In the matter of Operational Services Australia Pty Ltd

The Plaintiff, PN Century 1268 Pty Ltd (“PN Century”) applies to wind up Operational Services Australia Pty Ltd (“Company”) on the grounds of insolvency. Shortly before the hearing of the winding up application the Company appointed voluntary administrators. The winding up application was then adjourned, on several occasions, to allow the voluntary administrators to advance their investigations. PN Century now seeks to proceed with its winding up application and the voluntary administrators apply under ss 440A and 467 of the Corporations Act 2001 (Cth) and in the Court's inherent jurisdiction for an adjournment of the winding up application on the contention that that is in the interest of creditors.

The applicable principles are well established. I summarised them in Re CII Group Pty Ltd [2025] NSWSC 318 and will draw on that summary, without repeating it in full, for the purposes of this application. Under s 440A of the Act, the Court may adjourn a winding up application where a voluntary administrator has been appointed if the Court is satisfied that it is in the interests of the company's creditors for the company to continue under administration rather than be wound up. Whether the Court will be satisfied of the matters set out in s 440A(2) of the Act is to be determined in the relevant circumstances, and it requires a sufficient possibility, and not merely speculation, the creditors interests ought well be advantaged by the adjournment of the winding up application: Creevey v Deputy Commissioner of Taxation (1996) 19 ACSR 456 at 456–457. Where, as here, the application is brought when the voluntary administrators' investigations are further advanced, more information is likely to be required to establish the basis for an adjournment than might be the case if the application was brought at an earlier point, to permit further investigations to be undertaken. The lateness of an application is also a relevant matter, particularly where the appointment is made, as it was here, shortly before the hearing of a winding up application: Re Offshore and Ocean Engineering [2012] NSWSC 1296 at [15]; leave to appeal refused in Offshore and Ocean Engineering v Greenwich Contractors Pty Ltd [2012] NSWCA 371. Whether an adjournment is treated as arising under s 440A(2) of the Act or under s 467 of the Act or in the Court's 'inherent' jurisdiction, the administrators bear the onus of satisfying the Court as it is in the interests of creditors for the adjournment to take place.

Mr Ryan, who appears for the voluntary administrators, here puts the case for adjournment, principally, on two bases. The first is that it would be in the interest of creditors to be given the opportunity to decide whether a deed of company administration should be adopted. The second is that, in the relevant circumstances, the amount of recoveries that would be necessary, in liquidation, to exceed the result in a voluntary administration is unlikely to be achieved. I do not accept either proposition, because any relevant comparison is undermined by the uncertainties in both elements of it, such that the voluntary administrators cannot establish that a further adjournment is in creditors’ best interests.

The voluntary administrators read two affidavits dated 11 November 2025 and 19 November 2025 of one of the voluntary administrators, Mr Otaegui-Campos. It is sufficient to have primary reference to the latter affidavit, since the former appears to have been displaced by the voluntary administrators’ subsequent investigations. By his affidavit dated 19 November 2025, Mr Otaegui-Campos referred to the voluntary administrators’ report to creditors, which referred to a greater and more certain expected return under a deed of company arrangement, which he considered was likely to be more advantageous than the return that would be achieved in a liquidation, and expressed the view that it was in the creditors' interests for the Company to execute a deed of company arrangement on that basis. Implicitly, the voluntary administrators also contended that it was therefore in the interest of creditors to adjourn the winding up, so as to allow creditors to approve the deed of company arrangement, if they considered it was in their interests to do so. A question may have arisen from the fact that almost all of the creditors who might have voted on it were related party creditors but I put aside that question for the moment.

It seems to me that the fundamental and obvious difficulty with Mr Otaegui-Campos' analysis, which was fairly disclosed by the exhibit to his affidavit, and fairly acknowledged by Mr Ryan in submissions, is that both elements of the comparison between a voluntary administration and a liquidation are so uncertain that the comparison has no utility. The first, namely, the return for the deed of company arrangement, reflects a position where the substantial part of the deed fund will already be spent in paying the voluntary administrators' costs. The remaining part of the deed fund is exposed to any further escalation in the voluntary administrators' costs, and there is nothing in the voluntary administrators’ report to which I have been taken that provides any comfort that there will not be such an escalation, so that the ultimate position is there is a deed fund from which the only beneficiary is the voluntary administrators and not the creditors. That would not, of course, be the first occasion on which that had occurred in matters of this kind.

The second difficulty is that a comparison is made with the result of a liquidation, but it is apparent from the exhibits to Mr Otaegui Campos's affidavit that there is no reliable basis to assess the result of a liquidation. The voluntary administrators observe in the report to creditors that they have not been provided with books and records for the Company, although they have requested them, and they have formed the view that adequate books and records have not been maintained to comply with s 286 of the Act. That is one possibility; another is that the deed proponents, who wish to have the deed approved, have simply not chosen to provide the books and records which might allow it to be adequately assessed.

