Removal of a liquidator and referral to ASIC

A very long running claim by a liquidator for insolvent trading and other insolvency-based claims was defended on the basis that the company was in fact solvent because it had holding company funding. The circumstances of findings of misleading conduct by the liquidator and the continuation of the proceedings even after evidence of solvency was apparent are not explained here.  Suffice to explain that the liquidator was removed and denied any remuneration or expenses.   Justice Croft ordered the matter be referred to the Commonwealth (FEG), which funded the claim, and to ASIC.

See Re Gemwood Projects Pty Ltd (in liq) [2025] VSC 819 (19 December 2025)

While the circumstances of the findings of misleading conduct by the liquidator are not explained here, these points are of interest.

A company’s failure to pay all of its debts on time is not necessarily determinative of insolvency

“the Company’s failure to pay each and all of its debts on time is a factor, but not determinative of insolvency. The authorities indicate that the Court’s assessment of solvency is one which considers the commercial realities which the Company faces. In the context of the Company operating in an industry where, the evidence indicated, late or disputed payments are the ‘norm’, the Company’s commercial decision to ‘stretch’ and negotiate debts owing does not establish insolvency in these circumstances”. [reference omitted] at [689].

Given the company was not insolvent, preference recoveries had to be repaid

“691 The Liquidator is said to have received, as a result of the settlements with the ATO and SRO, unfair preference claims in the amounts of $310,000 and $72,000, respectively. As a result of my finding that the Company was not insolvent, those payments made by the Company to the ATO and SRO were not unfair preferences. … I am satisfied that the ATO and SRO were both not properly informed of all the circumstances in which the allegation of an unfair preference payment arose. … on incomplete information regarding whether the Company was, in fact, insolvent, the ATO and SRO each determined to settle the unfair preference claims made against them. Had [the liquidator] informed the ATO and SRO of the circumstances of the E&C lending arrangement, as he was required to do so, the ATO and SRO may very well have determined not to settle those claims”.

The Judge ordered that the settlement sums received by the liquidator from the ATO and SDO were to be returned to those agencies. 

There is no distinction between the duties owed by a court‑appointed and a voluntary liquidator

The liquidator was a voluntary liquidator.  Following a review of the cases, and whatever was the case in the past, there is no distinction between the duties owed by a court‑appointed and a voluntary liquidator: at [695-701].

The Briginshaw standard is required to be met in deciding on the removal of a liquidator

One particular point raised was whether, when a court is deciding whether to remove a liquidator, the higher Briginshaw standard of proof should apply.  Although the Judge was unable to locate any case law to this effect, the Judge applied the Briginshaw standard in his finding that the liquidator should be removed, taking into account the authorities which caution against courts readily making orders against liquidators. While further financial and time resources would be required for a new liquidator to take over, the circumstances warranted the removal, and such removal would be in the best interest of the company’s creditors.

The same standard would apply to the removal of a trustee in bankruptcy.

No remuneration and expenses

Pursuant to s 90‑15 of the IPSC, the liquidator was ordered to be removed and not to have any of his remuneration and expenses incurred in respect of the proceeding, and any remuneration and expenses already paid to him were to be returned.

Referral to the Commonwealth, and ASIC

Significantly, the Judge said that having regard to the Commonwealth funding of the claim, and his concerns with the manner in which the claims were prosecuted, he would arrange for a copy of his reasons for judgment to be provided to “the Commonwealth Attorney-General’s Department (FEG)” and to ASIC: at [709].

^^^