Supreme Court New South Wales Medium Neutral Citation: In the matter of Jewels of Sydney Pty Ltd (in liquidation) (No 2) [2024] NSWSC 634 Hearing dates: 24 May 2024 Date of orders: 24 May 2024 Decision date: 24 May 2024 Jurisdiction: Equity - Corporations List Before: McGrath J Decision: Court approval of the deed of assignment entered into by the liquidator and confidentiality orders granted: see [21] Catchwords: CORPORATIONS — liquidators — application by liquidator seeking court approval of entry into proposed deed of assignment — where proposed deed of assignment appropriate and consistent with expeditious and beneficial administration of liquidation — where liquidator also seeks confidentiality orders in respect of material concerning entry into proposed deed of assignment — where public interest in the proper administration of justice in respect of the liquidation outweighs open justice concerns to justify confidentiality orders Legislation Cited: Corporations Act 2001 (Cth), Schedule 2, s 477(2B) Courts Suppression and Non-publication Orders Act 2010 (NSW), ss 7, 8(1)(a) and 8(1)(e) Cases Cited: In the matter of Jewels of Sydney Pty Ltd (in liquidation) [2024] NSWSC 538 Category: Principal judgment Parties: Jewels of Sydney Manufacturing Pty Ltd (in liquidation) (First Plaintiff) Jewels of Sydney Pty Ltd (in liquidation) (Second Plaintiff) Jamieson Andre Louttit (Third Plaintiff) Valtimo Holdings Pty Ltd (Interested Party) Representation: Counsel: D Edney (Plaintiffs) S Gallant (Solicitor - Interested Party) Solicitors: Cornwalls (NSW) (Plaintiffs) ERA Legal (Interested Party) File Number(s): 2024/00085875 Publication restriction: Nil JUDGMENT – EX TEMPORE (REVISED 24 May 2024) INTRODUCTION 1. This is the continuation of an application made by the third plaintiff, Jamieson Louttit (Liquidator), in his capacity as the liquidator of each of the first plaintiff, Jewels of Sydney Manufacturing Pty Ltd (in liquidation) (JOS Manufacturing), and the second plaintiff, Jewels of Sydney Pty Ltd (in liquidation) (JOS). I will collectively refer to JOS Manufacturing and JOS as the JOS Companies. 2. The application is made pursuant to s 477(2B) of the Corporations Act 2001 (Cth) for the court's approval of the Liquidator's entry into, and his causing the JOS Companies to enter into, the amended deed of assignment (Amended Deed of Assignment) in respect of any chose in action the JOS Companies have or may have against Pierre Germani, Joey Germani, Jack Germani, Pro Diamonds Pty Ltd and Pierre & Sons Holdings Pty Ltd. 3. I previously dealt with another part of the application in In the matter of Jewels of Sydney Pty Ltd (in liquidation) [2024] NSWSC 538 (First Judgment). These reasons assume familiarity with the First Judgment. 4. In the First Judgment, pursuant to s 477(2B) of the Corporations Act, I approved the entry by the Liquidator on behalf of the JOS Companies into the costs agreement made on 2 February 2024 between the Liquidator and solicitors, Cornwalls (NSW) Pty Ltd, pursuant to which Cornwalls acts for the Liquidator in his capacity as liquidator of the JOS Companies on various matters, including seeking court approval of the Deed of Assignment dated 23 February 2023 (Deed of Assignment). 5. In the First Judgment, I also made orders pursuant to ss 7, 8(1)(a) and 8(1)(e) of the Courts Suppression and Non-publication Orders Act 2010 (NSW) (Courts Suppression Act) prohibiting disclosure of the Deed of Assignment, the confidential affidavit of the Liquidator sworn 28 February 2024 (First Confidential Affidavit), the documents contained in exhibit JL-2 to the First Confidential Affidavit, the confidential affidavit of the Liquidator sworn 3 May 2024 (Second Confidential Affidavit), and the documents contained in exhibit JL-4 to the Second Confidential Affidavit (collectively the Confidential Bundle). 6. At the time of the hearing immediately prior to the First Judgment, the Liquidator had not given notice of the application and the nature of the assignment proposed under the Deed of Assignment to the creditors of the JOS Companies as required pursuant to s 100-5 of the Insolvency Practice Schedule (Corporations) (Schedule 2 to the Corporations Act). This meant that the First Judgment only dealt with orders in relation to the costs agreement and the non-publication of the Confidential Bundle. 7. The Liquidator now seeks approval under s 477(2B) of the Corporations Act for the Liquidator's entry into the Amended Deed of Assignment. 8. The Liquidator also seeks orders under ss 7, 8(1)(a) and 8(1)(e) of the Courts Suppression Act prohibiting disclosure of the confidential affidavit of the Liquidator sworn 21 May 2024 (Third Confidential Affidavit), the confidential affidavit of the Liquidator sworn 23 May 2024 (Fourth Confidential Affidavit) and the confidential affidavit of Chris Kintis sworn 24 May 2024 (Fifth Confidential Affidavit) which disclose further offers received for the assignment of the claims of the Liquidator and the JOS Companies against each of Pierre, Joey, Jack, Pro Diamonds and Pierre & Sons Holdings Pty Ltd. Those orders are sought on the basis that they are necessary to prevent prejudice to the proper administration of justice and/or it is otherwise necessary in the public interest for the orders to be made and that this public interest significantly outweighs the public interest in open justice. RELEVANT FACTS 1. I set out the relevant facts in some detail in the First Judgment at [5]–[31]. I need not repeat those matters, other than to say that the principal contextual matters are that: 1. the JOS Companies were established by Pierre and Frederick Grotte to conduct a jewellery business selling diamonds and other gemstones to both retail customers and wholesale to other retail jewellery businesses; 2. on 24 August 2022, the Liquidator was appointed as voluntary administrator of the JOS Companies and the JOS Companies ceased trading; and 3. on 29 September 2022, the creditors resolved to wind up the JOS Companies and the Liquidator was appointed as the liquidator of the JOS Companies. 