Federal Court of Australia

Otway (liquidator), in the matter of AMD Freight Pty Ltd (in liq) [2025] FCA 1019

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 436B(2)(g) of the Corporations Act 2001 (Cth) (Act) the plaintiffs have leave to appoint themselves as joint and several administrators of AMD Freight Pty Ltd ACN (632 274 947) (Company).

2.    The requirement for the plaintiffs to comply with s 436E of the Act is dispensed with.

3.    The plaintiffs’ costs of, and incidental to this application be costs in the liquidation of the Company and are to be paid out of the Company’s assets.

4.    The following persons have liberty to apply to vary or revoke the above orders:

(a)    the plaintiffs; and

(b)    any creditor of the Company (including any employee of the Company),

such liberty may be exercised initially by means of email to the Chambers of the presiding judge directed to associate.charlesworthj@fedcourt.gov.au.

5.    In the event that the liberty in paragraph 4 is not exercised within 90 days of these orders then, by this order, the originating application is finalised.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

CHARLESWORTH J

1    On 11 August 2025 I made orders relating to the affairs of AMD Freight Pty Ltd (ACN 632 274 947) (in liquidation) (Company). Oral reasons were given on that day.

2    These written reasons are revised from the transcript. As foreshadowed at the hearing, the written reasons include additional references to factual background, legal principle and some elaboration not inconsistent with the ex tempore reasons.

Reasons revised from the transcript

3    The Company operates a road transportation business. It was placed in liquidation on 1 April 2025 on the petition of the Deputy Commissioner of Taxation. The plaintiffs were appointed joint and several liquidators of the Company on the same day (Appointment Date).

4    By originating process filed 11 July 2025, the plaintiffs seek:

(1)    leave under s 436B(2)(g) of the Corporations Act 2001 (Cth) to appoint themselves as joint and several administrators of the Company; and

(2)    an order that compliance with s 436E of the Act (for the conduct of a first meeting of creditors) be dispensed with.

5    The application is supported by affidavits of Mr Thomas Otway sworn on 11 July 2025 and 7 August 2025. I am satisfied that the opinions expressed in the affidavits are properly formed having regard to the plaintiffs’ experience, their work as liquidators and the documents upon which they relied. The facts stated in these reasons should be understood as findings based those affidavits.

6    The plaintiffs have notified the Company’s financiers and unsecured creditors of the filing of this application. No financier or unsecured creditor has indicated opposition to the relief sought nor have they sought to be heard.

Facts and Liquidator’s Opinions

7    Mr John Moulsdale is the current director of the Company (Director). He was appointed in January 2025 following the passing of the former director, Ms Lynda Potter (Former Director). The Former Director was the sole shareholder of the Company. She died earlier this year.

8    On or around the Appointment Date, the Director informed Mr Otway that he was in the final stages of negotiating a sale of the Company when the winding up order was made.

9    The plaintiffs were informed that the cause of insolvency was the Former Director’s extended period of illness, spanning more than four years. During the illness, an employee was left to operate the Company, eventually leading to its inability to make payment of “significant debts”.

10    The plaintiffs have formed the view that the Company has been insolvent from 30 April 2022 and remains so. The plaintiffs have caused the Company to continue to trade in order to preserve the value of its business. Their opinion is that placing the Company into voluntary administration is in the best interests of the creditors, on the basis that:

(1)    its business appears to be profitable;

(2)    it employs six staff and two contractors;

(3)    the Director has advised Mr Otway that he (jointly with another person) intends to present Deed of Company Arrangement (DoCA) to creditors;

(4)    if it is not placed into voluntary administration, the plaintiffs will take steps to sell the business, resulting in:

(a)    the crystallisation of employee entitlements resulting from termination, becoming a debt owed by the Company;

(b)    the Company’s assets being sold at a discount to market value at auction, likely increasing the losses of unsecured creditors;

(5)    if placed into voluntary administration and the DoCA is rejected, the administrators can continue trading operations, preserving the value of the Company’s assets and operations for a “going concern” sale; and

(6)    that would avoid the resulting loss likely to be incurred by ceasing operations upon an external sale in a liquidation, and the associated fees and delays in preparing for such sale.

