In the matter of Balamara Resources Limited (in liquidation)

By Interlocutory Process filed on 20 December 2024 (“Liquidators IP”), Mr Reidy, Mr Barnden and Ms Smith (“Liquidators”) seek an order, under s 90-15 of the Insolvency Practice Schedule (Corporations) (“IPSC”) that they are justified in declining to convene a meeting of the creditors of Balamara Resources Ltd (“Company”) as directed by letter dated 9 December 2004 (“Direction”) sent by the solicitors for Bright Agile Ltd and several other creditors of the Company (“Directing Creditors”). I will address the converse application brought by the Directing Creditors below.

On 13 May 2025, I noted the parties’ common position that the question whether it was reasonable (in the requisite sense) for the Liquidators to convene the requested meeting is to be determined as at the date of that request, namely 9 December 2024. On the first day of the hearing, 5 June 2025, I ordered that the Directing Creditors be joined as Defendants to that Interlocutory Process and heard in the proceedings on that basis.

I first set out the background to these proceedings, drawing in part on the summary in my earlier decision in Re Balamara Resources Ltd [2024] NSWSC 1309. The Company is an Australian based mining company which had or has interests in coking coal deposits in the Republic of Poland. It sought, but did not obtain, the requisite permission from the Polish Government to mine the coal deposits and it appears its only significant asset is potential claims (“Polish Claim”) against the Republic of Poland for an allegedly wrongful refusal to issue the requisite permits.

The Plaintiff in these proceedings, Vulpes Distressed Fund (“Vulpes”), which took a limited role in this application, has been a significant shareholder in the Company since 2019. On 4 August 2023, Vulpes commenced proceedings seeking, amongst other things, relief against Messrs Hale, Leung, and Lenartowicz for breach of directors’ duties and oppressive conduct in respect of the Company (Barnden 26.2.25 [8]). On 26 February 2024, those proceedings were resolved by a Deed of Settlement although there are issues, which I need not resolve, as to the extent to which the parties complied with its terms.

By Originating Process filed on 14 June 2024, Vulpes then sought orders for the winding up of the Company and Bright Agile was heard by leave under r 2.13 of the Supreme Court (Corporations) Rules in that application. On the second day of the hearing of that application, the Company indicated that it no longer opposed a winding up order on the just and equitable ground under s 461(1)(k) of the Corporations Act 2001 (Cth); Vulpes then narrowed the relief that it sought to seek that order; and, after hearing submissions from Vulpes, I then made that order and consequential orders, including that the Liquidators be appointed as the liquidators of the Company. In making the winding up order, I found that there were multiple failures with the Company’s governance including a failures to prepare financial accounts and a failure to lodge tax returns since 1 July 2018, and I also found that there had also been a breakdown in the working relationship of the directors.

Within a week of the appointment of the Liquidators, they met with representatives of the Directing Creditors (Barnden 26.2.25 [177]). On 26 October 2024, nine days after the winding up orders, representatives of the Directing Creditors met with their proposed alternate liquidators. On 14 November 2022, the Liquidators issued a circular to creditors, which included a request for funding of the liquidation.

On 22 November 2024, Mr Lenartowicz, who is a former director of the Company and one of the Directing Creditors, sent a misleading letter to the Company’s shareholders, which blamed Vulpes for the winding up and failed to disclose the Court’s findings of multiple governance failures on the part of the Company and (at least some of) its directors that founded that order. On 9 December 2024, the solicitors acting for the Directing Creditors issued the Direction (Barnden 20.12.24 [21]; Ex L1, CB 223) to the Liquidators that relevantly claimed that the Directing Creditors represented in excess of 25% in value of the Company’s creditors and, pursuant to s 75-15 of the IPSC, directed that the Liquidators convene a meeting of creditors of the Company for the purpose of the creditors resolving, if they saw fit, resolutions that:

I do not understand Ms Beechey, who appears for the Directing Creditors, to press a submission that whether the Direction was unreasonable for the purposes of s 75-15 of the IPSC and r 75-250 of the Insolvency Practice Rules (“IPR”) should be determined without regard to the nature of the resolutions that were to be passed at that meeting. That submission would have faced the obvious difficulty that the Direction itself set out the terms of the proposed resolutions, and whether that Direction was reasonable in the relevant sense would be determined by reference to its content as a whole.

By 12 December 2024, the Liquidators had engaged a law firm to serve an amended notice of dispute on the Republic of Poland in respect of the Polish Claim and, on 16 December 2024, that notice of dispute was sent to the Republic of Poland (Ex L1, CB 200).

By a file note dated 17 December 2024 (ignoring an obvious typographical error) (“Record”), the Liquidators recorded their reasons for declining to convene the creditors’ meeting as required by the Direction. I will set out and address those reasons below. By a letter also dated 17 December 2024 (“Notice”) (Ex L1, CB 251) from the Liquidators’ solicitors to the Directing Creditors’ solicitors, the Liquidators advised the Directing Creditors that they declined to convene the creditors’ meeting as required by the Direction and indicated their reasons for not doing so. The Notice raised a question whether the Directing Creditors were more than 25% of creditors by value, but the Liquidators do not now take any point that the Directing Creditors did not hold sufficient debt to direct that the meeting be called, and it is not necessary to determine any question as to the status of the debts claimed by those creditors. The Liquidators there expressed the view that, for the reasons stated, the Direction was unreasonable within the meaning of IPR r 75-250(2)(a) and/or (d). I will also set out and address those reasons below. The Liquidators also there indicated that they would bring this application under IPSC ss 90-15 and 90-20 for an order that they were justified in not complying with the Direction in the relevant circumstances. On 20 December 2024, the Liquidators filed their Interlocutory Process which sought an order that they were justified in declining to convene the meeting of the Company’s creditors in accordance with the Direction.