The voluntary administrators refer to the receipt of a director's report on company activities and property, which, oddly, they note was prepared by the director based on the company's records. That may refer to any records other than the financial records that are either not maintained or are not produced to the voluntary administrators to allow their accuracy to be tested. The voluntary administrators then refer to unsecured creditors, which are largely related party creditors, other than the creditor in this application, PN Century and the Australian Taxation Office. They refer to the existence of a presumption of insolvency, arising from the Company’s failure to maintain company records and express the view that the date of the Company's likely insolvency was 11 August 2025, being the date of the creditor's statutory demand. That, of course, has the difficulty that where the Company is presumed to be insolvent by reason of a failure to maintain adequate financial records, then that presumption arises long before the date of the creditor's statutory demand.

The voluntary administrators refer to a recovery for unfair preferences, without expressly acknowledging that the party which received the unfair preference is also a related company to the Company, raising the possibility of other challenges to that payment. They also refer to unreasonable director related transactions, but do not include the transaction with the related party as potentially falling within that category. They refer to the possibility of an insolvent trading claim, but do not address the possibility that such a claim is available for a much longer period by reason of the presumption of insolvency arising from the Company’s failure to maintain adequate financial records. The voluntary administrators also compare the estimated return from a deed of company arrangement than the result in a winding up, on the premise that $40,000 will be available from the amount of the deed fund contribution to be shared among creditors other than related party creditors which will not participate in the deed fund. Again, as I have noted above, that premise depends upon the absence of any increase in the costs incurred by the voluntary administrators, where the amount available for distribution, after the existing costs of the voluntary administration, is not large and could readily be eroded by even a minimal overrun in the voluntary administrator's costs.

For all these reasons, I am not satisfied that there would be any advantage to creditors in having the opportunity to consider the deed fund, at a meeting at which the vast majority of creditors would be related party creditors, and where the information which they are asked to consider would be unreliable, both in respect of the amount that could be recovered in a liquidation and in respect of the amount that they are likely to receive under the deed fund. In these circumstances, I can form no affirmative view that it is in the interests of creditors to adjourn the winding up.

The Court may order that a voluntary administrator pay the costs of an unsuccessful application to adjourn a winding up application. After hearing the parties, I did not make such an order here, where the amount of costs involved would likely not warrant the costs of an assessment.

I now determine the application for a winding up of the Company brought by PN Century. There is evidence of service of the winding up application served on the Company, by the affidavit of service dated 2 October 2025 of Ms Keegan. In any event, Operational Services has appeared, at least by legal representatives for its voluntary administrators, in respect of the application to date, having previously sought an adjournment of the application. There is evidence of notification to ASIC of the winding up application, and a publication of the winding up application, by two affidavits of Mr Foster dated 13 October 2025. The affidavit dated 2 December 2025 of Mr Nguyen in turn exhibits the creditors' statutory demand on which reliance is placed for the winding up application and proves that the debt which is the subject of the demand is unpaid. The evidence that has emerged in the course of the adjournment application indicates that the Company also has other unpaid third party debts as well as debts owed to related parties.

A presumption of insolvency here arises from the Company’s failure to comply with the demand, as summarised by the High Court of Australia in Australian Securities and Investments Commission v Lanepoint Enterprises Pty Ltd (2011) 244 CLR 1; [2011] HCA 18 at [28]. The Company has not sought to establish its solvency, and the evidence led in respect of the application for adjournment in the winding up application tends to displace any suggestion of its solvency. For these reasons, a winding up order should be made.

A question arises as to the identity of the liquidator to be appointed. The voluntary administrators who had been appointed to the Company consent to their appointment as liquidator, and I recognise that they have been in office for some time and have undertaken some investigations although those investigations have plainly been limited by the fact that they were not provided access to the Company's books and records, if those and books and records existed, a matter to which I referred in dealing with the adjournment of the winding up application. On the other hand, PN Century presses for the appointment of its nominee as liquidator, notwithstanding the risk of duplication of any work that has been undertaken by the voluntary administrators in that respect.

I have referred in previous judgments to the practice in this Court that the plaintiff should have its choice of liquidator, unless there is reason to order to the contrary. Here, the question is finely balanced, because I appreciate there is a risk of duplication of work done by the existing voluntary administrators, if they are not appointed as liquidators, although there is also some benefit in the appointment of a liquidator in which at least a major creditor has confidence, where any liquidation will likely need to be funded in order to bring about recoveries in the liquidation. On balance, in circumstances that the voluntary administrators have had no or limited access to the Company’s financial records to date, and expressed a view that a course that will not now be adopted was the preferable course for creditors, it seems to me that I should give effect to PN Century’s choice of liquidator, notwithstanding that there may be some duplication of work already done by the voluntary administrators, and likely some additional costs incurred in that course.

PN Century seeks a gross sum costs order, in an amount that is reasonable, and indeed modest, having regard to the time which this application has taken and the number of adjournments which have been involved. I will make that order.