Federal Court of Australia Vardy v Linz, in the matter of Bondi Pizza Pty Ltd (in liq) (No 2) [2022] FCA 1080 File number(s): NSD 534 of 2020 Judgment of: YATES J Date of judgment: 13 September 2022 Catchwords: CORPORATIONS – application by liquidator of company for approval of entry into Deed of Variation pursuant to ss 477(2A) and 477(2B) of the Corporations Act 2001 (Cth) – where approval sought nunc pro tunc – application for suppression orders pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth) in relation to the Deed of Variation – application pursuant to s 1322(4) of the Corporations Act that Deed of Variation not invalid by reason of being entered into without Court's prior approval – applications granted Legislation: Corporations Act 2001 (Cth) ss 477(2A), 477(2B), 1322(4)(a) Federal Court of Australia Act 1976 (Cth) s 1322(4)(a) Corporations Regulations 2001 (Cth) reg 5.4.02 Cases cited: Elderslie Finance Corporation Ltd v Newpage Pty Ltd (No 6) [2007] FCA 1030; 160 FCR 423 Vardy v Linz, in the matter of Bondi Pizza Pty Ltd (in liq) [2021] FCA 530 Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 13 Date of hearing: 8 and 13 September 2022 Counsel for the Plaintiffs: Ms I King Solicitor for the Plaintiffs: CCSG Legal Counsel for the Defendants: The Defendants did not appear ORDERS NSD 534 of 2020 IN THE MATTER OF BONDI PIZZA PTY LTD (IN LIQUIDATION) ACN 134 544 317 BETWEEN: DARREN JOHN VARDY IN HIS CAPACITY AS LIQUIDATOR OF BONDI PIZZA PTY LTD (IN LIQUIDATION) ACN 134 544 317 First Plaintiff BONDI PIZZA PTY LTD (IN LIQUIDATION) ACN 134 544 317 Second Plaintiff AND: GARY MICHAEL LINZ First Defendant MARK JEREMY RUCK Second Defendant MICHAELA SAMCIKOVA (and others named in the Schedule) Third Defendant order made by: YATES J DATE OF ORDER: 13 SEPTEMBER 2022 THE COURT ORDERS THAT: 1. Pursuant to s 477(2A) and s 477(2B) of the Corporations Act 2001 (Cth), the second plaintiff on behalf of the first plaintiff be authorised nunc pro tunc to enter into the Deed of Variation being Confidential Exhibit "DJV-04" to the affidavit of Darren John Vardy sworn 12 September 2022. 2. Pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth), until such time as any litigation (including any appeal) arising out of the winding up and affairs of the first plaintiff is concluded or until otherwise ordered, the following documents be kept confidential and not be published or disclosed to another party, on the ground that it is necessary to prevent prejudice to the administration of justice: (a) Confidential Exhibit "DJV-03" to the affidavit of Darren John Vardy sworn 3 August 2022; (b) Confidential Exhibit "DJV-04" to the affidavit of Darren John Vardy sworn 12 September 2022. THE COURT DECLARES THAT: 3. Pursuant to s 1322(4)(a) of the Corporations Act 2001 (Cth), the Deed of Variation being Confidential Exhibit "DJV-04" referred to in the affidavit of Darren John Vardy sworn 12 September 2022 is not invalid by reason of it having been entered into without the Court's prior approval. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT YATES J: 1 The second plaintiff, Darren John Vardy, is the liquidator of Bondi Pizza Pty Ltd (in liquidation) (the company). Mr Vardy seeks approval, pursuant to ss 477(2A) and (2B) of the Corporations Act 2001 (Cth) (the Act), to enter into, on the company's behalf, a Deed of Variation varying certain obligations under a Deed of Settlement and Release entered into on 20 April 2021. The parties to the Deed of Variation are the parties to the Deed of Settlement and Release who had obligations to make payments or to provide security thereunder. A copy of the Deed of Variation is exhibited to an affidavit made by Mr Vardy on 12 September 2022. 2 On 18 May 2021, the Court made an order pursuant to s 477(2B) of the Act granting approval to Mr Vardy and the company, nunc pro tunc, to enter into the Deed of Settlement and Release. The Court also made an order pursuant to s 1322(4)(a) of the Act that the Deed of Settlement and Release was not invalid by reason of it having been entered into without the Court's prior approval: Vardy v Linz, in the matter of Bondi Pizza Pty Ltd (in liq) [2021] FCA 530. 