Subsequently, in mid-January 2025, the Liquidators issued their statutory report to creditors and issued a circular to creditors, noting their decision not to convene the creditors meeting as requested by the Directing Creditors.

Turning now to the affidavit evidence, the Liquidators read the affidavit dated 20 December 2024 of Mr Barnden. Mr Barnden there refers to the circumstances in which the Liquidators were appointed; the identity of the Company’s directors and shareholders at that time; and the nature of the Polish Claim. He also refers to the steps which he has taken to obtain funding to pursue that claim and to the receipt of the Direction on 9 December 2024. Mr Barnden there refers to several matters which led him to form the view that the direction was unreasonable, including the absence of any complaint as to the Liquidators’ conduct by any independent creditor; the failures in the Company’s governance which had existed at the point that it was placed in liquidation, at a time that Mr Leung, Mr Hale and Mr Lenartowicz were directors of the Company; the involvement of another of the creditors giving the Direction (“Ample Skill”) in a potentially competing claim against the Republic of Poland; and the work undertaken by the Liquidators since their appointment.

By a second affidavit dated 26 February 2025, Mr Barnden provided more detailed background to the liquidation, referring to the history of proceedings in the Court which had culminated in the winding up order; updated the position as to funding for the Polish Claim; outlined the work undertaken by the Liquidators and the status of their investigations to date, including in respect of transactions requiring further investigation involving Messrs Lenartowicz and Mr Hale, who are two of the Directing Creditors; and identified the potential for duplication of work and delay if the Liquidators are now replaced and the adverse impact of their replacement upon a funding offer received from Vulpes which is conditional upon their remaining in office. Mr Barnden also there noted that the new liquidators who are proposed to be appointed had met with the representatives of the Directing Creditors on 26 October 2024, several days after the Court had made the winding up order and appointed the Liquidators, although the Direction was not issued until over a month later.

By a third affidavit dated 27 May 2025, filed pursuant to leave to lead further evidence as to the intermediate steps of his reasoning for not convening the creditors’ meeting in response to the Direction, Mr Barnden set out, at greater length, the factors that he had taken into account in forming his opinion that the Direction was unreasonable. I will address those matters below.

Mr Barnden was cross-examined at some length. He acknowledged that, under the provisions for removal of a liquidator introduced by the IPSC, creditors are not required to provide reasons for their exercise of the power to remove a liquidator but observed that it would be “normally good practice” to do so (5.6.25 T5). I should add that, if a creditor seeks to establish that there is reason for the removal of a liquidator, in an application of this kind, then it will generally need to lead evidence as to its reasons for the liquidator’s removal. Mr Barnden was also cross-examined as to the operation of other provisions of the IPSC, which is properly a matter of their construction. He was cross-examined to seek to establish that the Notice was a “complete” statement of his reasons for not complying with the Direction, and he observed that other issues had been discussed when the Notice was prepared but he and his legal advisers had decided that “this was the final version of the letter to be issued” (5.6.25 T7). The cross-examination was of little utility, because any summary of reasons for a decision will necessarily be incomplete, because it is a summary in nature, and even an extended account of reasons for a decision will rarely be a “complete” statement of all the steps in the decision-maker’s reasoning.

Mr Barnden confirmed the view expressed in his third affidavit that a liquidator should ordinarily not incur substantial costs when on notice of application for his or her removal (5.6.25 T9). His evidence was that he would have delayed the steps necessary to address the Polish claim if he had agreed to convene the meeting; and Ms Beechey then put, and he accepted, that that delay would be detrimental to creditors (5.6.25 T12). It seems to me that that cross-examination emphasised a real difficulty created by the Direction, particularly when it was served late in the year and at a time that a creditors’ meeting could not be called promptly, namely that the Liquidators would be required either to delay those steps and potentially face a complaint (as put by Ms Beechey) that their doing so would be contrary to the interests of creditors; or not delay those steps, and potentially face the converse complaint that they had incurred unnecessary costs in taking steps that a newly appointed liquidator considered should not have been taken. Mr Barnden was also cross-examined to seek to establish that he did not refer to matters indicated in, variously, paragraphs 15-17, 24-26 and 32 of his third affidavit in his earlier affidavits and it was alleged that these paragraphs, or some of them, were a “retrospective justification” for the decision not to convene the relevant meeting; unsurprisingly, he denied that proposition (5.6.25T T17). I address these matters further below.

The Plaintiff in the proceedings, and the Second Respondent in this application, Vulpes, read the affidavit dated 15 May 2025 of one of its directors, Mr von Bernstorff, who indicated that he and Vulpes were creditors of the Company and did not support the meeting sought to be called by the Directing Creditors and did not wish the Company to incur the additional expenses associated with the replacement of the Liquidators. Vulpes otherwise did not take an active role in this application.

