee of inspection for consideration. 23 In August 2014, the committee of inspection resolved that the liquidator be authorised to compromise the Reed Group debt and Reed, the liquidator and RBG entered into a deed of settlement dated 22 October 2014 ("2014 agreement"). 24 Subsequently, RBG approached the liquidator to seek to alter the terms of the 2014 agreement. The proposal was that RBG would pay an amount of $1,500,000 in full and final settlement of amounts owing under the 2014 agreement, upon the liquidator entering into a funding agreement with Sydney Funders to pursue the dispute in respect of Reed's claims in connection with works the subject of the BER contract and claims in respect of works done under the BER contract. 25 At the 6 April 2017 meeting of creditors, a resolution was passed authorising the liquidator to accept RBG's proposal. On 21 April 2017, a deed of settlement was executed by Reed and the liquidator in accordance with this resolution. Pursuant to the deed of settlement, RBG was required to make an immediate upfront payment to Reed of $300,000 in respect of the settlement amount, with the balance of the settlement amount payable by way of a final instalment. Considerations of liquidator in entering into funding agreement 26 The funding agreement was signed by the liquidator on 21 April 2017. It contains a condition precedent to its operation that the liquidator must obtain Court approval to enter into the agreement within one month after the date of the agreement. 27 It is also a term of the funding agreement that the liquidator may terminate the agreement if the balance of the settlement payable by RBG pursuant to the 21 April 2017 deed of settlement amount is not received by Reed. 28 The liquidator believes that the terms offered by Sydney Funders are commercially reasonable; that, as no creditors of Reed or any other funders have offered to provide funding, the terms of that funding are better than any other funding option currently available to the liquidator; and that he has exhausted all available options to secure funding to prosecute the dispute. 29 The liquidator concluded that it was in the commercial interests of Reed for the liquidator to enter into the funding agreement and that his entry into the funding agreement was in the best interests of all creditors of Reed. 30 The liquidator's evidence was that Sydney Funders has garnered critical support from former employees of Reed which will enable him to pursue the dispute with the Minister. The liquidator does not consider that such support will be necessarily available under other possible funding arrangements. Legal principles Section 477(2B) 31 Section 477(2)(m) of the Corporations Act provides for a liquidator's general power to "do all such other things as are necessary for winding up the affairs of the company and distributing its property". That power is qualified in relation to the entry into agreements in the circumstances in s 477(2B). 32 Section 477(2B) of the Act provides: 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 (for example, but without limitation, a lease or a an agreement under which a security interest arises or is created) if: (a) without limiting paragraph (b), the term of the agreement may end; or (b) 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. 33 In Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher [2011] FCAFC 89; (2011) 85 ACSR 38 ("Fortress") at [40], the Full Court observed that, in considering whether to give approval under s 477(2B), the Court must consider the purposes for which the powers of a liquidator exist. Those purposes include the recovery of funds for the benefit of creditors: McGrath and Another (in their capacity as liquidators of HIH Insurance Limited and Others) [2010] NSWSC 404; (2010) 266 ALR 642 at [13]; Pascoe; re Brentwood Village Ltd (in liq) [2014] FCA 1295, [44]. 34 The standard imposed under s 477(2B) concerns an assessment by the Court that entry into the agreement is a proper exercise of power and not ill-advised or improper on the part of the liquidator, rather than involving the exercise of commercial judgment: Re Gerard Cassegrain & Co Pty Ltd (in liq) [2013] NSWSC 257 ("Cassegrain") at [11] per Black J citing Re McGrath (in their capacity as liquidators of HIH Insurance Ltd) [2010] NSWSC 404; (2010) 266 ALR 642. 35 In Pascoe; re Matrix Group Ltd (in liq) [2011] FCA 1117 ("Pascoe") at [7], Jacobson J cited with approval the following statement by Austin J of the relevant test in Leigh; Re AP and PJ King Pty Ltd (in liq) [2006] NSWSC 315 at [23]: Although the court has the statutory task [under s 477(2B)] of giving "approval" to a liquidator's agreement that may end more than three months after it is entered into, the case law shows that the court undertakes something less than a complete "merits review". As Giles J said in Re Spedley Securities Ltd (in liq) (1992) 9 ACSR 83 at 85-6: ... the court is necessarily confined in attempting to second guess the liquidator in the exercise of his powers, and generally will not interfere unless there can be seen to be some lack of good faith, some error of law or principle, or real and substantial grounds for doubting the prudence of the liquidator's conduct. 