11    The plaintiffs propose that during administration the Company’s creditors will have an opportunity to review the proposed DoCA in conjunction with an independent administrator’s report, pursuant to r 75-225(3) of the Insolvency Practice Rules (Corporations) 2016 (Cth). The plaintiffs are presently of the view that entry into voluntary administration is the “only way” the Company can continue to “trade long term”.

Appointment of plaintiffs as administrators

12    Section s 436B of the Act is contained in Pt 5.3A. The object of that Part (as expressed in s 435A) is to provide for the business, property and affairs of an insolvent company to be administered in a way that:

(a)    maximises the chances of the company, or as much as possible of its business, continuing in existence; or

(b)    if it is not possible for the company or its business to continue in existence—results in a better return for the company’s creditors and members than would result from an immediate winding up of the company.

13    Section 436B(1) provides that a liquidator or provisional liquidator of a company may, in writing, appoint an administrator of the company if he or she thinks that the company is insolvent, or is likely to become solvent at some future time. Section 436B(2) provides that a liquidator must not appoint himself or herself as an administrator unless under subs (1):

…

(f)    at a meeting of the company’s creditors, the company’s creditors pass a resolution approving the appointment; or

(g)    the appointment is made with the leave of the Court.

14    Distilling the authorities on the question of leave, in Mansfield (liquidator), in the matter of NR Complex Pty Ltd (in liquidation) (receivers and managers appointed) [2023] FCA 614 Halley J said that the test for leave under s 436B(2)(g) was not an onerous one, the grant should not be treated as a “mere formality, or mere procedural obstacle” (citing Re Keldane Pty Ltd (in liq) [2011] VSC 385, Pagone J (at [13]). His Honour explained that:

(1)    the predominant consideration on an application for leave for self-appointment is whether the liquidator is “an appropriate person to be an administrator”;

(2)    the liquidator of the company will generally be granted leave to appoint themselves, unless there are counteracting reasons as to their suitability;

(3)    there is a “desirability of continuity” in the persons in charge of the management of the company;

(4)    the appropriateness of an appointment must be weighed against any “conflict of interest, threat to independence or anything else offensive to commercial morality” such that, generally, the proposed appointee should have no prior association with the company; and

(5)    other considerations include the proposed appointee’s “familiarity” with the commercial affairs of the concerned company, the likelihood of duplicated work that would be incurred by appointing a different administrator, and costs associated with continuing ongoing negotiations and / or complex arrangements.

15    In the present case I am satisfied that the plaintiffs have formed the opinion that the Company is insolvent, such that the condition for the appointment of administrators is fulfilled. I do not otherwise consider it to be the role of the Court to interrogate the opinion of the plaintiffs that administrators should be appointed. That is principally because s 436B(1) of the Act contemplates that a liquidator may appoint an administrator by an act of writing without first securing the approval of the Court in the exercise of that discretion. The Court’s powers are here invoked solely for the purpose of s 436B(2)(a) and (g) and relate to the more confined question of the identity of the administrators to be appointed.

16    For the purposes of those provisions, I am satisfied that:

(1)    the plaintiffs did not have any prior relationship or commercial relationship with the Company or any of the entities involved in effecting the DoCA prior to their appointment as liquidators;

(2)    Mr Otway has developed a familiarity with the affairs of the Company, demonstrated by investigations conducted as part of this application and during the operation of the Company’s business as a going concern;

(3)    Mr Otway has been engaged in negotiating and will be in involved in carrying out the proposed DoCA and $100,000.00 has already been deposited into the liquidators’ trust account to facilitate payment of equipment finance arrears;

(4)    there is likely efficiency to be gained in maintaining continuity of appointees between the liquidation and voluntary administration;

(5)    appointment of the plaintiffs as administrators would avoid the duplication of expenses that have already been incurred in progressing the liquidation and DoCA;

(6)    there is no evidence disclosing any real or potential conflict of duty or interest and no other consideration running against “commercial morality” if the plaintiffs were to be appointed; and

(7)    there is nothing to suggest that the proposal to progress the DoCA is unreasonable or problematic, indeed all indications are that the plaintiffs are conducting the affairs of the Company consistent with the objects of Pt 5.3A of the Act;

17    In addition, I afford considerable weight to the circumstance that no creditor has communicated any opposition to the present application, nor has any creditor sought to be heard.