The Directing Creditors read the affidavit dated 8 May 2025 of Mr Hale. Mr Hale claims to be a creditor of the Company and sole shareholder of a company which is a creditor of the Company. His evidence is that he wants the Liquidators to convene a meeting so that the Company’s creditors may vote on whether to replace the Liquidators; the company which he is a shareholder also wants that to occur; and several other creditors of the Company who are named as the Directing Creditors take the same view. Notably, Mr Hale does not provide any explanation of why he, his associated company, or other Directing Creditors take that view and does not suggest that any aspect of the Liquidators’ conduct has given rise to any basis for concern. I proceed on the basis that no evidence that Mr Hale or other Directing Creditors could have led as to that matter would have assisted them in their opposition to the Liquidators’ application or in advancing their own application: Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418–419; Zaccardi v Caunt [2008] NSWCA 202 at [27].

I first address the relevant statutory provisions. The Directing Creditors relied on s 75-15 of the IPSC to require the Liquidators to convene the requisite creditors meeting and this application raises questions as to the scope of that section and questions of fact. That section relevantly provides:

The parties proceeded on the basis that either IPSC s 75-15(1)(c) or (1)(d) is here satisfied and the primary issue in dispute is whether the Direction is not reasonable for the purposes of IPSC s 75-15(2)-(3) and IPR r 75-250. That rule relevantly provides:

The power to remove and replace a liquidator is in turn conferred on creditors by IPSC s 90-35(1) which provides that:

Ms Beechey also draws attention (21.05.25 T28) to the structure of the IPSC, including provisions concerning information, the calling of meetings, committees of inspection and other directions by creditors. She notes that IPSC Div 90 provides for removal of an external administrator by creditors and the meeting called by the Directing Creditors is directed to the exercise of that power (21.05.25 T28). She also refers to the paraphrase of the relevant provisions in the Explanatory Memorandum to the Insolvency Law Reform Bill 2015, which observed that creditors have the ability to “remove an official liquidator appointed in a Court-ordered winding up without an order of the Court”. I do not understand there to be any contest as to the existence of that power in the application, although there is plainly a contest as to whether the Liquidators are required to call the relevant meeting in the relevant circumstances. Ms Beechey refers (21.05.25 T28) to a further paraphrase of the scope of IPSC s 75-15 in the Explanatory Memorandum, which does not advance matters, and to the statement of the Government’s objectives, outcomes, goals and target in the Explanatory Memorandum (at [9.75]) which noted, inter alia, that the Bill sought to “address current regulatory and market failures”, enhance competition within the market for insolvency services and “empower … stakeholders with an interest in the conduct of an insolvency administration to better protect their own interests”. Ms Beechey also refers (21.05.25 T32) to the objective of the legislation, as stated in the Explanatory Memorandum, to “[b]etter empower creditors to replace poorly performing practitioners” and notes that creditors were to be empowered to remove an insolvency practitioner through an ordinary resolution, and the insolvency practitioner would retain a right to apply to the Court to prevent removal in “restricted circumstances”.

Ms Beechey refers (21.05.25 T31) to the Second Reading Speech in respect of the Insolvency Law Reform Bill 2015 (at page 1468) as follows:

There is here no evidence and no suggestion that the Liquidators could be characterised as “poorly performing practitioners” within the scope of that identified purposes of these provisions.

The scope of IPSC s 75-15 and IPR r 75-250 has been considered in the case law. In Re FW Projects Pty Ltd (in liq) [2019] NSWSC 892 (“FW Projects”), I dealt with an application for removal of a liquidator on the basis that he had failed to convene a creditor’s meeting following a direction given by creditors under IPSC s 75-15. I there noted the application of IPR r 75-250 and noted that the parties did not refer to its scope in submissions and did not suggest its application would alter the outcome of that hearing. I there observed (at [161]) that:

Ms Beechey submits that I was in error in FW Projects in determining the question of whether it was reasonable to convene the relevant meeting by reference to, inter alia, what that meeting was intended to do. I do not accept that submission and, as I have noted above, it seems to me that whether a direction to call a meeting is unreasonable must depend on what that meeting is intended to do, particularly where the direction itself incorporates reference to what the meeting will address.

In AXF Group Pty Ltd v AXF Holdings Pty Ltd [2020] VSC 375 (“AXF”), somewhat unusually, a liquidator sought the Court’s guidance as to whether he could take certain matters into account in dealing with a direction by creditors to convene a meeting to remove the liquidator, before he made the relevant decision. Almond J there considered the scope of IPSC s 75-15 and IPR r 75-250 and observed (at [19]-[20]) that:

I do not understand his Honour there to suggest that the existence of substantial prejudice must be certain, as distinct from probable, where any forward-looking assessment of that matter will necessarily require an assessment of probability to be made. Rather, his Honour rightly recognises that the bare possibility of such prejudice does not satisfy that requirement. His Honour also there expressed the view (at [36]) that:

His Honour also noted (at [40]) that:

His Honour also observed (at [46]-[48]) that:

I recognise that this observation was expressly directed to the facts of the particular case. A different outcome might well arise, on different facts, where a liquidator is appointed by a Court after competing nominations are put before the Court, as often occurs in New South Wales, and the replacement of a liquidator is directed to reversing the Court’s decision as to that question. In that case, there may be substantial prejudice to the interests of third parties, including the community, which have a real interest in the proper administration of justice. Such a direction may also be vexatious, in the sense that it is made for an improper purpose, if there is no apparent explanation for the creditors’ wish to replace the liquidator other than a hope or expectation (which should not be well-founded) that a newly appointed liquidator will be less independent than his or her predecessor. Whether that is the case will be a question of fact in a particular case. His Honour also there found that concerns in that case as to the effect of the replacement of the liquidator on investigations and proceedings were speculative, and that substantial prejudice arising from the waste of the liquidator’s work were not established, but those were findings on the facts of that case with no general application.

