Disclosures to the court by liquidators
by Michael Murray | Mar 22, 2013
A syndicate of banks has failed in seeking to set aside orders granting approval to the liquidators of ABC Learning to enter into a funding agreement with IMF in relation to $244m proceedings against the syndicate to set aside certain securities granted by the companies to the banks. The court explained the duties of liquidators in such cases.
The banks claimed that that the liquidators had failed to disclose material information to the judge granting the orders, that is, that, in addition to IMF funding their proceedings, IMF was funding representative proceedings brought by shareholders against the ABC Learning Group.
This was said to put the liquidators in a position of conflict. But the Judge found it was not a material conflict: CBA Corporate Services (NSW) Pty Ltd, in the matter of ZYX Learning Centres Ltd (receivers and managers appointed) (in liq) v Walker [2013] FCA 243
“There was no debate about the well established proposition that the liquidators owed a heavy duty to disclose to the Court all facts that were material to the application for approval of the funding”
but that was not the case here, for reasons the Judge discussed. Nevertheless, the Judge said he
“should not be thought in any way to depart from the principle that practitioners owe a duty of full disclosure in making an application of [this] type ... What is or is not material in any application is a question of judgment in each case. Of course, the Court should not be burdened with irrelevant detail but it is always better to err on the side of caution particularly where, as in the present case, a litigation funder may possibly wear more than one hat”.
This was said to put the liquidators in a position of conflict. But the Judge found it was not a material conflict: CBA Corporate Services (NSW) Pty Ltd, in the matter of ZYX Learning Centres Ltd (receivers and managers appointed) (in liq) v Walker [2013] FCA 243
“There was no debate about the well established proposition that the liquidators owed a heavy duty to disclose to the Court all facts that were material to the application for approval of the funding”
but that was not the case here, for reasons the Judge discussed. Nevertheless, the Judge said he
“should not be thought in any way to depart from the principle that practitioners owe a duty of full disclosure in making an application of [this] type ... What is or is not material in any application is a question of judgment in each case. Of course, the Court should not be burdened with irrelevant detail but it is always better to err on the side of caution particularly where, as in the present case, a litigation funder may possibly wear more than one hat”.
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