Success fee not enough to block funding approval

Tardily explained delays, evidentiary gaps, fundamental misapprehensions and low bar success fees.

What else could central coast liquidator Tim Heesh have done to imperil his application for retrospective entry into a funding agreement with a related party?

According to Federal Court judge Elizabeth Cheeseman this week not much.

“It was put on behalf of the Liquidator that he has been candid and fulsome in his explanation for the delay. That is an overstatement.” Justice Elizabeth Cheeseman.

In Heesh, in the matter of Australian Bullion Company (Jewellery) Pty Ltd (in liq) [2025] FCA 571 her honour recounts how Heesh covered pretty much every base but 11th hour legal advice of a privileged and confidential nature got the application over the line, despite judicial dissatisfaction with Heesh’s dawdling.

To be fair Heesh has been hampered in progressing the liquidation in that the proceedings he initiated in the Administrative Appeals Tribunal (AAT) and won are now the subject of appeal. In addition there is a related party proceeding underway which Heesh has deemed effectively stays progress of the AAT proceedings.

Heesh entered into the agreement with the funder which is associated with precious metal refiner Pallion Group back in March 2023.

This came almost five years after Heesh had been appointed liquidator via a resolution of creditors of Australian Bullion Company (Jewellery) Pty Ltd (ABCJ).

His appointment came just months after the Australian Tax Office (ATO) issued amended assessment notices and penalty assessment notices to ABCJ totalling approximately $136 million for the tax periods from 1 July 2011 to 30 June 2014 and 1 July 2016 to 30 July 2016.

In the course of his application – which he commenced in March 2024 – Heesh informed the court that back in 2018 he had a verbal agreement with Pallion to fund his costs of the liquidation. Despite this revelatory smorgasbord her honour professed herself starved.

“On the first occasion the matter was listed, the Liquidator did not lead any evidence going to the basis upon which he had formed the view that the proceeding the subject of the Funding Agreement “had merit” and was “not frivolous or vexatious,” she said, referring to the proceedings Heesh had commenced challenging the assessments.

“The Funding Agreement included a provision for the payment of a success fee of $250,000. The Liquidator did not address in his evidence why such a term was appropriate,” she continued.

“The evidence relied on by the Liquidator was opaque in relation to an earlier agreement with the Funder whereby the Funder agreed to pay the Liquidator’s costs.

“The Liquidator did not disclose how much he had invoiced the Funder under this earlier arrangement or how much he had been paid,” she added suggesting Timbo ticked every box if he was looking to have his application refused. But Justice Cheeseman knows how to knit the quilt of procedural fairness.

“Having raised concerns in relation to each of these matters, I adjourned the hearing to enable the Liquidator to lead additional evidence. The hearing resumed after further evidence was filed. Following that hearing, the Liquidator was granted leave to file brief additional submissions, which were subsequently provided.”

During this tortured process it emerged that payment of the $250,000 success would be triggered in full if the liabilities supposedly owed to the ATO are reduced in any amount. Brazilian bikinis come with more strings attached.

The court heard that there were no other conditions attached to the fee other than it would be paid to the company, not the liquidator. Unsurprisingly neither the legal advice provided in support of the application or Heesh’s experience as a registered liquidator found that his independence could be compromised by such an arrangement.

None of the submissions however addressed the point that if a funding agreement is to last for more than three months an application for entry should be made before entry, not a year afterwards. And the judge wasn’t swallowing Heesh’s rationale for why the delay was of no moment.

“The Liquidator submits that there has been no protraction of the liquidation by reason of his delay because the progression of the Australian Bullion litigation is delayed for other reasons,” she said.

“That may be so, but it is not for the Liquidator to impose his own decision for that of the creditors or the Court as is required by s 477(2B).

“It was put on behalf of the Liquidator that he has been candid and fulsome in his explanation for the delay. That is an overstatement,” she said.

“I do, however, accept that the Liquidator has now provided an explanation for his delay in seeking the requisite approval.

“In short, the delay was caused by the Liquidator’s fundamental misapprehension of his obligation to obtain approval under s 477(2B), as well as by his readiness to adopt a “wait and see” approach over a prolonged period, well after the Funding Agreement had been executed in circumstances where it was clear that it would in all likelihood continue in operation for over three months and that approval in one guise or another was required.”