I should add, for completeness, that Ms Beechey contended that Almond J was there in error (as, she contends, I had also been in error in FX Projects) in having regard to aspects of the resolution which were to be passed at the proposed meeting, which she contends is only relevant to whether the removal of a liquidator is reasonable and not to whether the direction to convene a meeting is reasonable. I do not accept that submission. It seems to me that that approach would be highly artificial, where whether it is reasonable in the relevant sense to call a meeting must partly depend on what that meeting is to do. As I noted above, that approach would also here be inconsistent with the fact that the Direction itself incorporates the proposed resolutions, and the Court should determine whether that Direction as a whole (including the proposed resolutions) is reasonable in the relevant sense.

Mr Golledge, with whom Ms Bailey appears for the Liquidators, in turn submits and, I accept, that IPR r 75-250 provides an exhaustive statement of the criteria against which the question of whether the relevant direction is reasonable is determined for the purposes of IPSC s 75-15. That seems to be clear, on the terms of the section, where IPR r 75-250(2) specifies when a direction is not reasonable and IPR r 75-250(4) treats any direction that is not within that section as reasonable. That approach is also consistent with the approach that has been taken in respect of similar provisions allowing creditors a qualified right to access to documents in a liquidation. IPSC s 75-15 here adopts a somewhat similar approach to IPSC s 70-45, which establishes a regime by which creditors may request documents from a liquidator and requires the liquidator to comply with that request unless specified conditions are satisfied, although it also allows an express right to appeal from the liquidator’s decision in respect of document production. IPR r 75-250 is similar to IPR r 70-15(2) which specifies the circumstances in which a request for the production of documents is not reasonable. In Re 1st Fleet Pty Ltd (in liq) [2019] NSWSC 6 (“1st Fleet”), to which Mr Golledge referred, I held that that that rule provided a complete statement of the circumstances in which it was or was not reasonable for an external administrator of a company to comply with a request, and that holding has since been approved by Anderson J in Re Secatore; Bob Jane Corporation Pty Ltd v Last Lap Pty Ltd (in liq) (2020) 144 ACSR 648 at [45]; [2020] FCA 627 (“Secatore”) and by Robson J in Re Pacific Biotechnologies Ltd [2020] VSC 636 at [29]ff (“Pacific Biotechnologies”).

The case law dealing with similar provisions also assists as to whether a direction is “vexatious” for the purposes of IPR r 75-250. In 1st Fleet at [43], I accepted Counsel’s submission that:

In Secatore, Anderson J applied that test in considering the question of when a request for information will be “vexatious” and it was also approved in AXF.

Mr Golledge also addresses the question what is required to establish that an external administrator has formed the relevant opinions in good faith for the purposes of IPR r 75-250. He draws attention to the consideration of what was required to establish good faith on the part of a liquidator in Spalla v St George Motor Finance Ltd (No 7) [2006] FCA 1177 at [168] as follows:

It seems to me that that decision provides assistance as to the concept of “good faith” in IPR r 75-250, although it was decided before that rule was introduced. However, Mr Golledge here accepted that, to satisfy the requirement that the administrator has reached the relevant opinion “acting in good faith”, he or she should also have made a genuine attempt to inform himself or herself about the subject matter of the relevant opinion, and then made a genuine attempt to assess the weight of the matters that he or she has identified being relevant to the decision that he or she had to make. I will proceed on that basis, where the Liquidators accept that position, although that may impose a more exacting test than the case law.

In Pacific Biotechnologies (which, as I noted above, dealt with a request for document production relying on the somewhat similar provisions to which I have referred above), Robson J noted that he was not referred to case law as to the meaning of the phrase “acting in good faith” and observed (at [35]) that, in order to establish that he or she has acted in good faith, the external administrator should establish that his opinion was based upon a reasonable basis. It seems to me that an administrator who establishes that matter will plainly satisfy a “good faith” standard; however, the case law to which I have been taken indicates that an external administrator can also satisfy the “good faith” standard without establishing that his decision was objectively reasonable or “correct” or “preferable” in the relevant circumstances where it was honestly made and, possibly, also based on a proper attempt to inform himself or herself of and consider relevant matters. His Honour also observed (at [45]) that it was not the Court’s role in applying IPR r 70-15 in the context of a document production request to determine the facts which underlay the relevant exception, as distinct from the question whether the external administrator had “in good faith formed the required opinion”. His Honour also there noted that, in order to establish “reliance on some reasonable basis” to come to a relevant opinion, the external administrator could, for example, show that he had taken legal advice instructed himself or herself on the relevant legal principles (at [46]). I accept that that evidence would be relevant and possibly sufficient to establish that matter, although it would not be necessary to establish a decision made by an external administrator in good faith.

In Watson & Co Superannuation Pty Ltd v Dixon Advisory and Superannuation Services Ltd [2022] FCA 1273, Thawley J considered an application under IPSC s 70-90 for an order requiring an external administrator to produce the requested documentation, and considered the scope of IPSC s 70-45 and IPR r 70-15(2)(a) and (g), which adopt corresponding wording to IPR r 70-250(2)(a) and (d). His Honour referred to Pacific Biotechnologies with approval and there found that the external administrator had, in good faith, formed the view that privilege applied, and the production of insurance policies would found an action by the insurers for breach of contract and risk the insurer avoiding the policies, to the substantial prejudice of creditors. His Honour held (at [40]) that that was sufficient to support the external administrator’s refusal of the request, and his Honour did not determine whether that opinion was objectively correct, as distinct from held in good faith.

