Ample Skill Ltd v Reidy

WARD P: On 9 December 2024, the applicants, in their capacities as creditors of the second respondent, Balamara Resources Ltd (In Liquidation) (the Company), directed the first respondent (the Liquidators), as liquidators of the Company, to convene a meeting of creditors of the Company (Direction) for the purpose of considering a resolution to remove the Liquidators and to appoint other named persons as liquidators of the Company. The Liquidators refused to convene the meeting on the basis that they had formed the opinion, in good faith, that the Direction was unreasonable (see s 75-15(2) of the Insolvency Practice Schedule (Corporations) 2016 (Cth) (IPS) and r 75-250 of the Insolvency Practice Rules (Corporations) 2016 (Cth) (IPR)).

By Interlocutory Process filed on 20 December 2024 in the Corporations List, pursuant to ss 95-15 and 90-20 of the IPS, the Liquidators sought an order to the effect that they were justified in declining to convene the meeting of creditors (Liquidators’ Application). The applicants (being the Directing Creditors) then filed their own Interlocutory Process on 8 May 2025, seeking an order pursuant to s 90-15 of the IPS that the Liquidators be directed to convene a meeting for the purpose of considering resolving, if they see fit, the said resolution (Directing Creditors’ Application).

The competing applications were heard by Black J on 21 May and 5 June 2025. His Honour noted in the primary judgment (at [2]) that it was the common position of the parties that the question whether it was reasonable in the requisite sense for the Liquidators to convene the requested meeting was to be determined as at the date of the request (i.e., 9 December 2024), rather than as at the date of the hearing. Pausing here, the Liquidators say that, by reason of that agreed approach, the question of the correctness or otherwise of the primary judge’s decision is academic and will not have any effect on the ongoing conduct of the winding up. I address that contention in due course.

On 13 June 2025, the primary judge gave the direction sought by the Liquidators and dismissed the Directing Creditors’ Application (In the matter of Balamara Resources Limited (in liquidation) [2025] NSWSC 618) (the primary judgment).

By summons dated 11 July 2025, the applicants seek leave to appeal from his Honour’s decision. They submit that the primary judge misconstrued the requirements of r 75-250(2) of the IPR and that, having done so, his Honour reached the wrong conclusions on the respective applications. They argue that his Honour’s error was compounded by errors regarding the admission of further evidence after the Liquidators had closed their case (on 21 May 2025) and the assessment of that late evidence.

The application for leave to appeal was heard concurrently with the appeal itself, on the basis that there was likely to be (as indeed proved to be the case) a substantial overlap between the leave application and the argument on the merits of the appeal were leave to be granted. As will be seen, the proposed appeal raises both matters of statutory construction and evidentiary issues, as well as challenges to findings of fact made by the primary judge.

The proposed grounds of appeal are set out in an amended draft notice of appeal as follows:

The relief sought by the applicants includes an order that:

While the applicants in some of their written submissions appear to raise a doubt as to whether leave to appeal is required, emphasising that the practical effect of the impugned orders was to reject with finality the Direction, they nevertheless accepted that leave to appeal is likely to be required because judicial directions issued to a liquidator are not ordinarily thought to be determinative of the rights of the parties; and they concede that leave is required in any event in respect of the proposed appeal from the primary judge’s evidentiary rulings (Grounds 1 and 1A).

The Liquidators contend that leave is required because the decision at first instance was interlocutory, being a decision pursuant to s 90-15 of the IPS in the context of an ongoing liquidation and where no rights were finally determined (citing, by way of example, Michael Wilson & Partners Ltd v Porter [2022] FCA 336 per Stewart J at [27], his Honour there citing Georges v Seaborn International Pty Ltd (Trustee) [2012] FCA 294 at [27] per Murphy J). I agree.

As to whether leave should be granted, the applicants argue that the interpretation of r 75-250 of the IPR (which is set out in due course below) is an issue of statutory interpretation of daily importance in external administrations generally, noting that there is no appellate authority on the issue and that, in two of the three relevant first instance decisions (In the matter of FW Projects Pty Ltd (in liq) [2019] NSWSC 892 (FW Projects) and AXF Group Pty Ltd v AXF Holdings Pty Ltd [2020] VSC 375) the Court did not have the benefit of submissions as to the proper construction of r 75-250 (in the first, the parties did not make submissions regarding r 75-250 at all (see at [159]) and, in the second, no party opposed the directions sought so the Court proceeded on the assumption that the matters raised by the liquidator were relevant). The third of the three first instance cases to which the applicants refer is that which is the subject of the present application. Thus, the applicants say that this is the first appellate case which squarely raises the interpretation of r 75-250.

Further, the applicants submit that this case raises an important point of public policy arising from the 2017 reforms to the conduct of external administrations. They argue that the primary judge’s construction of r 75-250 undermines the functioning of the powers conferred on creditors as part of those reforms and they submit that the interpretation of r 75-250 is also likely to affect the future interpretation of the same words in other rules (referring to rr 70-10, 70-15, 70-20, 70-25, 75-195, 75-250 and 80-15 of the IPR).

As to Grounds 1 and 1A, the applicants submit that leave should be granted on the basis that the errors they contend were made had a material bearing on the outcome of the case in that the evidence admitted introduced the only asserted reason of the Liquidators (the so-called Work Minimisation Reason – see below) that was not directed to the “wrong” question of whether the removal of the Liquidators would be vexatious or seriously prejudicial.

The Liquidators oppose the grant of leave. They say that the value of the matter in issue does not exceed the statutory threshold of $100,000 prescribed by s 101(2)(r) of the Supreme Court Act 1970 (NSW) and they submit that there is no substantial injustice to the applicants occasioned by the impugned orders. The Liquidators say that the applicants are not precluded from issuing a new request for the convening of a meeting at any stage of the ongoing liquidation (the primary judgment giving rise to no issue estoppel or res judicata which would prevent such a step) and they say that any such request would fail to be considered in light of the circumstances as they exist at the time of the request (rather than by reference to circumstances as they existed now almost 15 months ago).

Further, the Liquidators say that, in substance, the appeal is one from findings of fact (noting that 16 of the proposed grounds of appeal relate to findings of fact or the exercise of discretion), which they say were open to the primary judge on the evidence, are not manifestly wrong and would not necessarily be disturbed even if the “reasonableness” requirement for which the applicants contend were made out.

The Liquidators further say (as adverted to above) that any consideration of the application of r 75-250 of the IPR would necessarily be confined to a consideration of the particular factual circumstances in the winding up as they existed in December 2024 and would thus not be of any public utility.

Insofar as the applicants raise a question as to whether r 75-250 of the IPR requires that a decision to refuse to convene a meeting must be objectively reasonable, the Liquidators submit that this argument is misconceived and does not give rise to a serious proposition requiring appellate judicial attention. The Liquidators argue that the mere absence of appellate authority on the construction of a legislative provision does not trigger a need for such authority, submitting that the primary judgment is well-reasoned, is not manifestly wrong, and is not inconsistent with a plain reading of the statute or the two earlier cases that considered the statute. The Liquidators further point out that the relevant orders were made pursuant to s 90-15 of the IPS, being a discretionary provision in respect of which an error in the House v The King (1936) 55 CLR 499; [1936] HCA 40 (House v The King) sense (see at 505) must be demonstrated.

Having considered the arguments raised on the concurrent hearing, I am of the opinion that leave should not be granted. This is because there is no practical utility in the appeal. That can be demonstrated by the relief sought which includes a direction to the Liquidators to convene a meeting to consider and if thought fit, pass a resolution in the form sought some 15 months ago. This Court has no idea what has transpired in the winding up of the Company since December 2024. The suggestion that the order sought by the applicants should now be made in those circumstances (even if the applicants’ construction of r 75-250 is correct) is not tenable. Any new request to convene a meeting would need to be considered having regard to the circumstances at the time the request was made.

The Liquidators have conceded that no issue estoppel arises from the primary judgment. Where there is an available alternative avenue for the applicants to seek the relief they claim, this is not an appropriate vehicle for an appeal. The applicants’ response to the proposition that they could simply issue a new request for a meeting is that such a request would fall to be determined having regard to the primary judge’s construction of r 75-250 of the IPR (which they contend is wrong) (see T 8). However, that does not grapple with the fact that a new request would need to be considered by the Liquidators having regard to the circumstances of the winding up as they then exist (not as they existed at 9 December 2024) and the Liquidators would then do so with the benefit of this Court’s reasons. Further, the applicants argue that there is public utility in setting the law straight (T 9) but in view of the conclusion I would have reached had the leave been granted (see below) the force of that submission falls away.

Insofar as it is suggested that on that approach there could never be a challenge to a liquidator’s decision to decline to convene a requested meeting, it is relevant to note the timing of the respective applications. While the Liquidators’ Interlocutory Process was issued promptly after the making of the decision to refuse the request, the competing application by the applicants was not filed until some five months later, shortly before the hearing commenced on 21 May 2025. It is by no means apparent that the applicants could not have sought to adduce evidence as to the events that had occurred during the course of the winding up in support of their application to the primary judge for the relief they sought as to the convening of the requested meeting.

Therefore, and leaving aside the need for leave to challenge the evidentiary rulings and the hurdles facing the applicants when challenging the findings of fact and exercise of discretion, I would refuse leave to appeal. Were leave to be granted, I would dismiss the appeal for the following reasons.

The factual background to the present dispute is set out by the primary judge (at [3]-[11] of the primary judgment) and may be briefly summarised.

The Company is an Australian based mining company whose only significant asset appears to be its potential claims against the Republic of Poland (the Poland Claim) for alleged wrongful refusal to issue certain mining permits ([3] of the primary judgment). The Company was wound up by the Court on the just and equitable ground on 17 October 2024 and the Liquidators were appointed as the liquidators of the Company ([4]-[5] of the primary judgment).

On 14 November 2024, the Liquidators issued a circular to creditors which included a request for funding of the liquidation ([6] of the primary judgment).

On 9 December 2024, as already noted, the Directing Creditors issued the Direction requiring the Liquidators to convene a meeting of the creditors of the Company. As stated in the Direction, the purpose of the meeting was to allow the creditors to consider and resolve, if they saw fit, the following resolutions:

The Direction noted that each of the Directing Creditors agreed to bear “the costs of complying with the direction and if need be, provide security for those costs”. Pausing here, this is not in its terms an agreement or undertaking to bear any costs incurred as a consequence of compliance with the Direction, such as might be incurred as a result of delay in the winding up occasioned by the convening of the meeting or costs incurred as a result of the outcome of the meeting (such as duplication of costs by reason of new liquidators becoming involved in the winding up).

On 11 December 2024, the Liquidators’ solicitors confirmed receipt of the Direction and said that the Liquidators were considering the request. At or about that time, the Liquidators engaged an English law firm (Candey) in relation to an aspect of the preparation for the Poland Claim. On 16 December 2024, Candey sent an amended notice of dispute to the Republic of Poland in respect of the Poland Claim on behalf of the Company.

On or about 13 December 2024, the Liquidators prepared a Memorandum of File Note, recording reasons for non-compliance with the Direction (Annexure C to the third affidavit affirmed by Mr Andrew Barnden). Those reasons included:

By letter dated 17 December 2024, the Liquidators’ solicitors notified the Directing Creditors that the Liquidators declined to comply with the Direction (Refusal Letter), setting out the reasons for the refusal as required by r 75-250(2)(a) of the IPR. The Liquidators’ File Note, which Mr Barnden, a joint liquidator of the Company, accepted set out the record of their reasons for the purposes of r 75-250(2)(b) of the IPR, set out substantially the same reasons as those in the Refusal Letter.

In the Refusal Letter, under the heading “[t]he request is unreasonable”, while adverting to some doubt as to whether the Directing Creditors represented more than 25% of creditors (an issue not relevant to the proposed appeal), the Liquidators’ view that the Direction was unreasonable within the meaning of r 75-250(2)(a) and/or (d) of the IPR was recorded ([26] of the Refusal Letter). The reasons for that view were then outlined.

At [27]-[31], the letter noted the making of the winding up orders and his Honour’s reasons for so doing, noting that Bright Agile Ltd (one of the Directing Creditors) was granted leave to appear in the proceedings but did not oppose the making of the winding up order and the appointment of the Liquidators.

The Refusal Letter then stated:

The Refusal Letter noted (at [34]) that a letter dated 22 November 2024 sent by one of the Directing Creditors to shareholders (which I interpose to note his Honour found to be misleading in another respect – see [7] of the primary judgment) stated that the sole shareholder of another of the Directing Creditors (Ample Skill Ltd) was also bringing his own claim against the Republic of Poland seeking damages arising out of the same factual matrix (see [34] of the Refusal Letter). At [35] of the letter, it was noted that, insofar as the Direction related to Ample Skill, the Liquidators considered that Ample Skill had interests which competed with those of the Company’s creditors and shareholders as a whole.

The letter reiterated the Liquidators’ formation of the view that the Direction was unreasonable (at [36]) and went on to foreshadow an application under ss 90-15 and 90-20 of the IPS for an order that the Liquidators were justified in refusing to comply with the Direction.

As noted above, the applicants in May 2025 filed their competing application under s 90-15 of the IPS for an order that the Liquidators convene the requested meeting.

The competing applications were listed for hearing on 21 May 2025.

On that occasion, the Liquidators read two affidavits of Mr Barnden (one of the Liquidators): the first affirmed on 20 December 2024 and the second on 26 February 2025.