1. On 8 May 2024, the Liquidator sent an updated notice to creditors of the JOS Companies providing further details about the application and annexing the First Judgment. 2. Between 16 and 23 May 2024, the Liquidator invited and received competing offers from each of Pierre and Fred with various terms for the assignment of the causes of action the JOS Companies have or may have against Pierre, Joey, Jack, Pro Diamonds and Pierre & Sons Holdings Pty Ltd. The Liquidator has conducted a detailed commercial assessment of the competing offers to estimate the dividend to creditors which would be achieved under each of them. From this assessment, the Liquidator has determined that entry into the Amended Deed of Assignment is in the best interests of creditors. CONFIDENTIALITY Legal Principles 1. I set out the relevant provisions of the Courts Suppression Act and the authorities regarding them in the First Judgment at [32]–[34], which I need not repeat. 2. In summary, I need to be satisfied that the suppression order is necessary to prevent prejudice to the proper administration of justice or is otherwise necessary in the public interest for the order to be made and that that public interest significantly outweighs the public interest in open justice. I am also cognisant that confidentiality orders are commonly made where a liquidator has obtained litigation funding for recovery proceedings or to investigate the possibility of available claims in a winding up so as not to prejudice the liquidators in their pursuit of those potential claims. Consideration 1. I am satisfied that all of the materials contained in the Third Confidential Affidavit, the Fourth Confidential Affidavit and the Fifth Confidential Affidavit are commercially sensitive because they relate to the commercial terms on which the assignment is proposed to be made (including the way in which any potential recoveries might be divided), the Liquidator's assessment of the potential value of the claims to be assigned, the merits of the Amended Deed of Assignment and the commercial assessment of the various offers put by each of Fred and Pierre as alternatives to the Deed of Assignment and the Amended Deed of Assignment. 2. I am satisfied that any disclosure of these matters to the defendants in the proposed litigation which is the subject of the Deed of Assignment and the Amended Deed of Assignment would give a tactical benefit to those defendants in that litigation and therefore disadvantage the interests of the JOS Companies given that they have an interest in the outcome of the litigation. It would therefore interfere with the attainment of justice. 3. Accordingly, I am satisfied it is appropriate to make the confidentiality orders that are sought in relation to the Third Confidential Affidavit, the Fourth Confidential Affidavit and the Fifth Confidential Affidavit to prevent prejudice to the proper administration of justice in the future proceedings, and also because it is otherwise necessary in the public interest for the order to be made, in circumstances where that public interest significantly outweighs the public interest in open justice. AMENDED DEED OF ASSIGNMENT Legal Principles 1. I set out the terms of s 477(2B) of the Corporations Act and the authorities regarding it in the First Judgment at [39]–[41], which I need not repeat. 2. In summary, the provision prohibits a liquidator of a company from entering 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 be discharged by performance more than three months after the agreement is entered into even if the term may end or the obligations may be discharged within those three months. In exercising the discretion in s 477(2B), I must not second guess the liquidator's judgement but be satisfied that there is no error of law, bad faith or impropriety and ensure that the proposal is consistent with the expeditious and beneficial administration of the winding up. The consideration is whether it is reasonable and in the interests of the liquidation to permit the liquidator to enter into an agreement that would not be completed within three months. Consideration 1. As the guiding principles reinforce, I must not second guess the commercial judgement of the Liquidator to enter into the Amended Deed of Assignment if he so chooses. I am satisfied that there is no error of law, bad faith or impropriety in the course proposed by the Liquidator to enter into the Amended Deed of Assignment. I also consider that it is consistent with the expeditious and beneficial administration of the winding up of the JOS Companies. 2. For these reasons, I propose to give approval under s 477(2B) of the Corporations Act for the Liquidator's entry into the Amended Deed of Assignment. ORDERS 1. For the reasons given above, I propose to make the following orders: 1. Pursuant to ss 7, 8(1)(a) and 8(1)(e) of the Courts Suppression and Non-publication Orders Act 2010 (NSW): 1. Disclosure of the affidavit of Jamieson Andrew Louttit sworn 21 May 2024, the affidavit of Jamieson Andrew Louttit sworn 23 May 2024 and the affidavit of Chris Kintis sworn 24 May 2024 (Confidential Affidavits) are prohibited except by order of the court made on application of which the plaintiffs have been given at least three business days' prior notice; 2. The Confidential Affidavits be placed in an envelope marked "Confidential: to be opened only by order of the Court"; 3. This order take effect in the Commonwealth of Australia, and until further order; but 4. This order does not prohibit the plaintiffs from voluntarily disclosing the documents the subject of this order. 1. Pursuant to section 477(2B) of the Corporations Act 2001 (Cth), the entry by the third plaintiff on behalf of the first and second plaintiffs into a deed of assignment substantially in the form at annexure "F" to the affidavit of Jamieson Andrew Louttit sworn 23 May 2024 be approved. 2. The plaintiffs' costs of the proceedings be costs in the first and second plaintiffs' liquidations. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 24 May 2024