In his opening outline of submissions, Mr Golledge submits, by reference to these provisions and the case law, and I accept, that:

In oral submissions, Mr Golledge also submits, and I also accept, that that IPR r 75-250 could have required an objective assessment by the Court of the basis of a liquidator’s opinion, or, I would add, prescribed a reasonableness test for the assessment of that opinion. That section does not do so and instead requires the Court to answer the question whether the external administrator held the opinions that he or she in fact formed in good faith. Mr Golledge submits that the intent of that section is that the relevant decision will be made by the external administrator and will not be subject to a review on the merits by a Court, provided that the Court is satisfied that the external administrator formed the requisite opinion and did so in good faith.

Ms Beechey in turn refers to decisions in the context of derivative actions, including Swansson v Pratt Properties Pty Ltd (2002) 42 ACSR 313; [2002] NSWSC 583 and Gillespie v Gillespie (2025) 172 ACSR 183, [2025] NSWCA 24, dealing with leave to bring a statutory derivative action, to submit that the question of good faith should require an assessment of whether a liquidator has a reasonable basis for the opinion reached, and not only whether the liquidator genuinely holds the opinion and (as accepted by Mr Golledge) there has been a genuine attempt by the liquidator to inform himself or herself of relevant matters and a genuine attempt to assess their weight. I do not accept that submission. First, that is not the ordinary meaning of the term “good faith”, whether generally or in the context of a liquidation, and I have referred to relevant case law above. Second, it is understandable that a “good faith” standard would be applied in an exacting way in determining whether to grant leave to bring a derivative action, but the legislative intent in this context is plainly not to bring in, by that standard, merits review of a liquidator’s decision whether to call a meeting. Third, if the intent of the IPR was that the Court should assess whether the liquidator had a reasonable basis for his or her opinion, rather than whether that opinion was held in good faith, then the Rules could readily have so provided.

Ms Beechey also submits that a “narrow” reading of the concept of “good faith” would “defeat” creditors’ right to direct a meeting of creditors and remove a liquidator. I also do not accept that submission, first, because that “right” is already qualified by the exceptions which provide that such a meeting need not be held; and, second, because that qualified right would be preserved against any decision of a liquidator not to convene that meeting which was made in “bad faith”, for example, where a liquidator declined to convene a meeting to replace him or her in the face of identified concerns as to his or her performance that would be addressed by his or her replacement. Ms Beechey also submits that the legislative intention was clear, namely, to take the question when meetings were to be called out of the hands of liquidators (21.5.25 T39); but that proposition again neglects the fact that the legislature conferred a qualified, rather than absolute, right to require that such a meeting be convened upon creditors.

On this basis, Mr Golledge submits, and I accept, that the questions to be decided are whether the Liquidators (acting through Mr Barnden) in fact reached the view that (1) the Directing Creditors’ request was unreasonable by reason of circumstances specified in IPR r 75.250(a) or (2) the Directing Creditors’ request was unreasonable by reason of circumstances specified in IPR rule r 75.250(d); and (as a result of the possibly more exacting standard accepted by Mr Golledge) the Liquidators formed either of those opinions at the conclusion of, or as a result of, a genuine attempt to inform themselves of the relevant considerations and undertook a genuine assessment of those matters in coming to that conclusion. The Directing Creditors’ request is deemed to be unreasonable for the purposes of IPSC s 75-15 and the liquidators are not required to convene the relevant meeting if the Liquidators establish either of those matters.

I also recognise that IPR r 75–255 requires an external administrator to give notice in respect of unreasonable directions and provides that:

I have referred to the Record and the Notice above and I will address their content in detail below.

In her opening outline of submissions, Ms Beechey submits that:

This submission may not much assist the Directing Creditors where both the Record and the Notice recorded that the Liquidators had in fact formed each of the requisite opinions required by IPR r 75-250(2)(a) and (d), although the Directing Creditors challenge the adequacy of their basis for doing so. In any event, I do not accept this submission. Although the Court can and should have regard to the matters set out in the Reasons and the Notice, it should not decide the proceedings on a false factual basis, by disregarding matters that the Liquidators in fact took into account, as established by the evidence, even if they were not expressly stated in the Record or the Notice. It would also be odd to hold a liquidator to a higher standard of reasons in giving such a notice, likely in summary form, than applies to a substantive judgment of a Court or Tribunal which need not record every fact and matter to which the Court had regard in making a decision. I recognise that the Court might (in an appropriate case) not believe an external administrator’s evidence that there were intermediate steps in his or her reasoning process supporting those matters that were not fully recorded in the Notice, but this is not such a case.

Consistent with the approach that I have indicated above, I now turn to the assessment of the opinions formed by the Liquidators which requires that I first determine the content of those opinions, and then whether they were formed in good faith. I approach that question by reference to the Record, the Notice, Mr Barnden’s affidavit evidence and his cross-examination on the second day of the hearing. The Record and Notice both identified several reasons why the Liquidators considered the Direction was unreasonable in the relevant sense.