In the first of those affidavits, Mr Barnden deposed (under the heading Unreasonableness) that no creditor (including those associated with the Directing Creditors) had made any complaint or criticism about the Liquidators’ actions or the performance of the Liquidators’ duties ([31]); that evidence that was before the primary judge at the time of the making of the winding up order to the effect that there had been failures in the Company’s corporate governance was consistent with his investigations to date ([33]) (noting at the time the Company was placed into liquidation three of the Directing Creditors were all directors of the Company tasked with its governance ([34])); one of the Directing Creditors (Bright Agile Ltd) attended the winding up hearing and did not at that time oppose his appointment as liquidator ([35]); the sole shareholder (Mr Yaw Chee Siew) of one of the Directing Creditors (Ample Skill Ltd) also had a claim against the Republic of Poland and he was concerned that he and/or Ample Skill had interests which might compete with the Company’s Poland Claim ([37]); and the Liquidators had done “significant work” to progress the Poland Claim, including liaising with various lawyers, liaising with the Company’s Polish subsidiaries, attempting to secure the Company’s books and records and dealing with foreign legal proceedings commenced by the Company’s creditors ([38]-[39]).

Similarly, in Mr Barnden’s second affidavit, he deposed to work undertaken in relation to the international arbitration claim against the Republic of Poland (see [28]-[45]) and other work undertaken by the Liquidators ([46]-[50]); to his concern as to the potential for duplication of work by any replacement liquidators which would significantly increase costs associated with the liquidation and prolonged delay in progressing the liquidation ([56]); and to a concern that the Company’s ability to defend arbitration proceedings commenced by one of the Directing Creditors (Mr Yaw) may be prejudiced by a change in liquidators due to the time required for incoming liquidators to familiarise themselves with the proceedings ([61]).

Pausing here, the applicants submit that none of those matters went to the question in issue, namely why Mr Barnden considered it “unreasonable” to convene the meeting (as opposed to why he thought it would be prejudicial to the creditors if the Liquidators were removed as liquidators of the Company).

The applicants note that, in both written and oral submissions before the primary judge, counsel for the Directing Creditors submitted that the Liquidators had asked themselves the wrong question; that the Liquidators’ reasons both in the Refusal Letter and in Mr Barnden’s evidence went to the removal of the Liquidators and not the convening of the meeting; and that there was no evidence that the Liquidators had undertaken the balancing exercise required by r 75-250(2)(a) of the IPR in forming the opinion that the Direction was unreasonable. They point out that Mr Barnden was present in Court on 21 May 2025 (at least from midday). (Mr Barnden’s recollection in cross-examination was that he was in Court from around 11.45am/12noon on 21 June 2025 (5/6/25; T 6)).

During closing submissions in reply by Senior Counsel for the Liquidators, the primary judge raised the following about the Refusal Letter:

His Honour then said that Mr Barnden was:

His Honour later said:

Instructions then having been sought from Mr Barnden, the Liquidators then sought leave to adduce further evidence explaining the reasoning process that had led Mr Barnden to the conclusions expressed at [46] of the Refusal Letter. Counsel for the Directing Creditors opposed the grant of such leave. The primary judge granted leave to the Liquidators to file and serve “a further affidavit limited to addressing the immediate [sic; intermediate] steps of his reasoning process between the facts to which he refers and the conclusions which he has reached, in determining not to convene a meeting of creditors of Balamara Resources Ltd”. After discussion as to available dates, the hearing was adjourned to 5 June 2025.

In his Honour’s ex tempore judgment on the application to re-open and call further evidence, the primary judge said:

Following that grant of leave, the Liquidators filed a third affidavit of Mr Barnden (affirmed on 27 May 2025), in which Mr Barnden deposed that he considered that the Direction appeared to be an attempt to circumvent the Court-ordered appointment of independent liquidators tasked with investigations of the affairs of the Company ([10]) and that in his view an attempt to circumvent the orders made by the Court, especially when (at least some of) the Directing Creditors had not opposed the Liquidators’ appointment during the winding up proceedings, was vexatious ([12]). He also deposed to a concern that a purpose of the Directing Creditors may have been trying to avoid an investigation of positive breaches that a new liquidator might not be funded to pursue and that the absence of such investigations would be prejudicial to the creditors of the Company because it would deprive them of possible recoveries ([19]).

Mr Barnden again deposed to his belief that Mr Yaw’s (and/or Ample Skill’s) intention in directing the convening of the meeting was acting in their own interest as opposed to the interest of all creditors and shareholders of the Company ([20]).

Mr Barnden then addressed the issue of impact on creditors – costs and delay, referring to [32]-[33] of the Refusal Letter. Mr Barnden deposed that in his experience insolvency practitioners should not incur unnecessary substantial costs when put on notice of their potential replacement ([25]) and said that the delay of approximately eight weeks before a meeting could be held, during which time the Liquidators would be required to minimise their work including in respect of the Poland Claim so as not to incur unnecessary costs, would be prejudicial to creditors and shareholders of the Company because it would delay steps needed to progress the Poland Claim including while Mr Yaw’s claim would be able to proceed ([26]).

At [27], Mr Barnden deposed that in addition to that prejudice if a resolution to replace Liquidators succeeded he formed the view that creditors would be prejudiced by the further delay and costs associated with replacement liquidators getting up to speed with the Poland Claim.

At [28]-[29], Mr Barnden explained his view as to the Ample Skill “conflicting claim” (referring to [34]-[35] of the Refusal Letter), namely that delay would allow Mr Yaw’s claim to proceed at a faster pace than the Company’s claim and that, if Mr Yaw’s claim ultimately succeeded, the damages he would receive would not require distribution in accordance with s 556 of the Corporations Act 2001 (Cth) (Corporations Act) such that the Company’s creditors would not receive dividends on a priority basis, nor would shareholders receive any payment of surplus funds on a pari passu basis, and that creditors and shareholders would be prejudiced.

After explaining the “no complaint/reason”, including that no reasons were given for the delay in issuing the Direction and no reason why they wanted to remove the Liquidators ([30]), Mr Barnden said that he:

The applicants say that only one of the reasons set out in the third affidavit went to the convening of a meeting, that being a new reason (the Work Minimisation Reason) which they identify as that given by Mr Barnden in his third affidavit that:

The applicants say that Mr Barnden also further developed some reasons previously given but did not identify how they went to the prejudice of convening a meeting, as opposed to his perception of prejudice if the creditors resolved to remove the Liquidators.

The Directing Creditors objected to parts of Mr Barnden’s third affidavit being admitted into evidence, on the basis that they were outside of the scope of the grant of leave, including relevantly objections to [25], [26] and the opening sentence of [27] (which they say was the evidence as to the new Work Minimisation Reason):

Those objections were overruled.

The primary judge considered that each of (relevantly) [25], [26] and [27] of Mr Barnden’s third affidavit were within the scope of leave so far as Mr Barnden indicated what he said were intermediate steps of his reasoning process. His Honour said that if Mr Barnden held the relevant belief, it was an intermediate step in the reasoning process as a matter of characterisation (5/6/25; T 3.15). His Honour also said that the words objected to in [33] of that affidavit would not rise above any earlier matters which sought to give rise to costs and delays but, so far as they referred to earlier matters, his preliminary view was that this was within the scope of the relevant leave. Counsel for the Directing Creditors did not seek to be heard to the contrary (5/6/25; T 3.33).

The applicants note that Mr Barnden gave evidence in cross-examination that the Refusal Letter and the File Note set out the final reasons that the Liquidators decided upon to say that the Direction was unreasonable (5/6/25; T 18.28). Mr Barnden accepted that the Work Minimisation Reason (i.e., the reason accepted at [69] of his Honour’s judgment relating to the eight week delay before the meeting and concern to minimise work, thus delaying steps to progress the Poland Claim) was not mentioned in the Refusal Letter or File Note but Mr Barnden said that this was “all part of the thought process” (see 5/6/25; T 33-37).

Mr Barnden agreed that he did not mention those reasons in his first or second affidavit, explaining that the third affidavit was prepared on the basis that he had to expand upon his thought process of reaching those reasons (5/6/25; T 11.7-16) but said that the matters in [25] and [26] of his third affidavit were part of the thought process that led to those reasons. He denied that those paragraphs were a retrospective justification for his decision and denied that he had included them in the third affidavit in an attempt to meet the Directing Creditors’ argument that the Liquidators had asked themselves the wrong question (5/6/25; T 11.28-33).

In cross-examination, when asked what work he would not have done had he agreed to convene the meeting, Mr Barnden said:

Mr Barnden agreed that (notwithstanding that he declined to call the meeting) he had minimised the work in respect of the Poland Claim (although he considered such a delay could be prejudicial to creditors) (see 5/6/25; T 15.40-47). This evidence is relied upon by the applicants in the context of Ground 4 of the proposed grounds of appeal, in support of the inference they argue should have been drawn that the Liquidators intended at the time to minimise the work and hence the Work Minimisation Reason was a neutral factor. I consider that argument in due course.

Mr Barnden was asked about other paragraphs of his affidavit and similarly denied that these were attempts at retrospective justification of his reasons.

At T 21, Mr Barnden affirmed that he considered an increase in costs and delay would be substantially prejudicial to shareholders because he said it flowed into the Ample Skill matter (i.e., the competing claim against the Republic of Poland) and that delay in progressing the Poland Claim would allow Ample Skill potentially to have an unjust enrichment on their claim, which would be prejudicial to the creditors and shareholders.

In 2017, legislative reforms commenced which conferred on the general body of creditors of a company under external administration, a power to resolve to remove and replace the external administrator as well as a power on creditors to direct the external administrator to convene a meeting.

The Second Reading Speech for the Insolvency Law Reform Bill 2015 (at p 1468) referred to the empowerment of creditors to remove a practitioner appointed to a personal or corporate insolvency “through a simple resolution of creditors at any time, and without Court involvement” and to this removing a “significant barrier”.

Section 75-15(1) of the IPS, being Schedule 2 to the Corporations Act, confers on the creditors of a company the power to direct a liquidator to convene a meeting of creditors. A liquidator must convene the meeting if directed to do so by creditors meeting certain value thresholds (s 75-15(3)). The liquidator need not comply with such a direction if the direction is not reasonable (s 75-15(3)).

Rule 75-250(2) of the IPR defines when a direction to convene a meeting will be “unreasonable”:

The ability of a creditor or group of creditors to direct the convening of a meeting (s 75-15 of the IPS) is separate and distinct from the power of the creditors as a whole to pass a resolution for the removal and replacement of a liquidator (s 90-35 of the IPS). The applicants say that this is reflected in the structure of the IPS (Division 75 conferring a power on creditors to direct the convening of a meeting, which can only be refused if the direction itself is unreasonable; Division 90 conferring on the general body of creditors a power to resolve to remove a liquidator).

Pausing here, the applicants submit that, in considering whether a direction made under s 75-15 is unreasonable, the consequences of the exercise of the creditors’ power under s 90-35 to remove a liquidator ought not be taken into account. It is submitted that to conflate the two is to give the liquidator a “backdoor” into defeating the creditors’ exercise of their rights under s 90-35 to remove a liquidator by the simple expedient of denying them a meeting.

The applicants maintain that it is clear from the text of r 75-250 that the opinion to be formed is as to substantial prejudice and benefits of complying with the direction (as opposed to the possible consequences of the vote at the meeting) and they say that this is consistent with the existence of the separate remedy in s 90-35(4) of the IPS under which a liquidator may apply to be reinstated and the Court may reinstate them if the Court is satisfied that their removal was “an improper use of the powers of one or more creditors”. It is submitted that it is on that application that the propriety of the removal of the liquidator is to be considered. The applicants emphasise that, in determining any application for reinstatement, the Court is to form its own view as to whether there was an improper use of the creditors’ powers; it is not to defer to the good faith opinion of the liquidator on that question. The applicants say that this is a deliberate legislative choice which has been sidestepped by the Liquidators’ refusal to convene the meeting.

The applicants say that there is a clear analogy with courts declining to injunct the holding of a creditors’ meeting because the creditors might pass at that meeting a resolution in which related creditor’s votes are determinative of the outcome; instead, the court permits the meeting to be held and, if the resolution passes, the court will hear any application to set aside the resolution. The applicants say that that approach is informed both by the uncertainty as to whether the resolution will pass and by the legislative change that conferred on the court a power to set aside a resolution passed on related-creditor votes. They argue that the same reasoning applies here: that the legislature has conferred on the court a power to reinstate a liquidator improperly removed; and that it is at that stage, and not at the stage of a direction to convene a meeting, that the court (and not the liquidator) is to consider the propriety of the removal of the liquidator.

His Honour noted that the parties had proceeded on the basis that either s 75-15(1)(c) or (1)(d) was satisfied (as to the threshold required for a direction of the kind given ([20])) and that the primary issue in dispute was whether the Direction was not reasonable for the purposes of s 75-15(2)(3) of the IPS and r 75-250 of the IPR.

Addressing a submission by the Directing Creditors that his Honour had been in error in FW Projects in determining whether it was reasonable to convene the relevant meeting by reference, inter alia, to what that meeting was intended to do, his Honour did not accept that submission. His Honour said (at [26]), that the determination of whether a direction to call a meeting is unreasonable must depend on what the meeting was intended to do “particularly where the direction itself incorporates reference to what the meeting will address (see also his Honour’s comments at [32] where his Honour said that the Court should determine whether the Direction “as a whole (including the proposed resolutions) is reasonable in the relevant sense”).

His Honour accepted that r 75-250 provides an exhaustive statement of the criteria against which the question whether the relevant direction is reasonable is to be determined ([33]), pointing to the consistency with that approach to the approach taken in similar provisions allowing creditors a qualified right to access documents in a liquidation.

