Background
Timor Sea Oil & Gas Australia Pty Ltd (TSOGA), which was in liquidation, sued the Commonwealth over statutory changes made after Australia entered a maritime-boundary treaty with Timor-Leste. TSOGA alleged that the changes reduced the areas covered by two petroleum production licences and caused financial harm. It sought reasonable compensation under the relevant legislation or, alternatively, a declaration that the legislation was invalid as applied to the licences.
TSOGA and its liquidator entered into a deed assigning the claims to NOGA Holdings Pty Ltd, an entity within TSOGA’s ownership chain. Because performance of the deed could extend beyond three months, court approval was required under s 477(2B) of the Corporations Act 2001 (Cth). Castleton Commodities Merchant Asia Co Pte Ltd (CCMA), which claimed security interests over TSOGA’s property and proceeds, argued that any distribution order must not impair its rights as a secured creditor.
The Court’s Holding
Justice Stellios retrospectively approved the deed of assignment. The Court found that the liquidator had made a commercial judgment that the arrangement was in creditors’ interests and beneficial to the winding up. NOGA Holdings would assume the costs and risks of the litigation, while the practical alternative appeared to be that the proceeding would not continue. The Court found no basis to suspect bad faith, impropriety, legal error or another reason to override the liquidator’s judgment. It expressly did not assess the merits of the underlying claim against the Commonwealth.
The Court also ordered that any recovery be distributed under clause 8.1 of the deed, but stated that the order was not intended to displace statutory provisions governing secured creditors’ entitlements. It substituted NOGA Holdings as applicant and permitted amended initiating documents to be filed. Interim confidentiality and suppression orders were made pending determination of the application for final suppression orders.
Key Takeaways
- A liquidator may assign a company’s chose in action, including a bare right of action, but an agreement extending beyond three months requires approval under s 477(2B).
- In deciding whether to approve such an agreement, the Court gives due weight to the liquidator’s commercial judgment while checking for bad faith, impropriety, legal or principled error, disproportionate benefit, and harm to the efficient administration of the winding up.
- An order under s 90-15 may support distribution under an approved arrangement, but the Court was not persuaded that the provision authorizes an order displacing statutory rules governing a secured creditor’s entitlements.
Why It Matters
The decision illustrates how an insolvent company’s litigation may be transferred to a third party willing to bear its cost and adverse-costs risk when the liquidator considers assignment preferable to allowing the proceeding to end. Approval under s 477(2B), however, is permission for the liquidator to act on that commercial judgment; it is not judicial endorsement of the agreement or an assessment of the assigned claim’s merits.
The ruling also emphasizes that approval of an assignment and related distribution arrangements does not, without more, extinguish or reorder a non-party secured creditor’s statutory rights. Courts may frame their orders expressly to preserve those rights where the existence or value of the asserted security has not been determined.