36 The Court's task is to satisfy itself, having regard to the liquidator's commercial judgment, that there is no error of law, grounds for suspecting bad faith or any other good reason to intervene: Corporate Affairs Commission v ASC Timber Pty Ltd (1998) 29 ACSR 109 at 118; Stewart, re Newtronics Pty Ltd [2007] FCA 1375. 37 In Fortress, at [24], the Full Court endorsed the following comprehensive list of factors (identified by Austin J in Leigh re AP& PJ King Pty Ltd (in liq) [2006] NSWSC 315 at [25] and Re ACN 076 673 875 Ltd (rec'r & mgr apptd) (in liq) [2002] NSWSC 578; (2002) 42 ACSR 296 at [17]-[34]) relevant to the Court's assessment of a proposed litigation funding agreement: (1) the prospects of success of the proposed litigation; (2) the interests of creditors other than the proposed defendant; (3) possible oppression; (4) the nature and complexity of the cause of action; (5) the extent to which the liquidator has canvassed other funding options; (6) the level of the funder's premium; (7) consultations with creditors; and (8) the risks involved in the claim. 38 Generally, creditors are the best judge of their commercial interests, and the approval of creditors is an important discretionary factor in favour of the approval of the funding agreement: cf. Buiscex Ltd v Panfida Foods Ltd (in liq) (1998) 28 ACSR 357 at 362. 39 In Emu Brewery Developments Pty Ltd; re Emu Brewery Developments Pty Ltd [2009] FCA 1212, Gilmour J made an order approving a compromise of a claim that had been approved by creditors pursuant to s 477(2A). In that case, the deed giving effect to the compromise contained a condition precedent requiring the Court to make a direction that the liquidators were justified in entering into the deed. Similarly, in One.Tel Network Holdings [2001] NSWSC 1065; (2001) 40 ACSR 83, at [23], Austin J noted that his Honour had approved the liquidators' entry into an agreement pursuant to s 477(2B) where that approval was a condition of the agreement and where another condition was the approval of the committee of inspection. Section 1322(4) 40 By s 1322(4)(d), subject to the terms of that provision, the Court may, relevantly, make an order extending the period for doing any act, matter or thing or instituting or taking any proceeding under this Act. 41 A liquidator should seek the Court's approval before entering into a long term agreement. However, the Court may give retrospective approval to an agreement under s 477(2B) in appropriate circumstances: Hamilton, re ACN 101 634 146 Pty Ltd (in liq) [2014] FCA 687; Stewart, re Newtronics Pty Ltd [2007] FCA 1375 at [25]; Re HIH Insurance Group Ltd [2001] NSWSC 308; (2001) 19 ACLC 1102; Empire (Aust) Nominees Pty Ltd v Vince [2000] VSC 324; (2000) 35 ACSR 167. Directions to liquidator 42 Section 479 of the Act, which was repealed by the Insolvency Law Reform Act 2016 (Cth) ("ILR Act"), but continues to apply to the administration of the second plaintiff by virtue of s 1579 of the Act and regs 10.25.01 and 10.25.02 of the Corporations Regulations 2001 (Cth) ("Regulations"), provides: (1) Subject to this Part, the liquidator must, in the administration of the property of the company and in the distribution of the property among its creditors, have regard to any directions given by resolution of the creditors or contributories at any general meeting or by the committee of inspection, and, in case of conflict, any directions so given by the creditors or contributories override any directions given by the committee of inspection. (2) The liquidator may convene general meetings of the creditors or contributories for the purpose of ascertaining their wishes, and he or she must convene meetings at such times as the creditors or contributories by resolution direct or whenever requested in writing to do so by at least one-tenth in value of the creditors or contributories. (3) The liquidator may apply to the Court for directions in relation to any particular matter arising under the winding up. (4) Subject to this Part, the liquidator must use his or her own discretion in the management of affairs and property of the company and the distribution of its property. 43 Section 479(3) of the Act allows a Court-appointed liquidator to apply to the Court for directions in relation to a matter arising under a winding up. In Cassegrain at [18], Black J said: The function of a liquidator's application for directions under [s 479(3)] is to give the liquidator advice as to the proper cause of action for him or her to take in the liquidation; Re Ansett Australia Ltd (admins apptd) v Korda [2002] FCA 90; (2002) 115 FCR 409; (2002) 40 ACSR 433 at [46]. The Court will typically not give such a direction where a matter relates to the making and implementation of a business or commercial decision, where no particular legal issue is raised and there is no attack on the propriety or reasonableness of the decision, but may do so where a legal issue or an attack on the propriety of the decision is raised: Re G B Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674 at 686-687; (1991) 5 ASCR 673; Re Ansett Australia Ltd at [65]. For example, the Court gave a direction to a liquidator that he would be acting properly in discontinuing appeals in Re Addstone Pty Ltd (in liq) (1997) 25 ACSR 357, where Mansfield J observed at 363 that one circumstance in