At [37], his Honour said he would proceed on the basis that, to satisfy the requirement that the liquidator reached the relevant opinion “acting in good faith”, the liquidator should have made a genuine attempt to inform himself about the subject matter of the opinion and to assess the weight of matters identified by the liquidator as being relevant to the decision (even though this might be more exacting than the case law required).

At [38], his Honour referred to Re Pacific Biotechnologies Ltd [2020] VSC 636 (Re Pacific Biotechnologies), saying that an administrator who establishes that an opinion was based on a reasonable basis would plainly satisfy the “good faith” standard but said that the case law indicated that an administrator could also satisfy the good faith standard without establishing that the decision was objectively reasonable or correct in the relevant circumstances when it was honestly made (and possibly based on a proper attempt to inform himself or herself of and consider relevant matters).

At [42] and [78], his Honour said that the good faith requirement in r 75-250 does not require that the Liquidators had a reasonable basis on which to form an opinion, just that the Liquidators genuinely held the opinion, that the Liquidators tried to inform themselves about matters relevant to forming the opinion and that they made a genuine attempt to assess the weight of those matters prior to reaching the opinion.

His Honour rejected the submission of the Directing Creditors’ counsel for three reasons. First, that this was not the ordinary meaning of good faith. Second, that while it was understandable that a good faith standard would be applied in an exacting way in determining whether to grant leave to bring a derivative action, the legislative intent in this context was plainly not to bring in, by that standard, a merits review of the liquidator’s decision whether to call a meeting. Third, that 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, the IPR could have readily so provided.

At [43], his Honour did not accept counsel for the Directing Creditors’ submission that a narrow reading of good faith would defeat creditors’ right to direct a meeting of creditors and remove a liquidator. First, because that right was already qualified by exceptions which provide that such a meeting need not be held. Second, the fact that the qualified right would be preserved against any decision of the liquidator not to convene the meeting which was made in bad faith.

At [72], his Honour noted the submission that the Liquidators had asked the wrong question – whether replacement would be vexatious or prejudicial, when the requirement was to establish whether the Direction to call the meeting was vexatious or so seriously prejudicial as to outweigh the benefits of complying with the Direction. His Honour said (at [73]) that the distinction was artificial because the Direction incorporated resolutions sought to be passed and whether there was serious prejudice so as to outweigh the benefits of compliance or was vexatious depended on what the meeting sought to achieve and the circumstances in which that would be achieved.

At [75], addressing the submission that there was no evidence that Mr Barnden had turned his mind to the benefits of complying with the Direction, his Honour said that an obvious difficulty was that the Directing Creditors had not identified any benefit of complying with the Direction but went on to say that he recognised 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”.

At [76], his Honour did not accept the submission that the Liquidators did not address the question whether the Direction would be substantially prejudicial and that prejudice outweighed the benefit of compliance, saying:

The primary judge found that the Liquidators held an opinion in good faith that the Direction was unreasonable under r 75-250(2)(a) ([78]):

His Honour said that he did not need to reach a concluded view as to whether the Liquidators held an opinion in good faith that the Direction was vexatious ([79]).

His Honour said at [81]-[82]:

As to the directions sought by the Liquidators under s 90-15, his Honour was satisfied that the relief sought would have utility in providing protection for the Liquidators ([88]).

As to the Directing Creditors’ Application, his Honour said at [91]:

Broadly, the applicants contend that, properly construed, s 75-15 of the IPS requires that a liquidator call a meeting as directed by creditors unless the thing required by the direction (i.e., convening the meeting) is not objectively reasonable. They argue that the question is not whether the passing of any resolutions to be put at the meeting would have consequences that are reasonable or unreasonable. While they accept that the purpose for which the meeting is requested to be held (i.e., the proposed resolution(s)) may be taken into account (counsel saying in oral submissions that what resolutions are to be put at the meeting is relevant to the question of reasonableness – see at AT 3), the applicants submit that, in considering whether a direction made under s 75-15 is unreasonable, the potential consequences of the outcome of the meeting (i.e., here, the exercise of the creditors’ power under s 90-35 to remove a liquidator) ought not be taken into account. It is submitted (as it was at first instance) that to conflate the two (i.e., the unreasonableness of the Direction and the unreasonableness of the consequences of passing a resolution proposed to be put at the meeting) is to give the liquidator a “backdoor” into defeating the creditors’ exercise of their rights under s 90-35 to remove a liquidator by the simple expedient of denying them a meeting.

The Liquidators submit that there was no error in the primary judge’s determination that they had formed an opinion, in good faith, that the Direction was unreasonable and that they were, therefore, justified in declining to convene the meeting.

Further, the Liquidators submit that even if the construction of r 75-250 of the IPR for which they contend to be wrong, the appeal must still be dismissed because his Honour was satisfied that the Liquidators actually formed the necessary opinion in good faith and on reasonable grounds. It is noted that, in doing so, his Honour rejected the applicants’ challenge to the Liquidators’ evidence on this topic and that this finding was one based, in part, on a credibility assessment of Mr Barnden’s evidence. The Liquidators say that the applicants have not demonstrated a basis on which to overturn the factual findings of the trial judge in this regard. Hence, it is submitted that even if the applicants succeed on the construction issue, in light of the facts as found by the primary judge, the orders his Honour made ought not be disturbed.

I turn now to the respective proposed grounds of appeal. For ease of reference, I set out the particular ground before turning to the submissions made in relation to that ground.

The applicants describe Grounds 1-4 as raising an evidentiary issue, namely whether the primary judge erred in granting leave to the Liquidators to re-open their case during the Liquidators’ closing submissions in reply and, when the hearing recommenced two weeks later, admitting parts of that evidence over objection. Although dealt with collectively in the applicants’ submissions, it is preferable to deal with Grounds 1 and 1A sequentially.

At the outset, the Liquidators maintain that it is not open to the applicants to raise this ground of appeal because they say that the applicants did not oppose the grant of leave to adduce further evidence, despite expressly being given the opportunity to do so, referring to the transcript of the hearing on 21 May 2025 (at T 61.42-62.15). His Honour there indicated an intention to allow the re-opening application, referred to ss 56, 61 and 62 of the Civil Procedure Act 2005 (NSW) (Civil Procedure Act) and invited counsel for the applicants to make any submission as to why that course should not be followed (see 21/5/25; T 61.48-49).

The Liquidators say that, beyond referring to the fact that the Liquidators had already filed two affidavits, counsel for the applicants did not take any objection to the course proposed by his Honour and did not assert any prejudice to them were leave to be granted. In particular, the Liquidators point out that it was not suggested to his Honour that any unfairness would arise from the fact that Mr Barnden had been privy to the oral submissions which had been made by the applicants as to his evidence; and that it was not said that the grant of leave would invite “retrospective justifications” to remedy defects in the Liquidators’ reasons. The Liquidators note that the only submission which was made at that stage by the applicants was in relation to the timing of any resumed hearing and for the delivery of any further affidavit from the Liquidators and for the allocation of sufficient time to the applicants to consider and to respond, if necessary, to that evidence (all of which concerns were accommodated by the timetable proposed by his Honour and accepted by the applicants) (21/5/25; T 62.48-64.9).

In reply submissions, the applicants contend that the grant of leave to re-open and call further evidence was opposed as they say his Honour understood (referring to his Honour’s ex tempore judgment). I note that in that judgment, apart from noting the submission by counsel for the applicants as to the fact that two affidavits had already been served in the proceedings by the Liquidators, his Honour also referred to Counsel for the applicants’ submission that it might be necessary to cross-examine Mr Barnden about any further evidence and potentially to serve notices to produce for documents; as well as stating that, to the extent that the applicants in their submissions had sought to rely on the gap in Mr Barnden’s reasoning process “or to characterise that gap as amounting to answering the wrong question”, then the applicants “would be entitled to respond to any change which arises when and if that gap is filled”. Thus, by reference to the transcript (at 21/5/25; T 62.1-15), it might be more accurate to say that the applicants’ opposition to the application to re-open could be inferred from the submissions they made at the time (rather than expressly being opposed). Nothing ultimately turns on this.

As to the substance of the proposed ground of appeal, the applicants accept that the grant of leave to re-open was a discretionary decision and that they must demonstrate error in the House v The King sense. They identify the relevant error as being that the primary judge failed to take into account the prejudice to the Directing Creditors in having to meet new evidence as to Mr Barnden’s reasoning after the Directing Creditors had made comprehensive submissions, in the presence of Mr Barnden, as to the defects in Mr Barnden’s reasoning. It is submitted that the grant of leave to re-open and call further evidence invited retrospective justifications shaped to remedy the defects in the Liquidators’ reasons that had been exposed by the Directing Creditors’ submissions and that allowing the Liquidators to re-open and call further evidence in those circumstances caused serious prejudice to the Directing Creditors’ case (which they say was compounded by the primary judge admitting, over their objection, evidence that went beyond the scope of the grant of leave – the subject of their proposed Ground 1A).

The applicants submit that evidence of a person’s beliefs as to their reasons for holding an opinion is inherently difficult to challenge and say that, for that reason, it was particularly important that Mr Barnden give all of his evidence of his reasons before they embarked on establishing that those reasons were insufficient. They maintain that there was obvious prejudice in allowing evidence to be given by Mr Barnden after he had read and heard the other side’s arguments against the validity of the reasons he previously gave for his opinion, and he had heard the judge’s preliminary views in respect of those arguments (the prejudice being that Mr Barnden was permitted an opportunity to tailor his further evidence of his personal beliefs to overcome the legal arguments). They say that the prejudice caused by the grant of leave to re-open was not raised at the time because, had the new evidence been within the narrow grant of leave, there may have been no prejudice.

The applicants further contend that the primary judge’s exercise of discretion in permitting the Liquidators to re-open their case and call further evidence was not consistent with the “just, quick and cheap” resolution of the real issues in the proceedings (the overriding purpose invoked by the primary judge by reference to s 56 of the Civil Procedure Act).

As noted above, it is accepted that the decision to grant leave to re-open and to adduce further evidence was a discretionary judgment on a question of practice and procedure, such that House v The King error must be shown. Here, the primary judge explained his reasoning, including by reference to the overarching principle which governs matters of case management (referring among other provisions to s 56 of the Civil Procedure Act). His Honour gave the applicants’ counsel the opportunity to object to the course he proposed and set the terms on which the leave was granted. His Honour did not (as the applicants in effect assert) fail to take into account that there might be prejudice to the applicants in having to meet new evidence going to the filling of the gap in Mr Barnden’s reasoning process that they had relied on in their submissions. Indeed, his Honour referred in his ex tempore reasons to the applicants’ submissions as to that gap in the context of saying that they would be entitled to respond to any change arising when and if the gap was filled.

The applicants had the opportunity to adduce evidence in response to Mr Barnden’s third affidavit and, perhaps more importantly, to cross-examine on the further evidence and to put submissions to the Court in light of that cross-examination.

There was no error in failing to take into account potential prejudice to the applicants by reason of the opportunity for retrospective justification of the relevant opinion. His Honour was well aware of that (see the transcript exchanges extracted earlier) and that was addressed by the ability for the applicants to cross-examine on that very issue. Insofar as the applicants submit that his Honour’s course was not consistent with the overriding purpose in s 56 of the Civil Procedure Act, this amounts to little more than a difference of opinion as to the effect of such leave being granted. His Honour clearly took the overriding purpose into account and his conclusion was not so manifestly unreasonable as to bespeak error in the way in which it was reached. Insofar as the complaint seems to be that the Liquidators had the opportunity to improve their case (or conversely the applicants’ prospects of success were potentially diminished), by reference to the inherent difficulty in cross-examining a witness as to his or her belief, what here occurred is that his Honour explained why he considered it in the interests of justice to permit further evidence on that confined topic. The very fact that, in oral submissions, it was frankly conceded that if the further evidence had not (as they contend it did) gone beyond the scope of the leave granted, there would have been no argument made by the applicants as to prejudice (see AT 14.27) demonstrates the lack of merit to the challenge raised by Ground 1.

Therefore, were leave to be granted, Ground 1 would be dismissed. It is not necessary in those circumstances to address the Liquidators’ contention that it was not open to the applicants to raise this ground at all (as explained above).

The context in which this ground arises is as follows. When the hearing resumed on 5 June 2025, the Liquidators sought to read Mr Barnden’s third affidavit, affirmed on 27 May 2025. The applicants had indicated, ahead of the resumption, objections to parts of that affidavit. Relevantly, objection was taken to the following paragraphs ([25] and [26]) and, in the case of [27], the first sentence thereof:

The Liquidators point to the following exchange which took place after the affidavit was formally read (5/6/25 June; T 3.1-34):

The Liquidators say, by reference to the above, that the applicants did not ultimately press their objections. The applicants cavil with that proposition, maintaining that the primary judge ruled on them, stating that he did so in the manner he had indicated.

The terms of the leave granted, as recorded in the ex tempore judgment, were that further evidence was permitted “directed to the intermediate steps between the factual observations he [Mr Barnden] makes and the conclusions that he reaches ...”. The Liquidators say that the scope of that grant is to be understood in light of the exchanges with counsel on 21 May 2025 (T 60.35-61.25), and that the leave was limited to evidence which illuminated the reasoning process undertaken by Mr Barnden and explained the logical connection between the factual matters to which Mr Barnden had had regard and his conclusions drawn from those facts.