It is convenient to deal with the first, second and third reasons identified in the Record and the Notice together, where the supporting evidence overlaps. The first reason identified in the Record and the Notice related to the circumstances in which the winding up order was made and the involvement of several of the Directing Creditors in those matters. The second reason recorded in the Record and the Notice related to the fact that Bright Agile had not, at the hearing, sought to nominate persons other than the Liquidator for appointment. The third reason related to a concern that the Direction sought to “bypass” the position as to the appointment of independent liquidators as determined by the Court’s orders and secure the Directing creditors’ choice of liquidators.

The Record relevantly stated that:

The Record also noted that:

The Notice advised that:

The Notice also advised that:

In paragraphs [10]-[12] of his 27 May 2025 affidavit, Mr Barnden elaborated on his view that the Direction was an “attempt to circumvent” the appointment of the Liquidators. He also there refers to the outcome of his initial investigations, including the identification of loans made to the Company by several of the Directing Creditors that had not received unanimous board approval as required by an earlier Deed of Settlement and the subsequent payment of funds derived from those loans to Mr Hale and Mr Lenartowicz, who are also Directing Creditors, in transactions which were potentially voidable and may constitute a breach of directors’ duties. I accept Mr Barnden’s evidence that he had regard to these matters, to which liquidators would ordinarily give attention, in considering the Direction.

In his 27 May 2025 affidavit, Mr Barnden also noted that Bright Agile and Messrs Hale, Lenartowicz or Leung had not sought to oppose appointment of the Liquidators in the proceedings. He also referred to the view that he had formed that all of the Directing Creditors were associated with or related entities of the Company, other than one Directing Creditor who was a former director of the Company. He also addressed a letter dated 22 November 2024 from Mr Lenartowicz to the Company’s shareholders which he (rightly) observed had misrepresented the circumstances in which the Company was wound up.

Mr Barnden there expressed the view (Barnden 27.5.2025 [16], [19]) that:

It seems to me that this evidence does not rise higher than the possibility of misuse of the relevant powers and would not, if this were an appeal from the Liquidators’ decision on the merits, establish that the relevant direction was vexatious.

The fourth reason was stated in the Record as follows:

That reason was put a little more fully in the Notice, as follows:

In his third affidavit, Mr Barnden pointed (Barnden 27.5.25 [17]) to the possibility that, if removed, the Liquidators would apply to the Court under IPSC s 90-35 for reinstatement. Ms Beechey put, in cross-examination and in submissions, that this was a late invention, although Mr Barnden had referred to a possible application of that character under another provision of the IPSC in his second affidavit. I accept that Mr Barnden had recognised the possibility of such an application in December 2024, although not necessarily all the bases on which it could be made. I give little weight to this matter as a source of prejudice to creditors or shareholders since such an application could be brought where any liquidator is removed by creditors.

Mr Barnden also pointed, in his third affidavit, to the risk of delay in the progress of the liquidation and further costs that would be prejudicial to the Company’s creditors and shareholders and indicated his opinion (Barnden 27.5.25 [21]) that:

He also there explained why he considered that the Company’s shareholders, as well as creditors, stood to benefit from any recovery in the Polish Claim and referred to his recognition that, if successful, the claim could bring a substantial recovery. His evidence (Barnden 27.5.25 [23]) is also that:

Mr Barnden also referred to steps which, as at December 2024, he was taking to communicate with the Company’s shareholders as to these matters. He expressed the view, plausibly, that an insolvency practitioner should not incur substantial costs when put on notice of his or her potential replacement and (Barnden 27.5.25 [26]-[27]) that:

The fifth reason for the Liquidators not convening the requested meeting pursuant to the Direction related to a suggested difference of interests between the Company in respect of the Polish Claims and one of the Directing Creditors, Ample Skill, which was pursuing its parallel claim against the Republic of Poland. That issue was stated in the Record as follows:

That reason is also stated in the Notice as follows:

In his third affidavit, Mr Barnden also noted (Barnden 27.5.25 [20]) a potential conflict of interest between Mr Siew and Ample Skill on the one hand and the Company on the other so far as their potentially competing arbitration claims against the Republic of Poland were concerned.

Mr Barnden’s evidence in his third affidavit (Barnden 27.5.25 [33]) was that, in summary:

As I noted above, in closing submissions and in oral submissions on the second day of the hearing, Ms Beechey attacked Mr Barnden’s evidence as to delay and costs, submitting that it was recent invention. In oral submissions on the second day of the hearing, Mr Golledge responded the Court should not accept a submission that Mr Barnden had given dishonest evidence, so as to seek to “shore up” his position. I do not accept Ms Beechey’s submission although I accept, obviously enough, that Mr Barnden’s third affidavit was more detailed than the Notice and the Record, and also more detailed than his first and second affidavits in the proceedings. I do not doubt that Mr Barnden recognised at the relevant time that the Direction had been given in the second week of December 2024 and there would be difficulty in seeking to have creditors attend any meeting until the new year; that he also knew that it would be, at least, imprudent to incur expenses on significant activities which any newly appointed liquidators might consider should not have been undertaken; that continuing uncertainty as to the identity of the Liquidators appointed to the Company would inevitably delay progress of the Poland Claim and the liquidation; and that would likely increase its costs, as the usual consequence of delay.