which such a direction may be given is, "where the liquidator's proposed decision is the subject of criticism by a particular creditor or creditors as being unreasonable or mala fides." In Pascoe; Re Matrix Group Ltd (in liq) … Jacobson J observed that such a direction could be made, inter alia, where there was a legal issue of substance or procedure such as the propriety or reasonableness of the particular course. A liquidator is protected against a claim for breach of duty if he or she acts in accordance with a direction given by the Court under s 479(3) and he or she made full disclosure to the Court in the relevant application. Consideration 44 While the liquidator has obtained creditor approval to enter the funding agreement (which could obviate the need for the application), it is a condition that the funding agreement will terminate if court approval is not obtained within a month of its entry. 45 The size of the funding premium under the funding agreement is a relevant consideration: Cassegrain at [12]; Hughes, re Sales Express Pty Ltd (in Liq) [2016] FCA 423 at [20]. The liquidator considers the funding premium to be commercially reasonable, particularly given the risks to the funder prevalent in the arrangement and given that a reasonable portion of any recovery is to be remitted from the funding premium back to certain creditors of Reed. 46 The liquidator submitted that the following considerations supported a conclusion that the Court should grant the approval sought: (1) there is nothing unusual about the manner in which funding will be provided under the terms of the funding agreement; (2) the liquidator has explored other funding options, none of which have been fruitful; (3) creditors have approved the entry into the funding agreement at a meeting of creditors; (4) while prospects can only be considered in the abstract, the liquidator has obtained advice from senior counsel confirming the availability of claims against the Minister; (5) there is no identifiable oppression in pursuing the dispute, and the liquidator has not identified any loss or damage that Reed is likely to suffer through his actions in entering into the funding agreement; (6) the dispute appears to be relatively complex, although it is primarily one of construction and otherwise of determining the precise quantum of Reed's claim; (7) the risks in embarking upon the dispute appear to be generally insulated by Sydney Funders under the funding agreement; (8) the funding premium is not excessive; (9) the liquidator is not subject to any unusual control by the Sydney Funders in pursing the dispute; (10) the funding agreement contains a clear and reasonable dispute resolution provision; and (11) the arrangement is one obviously directed towards ultimately reducing Reed's assets to cash or divisible property, and providing a return to creditors. 47 I have reviewed the funding agreement. Based on that review and on the evidence of Mr Robinson, I accepted submissions (1) to (11) and I accepted that there is no reason to conclude that the liquidator's entry into the funding agreement was other than a proper exercise of his power, or to conclude that it was an ill-advised or improper act on the part of the liquidator. 48 Accordingly, I was satisfied that it was appropriate to extend the time for making the application for approval to 24 April 2017 under s 477(2B) and to grant the approval sought. Liquidator's application for directions 49 The liquidator sought a direction that he was justified in acting on the funding agreement as though it had been approved pursuant to s 477(2B) of the Act prior to 21 April 2017. The liquidator's application for directions was made under s 90-15(1) of Sch 2 of the Act, which is titled the "Insolvency Practice Schedule (Corporations)", rather than s 479(3) set out above. At the hearing on 1 May 2017, I was satisfied that the direction sought should be made under s 90-15(1), in the light of the fact that the Court's approval pursuant to s 477(2B) was obtained retrospectively. 50 Section 90-15(1) provides: Court may make orders (1) The Court may make such orders as it thinks fit in relation to the external administration of a company. … Examples of orders that may be made (3) Without limiting subsection (1), those orders may include any one or more of the following: (a) an order determining any question arising in the external administration of the company; (b) an order that a person cease to be the external administrator of the company; (c) an order that another registered liquidator be appointed as the external administrator of the company; (d) an order in relation to the costs of an action (including court action) taken by the external administrator of the company or another person in relation to the external administration of the company; (e) an order in relation to any loss that the company has sustained because of a breach of duty by the external administrator; (f) an order in relation to remuneration, including an order requiring a person to repay to a company, or the creditors of a company, remuneration paid to the person as external administrator of the company. … 51 By s 5-15 of the Insolvency Practice Schedule (Corporations), a company is taken to be under external administration if, relevantly, a liquidator has been appointed in relation to the company. 