The applicants emphasise that the leave was for further evidence of Mr Barnden directed to the intermediate steps “between” the factual observations Mr Barnden had made and the conclusions that he reached. The applicants say that the reference in the grant of leave to the “factual observations he makes” was to the factual observations in Mr Barnden’s existing evidence. The applicants’ complaint is that the evidence that was admitted, over objection, was evidence of new reasons in support of the Liquidators’ opinion, and not the “intermediate steps” in the chain of reasoning.

The Liquidators say that, in accordance with the grant of leave, the paragraphs to which the applicants objected, identified the basis for the view that there would be delay and his view that such would be prejudicial, noting that both the File Note and the Refusal Letter (at [32]) contain a reference to the consequences of “increased costs” and “delay” which Mr Barnden believed would be caused if he complied with the Direction. The Liquidators say that the evidence to which objection was taken explained the reasoning process which Mr Barnden undertook in reaching the ultimate conclusion expressed in the Refusal Letter and that this is what his Honour had contemplated by the grant of leave.

The applicants’ response is to contend that the Liquidators have selectively quoted from the File Note and Refusal Letter in attempting to link the Work Minimisation Reason to “increased costs and delay”. As to costs, the applicants say that there can be no suggestion that there would have been any costs associated with convening the meeting, because the Directing Creditors had agreed in the Direction to bear the costs of complying with the Direction and there was no evidence of any costs associated with convening the meeting. As to delay, the applicants say that, when read in its context in the File Note and the Refusal Letter, the delay referred to is the potential delay in prosecuting the Poland Claim if the Liquidators were removed, as confirmed in Mr Barnden’s third affidavit evidence filed prior to the hearing. The applicants say that there was no mention of costs or delay in Mr Barnden’s first affidavit and they note that, in his second affidavit, Mr Barnden explained his reasoning as to costs and delay as follows:

The Liquidators submit that even if those two paragraphs ([25] and [26]) of Mr Barnden’s third affidavit ought to have been excluded, this would not provide a basis for overturning his Honour’s decision, referring to the need for the applicants to demonstrate that such evidence materially affected the outcome of the hearing (citing Gerlach v Clifton Bricks Pty Ltd (2002) 209 CLR 478; [2002] HCA 22 at [6]). It is noted that his Honour examined (at [47]-[68]) the evidence given by Mr Barnden concerning his reasons for concluding that convening the meeting would be prejudicial and/or vexatious and that the Work Minimisation Reason (set out at [25] and [26] of Mr Barnden’s third affidavit) was only one of a number of factors which led to the conclusion about delay. The Liquidators submit that, on a fair reading of the judgment as a whole, it cannot be said that had the impugned paragraphs been excluded from consideration, his Honour would have reached a different conclusion or that these were in any significant way determinative in his reasoning.

The applicants on the other hand maintain that the wrongly admitted evidence did affect the final result, saying that it was the only evidence of a reason for refusing the Direction that may have been addressed to the correct question (the effects of convening the meeting) and not to the wrong question (the anticipated effects of the removal of the Liquidators).

Again, the decision to admit the parts of the further evidence to which objection was taken was a discretionary judgment on a question of practice and procedure. The primary judge explained his reasoning as to why the evidence in question fell within the scope of the leave he had granted. The primary judge was obviously in the best position to assess the scope of the leave that he had granted. That said, it is clear from the ex tempore reasons of 21 May 2025, that his Honour was permitting evidence of the “line of reasoning” which connected the facts to which Mr Barnden had referred and the conclusions which he had drawn from those facts – i.e., an explanation of Mr Barnden’s subjective reasoning process (since his Honour said that the line of reasoning would be a matter within Mr Barnden’s knowledge). It was certainly open to the primary judge to read the impugned paragraphs of Mr Barnden’s third affidavit as explaining that line of reasoning. The emphasis that the applicants here put on the word “between” is to my mind misplaced if it suggests that it was not within the scope of leave for Mr Barnden to adduce evidence of his reasoning process or “line of reasoning”. The fact that there was no reference in the Refusal Letter/File Note to an eight week delay does not lead to an inference that this did not form part of the reasoning process.

As to whether the further evidence proffered new reasons for the decision as opposed to exposing the relevant line of reasoning, the concern as to increased costs and delay in the liquidation was clearly referred to in both the File Note and the Refusal Letter. While there was no reference to the Work Minimisation Reason, it is clear that there was a concern as to the impact of delay, including, in particular, on the preparation for the Poland Claim.

As to whether there was prejudice occasioned by the admission of that evidence, Mr Barnden was squarely challenged in cross-examination that his latest evidence was a recent invention (5/6/25; T 11.9-33; T 17.13-15; T 18.27-28). The applicants further say that it was put to Mr Barnden in cross-examination that his evidence had been influenced by the Directing Creditors’ submissions on the first day of the hearing (5/6/25; T 11.30-34). Relevantly, Mr Barnden denied that this was a recent invention.

Having had the benefit, in assessing that evidence, of observing Mr Barnden in cross-examination, the primary judge did not accept the proposition that it was a recent invention ([69]). That finding was not glaringly improbable or inconsistent with incontrovertible facts.

Had leave been granted for Ground 1A, I would have dismissed it.

Grounds 2 and 3 challenge the factual findings made in the final sentence of [69] of the judgment:

The applicants submit that, if the Work Minimisation Reason had been one of the Liquidators’ reasons for refusing to comply with the Direction, it would have been included in the Refusal Letter and the File Note (as required by r 75-250(2) of the IPR) and in Mr Barnden’s first two affidavits. The applicants say that it is more likely that the Work Minimisation Reason was a retrospective justification which emerged only after the Directing Creditors had identified in written and oral submissions that the Liquidators had directed themselves to the wrong question (their removal, instead of the convening of a meeting) than the Liquidators’ opinion having been based on the Work Minimisation Reason which they nonetheless chose not to refer to in the Refusal Letter, the File Note or either of Mr Barnden’s first two affidavits.

The applicants contend that the primary judge should have found that the Work Minimisation Reason did not form part of the Liquidators’ reasons at the time of the refusal to comply with the Direction.

It is noted that Mr Barnden accepted in cross-examination that: the Refusal Letter contained a fair and accurate statement of his reasons for finding that the Direction was unreasonable; it was important not to omit any of his reasons from the written record; the File Note together with the Refusal Letter provided a fair and reasonable statement of his reasons and that they set out the final version of the reasons (5/06/25; T 7 5-15; T 8.5-27) and that Mr Barnden also accepted that he did not put the Work Minimisation Reason into the Refusal Letter, though saying that “[i]t’s there saying that it’ll result in unnecessary delay and additional costs if I’m replaced” (5/6/25; T 9. 49).

The Liquidators, in response, point to the following evidence in support of his Honour’s conclusions at [69]. As to the first, (that Mr Barnden recognised, when he received the Direction of 9 December 2024 that it was the second week of December and that it would be difficult to seek to have creditors attend any meeting until the new year), the statements in the Refusal Letter (at [2] and [32]) as to the timing of the receipt of the Direction and the concern about the impact of convening the meeting on creditors, and the first and third bullet points on p 2 of the File Note, as well as Mr Barnden’s third affidavit (at [25]-[27]). As to the second (that Mr Barnden knew it would be imprudent to incur expenses on significant activities which newly appointed liquidators might consider should not have been undertaken), they point to Mr Barnden’s third affidavit at [25] and the transcript of his cross-examination on 5 June 2025 (at T 10.14-18; T 12.16-25, 39-49). As to the third (that uncertainty as to the identity of liquidators would inevitably delay progress of the Company’s Poland Claim and the liquidation), they point to the Refusal Letter at [2] and [32] and the first and third bullet points on p 2 of the File Note, as well as Mr Barnden’s third affidavit at [25]-[27] and his cross-examination on 5 June 2025 at T 12.16-25, 39-49. As to the fourth (that a usual consequence of delay as described is an increase in costs), the Liquidators say that this was an inference that his Honour was entitled to draw given Mr Barnden’s experience in the conduct of liquidations.

The applicants say that the evidentiary references to which the Liquidators have referred (see above) were not references to any cost or delay involved in convening the meeting but, rather, to cost and delay if the Liquidators were removed.

The Liquidators say that the Work Minimisation Reason was not a new justification for their refusal to convene the meeting; rather, it was part of the reasoning process which was referred to in the Refusal Letter at [32] and in the third bullet point on page 2 of the File Note, although they accept that the detail of the “intermediate reasoning steps” was not there fully explained.

Further, the Liquidators submit that, even if the Work Minimisation Reason evidence had not been taken into account by the primary judge, the applicants have not demonstrated that a different conclusion would have been reached had those two paragraphs not been admitted into evidence.

In my opinion, the challenge to his Honour’s factual findings at [69] is not made good. It was open to his Honour to accept Mr Barnden’s reasoning (as explained in the third affidavit) for the conclusions he had drawn as to the impact of convening the meeting (by reference to increased costs of the liquidation and delays in the prosecution of the Poland Claim) and to accept Mr Barnden’s evidence to the effect that, although not precisely stated in the File Note and Refusal Letter, the “Work Minimisation Reason” was part of what underlay his concern as to those costs and delay.

The purpose of the further evidence, as his Honour made clear at the time leave was granted for that evidence, was to expose the line of reasoning leading to the conclusions drawn by the Liquidators as to the unreasonableness of the Direction. Given the generality of the reference to the impact on the creditors and increased costs, a more detailed exposition of the reasoning process as contained in Mr Barnden’s third affidavit is not surprising and does not lead to the conclusion that this involved a new reason or retrospective justification for that concern.

Had leave been granted, I would have dismissed Grounds 2 and 3.

Proposed Ground 4 contends that his Honour ought to have found that the “Work Minimisation Reason” was not objectively reasonable for two reasons: first (Ground 4(a)), that a liquidator should not minimise work pending the calling of a meeting where an attempt to remove the liquidator has been foreshadowed where (as here) the liquidator holds the view that the minimisation of work would be prejudicial to creditors; second (Ground 4(b)), further or in the alternative, where the Liquidators intended to minimise their work for a period of at least eight weeks regardless of whether they complied with the Direction.

As to the first, it is submitted that the opinion, if based on the Work Minimisation Reason, was unreasonable and capricious, not an opinion formed in good faith. The applicants say that the primary judge ought to have found that the Liquidators’ opinion was not formed in good faith because the Work Minimisation Reason did not provide a reasonable basis to refuse to comply with the Direction and the rest of the Liquidators’ reasons as to prejudice concerned the prejudice of their removal, not the prejudice of calling the meeting.

The applicants say that no real prejudice would have resulted from the convening of the meeting because the eight week delay in convening the meeting coincided with the Christmas holiday period. (That submission appears to focus on the Christmas holiday period in this jurisdiction, whereas at least some of the work in relation to the Poland Claim was being undertaken overseas where the Christmas holiday period may not have customarily been as long.)

As to the second, the applicants say that the cross-examination of Mr Barnden exposed that the Liquidators minimised their work anyway (and they argue that it should be inferred that they must have intended to do so) despite having refused to comply with the Direction, until the Court had determined whether the refusal was justified. Accordingly, the applicants say that the Work Minimisation Reason was a neutral factor in whether or not to comply with the Direction because, either way, the interests of creditors were to be prejudiced by the Liquidators’ intended minimisation of their work.

The Liquidators say that the proposition in 4(a) asks for a finding not contended for at first instance and the proposition in 4(b) is not established on the evidence (the attempt to pursue such a line of questioning in cross-examination having been abandoned).

Ground 4 in effect assumes that which is sought to be established by Grounds 5 and 6, namely that, in order to be a decision made by the Liquidators acting in good faith, the decision must be objectively reasonable. For that reason, were leave to have been granted, Ground 4 would fail.

However, even assuming a requirement of reasonableness, I am not persuaded that it is unreasonable for a liquidator to form the view that work should be minimised pending an application for the liquidator’s removal per se (Ground 4(a)), nor even that this would necessarily be the case if to do so might be to the prejudice (or substantial prejudice) of creditors. In such circumstances, a liquidator (as, here, the Liquidators were) would be called upon to balance the competing prejudices – the prospect of increased costs of the liquidation that might ultimately prove unnecessary if the liquidator were then to be removed and the prospect of prejudice or substantial prejudice by reference to delay in relation to matters such as the Poland Claim in the present case if they did minimise work. Where funding of the liquidation appears to have been required by the Liquidators in the present case, the prospect of incurring potentially unnecessary or increased costs would no doubt become more acute.

Thus, the decision to minimise costs in the present case, notwithstanding ensuing delay in the liquidation does not seem to me to be objectively unreasonable and would not lead to the conclusion that the Liquidators’ opinion as to the unreasonableness of the Direction was itself objectively unreasonable.

As to the contention that it should be inferred that the Liquidators intended to minimise their work for at least eight weeks regardless of whether they complied with the Direction (and hence this should have been seen as a neutral factor), I do not accept that the primary judge was required to draw such an inference. The concession by Mr Barnden that work was minimised even though the meeting was not held does not require that a positive inference be drawn that, as at the time of declining to call the meeting, that was the Liquidators’ intention.

Thus, were leave to have been granted I would dismiss Ground 4.