Mr Golledge and Ms Bailey in turn submit that the Liquidators had in fact formed the requisite opinions under IPR rr 75.250(2)(a) and 75.250(2)(d), as recorded in each of the Record and the Notice, and that they did so in good faith in the sense noted above. In written submissions made on 3 June 2025, prior to the second day of the hearing, Mr Golledge and Ms Bailey also submit that:

In her opening outline of submissions, Ms Beechey in turn addresses the matters set out in the Record as follows, in an attack that is partly directed to their underlying merit and partly turns on a suggested distinction between calling the meeting and the resolution which would be passed at it, although both were addressed by the Direction:

Ms Beechey then submits, in her opening outline of submissions, that:

I consider this distinction is an artificial one, because the Direction incorporated the resolutions sought to be passed at the meeting, and whether the Direction was seriously prejudicial so as to outweigh the benefits of complying with it or vexatious depended upon what the meeting sought to achieve and upon the circumstances in which that would be achieved.

In oral submissions, Ms Beechey similarly submits (21.05.25 T27) that the Liquidators did not form the relevant opinions under IPR r 75-250 and they formed a different opinion. In particular, Ms Beechey submits that the Liquidators did not form the requisite opinion for the purposes of IPR r 75.250(2)(a) namely that “complying with the direction would substantially prejudice the interests of one or more creditors or a third party and that prejudice outweighs the benefits of complying with the direction”, notwithstanding that they had recorded that they had done so in the Record and advised the Directing Creditors that they had done so in the Notice. She submits (21.05.25 T24-25) that the Liquidators instead formed the opinion that their removal would be prejudicial, but “that is different to what is required” by r 75.250(2)(a) which requires that the Direction (as distinct from the relevant resolutions) be substantially prejudicial in a way that outweighs the benefits of complying with it; and she submits that there is no evidence before the Court that the Liquidators turned their minds to the need for substantial prejudice or undertook the exercise required by r 75-250(2)(a). Ms Beechey also submits that the Liquidators did not in fact form the opinion specified in r 75.250(2)(d) that the direction for the meeting was “vexatious” (21.05.25 T24), also notwithstanding that they had recorded that they had done so in the Reasons and advised the Directing Creditors that they had done so in the Notice.

In further written submissions made on 4 June 2025, prior to the second day of the hearing, Ms Beechey again submits that Mr Barnden’s reasoning process, as disclosed by his 27 May 2025 affidavit, did not address the question whether the Direction would substantially prejudice the interests of one or more creditors or a third party and that prejudice outweighs the benefit of complying with the Direction. Ms Beechey submits that there is no evidence that Mr Barnden turned his mind to the benefits of complying with the Direction. An obvious difficulty with that submission is that the Directing Creditors had not identified any benefits of complying with the Direction, although I recognise that, if the Direction was not unreasonable in the relevant sense, it would be a benefit to allow creditors an opportunity to vote at the relevant meeting.

I do not accept that submission. The Liquidators had recorded and notified the view that they had formed in response to that matter, by recording their satisfaction as to the matter stated in IPR r 75-250(a) in the Record and Notice. There was no particular complexity in the reasoning process as to that matter, because the Directing Creditors had not identified any benefit of complying with the Direction, by way of addressing any identified concern with the conduct of the liquidation or the Liquidators. Any benefit that exists in meeting their wish to hold the meeting, simply because that was their wish, was likely substantially outweighed by the Liquidators’ opinion, which I have accepted they held, as to disadvantages of delay and costs arising from that meeting. Ms Beechey also points to a suggested “benefit” that calling the meeting would have avoided this application; but I do not see any benefit in a liquidator convening a meeting in response to a creditors’ direction that is unreasonable in the requisite sense, for no better reason than to avoid the need to seek a direction from the Court or avoid a dispute with the creditors who had issued that unreasonable direction.

Ms Beechey also challenges the proposition that the Liquidators formed the relevant opinions in good faith, on the basis that that concept should be interpreted more broadly than Mr Golledge had put. I do not accept that submission where I find below that the Liquidators formed both of the requisite opinions and did so in good faith in the relevant sense.

In summary, on the proper construction of IPSC s 75-15 and IPR 75-250, which I have addressed above, I do not assess the Liquidators’ reasons for their decision not to call the meeting as required by the Direction as though on an appeal on the merits. The first question is instead whether, having regard to the matters to which the Liquidators referred in the Record and the Notice and their reasoning as to intermediate facts, they held (as they said they did, by express reference to then relevant provisions in the Reasons and the Notice) the opinion (“Requisite Opinion”) that complying with the Direction would substantially prejudice the interests of one or more creditors or a third party and that prejudice outweighed the benefits of complying with the direction. I am comfortably satisfied that they held that view, where their express reliance on r 75-250(2)(a) indicated that view and their reasons provided support for it. The second question is whether the Liquidators held that opinion in good faith, adopting the more demanding test for “good faith” that was accepted by Mr Golledge in submissions. I am satisfied that the Liquidators, acting in subjective good faith and after having made a genuine attempt to inform themselves and assess relevant matters, held the Requisite Opinion and that their opinions as to costs and delay were, without more, sufficient for them to do so.

I am also satisfied that the Liquidators also held the opinion, by reference to the winding up judgment, that several of the Directing Creditors had contributed to the failures of corporate governance which had led to the Company’s winding up; that Bright Agile had not, at the winding up hearing, sought to nominate persons other than the Liquidators for appointment; that the effect of the direction was to “bypass” the appointment of the Liquidators by the Court; and that Ample Skill had different interests from the Company in respect of the Polish Claim. I am also satisfied that the Liquidators in fact held the view that the Direction was vexatious, where their express reliance on r 75-250(2)(d) indicated that view and their reasons provided possible support for it I am satisfied that view was held in subjective good faith and that the Liquidators made a genuine attempt to inform themselves of, and assess relevant matters in, that regard. However, I have noted above that these matters do not rise higher than the possibility of misuse of the relevant powers and would not, if this were an appeal from the Liquidators’ decision on the merits, establish that the Direction was vexatious. In any event, it is not necessary to reach any final view as to these matters to determine this application given the findings I have reached on other grounds.