3 The background to this matter, as well as the applicable legal principles, are set out in the Court's reasons for judgment given on that occasion. Those matters do not require repetition or elaboration in these reasons. 4 Section 477(2A) provides: (2A) 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 compromise a debt to the company if the amount claimed by the company is more than: (a) if an amount greater than $20,000 is prescribed—the prescribed amount; or (b) otherwise—$20,000. 5 The prescribed amount is $100,000: reg 5.4.02 of the Corporations Regulations 2001 (Cth). 6 Section 477(2B) provides: (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 (for example, but without limitation, a lease or 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. 7 Clause 1.1 of the Deed of Variation provides: The parties acknowledge and agree that this Deed of Variation will not come into effect, and not be binding on the parties unless Court approval has been obtained pursuant to sections 477(2A) and 477(2B) of the Corporations Act 2001 (Cth) … 8 In an affidavit made on 3 August 2022, Mr Vardy explains the circumstances giving rise to the present application. In essence, following an approach from Mr Linz, who is one of the parties to the Deed of Settlement and Release, Mr Vardy reached agreement on a proposal to accept, in lieu of certain monthly payments under the Deed of Settlement and Release, an accelerated lump sum payment of a lesser aggregate amount. If approved, the Deed of Variation will give binding effect to this proposal. 9 Mr Vardy considers such an arrangement to be reasonable and commercial because: (a) the lump sum payment would provide certainty in respect of the funds to be received in the liquidation; (b) the lump sum payment would allow him to finalise the liquidation, as opposed to the liquidation remaining active for a further two years; (c) if the liquidation were to remain active for a further two years, he would be required to undertake further tasks and actions, and incur further costs in the liquidation (which Mr Vardy has estimated); and (d) accepting the lump sum payment would reduce the costs that would otherwise be incurred in the liquidation (which Mr Vardy has estimated). 10 I accept this evidence. However, it is for Mr Vardy to reach his own commercial judgment on these matters. 11 I am satisfied that s 477(2A) of the Act is engaged and that it is appropriate that approval be given under that provision. It is not clear to me that s 477(2B) is engaged. However, to the extent that the latter provision is engaged (as Mr Vardy believes it might be), it is appropriate that approval be given under that provision as well: Elderslie Finance Corporation Ltd v Newpage Pty Ltd (No 6) [2007] FCA 1030; 160 FCR 423 at [34]. 12 When granting approval on 18 May 2021 to Mr Vardy and the company to enter into the Deed of Settlement and Release, the Court made an order under s 37AF of the Federal Court of Australia Act 1976 (Cth) prohibiting the publication or disclosure of that document for a limited period on the basis that the order was necessary to prevent prejudice to the proper administration of justice. I am asked to make a similar order, on the same ground, in relation to the Deed of Variation and an earlier version of it. Given the existence of the previous order, I am satisfied that it is appropriate to make a corresponding order in respect of the Deed of Variation and the earlier version. 13 Orders will be made accordingly. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Yates. Associate: Dated: 13 September 2022 SCHEDULE OF PARTIES NSD 534 of 2022 Defendants Fourth Defendant: MIRIAM TORO Fifth Defendant: CASUAL DINING CONCEPTS (HOLDINGS) PTY LTD ACN 142 135 206 Sixth Defendant: BONDI PIZZA PARRAMATTA (HOLDINGS) PTY LTD ACN 605 153 982