Grounds 5 and 6 raise one of three issues of statutory construction in the proposed appeal (the third “good faith” issue as described in the applicants’ submissions), namely whether the requirement in r 75-250 of the IPR that a liquidator form the requisite opinion in good faith requires that the opinion be (objectively) reasonable or not unreasonable. The applicants accept that Grounds 5 and 6 will not require determination if it is concluded that the Liquidators did not form the requisite opinions or did so arbitrarily or capriciously. Grounds 5 and 6 are as follows:

The applicants submit that “good faith” in the present context requires an assessment both of whether the opinion was formed honestly and of whether there was a reasonable basis for the opinion. They say (and the Liquidators appear to accept) that a decision made capriciously is not a decision made in good faith. In the context of a request to convene a meeting to consider a resolution to remove the Liquidators (in which the Liquidators have a personal interest), the applicants contend that good faith ought require that the liquidator’s opinion be reasonable.

It is noted that the concept of good faith appears within the IPR in rr 70-10, 70-15, 70-20, 70-25, 75-195, 75-250 and 80-15 in a similar formulation, in each case referring to the standard to which an opinion must be held by an external administrator in order for that opinion to determine the rights of creditors in that given context.

The applicants rely on Re Pacific Biotechnologies, a case which concerned the right of creditors to seek production of documents under r 70-15(2)(c) of the IPR, in support of their contention that, in order for an external administrator to have reached an opinion in good faith, the opinion must have a reasonable basis for so doing (see at [35] per Robson J). There, Robson J found that it was reasonable for the administrator to refuse to produce a file note sought by the creditors because the administrator genuinely believed (albeit wrongly) that the file note was subject to legal professional privilege. The applicants say that there was, in that case, a reasonable basis for the liquidator’s belief.

The primary judge (at [38]) considered Re Pacific Biotechnologies. His Honour accepted that an administrator who establishes that his opinion was based on a reasonable basis would plainly satisfy a “good faith” standard but, as noted earlier, his Honour considered that the case law to which he had been taken (including Spalla v St George Motor Finance Ltd (No 7) [2006] FCA 1177 at [168] per Kenny J) indicated that an external administrator could also satisfy the good faith standard without establishing that the 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”. The applicants say that the primary judge erred in so finding (Ground 5) and that his Honour ought to have found that good faith requires there to be a reasonable basis for the opinion (Ground 6).

The applicants argue that the concept of “good faith” in this context should be that which applies in the administrative law context, namely that a statutory power will be exercised reasonably by a decision-maker and, where a decision depends on the opinion of the decision-maker, the decision is reviewable and is required not to be unreasonable. The applicants say that, in this context, the same requirement might be described as an absence of capriciousness. They argue that the primary judge was also wrong to find that the good faith standard for which they contended constituted a “merits review” ([42]); rather, they say that it is a standard aspect of judicial review. The applicants submit that the question is whether the result was unreasonable, not whether the Court would have reached the same opinion that the Liquidators reached.

The applicants also point to the requirement of good faith that arises in the context of leave to bring derivative actions under s 237 of the Corporations Act. They submit that the primary judge was wrong to find that the standard for a liquidator faced with a direction to call a meeting is a lower standard than is required of a creditor wishing to bring a claim in the name of the company ([42]).

Noting that r 75-250 is delegated legislation made pursuant to delegated rule-making power conferred on the Minister by s 105-1 and s 75-15(4) of the IPS, the applicants say that it is to be interpreted consistently with the scope and purpose of the enabling Act (the Corporations Act and specifically the IPS). The applicants point to the introduction of the IPS in 2017 with the express objective of “empowering stakeholders with an interest in the conduct of an insolvency administration to better protect their own interests” and they contend that the reforms conferred an important power on creditors to vote to remove a liquidator, the exercise of which power requires the convening of a meeting.

The applicants submit that the IPR should be construed consistently with the legislative purpose of enhancing creditor participation and that the narrow view of good faith taken by the primary judge is inconsistent with that legislative purpose. Reference is made to the Explanatory Memorandum that introduced the 2017 reforms, regarding the creditors’ right to direct the liquidator to convene a meeting:

In reply submissions, the applicants clarify that the meaning of good faith for which they contend is a subjective test “with some elements of reasonableness (or lack of unreasonableness) as exists both in the court’s supervision of liquidations and in administrative law”. They say that this is neither a “merits review” nor an “insistence ... that the Liquidators base their opinion on reasons which must be correct”. Rather, they say that the question is whether the result was reasonable, or not unreasonable, not whether the Court would have reached the same opinion reached by the Liquidators.

The Liquidators emphasise that the chapeau to r 75-250 of the IPR imposes a requirement as to the process by which the administrator’s opinion is reached, i.e., that the opinion is reached having acted in good faith in doing so. They submit that the requirement for good faith is directed to the decision-making process and not to its outcome (the opinion itself). In response to this, the applicants say that r 75-250(2) of the IPR does not impose a requirement that “the opinion is reached having acted in good faith in doing so”; rather, it imposes a requirement that “the external administrator, acting in good faith, is of the opinion that ...”. The applicants argue that this means that the liquidator must be acting in good faith in holding the opinion; they say there is no reference in the rule to process and no justification to read in such a requirement.

The Liquidators submit that it would have been open to the legislature to provide for a condition of reasonableness but that the provision did not take that form. In response, the applicants say that this is a non-sequitur (for the reasons given in Menz v Wagga Wagga Show Society Inc (2020) 103 NSWLR 103; [2020] NSWCA 65 at [67](2) per Leeming JA, Payne and White JJA agreeing) and they say that subordinate legislation is less carefully drafted, and less keenly scrutinised, than primary legislation.

As to the analogy sought to be drawn with the power to request documents, the Liquidators point to the existence of an express provision enabling the person requesting the document to apply to the Court if that request is refused (s 70-90 of the IPS) and to the absence of a similar provision in respect of a decision to refuse a meeting request, which they submit is consistent with the legislature having decided that ultimately this should be a matter left in the hands of the administrator, subject only to the obligation to act in good faith. In reply submissions, the applicants argue that the equivalent right of appeal in the present context is a liquidator’s right to apply to be reinstated by the court under s 90-35(4). They say that there was no need for the IPR to provide a separate right for creditors to apply to the Court where a direction to call a meeting is refused (referring to the availability of an application under s 90-15 of the IPS to challenge a decision of a liquidator) and point to the requirement for reasons for the decision as indicating the availability for review of those reasons.

Pausing here, insofar as the applicants refer to s 90-15 of the IPS and note that principles similar to administrative law principles are applicable on an application under that provision (referring to In re Edennote Ltd [1996] 2 BCLC 389, 394 (Nourse LJ, Millett LJ agreeing) and Bowen CJ in Eq in Re Equity Funds of Australia (in liq) (1976) 2 ACLR 238 at 239), the availability for such a challenge rather undermines the applicants’ “backdoor” argument (i.e., the argument that the primary judge’s construction of the relevant provision provides the liquidator with a backdoor means of frustrating the creditors’ entitlement to remove a liquidator by the simple expedient of refusing to convene a meeting, since there is an avenue by which the creditors can seek a direction that the meeting be convened – as they have done here).

While the Liquidators accept that the IPR and IPS are to be interpreted consistently with the scope and purpose of the enabling legislation, and they accept that the introduction of s 70-15 of the IPS was intended to “empower” stakeholders such as creditors, the Liquidators argue that the legislation granted only a qualified right to have a meeting actually held (as opposed to the unqualified right to make a request for that to occur) and they submit that this right is not undermined by the administrator’s exercise of a discretion to refuse the meeting based on the administrator’s opinion, reached in good faith, that the request was unreasonable.

In response to the submission that the legislature granted only a “qualified right to have a meeting actually held”, the applicants point to the unqualified right of the creditors “by resolution at a meeting, [to] remove the external administrator of a company”. They submit that the qualification on the right to direct the convening of a meeting should be narrowly construed so as not to deprive creditors of their right to remove the external administrator by resolution at a meeting. In this regard, the applicants invoke the observations of Lord Sumption in Eclairs Group Ltd v JKX Oil and Gas plc [2016] 3 All ER 641 at [37] (his Lordship there emphasising the importance of the application of the proper purpose rule to the powers of directors where the company is in play between competing groups seeking to control or influence its affairs), the applicants arguing that, of all the situations in which a liquidator may exercise his or her powers, a battle for control of the liquidation is probably the one in which the good faith or reasonableness requirement in r 75-250 has the most valuable part to play.

The Liquidators argue that the invocation of principles governing the approach to judicial review of administrative decision-making is inapt because the text of r 75-250 of the IPR itself describes the criterion by which the correctness or otherwise of the administrator’s decision is to be assessed. It is submitted that the IPR has, by imposing the good faith obligation, prescribed the limits to the administrator’s ability to refuse a direction to convene a meeting.

As to the applicants’ complaint that the primary judge was wrong (at [42]) to find that the standard for a liquidator faced with a direction to call a meeting is a lower standard than what is required under ss 236 and 237 of the Corporations Act for derivative leave, the Liquidators say that this ignores two of the three reasons given by the primary judge at [42] as to why the applicants’ proposed “reasonable basis” requirement should be rejected (namely, that such a condition is not part of the ordinary meaning of the term “good faith”, including by reference to case law, and that, if the intent of the IPR had been for the Court to assess whether the liquidator had a reasonable basis for his or her opinion, the text of the IPR could have so provided). Further, the Liquidators note that s 237(2) expressly incorporates objective standards in an assessment by the Court of an application for a grant of derivative leave (s 237(2)(c) and (d)), which they say could easily have been incorporated into the language of r 75-250 of the IPR.

As to the reliance placed by the applicants on Re Pacific Biotechnologies, the Liquidators point to Watson & Co Superannuation Pty Ltd v Dixon Advisory and Superannuation Services Ltd [2022] FCA 1273, to which the primary judge referred (at [39]), where the Court was satisfied that the administrators had formed an opinion, acting in good faith, that disclosure of insurance policies would found an action by the insurers for breach of confidence or risk avoidance of the policies, without the Court considering the merits or likelihood of either occurring.

The Liquidators accept that if a liquidator did not identify any matters which were considered or which exposed his or her reasoning process, it may be easier to establish that the opinion was not actually held and/or that it was not reached in good faith. Further, they accept that if exposition of the reasoning demonstrated that the administrator had acted in a capricious or arbitrary manner then that would undoubtedly be relevant to the question whether the administrator had acted “in good faith” but they submit that this is a different challenge to that here made by the applicants.

The Liquidators place emphasis on the context in which s 70-15 of the IPS and r 70-250 of the IPR will operate, namely, that they are concerned with a routine feature of insolvency administrations (the convening of creditors’ meetings) and they repeat the submission made at first instance and noted by his Honour at [90], as to the adverse consequences which would flow from importing a reviewable standard of objective reasonableness for an opinion as to unreasonableness of the direction to convene a meeting. The applicants cavil with the proposition that the context of s 70-15 IPS and r 75-250 IPR is “a routine feature” of insolvency administrations; rather, they say that the context is the convening of creditors’ meetings that the liquidator does not wish to convene, including meetings at which creditors wish to put resolutions for the removal of a liquidator.

No error has been established in the construction of r 75-250 of the IPR. The rule in its terms provides that a direction to convene a meeting of creditors is not reasonable if the external administrator “acting in good faith” is of the requisite opinion. As the Liquidators contend, the predicate of “acting in good faith” qualifies the subject of the condition (the external administrator) not the opinion itself. Therefore, the question is as to whether the external administrator (here, the Liquidators) has, acting in good faith, formed the requisite opinion. While there is not a direct reference to the process of decision-making, that is clearly what must be explored when determining whether the opinion that has been formed has been reached in good faith.

There is no basis for reading into the rule a requirement that the opinion be one that is objectively reasonable. It may readily be accepted (as the Liquidators have) that an opinion which is arbitrary or capricious is unlikely to have been one reached when acting in good faith. However, that does not mean that there is a requirement of reasonableness in the sense of the opinion being one that must be shown to have been reached in the absence of capriciousness, as the Liquidators have submitted. Rather, it points to the difficulty an external administrator is likely to have of showing that an arbitrary or capricious decision was made in good faith.

The fact that the Liquidators have a duty in all aspects of their role, to act in the interests of creditors (as the applicants have emphasised) takes the matter no further.

Insofar as the applicants invoke administrative law principles or concepts (referring to Avon Downs Pty Ltd v Commissioner of Taxation (Cth) (1949) 78 CLR 353 at 360; [1949] FCA 26), as the Liquidators point out, these concepts have developed generally in a very different statutory context. Moreover, it has been recognised in the administrative law context that where the decision-maker is required to be satisfied, as a matter of opinion, the scope for review is limited (see Buck v Bavone (1976) 135 CLR 110; [1976] HCA 24 at 118-119 per Gibbs J; cited with approval in Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259; [1996] HCA 6 at 275-276). Similarly, the invocation of cases dealing with the requirement of good faith in the context of applications for leave to bring derivative actions is inapt in the present context. There is nothing in r 75-250 or the context in which it appears in the IPR to warrant the imposition of an additional requirement of reasonableness in order to establish that the Liquidators’ opinion was reached or formed in good faith.

As indicated above, I do not accept that a “narrow” reading of the good faith requirement undermines the objective of empowering creditors to protect their interests (by ensuring their ability to call meetings to monitor the administration of the winding up and to remove external administrators) or provides a “backdoor” for liquidators to defeat creditors who desire to remove them. The right of creditors to direct the convening of a meeting (including one to consider a resolution to remove the external administrators) is subject to the limitation that the external administrator may decline to convene the meeting if the direction to convene a meeting is unreasonable. When such a direction will be unreasonable for this purpose is provided for by r 72-250 and, as his Honour found, that rule sets out exclusively the circumstances in which a direction will be unreasonable. The requirement that the external administrators act in good faith in forming an opinion of the kind required before the direction will be unreasonable is the protection against the creditors being denied the right to request that a meeting be convened.