For completeness, Ms Beechey also submitted that the Liquidators had a personal interest in not being removed as the Company’s liquidators, presumably because of their interest in remuneration for performing that role, although it was not apparent how that submission either undermined the opinions they had reached or deprived them of good faith. It seems to me that that submission does not assist the Directing Creditors. First, any liquidator is asked to convene a meeting for his or her removal may have such an interest; second, whether that interest is material will depend on matters not addressed by the evidence here, including whether the liquidators already have ample work and could readily apply staff not used in one external administration to another; and Ms Beechey acknowledged that she did not seek to establish anything as to the Liquidators workflow or their capacity to substitute other work and other remuneration for that obtained from this liquidation if they were removed as liquidators (21.05.25 T45).

Also for completeness, both Mr Golledge and Ms Beechey recognise the possibility that the Liquidators could challenge a removal after the event. Ms Beechey submits that this is reason that the Court should direct the Liquidators to convene the meeting. I do not accept that submission. The question of whether the Liquidators were required to convene the meeting depends on the matters set out in IPSC s 75-15 and IPR r 75-250, and the Liquidators were not required to convene the meeting if it is unreasonable in the relevant sense. It is no answer to that conclusion to say that, if the Liquidators had chosen to call the meeting although the Direction to do so was unreasonable in the requisite sense and they were not required to do so, they could then have moved to set aside its outcome.

For these reasons, I find the Liquidators formed the Requisite Opinion under. at least, IPR r 75-250(2)(a) and did so in good faith; the Direction is deemed unreasonable for the purposes of IPSC s 75-15; and the Liquidators were not required to convene the requisite meeting.

As I noted above, the Liquidators seek an order under IPSC s 90-15, that they are justified in declining to convene the meeting required by the Directing Creditors. It is sufficient, for present purposes, that I set out my summary of the applicable principles as to that section in Re BCA National Training Group Pty Ltd (in liq) [2023] NSWSC 366 at [3]ff, to which Mr Golledge referred, as follows:

By their outline of submissions in reply made on 19 May 2025, Mr Golledge and Ms Bailey addressed the scope of the Court’s power under IPSC s 90-15 and submit that the direction sought by the Liquidators should be made where their decision to call the meeting has become the subject of controversy.

In her opening outline of submissions, Ms Beechey submits that:

These submissions do not assist the Directing Creditors, because I am here satisfied that the Liquidators decision not to convene the requisite meeting was made in good faith and did not involve any error of law or lack of prudence, and there is utility to the external administration in protecting the Liquidators against unwarranted claims arising from that decision.

In oral submissions, Ms Beechey also submits (21.05.25 T27) that it is not appropriate to make the direction sought by the Liquidators under IPSC s 90-15, so as to provide protection to the Liquidators in respect of the decision they have made. Ms Beechey also submits (21.05.25 T47) that the Liquidators do not need protection, because it is “unrealistic” to suggest that any of the Directing Creditors would “sue them personally for loss incurred by the [L]iquidators having refused to convene a meeting”. I also do not accept that submission, given the history of litigation between, variously, the Company’s shareholders and creditors in this matter.

It is plain from the matters that I addressed above that the Liquidators’ decision not to call the meeting required by the Directing Creditors is contentious, although not because it is wrong, where the Direction is deemed unreasonable on the basis set out above. I am satisfied that the relief sought would be of utility in providing protection to which the Liquidators are properly entitled as Court-appointed liquidators who are seeking to deal with the Company’s Polish Claims where its shareholders and creditors have long been in dispute with each other. The direction sought is within the scope of IPSC s 90–15(1) and does not concern a mere business or commercial decision, is advantageous to the external administration of the Company and would facilitate the performance of the Liquidators’ functions in the difficult circumstances to which I have referred. I will make the direction sought for those reasons.

By Interlocutory Process filed on 8 May 2025, the Directing Creditors sought an order, under IPSC s 90-15, that the Liquidators convene a meeting of the Company’s creditors to consider specified resolutions for the removal of the Liquidators and the appointment of new liquidators. Ms Beechey submits that the Court should make an order under IPSC s 90-15 directing the Liquidators to call the meeting on the Directing Creditors’ application.

By their outline of submissions in reply made on 19 May 2025, Mr Golledge and Ms Bailey respond that the Directing Creditors’ Interlocutory Application is:

I will not make the direction sought by the Directing Creditors under IPSC s 90-15 that the Liquidators convene the requisite meeting, where the Direction is deemed unreasonable for the purposes of IPSC s 75-15. I do not consider that the Court’s discretion under IPSC s 90-15 should be exercised to bring about a meeting where the basis to convene it under IPSC s 75-15 was not established. Consistent with my observation in 1st Fleet at [27], the exercise of the Court’s discretion in that matter would undermine the predictability of the relevant provisions, increase the likelihood that there would be disputes as to their application and undermine their purpose. If, contrary to my view, it would be appropriate for the Court to second guess the Liquidators’ decision not to convene the requisite meeting in that manner, it seems to me that decision was properly reached in the relevant circumstances and that is also sufficient basis to decline the relief sought by the Directing Creditors under IPSC s 90-15.

For these reasons, I make the following orders: