In the September Insolvency Update in the case of Jones,
Saker, Weaver and Stewart (Liquidators), in the matter of Great
Southern Limited (in liq) (Receivers and Managers Appointed)
 FCA 807 , Siopsis J declined to approve the liquidator's
entry into a litigation agreement. Liquidators' must adequately
demonstrate prospects of success in potential litigation for the
courts to approve entry into the agreement.
However, recently the Federal Court in Jones, Saker, Weaver
and Stewart (Liquidators), in the matter of Great Southern Limited
(in liq) (Receivers and Managers Appointed)  FCA 1072
(27 September 2012) reconsidered this decision, and granted
approval to the liquidators to enter into the same funding
Gilmour J identified relevant principles to determining whether
to grant approval under s 477(2B) of the Corporations Act
2001 (Cth) as:
The role of the court is to grant or deny approval to the
Liquidators' proposal: Re The Bell Group Ltd (in liq)
 WASC 235 at ;
The task of the court is not to reconsider all of the issues
which have been weighed up by the Liquidators or to second guess
the Liquidators' judgment. Thus the Court's role is not to
determine if the Liquidators' proposal is the best available
option, to develop some alternative proposal which might seem
preferable or to substitute its own views for those of the
Liquidators: Re The Bell Group Ltd (in liq) at ; Re
Addstone Pty Ltd (In Liquidation) (1998) 83 FCR 583 at
Rather, the court must review the Liquidators' proposal to
"be satisfied that the liquidator is acting in good faith in
the making of the commercial judgment in respect of which the Court
is being asked to make an order": Re Addstone Pty Ltd (In
Liquidation) at 594.
In granting the application, His Honour found the following
It was in the best interests of creditors that the
investigations be undertaken and the liquidators and a specified
law firm be retained;
Furthermore, the committee of inspection of the Companies had
approved entry into the funding agreement and retainer of the
Without entry into the agreement there would be no returns to
The liquidators made extensive enquiries as to alternative
funding without success, and;
The liquidators made the application in good faith.
Where the Court is satisfied that the liquidators have acted in
good faith and for proper purposes, the Court will give
liquidators' permission to exercise their own commercial
Initially, the liquidators had failed to adduce evidence which
sufficiently addressed these factors.
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This Update highlights two recent cases that considered circumstances where liens could take priority over a registered security interest.
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