Insofar as the applicants submit that the ability of a liquidator, to make an application for reinstatement, if such a meeting is convened and the meeting resolves to remove the liquidator provides the setting in which the unreasonableness of the outcome of such a meeting should be tested (the applicants arguing that there is a clear analogy with courts declining to injunct the holding of a creditors’ meeting because the creditors might pass at that meeting a resolution in which related creditor’s votes are determinative of the outcome), that analogy is inapt in circumstances where the primary judge was required to determine the competing applications before him. The existence of a separate remedy in s 90-35(4) of the IPS for reinstatement of a liquidator removed at a meeting of the kind here sought to be held (if the removal was an improper use of the powers of one or more of the creditors) does not inform the proper construction of r 75-250 of the IPR. Indeed, just as the applicants submit that the propriety of the removal of a liquidator should be considered in the context of an application under s 90-35 of the IPS, so might it be observed that the applicants are not deprived of the ability to require a meeting to be held in circumstances where they could make (and have made) an application under s 90-15 for such a direction to be made by the Court.

The limitation on the creditors’ ability to direct the convening of a meeting by reference to the reasonableness of the direction (to be determined having regard to the definition of reasonableness provided by r 75-250) turns on whether the Liquidators have formed the requisite opinion in good faith. There is no requirement for the Liquidators’ opinion to be objectively reasonable. In the same sense in which it was held in Re Pacific Biotechnologies that the decision was in good faith, in the present case if the requisite opinion was formed honestly and, to the extent that this was a requirement of the good faith standard, having taken into account relevant matters, then that sufficed to satisfy the requirement that the Liquidators had acted in good faith.

Had leave been granted, I would have dismissed Grounds 5 and 6 (which means that those proposed grounds of appeal which are predicated on a requirement of reasonableness would necessarily also fail).

Ground 7 contends for a finding that the Liquidators’ opinion that the Direction was vexatious was not formed in good faith because it was not reasonable or alternatively was an opinion that no reasonable person in their position could hold. The applicants say that his Honour ought to have held that the opinion was not held in good faith because it was capricious or unreasonable. As noted above, his Honour did not need to make a finding as to this issue (see at [79]).

In their statement of challenges to factual findings, the applicants point to the finding by the primary judge (at [58]) that the Liquidators’ reasons regarding vexatiousness rose no higher than a possibility of misuse of the relevant powers; and the applicants say that there was nothing in the matters identified in the Refusal Letter, the File Note or Mr Barnden’s evidence which established that the Direction to convene the meeting was vexatious.

The applicants say that it was capricious or unreasonable for the Liquidators to “jump” from suspicions of a misuse of powers to an opinion that the Direction to convene the meeting was vexatious. The applicants submit that there can be nothing vexatious in creditors, whatever their personal motivations, wishing to have a meeting convened so that they may put a resolution to the general body of creditors. The applicants further say that, as the Explanatory Memorandum recognised, creditors might remove a liquidator even where it is not actually in their best interests to do so; and they note that the Explanatory Memorandum went on to observe that the safeguard against this was the simultaneous introduction of a creditors’ power “more easily [to] obtain information regarding the conduct of the administration” (not the refusal of the liquidator to convene the meeting).

Further, the applicants submit that there is no proper basis for an opinion that the Direction was vexatious because Bright Agile appeared as an interested person at the winding up application and did not then oppose the appointment of the Liquidators. The applicants argue that creditors exercising their statutory power to replace a liquidator may vote as they see fit without having to satisfy anyone of their reasons in advance and that the safeguard against improper use of the creditors’ powers is the remedy in s 90-35(4) of the IPS (referred to above).

The applicants note that three situations were identified at first instance that might constitute a vexatious direction to convene a meeting: first, as appears in r 75-250(3), where a direction is given within 20 business days after a similar direction was given; the second and third (as identified in the Liquidators’ written submissions) being where the resolution proposed to be put at the meeting is beyond the authority of the meeting to resolve or where the resolution would be otherwise incapable of having legal effect.

In their written submissions, the applicants accept that a liquidator considering the reasonableness of a direction to convene a meeting may “of course” have regard to the resolutions proposed to be put at the meeting in considering whether it is futile to convene the meeting and so the Direction unreasonable. However, the applicants say that the liquidator may not assume the outcome of a vote on the proposed resolution and then determine the reasonableness of the direction to convene the meeting based on whether the liquidator considers the consequences of the passing of the resolution to be reasonable. The applicants contend that to do so is to usurp the role of the Court on any future application under s 90-35(4) of the IPS for the liquidator to be reinstated.

The Liquidators say that Ground 7 depends on the applicants succeeding on Grounds 5 and 6 but that, even if it were accepted that there is a requirement that the Liquidators’ opinion have a reasonable basis, the Liquidators’ evidence as to the factual basis for the opinion which was reached and the primary judge’s acceptance of that evidence, together with his Honour’s conclusion that the opinion was justified ([78]), means that Ground 7 (and relatedly Ground 11) ought be dismissed.

The Liquidators submit that they correctly directed their attention to whether or not the Direction was unreasonable and expressly considered matters that related to that question, including: that the Direction appeared to be an attempt to bypass the orders made by the primary judge as to the Liquidators’ appointment; that there would be an increase in costs of the liquidation and delays in the Company’s prosecution of the Poland Claim; and that the Direction was given by a creditor (Ample Skill), whose sole shareholder was bringing his own claim against the Republic of Poland and whose interests were thus considered to conflict with those of the Company’s creditors and shareholders as a whole.

Further, the Liquidators submit that the primary judge was correct (at [32] and [73]) to reject the applicants’ submission that the question of reasonableness or otherwise of a request to convene a meeting could be divorced from consideration of the purpose sought to be achieved by the proposed meeting and the circumstances in which it would be achieved. The Liquidators say that the applicants accepted at first instance that the purpose of the proposed meeting was a relevant consideration when ascertaining whether a direction under s 75-15 of the IPS is unreasonable. The Liquidators submit that creditors, who are funding the liquidation processes, ought not be put to the expense and other consequences of convening and holding meetings without due consideration being able to be given, by the administrator, to the reasonableness of what is proposed to be achieved at the meeting.

The Liquidators submit that the fact that the reasons articulated by the Liquidators may be seen to impact upon the reasonableness not only of convening the meeting but also the adverse consequences of removal (were that to occur) is not to the point. They say that the concern with the immediate impact on issues then pressing in the winding up, namely, the expeditious prosecution of the Poland Claim was relevant to both and that they were entitled to take that into account in responding to the request; and did so.

In reply submissions, the applicants argue that, of the three matters to which the Liquidators are said to have had regard in forming the opinions required by r 75-250(2)(d) and r 75-250(2)(a), the first and third of those matters can only be relevant to the formation of an opinion (under sub-rule (d)) that the Direction is vexatious and that those matters were addressed to the wrong question and were quintessentially matters to be considered on a reinstatement application, not matters to be considered by a liquidator in forming an opinion as to whether the Direction was vexatious.

The contention that his Honour ought to have found that the Liquidators’ opinion that the Direction was vexatious was unreasonable, in circumstances where his Honour did not need to reach a final view on this issue given the finding as to the opinion that it was unreasonable, cannot be accepted. It was not necessary for his Honour to make a finding on every issue in dispute in circumstances where there was a dispositive finding on the latter issue (New South Wales v Kuru [2007] NSWCA 141 at [128] per Ipp JA).

In any event, the submission that there should have been a finding that the opinion that the Direction was vexatious was not an opinion held in good faith because it was capricious or unreasonable is not made good. The Liquidators’ reasons included reasons related to the lack of opposition to their appointment followed by the making of the Direction and the perceived conflict arising out of the competing claims by Ample Skill against the Republic of Poland. That reasoning may or may not be subject to criticism from an objective point of view but it is hardly capricious (and, as concluded above, it was not required to be objectively reasonable). It was open to conclude that the belief or opinion was honestly held even if not correct.

Had leave been granted, Ground 7 would have been dismissed.

Grounds 8 and 9 raise the second issue of statutory construction identified by the applicants on the proposed appeal, namely, whether there is an implicit requirement in s 75-15 of the IPS or r 75-250(2) of the IPR that creditors identify, in the direction to a liquidator, the benefits of convening the meeting or provide justification for their wish to have the meeting convened (see also Ground 12 below). As to Ground 8, this is framed as follows:

Ground 8 refers to the reasons of the primary judge at [15] and [18]. At [15], his Honour noted that Mr Barnden in cross-examination had acknowledged that, under the provisions for removal of a liquidator introduced by the IPS, creditors are not required to provide reasons for their exercise of the power to remove a liquidator but had observed that it would normally be good practice to do so (5/6/25; T 5). His Honour then went on to 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”. In this paragraph, his Honour does not draw any adverse inference against the applicants at all. His Honour is clearly predicating that observation on the situation where a creditor seeks to establish that there is reason for the liquidator’s removal. That observation has no application to the situation where the creditor does not do so.

As to [18], there his Honour referred to an affidavit read by the applicants from a person claiming to be a creditor of the Company and sole shareholder of a company which is a creditor of the Company (Mr Michael Hale), who gave evidence as to his wish for a meeting to be held for there to be a vote to remove the Liquidators. His Honour simply noted that Mr Hale did not provide any explanation as to why he (or others) took that view and did not suggest any aspect of the Liquidators’ conduct had given rise to any basis for concern. His Honour stated that he proceeded on the basis that no evidence that Mr Hale or another Directing Creditor could have led as to that matter would have assisted them in their opposition to the Liquidators’ application or in advancing their own application (citing Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418-419 (Ferrcom); Zaccardi v Caunt [2008] NSWCA 202 at [27]).

The applicants argue that the primary judge impermissibly drew an adverse inference against the applicants arising from their lack of evidence of the reasons supportive of the Direction. The applicants note that there is no requirement in the statutory regime for directing creditors to explain or justify why they wish to put resolutions to a meeting of creditors. Nor, they say, on an application for an order that the Liquidators complete their statutory duty, are directing creditors required to supply reasons why the Liquidators ought be removed.

In response, the Liquidators submit that his Honour was here describing, in an orthodox way, aspects of the cross-examination of Mr Barnden which related to the proposition that, in a different context (namely, when seeking to remove a liquidator), it was not incumbent on a creditor to provide a reason for wanting that outcome (with which Mr Barnden agreed – see at 5/6/25; T 5.47-49).

The Liquidators refer to [75]-[76] of his Honour’s reasons, which address a submission made by the applicants concerning alleged deficiencies in the evidence given by Mr Barnden in his third affidavit (namely, the absence of any reference to the balancing exercise contemplated by r 75-250(2)(a) of the IPR). The Liquidators submit that his Honour’s reference to the absence of any explanation from the applicants as to any benefit of complying with the Direction did not form the basis of any adverse inference against the applicants but simply explained why his Honour drew no adverse inference as to Mr Barnden’s evidence based on its failure to refer explicitly to a “balancing exercise” between prejudice and benefit. In other words, they say that the primary judge was explaining why a favourable inference need not be drawn to the advantage of the applicants in light of their forensic decisions as to the conduct of the litigation, including their own interlocutory application.

The Liquidators further submit that this observation had no relevance to the application actually before the Court and played no further part in his Honour’s reasoning.

I agree that there is no adverse inference drawn at [15]. As to [18], I note that his Honour was raising Ferrcom in the context not simply of the applicants’ opposition to the Liquidators’ application but also the applicants’ own application, though in either case the applicants would contend that no adverse inference should be drawn from a lack of evidence by them as to the reasons for the Direction or of any complaint as to the Liquidators’ conduct. Relevantly, at [76], his Honour referred to the absence of any identification by the applicants of any benefits of complying with the Direction “by way of addressing any identified concern with the conduct of the liquidation or the Liquidators”. This is the only context in which his Honour appears to have relied in any way on the absence of evidence as to the matters referred to at [15] and [18]. I consider the issue of “benefit” in the context of Ground 9.

In circumstances where nothing relevantly seems to have turned on the Ferrcom inference to which his Honour referred at [18], this ground goes nowhere. Had leave been granted, Ground 8 would have been dismissed.

This ground is related to Ground 8 and suffers the same problem.

The Liquidators submit that the observation made by the primary judge at [18] played no material role in his Honour’s determination of the critical questions in the Liquidators’ application. The applicants, on the other hand, contend that the adverse inference drawn by the primary judge against the Directing Creditors at [18] had a material impact on the primary judge’s determination. They say that, at [75]-[76], the primary judge “explained away” the Liquidators’ failure to consider the benefits of complying with the Direction (as was required for the Liquidators to form the r 75-250(2)(a) opinion) on the basis that the Directing Creditors had failed to identify any benefits.

I consider in due course the ground challenging the formation of the opinion (in relation to whether the Liquidators carried out the requisite balancing exercise). For the purposes of this proposed Ground 9, however, I see no error in the primary judge having taken into account that the applicants had not identified any benefit of complying with the Direction when addressing the reasoning process of the Liquidators. What his Honour said at [76] was that there was no particular complexity in the reasoning process as to that matter (i.e., any benefits of complying with the Direction) because the applicants had not identified any benefit of complying with the Direction. His Honour’s reference to the lack of evidence of any identified concern with the conduct of the liquidation or the Liquidators was made in the context of illustrating how any benefit of complying with the Direction might have been identified.

His Honour went on at [76] to say that “[a]ny 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”.

His Honour also noted that a suggested benefit was that calling the meeting would have avoided the application before him but his Honour did not see any benefit in convening a meeting “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”. I address this in the context of Ground 15 below.