52 Section 1615 provides that Div 90 of the Insolvency Practice Schedule (Corporations) applies in relation to an ongoing external administration whether or not the matter to be reviewed occurred before, on or after the commencement day. As explained below, the commencement day is 1 September 2017. 53 On 24 May 2017, I raised with the legal representatives for the liquidator an apparent slip as to the source of power under the Act for the above order. That slip arose as I had overlooked Sch 2 of the Corporations and Other Legislation Amendment (Insolvency Law Reform) Regulation 2016 (Cth) ("ILR Regulation"). Schedule 2 of the ILR Regulation inserts certain new regulations and a schedule into the Regulations. These new provisions alter the way in which the transitional provisions in Ch 10, Pt 10.25 of the Act are to be read, with their ultimate effect being to defer the effect of many of the amendments made by the ILR Act to 1 September 2017. 54 The new reg 10.25.02(3)(h) of the Regulations has the effect that s 479 of the Act, which was repealed by item 151 of Sch 2 of the ILR Act, continues to apply to the administration of the second plaintiff until 1 September 2017. The new reg 10.25.01 of the Regulations deals with the way in which various provisions in Ch 10, Pt 10.25 of the Act are to be read, the ultimate effect of which is that s 90-15 of the Insolvency Practice Schedule (Corporations) only applies to the administration of the second plaintiff from 1 September 2017. 55 As such, the power to give the direction sought is contained in the former s 479(3) of the Act. The direction that I gave was based upon the application of the principles governing the operation of s 479(3). Accordingly, the direction sought by the liquidator could have been sought and made under s 479(3). 56 On 25 May 2017, the liquidator indicated his agreement with the exercise of the Court's power under the slip rule to vary the orders made on 1 May 2017. On 26 May 2017, I made an order under r 39.05(h) of the Federal Court Rules 2011 varying order 2 made on 1 May 2017 so that the words "Pursuant to section 90-15(1) of Schedule 2 of the Act" in that order were replaced with the words "Pursuant to section 479(3) of the Act". Confidentiality 57 Section 37AF of the Federal Court of Australia Act 1976 (Cth) provides: (1) The Court may, by making a suppression order or non-publication order on grounds permitted by this Part, prohibit or restrict the publication or other disclosure of: (a) information tending to reveal the identity of or otherwise concerning any party to or witness in a proceeding before the Court or any person who is related to or otherwise associated with any party to or witness in a proceeding before the Court; or (b) information that relates to a proceeding before the Court and is: (i) information that comprises evidence or information about evidence; or (ii) information obtained by the process of discovery; or (iii) information produced under a subpoena; or (iv) information lodged with or filed in the Court. (2) The Court may make such orders as it thinks appropriate to give effect to an order under subsection (1). 58 By s 37AG(1)(a), the Court may make a suppression order or non-publication order on the ground that the order is necessary to prevent prejudice to the proper administration of justice. By s 37AG(2), a suppression order or non-publication order must specify the ground or grounds on which the order is made. 59 As Barrett J noted in Onefone Australia Pty Ltd v One.Tel Ltd [2010] NSWSC 498; (2010) 78 ACSR 163 at [2], the subject matter of an application of this kind is: … commercially confidential and sensitive … related to aspects of the litigation that any plaintiff, protecting its own interests and the integrity of the litigation process in which it is engaged, would take particular care to keep from the other party or parties to the litigation. Those aspects relate to the funding of the litigation. 60 The clear public interest in the due and beneficial administration of the estates of insolvent companies for the benefit of creditors is a relevant consideration in favour of a s 37AF order in this case. I was satisfied that an order pursuant to s 37AF should be made to protect confidential and commercially sensitive information concerning the funding arrangements and the resolution of the dispute. 61 These reasons include reference to materials that fall within the scope of the s 37AF order. Disclosure of reasons for judgments is an essential aspect of the principle of open justice and my provisional view is that the reasons should be published in their entirety. However, I propose to give the liquidator an opportunity to make submissions on that matter. Accordingly, I will publish the reasons to the liquidator only in the first instance and direct him to file within seven days any submissions in support of a contention that the reasons should be published in a redacted form. In my respectful view, the approach taken by Black J in Re Octaviar Administration Pty Ltd (in liq) [2014] NSWSC 344 at [15] to [21] is a useful guide in this case. I certify that the preceding sixty-one (61) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gleeson. Associate: Dated: 8 June 2017