I see no error in the primary judge taking into account, in the context of considering submissions as to the alleged failure by the Liquidators to entertain the requisite balancing exercise, that no benefits of convening the meeting had been identified by the applicants when the request for the meeting was made. Indeed, there was some resistance in oral argument on the present application to identifying the asserted benefits of holding the meeting. Ultimately, this came down to the proposition that there is a benefit in creditors being able to attend a meeting and consider the exercise of their right to remove the Liquidators. Counsel for the applicants quite properly conceded that such a benefit would apply in every case in which a direction to convene a meeting was issued. In those circumstances, his Honour can hardly be criticised for suggesting that there was no particular complexity in the reasoning process. If such a benefit is to be treated as given, then it surely was not necessary for there to be a formulaic recitation of it by the Liquidators in their Refusal Letter or File Note.

Had leave been granted, Ground 9 would have been dismissed.

These grounds in effect follow on from Grounds 8 and 9 and raise the issue as to whether the Liquidators formed the opinion required by r 75-250(2)(a) of the IPR, in circumstances where the applicants contend that there was little or no evidence that they had performed the balancing exercise required by that sub-rule “or were even aware that they were required to do so”.

The applicants contend that the primary judge should have found that the Liquidators did not form the requisite opinion because the evidence did not indicate that the Liquidators ever turned their minds to whether there would be substantial prejudice to creditors if the Direction were complied with, nor to whether there were any benefits of doing so, and did not weigh up those matters against one another to find that the substantial prejudice outweighed the benefits (or were even aware of the need to carry out such a balancing exercise). The applicants say that, despite the detailed affidavits from Mr Barnden, there was no evidence that the Liquidators considered the benefits of calling the meeting and there was no evidence that the Liquidators conducted the balancing exercise, other than having relied on r 75-250(2)(a) and/or (d) of the IPR in the Refusal Letter. They submit that, not having identified the benefits nor having weighed those benefits against the substantial prejudice, the Liquidators did not form the opinion required by r 75-250(2)(a) of the IPR and the primary judge should have so found.

The applicants emphasise that the statutory task was to evaluate what was required by the Direction (the convening of a meeting) and to assess the benefits of convening the meeting against any substantial prejudice that convening the meeting would cause.

In the alternative to ground 10, the applicants challenge the primary judge’s finding (at [78]) that the Liquidators held that opinion in good faith; rather, they contend that, to the extent that the Liquidators did form the opinion required by r 75-250(2)(a) of the IPR, the applicants say that they did so capriciously without regard to the statutory requirements and therefore the opinion was not in good faith or was formed unreasonably.

As to the reference by the Liquidators in their submissions to the increase in costs of the liquidation and delays in the Company’s prosecution of the Poland Claim as evidence of the Liquidators’ reasoning process, the applicants say those matters were concerned with the wrong question and that the Liquidators failed to undertake the necessary balancing exercise required by r 75-250(2)(a) of the IPR in respect of them.

The Liquidators point out that [76] contained no such finding as that impugned by Ground 10, that paragraph of his Honour’s reasons being solely concerned with criticisms directed to the form and contents of Mr Barnden’s third affidavit; rather, the finding was at [78], namely, that the Liquidators had formed the opinion necessary to support a refusal of the Direction. His Honour at [78], stated that he was comfortably satisfied that the Liquidators held the opinion that complying with the Direction would substantially prejudice the interests of one or more of the creditors or a third party and that prejudice outweighed the benefits of complying with the Direction.

The Liquidators accept that [78] was expressed in conclusory terms and that his Honour did not repeat all of the evidence given by Mr Barnden which led to that conclusion but they submit that Mr Barnden’s evidence was referred to in earlier parts of the judgment and that it was not necessary for his Honour to do so (having referred to the Liquidators’ express inclusion, in the Refusal Letter, of the terms of the provision and the requirement for unreasonableness by reason of prejudice and vexation). The Liquidators submit that the reference to those matters in the Refusal Letter and File Note suggested that the Liquidators had actually directed their attention to the statutory criteria. The Liquidators note that the primary judge also referred to the reasons given in the Refusal Letter and in particular to the Liquidators’ concerns about additional cost and delay, which his Honour found, of themselves, sufficient to justify the conclusion of unreasonableness.

The Liquidators point out that his Honour recognised that “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” (at [15]) and said (at [48]) that the Court 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 File Note or the Refusal Letter. The Liquidators argue that to focus on the lack of specific reference in the evidence to a “balancing exercise” is to focus on matters of pure form rather than substance. They argue that the material referred to and relied upon by his Honour showed that they were alert to the adverse consequences for the winding up which would flow from convening a meeting in response to the Direction at that particular time of the year and given the then position of the administration.

Thus, the Liquidators submit that they did undertake an appropriate consideration of the kind required by r 75-250(2) of the IPR and that his Honour was entitled so to find.

The Liquidators further argue that the applicants’ position on the balancing exercise issue asks the Court to prescribe a regime for what is inherently a subjective exercise that is always and unavoidably context-dependent. The Liquidators say that this is both antithetical to the scope and intent of r 75-250 of the IPR and the insolvency regime more generally and that it is inutile in this appeal, which is limited to considering a narrow time period now since long past.

The applicants dispute that the issue is one of form over substance. They say that the primary judge did not make reference (at [78] or anywhere else) to “the Liquidators’ express inclusion, in the Letter, of the terms of the provision”; and that the Refusal Letter simply referred to “r 75-250(2)(a) or (d) of the IPR”. The applicants say that the issue is that, other than the text “r 75-250(2)(a)”, there was no indication in any of the evidence that Mr Barnden ever turned his mind to the matters necessary for him to form the opinion, being: substantial prejudice of complying with the Direction; the benefits of complying with the Direction; and whether the substantial prejudice outweighed the benefits.

The Liquidators further say that the nub of the applicants’ complaint on this issue is that there was no evidence that the Liquidators had identified or weighed the benefit of giving creditors the opportunity to decide whether or not to replace the Liquidators. The Liquidators note that the primary judge noted on more than one occasion, including during the hearing and in the judgment, that there was no evidentiary basis for identifying a benefit of the meeting beyond it being what the applicants wanted. They say that it was never put to Mr Barnden (being the only Liquidator who gave evidence) that he had not identified or considered any such benefit. The applicants submitted in the hearing below that the benefit was “informed by the statutory structure” and there was no suggestion that the Liquidators were unaware of their statutory obligations or did not have regard to legislative provisions. In cross-examination, Mr Barnden affirmed his knowledge of the so-called benefit, namely the creditors’ right to remove a liquidator.

The Liquidators argue that the weighing of any benefit in allowing creditors the opportunity to consider replacing the Liquidators must be informed by matters that were expressly considered by the Liquidators, including the possible attempt by individuals, the subject of adverse findings to misuse such powers, the lack of complaint about the Liquidators’ conduct and the absence of ascertainable reason for facilitating the opportunity to consider replacement liquidators at the particular junction of the liquidation, and the fact that creditors and shareholders as a whole had not requested such an opportunity. It is submitted that those considerations reveal an implicit, albeit not express, consideration and weighing of the single benefit identified by the applicants.

Insofar as the applicants, by their “balancing exercise” issue (identified as Issue 2 in their submissions), invite a wide-ranging consideration of how a liquidator should fulfil his or her obligation to form an opinion, acting in good faith, the Liquidators say that that is not something which arises on the facts of this case and that it would seriously undermine the broad discretion given to external administrators to conduct administrations as they see fit, absent substantial grounds for doubting the prudence of the administrator’s conduct. They say that it would also have the effect of limiting the existing statutory wording in r 75-250 of the IPR by imposing restrictions that are not found in the legislation.

As to Ground 10, there was sufficient evidence to support the conclusion reached at [78] that the Liquidators had formed the requisite opinion, notwithstanding that there was no formulaic reference to the components of the opinion (benefit/substantial prejudice/and whether the latter substantially outweighed the former). The reference to r 75-250(2)(a) of the IPR indicated that the Liquidators were aware of the opinion that was required to be formed in order for them to conclude that the Direction was unreasonable. It was not necessary for the benefits of holding the meeting to be stated in circumstances where the applicants did not point to any benefits and the only benefits for which they here contend, were benefits said to accompany any (and every) direction to convene a meeting.

As indicated above, if the benefits are accepted to have been “a given” then a formulaic recitation of them cannot have been necessary. As experienced liquidators, the Liquidators can be assumed to have been aware of them (and to have implicitly accepted the existence of such benefits when considering the countervailing prejudice). As to the prejudice that might be said to flow from the meeting being convened, it is clear that the Liquidators saw this in terms of the costs to the liquidation (which I do not accept can be swept aside by the undertaking proffered by the applicants since that was simply to meet the cost of the holding of the meeting, not increased costs of the liquidation (which might flow if unnecessary costs were incurred in the meantime)), as well as to the delays associated with prosecution of the Poland Claim.

As to the complaint that there was no reference to any balancing exercise, I consider it implicit in the identification of the prejudice that the Liquidators must have balanced this against the only benefit now contended for by the applicants (being the benefit which would obtain in every case).

As to the alternative Ground 11, I do not accept that it has been established that the Liquidators’ opinion (that the Direction was so substantially prejudicial to the interests of creditors or a third party as to outweigh the benefits of complying with the Direction) was not formed in good faith because it was capricious or not reasonable (or alternatively was an opinion that no reasonable person in the Liquidators’ position could hold).

Had leave been granted, I would have dismissed Grounds 10 and 11.

Ground 12 raises much the same issue as Grounds 8 and 9. The applicants submit that it is wrong to suggest that they are somehow to blame for not advocating as to the benefits of the meeting (referring to [15], [18], [75]-[76] of the primary judgment, which I have considered above).

The applicants submit that the conclusion that the Direction was unreasonable could only be reached after an assessment of the benefits of complying with the Direction. It is submitted that the benefits were plain for the Liquidators to see and that it was their job to look for them and weigh them. The applicants say that, had the Liquidators done so, they would have found that the primary benefit of complying with the Direction was giving the creditors the opportunity to decide whether or not to replace them in exercise of the right to do so conferred on creditors by the legislature. As adverted to above, in oral submissions, the applicants say that the benefit of complying with the Direction “is allowing the creditors to exercise the right conferred on them by the legislature” but accepting that such a benefit will be identical in every case (AT 19), suggesting also that there may be benefits of the creditors coming together and hearing from the liquidator (which presumably would also be the same benefit in every case) (see at AT 20).

The Liquidators contend that it is an incorrect characterisation of [75] to suggest that it contains a finding that the applicants were required to identify the benefits of complying with the Direction. I agree. Rather, the primary judge there made the point that there was no particular complexity in the reasoning, in circumstances where no benefit of complying with the Direction had been identified (other than the obvious fact that, had the Direction been complied with then a meeting would have been called and creditors would have had the opportunity to meet and consider the proposed resolution).

Had leave been granted, I would have dismissed Ground 12.

Ground 14 challenges the finding that any benefit of complying with the Direction was likely to be substantially outweighed by the Liquidators’ opinion as to the disadvantages of compliance ([76]). The applicants complain that the primary judge should not have engaged in that assessment. They argue that, to the extent it was proper for the primary judge to form views as to benefit and the balancing exercise, the primary judge should have found that the benefits included allowing creditors an opportunity to consider exercising their power to remove a liquidator and quelling the controversy; and that those benefits were not outweighed by any substantial prejudice.

The applicants argue that at [76], the primary judge conducted the balancing exercise for himself because there was no evidence that the Liquidators had conducted the balancing exercise.

At [76], his Honour was addressing the applicants’ submission (recorded at [75]) that the Liquidators did not address the question whether the Direction would substantially prejudice the interests of one or more creditors or a third party and that that prejudice outweighed the benefit of complying with the Direction, and that there was no evidence that Mr Barnden had turned his mind to the benefits of complying with the Direction. His Honour did not accept that submission.

In that context, his Honour made the comment as to the lack of any particular complexity in the reasoning process to which I have already referred. True it is that his Honour then made the observations of which the applicants here complain as to benefit and in particular as to any benefit that existed in meeting the applicants’ wish to hold the meeting likely being substantially outweighed by the Liquidators’ opinion as to the disadvantages and costs arising from that meeting. However, those observations followed his Honour’s acceptance that the Liquidators had recorded their satisfaction as to the matter stated in r 75-250(a) of the IPR in the File Note and Refusal Letter and, significantly, preceded his Honour’s conclusion (see at [77] and [78]) that the Liquidators had formed both of the requisite opinions (substantial prejudice of compliance that would outweigh the benefits of compliance) and that they did so in good faith.

I do not accept that his Honour impermissibly substituted his own assessment of those matters for that of the Liquidators. Nor do I accept that his Honour ought to have found that the benefits of holding the meeting substantially outweighed the prejudice that the Liquidators (acting in good faith) considered would be occasioned to creditors by convening the meeting. The applicants in oral submissions themselves conceded that there may be a very narrow balancing exercise if the only benefit is that which is the same in every case – of exercising the power (see at T 20), suggesting that in most cases there will be little prejudice in calling the meeting and perhaps little benefit.

Had leave been granted, I would have dismissed Ground 14.

By Ground 15, the applicants contend that the primary judge engaged in circular reasoning in finding that there were no benefits in complying with the Direction because the Direction was unreasonable ([76]).

The relevant statements made by his Honour are, as I understand it, the following: at [75], that “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” and, at [76], that “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 to avoid a dispute with creditors who had issued that unreasonable direction”.

As to the statement at [75] (and similarly, as I apprehend it, the statement at [76]), the applicants say that the difficulty with that reasoning is that one needs to determine the benefit of complying with the Direction before one can determine whether the Direction was unreasonable under r 75-250(2)(a) of the IPR.

I accept that there is an element of circularity in the statements at [75] and [76] that are set out above but I do not consider that anything turned on them. The statements were made, as already noted, in the context of his Honour addressing the submission made by the applicants to the effect that Mr Barnden’s reasoning process as disclosed by the evidence did not establish that he had turned his mind to the benefits of complying with the Direction. There may well have been some infelicity of expression in the impugned statements which would explain or dispel the perceived circularity of reasoning (and it should be emphasised that his Honour’s reasons were given ex tempore and some latitude should be afforded to his Honour in those circumstances – as is well known ex tempore reasons should not be parsed as if they were a statute). But in any event, the relevant finding is that summarised at [78] (and referred to at [77]), as noted above. Therefore, any circularity in reasoning was not material to the outcome of the respective applications.

Had leave been granted, Ground 15 would have been dismissed but even had leave been granted and this ground of appeal allowed, it would not have led to the relief for which the applicants here contend (for the reasons set out much earlier in these reasons).

Ground 16 raises a fundamental complaint by the applicants, namely their contention that the Liquidators asked themselves the wrong question, namely, that they asked whether their removal as liquidators would be prejudicial to creditors if the resolution were to pass, not whether complying with the Direction by convening the meeting would be substantially prejudicial.

The Liquidators say that this ground only arises if the applicants succeed on the construction issue (Grounds 5 and 6) such that the Court must determine whether the matters considered by the Liquidators formed a “reasonable basis” for the opinion. On that assumption, and assuming that the primary judge did err in finding that the anticipated consequences of removal were proper matters to be taken into account as one of the factors bearing on the Liquidators’ reasonable analysis, the Liquidators say that this would not justify overturning the judgment in circumstances where his Honour had also found that the Liquidators held the relevant opinion on the basis of matters arising not from the outcome of the meeting, but from the convening of the meeting. The Liquidators argue that, in circumstances where the matters relied upon by the Liquidators in coming to the view that the Direction was unreasonable are matters affecting both the convening of the meeting and its possible outcome, then even if they did ask themselves the wrong question the outcome would be no different (referring to his Honour’s findings at [16], [18], [26], [32], [50]-[68] and [79]).

The applicants maintain that Ground 16 can succeed whether or not they are correct as to the question of construction. They say that if the Liquidators formed their opinion based on the anticipated consequences of their removal, then they did not form the opinion required by r 75-250(a) or (d) of the IPR and no question of good faith or reasonableness arises. In the alternative, they say that if the Liquidators’ opinion is taken to be an opinion under r 75-250(a) or (d), then it was an arbitrary and capricious opinion (i.e., not in “good faith”) because it was based on the anticipated consequences of their removal and not on the matters required by r 75-250(a) or (d); or in the alternative, it was an unreasonable opinion for the same reason.

The Liquidators emphasise that the applicants accepted in the hearing below that the purpose of the proposed meeting was a relevant consideration when ascertaining whether a direction under s 75-15 of the IPS is unreasonable. They say that, having made that concession, it is not now open to the applicants to suggest that the only stage at which the Liquidators ought to have considered the propriety of creditors seeking to effect their removal was after the requested meeting had been held or to complain that the primary judge similarly had regard to the stated purpose of the meeting as expressly contained in the Direction which the Liquidators were to consider.

The Liquidators say that, despite substantial cross-examination regarding Mr Barnden’s reasoning process, it was never put to Mr Barnden that he had asked himself the “wrong question”. The Liquidators say that questions in cross-examination were expressly premised on the basis of Mr Barnden’s reasons for finding that the Direction was unreasonable. It is noted that the primary judge rejected the applicants’ attack on Mr Barnden’s credibility, accepted his evidence and made appropriate findings accordingly.

The primary judge addressed the applicants’ argument that the Liquidators had asked themselves the wrong question at [73], having recorded at [71]-[72] the submissions made by the applicants in that regard. His Honour considered the distinction drawn between calling the meeting and the resolution to be passed to be an artificial one (see [73]) because the Direction incorporated the resolutions sought to be passed at the meeting and because whether the Direction was seriously prejudicial so as to outweigh the benefits of complying with it or was vexatious depended on what the meeting sought to achieve and upon the circumstances in which that would be achieved.

His Honour’s observation as to the artificiality of the distinction is demonstrated by the submissions made in this Court as to whether it was permissible for the primary judge to take into account the possible consequences if the resolution sought to be put at the meeting were to be resolved.

As already noted, in written submissions, Counsel for the applicants accepted that a liquidator considering the reasonableness of a direction to convene a meeting may of course have regard to the resolutions proposed to be put at the meeting but confined that concession to the situation of considering whether it would be futile to convene the meeting (and so the Direction would be unreasonable). In oral submissions, Counsel gave, as examples of when the resolutions to be put at a meeting would be relevant to the question of reasonableness, the situation where creditors directed that a meeting be called at which a resolution was to be put which could have no legal effect and where a meeting was called for a matter that had already been addressed in a previous meeting (AT 3). Counsel explained the applicants’ position as being that this did not involve consideration of the consequences of the proposed resolution because the resolution would have no legal effect (i.e., would be a nullity) and hence it was irrelevant whether or not the resolution was passed (AT 3). Counsel for the applicants maintained that it was not permissible for the liquidator to take into account the possible or assumed outcome of a vote on the proposed resolution (see also the debate at AT 6).

The spectre of debate as to the lawfulness or otherwise of a proposed resolution when a liquidator comes to consider whether or not it could be taken into account in deciding the reasonableness of a Direction to convene a meeting for the purpose of considering that very resolution (i.e., whether the proposed resolution is a nullity which could have no legal effect), is unlikely to have been intended and hardly consistent with the objective of empowering creditors effectively and efficiently to make decisions as a whole (see the extract earlier from the Explanatory Memorandum). It would leave liquidators in an invidious position of having to determine the lawfulness of proposed resolutions (rather than the outcome proposed by such resolutions) before forming the good faith opinion as to whether the benefits of convening the meeting are substantially outweighed by the prejudice to creditors.

I do not accept that, in determining the prejudice to creditors in this case of convening the meeting, it was impermissible for the Liquidators to take into account the prejudice that might flow if the resolution were to be passed, but in any event I accept that the Liquidators’ concerns as to delay were not confined to the position if the resolution were to be passed but also extended to delay arising from the convening of the meeting per se (because of the concern that work in those circumstances should be minimised), relevantly in relation to the Poland Claim, notwithstanding the prejudice that might flow therefrom.

Therefore, had leave been granted, I would have dismissed Ground 16.

Ground 17 goes to the ultimate result, namely the making of the direction sought by the Liquidators under s 90-15 of the IPS. His Honour was satisfied that the relief sought would be of utility in providing protection to which the Liquidators were properly entitled as Court-appointed liquidators who were seeking to deal with the Company’s Poland Claim where its shareholders and creditors had long been in dispute with each other (see at [88]). His Honour went on to explain that he considered it advantageous to the external administration of the Company and would facilitate the performance of the Liquidators’ functions in difficult circumstances.

The applicants simply contend that the primary judge erred in making the direction sought by the Liquidators. They did not put forward any submissions in support of this ground. Before the primary judge it had been contended that it was not appropriate to make such a direction and that the Liquidators did not need protection (as it was unrealistic to suggest that any of the Directing Creditors would sue the Liquidators personally for loss incurred by the refusal to convene a meeting) (see as recorded in the primary judgment at [87]). His Honour did not accept that submission having regard to the history of litigation between, variously, the Company’s shareholders and creditors in this matter ([87]).

As no submissions were put in support of this proposed ground, it may be assumed that it turns on the success in the preceding grounds. Had leave been granted, I would therefore have dismissed Ground 17.

Grounds 18 - 20 go to the determination of the Directing Creditors’ Application, in which, as noted above, the applicants sought an order under s 90-15 of the IPS directing the Liquidators to convene a meeting.

At [90], the primary judge recorded the response by the Liquidators to the Directing Creditors’ Application, including that this was an attempt to have the Court supplant the Liquidators’ opinion on the critical question with its own and that, as a matter of discretion, absent a finding that the Liquidators did not make their decision in good faith, the Court should not accede to the applicants’ request.

At [91], his Honour gave his reasons for refusing the application. His Honour did not consider that the discretion under s 90-15 of the IPS should be exercised to bring about a meeting where the basis to convene it under s 75-15 had not been established. His Honour said that the exercise of the Court’s discretion would undermine the predictability of the relevant provisions, increase the likelihood that there would be disputes as to their application and undermine their purpose. His Honour went on to say:

The applicants say that their application called on the Court to make its own assessment, in all the circumstances, of whether the meeting should be convened but, instead, the primary judge decided the application by deferring to the Liquidators’ opinion as to the reasonableness of the Direction (referring to the reasons at [91]). The applicants say that this was an erroneous abdication of the Court’s power to determine an application on the evidence before it under s 90-15 of the IPS.

The applicants note that the Directing Creditors did not seek an order under s 90-15 of the IPS that the Direction should be taken to be reasonable under r 75-250(2) of the IPR; rather, they sought an order that the Court direct the Liquidators to convene a meeting under the Court’s broad power in s 90-15 to make orders in relation to the external administration of a company, in circumstances where the Directing Creditors were being prevented by the Liquidators’ opinion from exercising their statutory right to vote on a resolution to remove the Liquidators.

The applicants contend that the primary judge ought to have exercised his discretion under s 90-15 of the IPS to direct that the Liquidators convene the meeting.

The Liquidators submit that, in circumstances where the primary judge found that they were justified (for the reasons they identified in evidence which was accepted by his Honour) in refusing to comply with the Direction, it would be anomalous for his Honour nevertheless to direct that the Liquidators do comply with that Direction in the absence of any separate evidence or justification. They say that is particularly the case where the applicants had, by consent, agreed that the application was to be dealt with by reference to the circumstances as they existed at the time of the giving of the Direction. It is submitted that it would be particularly anomalous if the Court, having decided that in December 2024 the request to convene the meeting was properly refused by the Liquidators on the basis that the request was unreasonable, were (sitting as if deciding the matter on the very day the refusal was made) nevertheless to order the Liquidators to convene the meeting.

In response, the applicants say that the question of whether the Court order the Liquidators to convene a meeting was not constrained by the parties’ common position that the question of whether it was reasonable (in the requisite sense) for the Liquidators to convene the requested meeting was to be determined as at the date of the Direction (see [2] of the primary judgment). The applicants say that the question of whether the Court ought to order the Liquidators to convene a meeting was not so constrained.

As to Ground 20, the applicants say that although the primary judge did not state his reasons for the conclusion that “the decision was properly reached” ([91]), it was presumably based on his view, that the Direction was unreasonable because the substantial prejudice of complying with the Direction outweighed the benefits of complying with the Direction. The applicants maintain that, for the reasons set out in their submissions on earlier grounds, that conclusion was erroneous.

The applicants submit that, if this Court finds that the Liquidators held a good faith but erroneous opinion that the Direction was unreasonable, then this Court should exercise the discretion in s 90-15 to direct the Liquidators to convene the meeting. It is submitted that, otherwise, the Liquidators’ erroneous opinion will continue to prevent the creditors from exercising their statutory right to vote on a resolution to remove the Liquidators.

This Court was not taken to the evidence on which the applicants relied in support of the Directing Creditors’ Application.

The complaint raised by Ground 18 goes to the ultimate outcome of the application. The complaint raised by Ground 19 is predicated on the outcome being solely (or “merely”) based on an acceptance by the primary judge of the Liquidators’ opinion as to the reasonableness of the Direction.

As to Ground 19, it is clear from the reasons that his Honour’s rejection of the relief claimed by the applicants in the Directing Creditors’ Application was not “merely” based on his acceptance of the Liquidators’ opinion that the Direction was unreasonable. His Honour explained at [91] that he did not consider that the discretion should be exercised to bring about a meeting where the basis to convene it had not been established and his Honour went on to explain that he considered that the exercise of the discretion would undermine the predictability of the relevant provisions, increase the likelihood of disputes as to their application and undermine their purpose. It was not suggested that there was error (of the House v The King kind) in relation to his Honour’s discretionary judgment on those bases. Further, while his Honour made clear that he did not consider it appropriate to second guess the Liquidators’ decision, he went on to observe that in his view the decision was properly reached in the relevant circumstances (that being in his opinion a sufficient basis of itself to decline the relief). Thus, there was not a ‘mere’ acceptance of the Liquidators’ decision. His Honour clearly turned his mind to whether, in the relevant circumstances, that decision was properly reached.

As to Ground 20, as noted above, this is a complaint that his Honour concluded that the Liquidators’ decision was properly reached. His Honour had earlier accepted that the Liquidators had formed in good faith the requisite opinion under r 75-250 of the IPR and hence that the Direction was deemed unreasonable for the purposes of r 75-15 of the IPS ([82]). For the reasons set out earlier, there was no error in that conclusion. Insofar as the conclusion that the Liquidators’ decision was properly reached states his Honour’s opinion on the evidence, such a conclusion provides a sufficient basis for his Honour to decline to exercise the discretion in favour of the applicants.

No error is here established. Had leave been granted, I would have dismissed Grounds 18 - 20.

For the reasons above, I propose the following orders:

PAYNE JA: I agree with Ward P.

FREE JA: I agree with Ward P.