18    In the circumstances described it is appropriate to make the order sought.

Dispensation of requirement for first creditors’ meeting

19    Part 5.3A of the Act requires at least two general meetings of creditors. The first meeting is to be held within eight days after the beginning of the administration pursuant to s 436E:

(1)    The administrator of a company under administration must convene a meeting of the company’s creditors in order to determine:

(a)    whether to appoint a committee of inspection; and

(b)    if so, who are to be the committee’s members.

(2)    The meeting must be held within 8 business days after the administration begins.

(3)    The administrator must convene the meeting by:

(a)    giving written notice of the meeting to as many of the company’s creditors as reasonably practicable; and

(b)    causing a notice setting out the prescribed information about the meeting to be published in the prescribed manner;

at least 5 business days before the meeting.

(3A)    A notice under paragraph (3)(b) that relates to a company may be combined with a notice under paragraph 450A(1)(b) that relates to the company.

(4)    At the meeting, the company’s creditors may also pass a resolution:

(a)    removing the administrator from office; and

(b)    appointing someone else as administrator of the company.

20    Under s 447A(1) of the Act, the Court may make any order it thinks appropriate about how Pt 5.3A of the Act is to operate in relation to a particular company. That includes a discretion to dispense with the requirement to conduct a first creditors’ meeting. The Court’s discretion under s 447A is to be exercised having regard to the “best interests of creditors as a whole”: Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 2) [2020] FCA 717, Middleton J (at [104]).

21    It may be commercially sensible to dispense with the requirement for a first creditors’ meeting following the self-appointment of the liquidators as administrators for several reasons. They may include the circumstance that a meeting of creditors has already taken place in an earlier context: see, for example: Brooks, in the matter of 351 Property Management & Maintenance Pty Ltd (in liq) [2023] FCA 1426, O’Bryan J (at [19], [32]); Hughes, in the matter of Vah Newco No. 2 Pty Ltd (in liq) [2020] FCA 1121, Middleton J (at [30]); Lucas, as liquidator of Blackwater Mine Workers’ Club Limited (in liq) v Blackwater Mine Workers’ Club Limited (in liq) [2023] FCA 1636, Derrington J (at [39]).

22    Mr Otway estimates the costs associated with holding the first meeting of creditors to be between $5,000.00 and $7,000.00.

23    It is relevant that at a first meeting of creditors in an administration, there may be a resolution removing an administrator and appointing another administrator:  Act, s 436E(4). Dispensing with the meeting will mean that cannot be done. However, in the present case I am satisfied that no creditor has asserted that the plaintiffs were not appropriate persons to be appointed as liquidators and none has sought to be heard in opposition to the present application.

24    The plaintiffs otherwise submit that the primary purpose of the first meeting of creditors within an administration is the appointment of a “committee of inspection”. The plaintiffs’ opinion is that the appointment of a committee of inspection is not necessary in this matter given its size and complexity. I do not consider the evidence to be sufficient to form a concluded view on that topic. However, I proceed on the basis that any creditor who considered that dispensing with the first meeting of creditors (and hence the opportunity to appoint the committee of inspection) has had an opportunity to consider the relief sought in this action and to voice any opposition to the proposed course. In the absence of any such opposition I consider it appropriate to dispense with the requirement to hold the meeting, but to grant liberty to apply to any affected person to vary that order. Dispensing with the requirement to conduct the first creditors’ meeting within the administration does not carry with it any express or implied approval of the DoCA that is presently being prepared. Rather, the dispensation will permit the plaintiffs, as administrators, to focus their resources on the preparation of an independent report to facilitate the creditors’ consideration of any DoCA in due course: Act, s 439A; Rules, r 75-225. Overall, I am satisfied that the avoidance of the costs of the first meeting of creditors is of benefit to the creditors of the Company as a whole.

Conclusion

25    I otherwise accept the plaintiffs’ oral and written submissions in support of the originating application. Orders will be entered in substantially the terms sought. It is appropriate to grant the relief sought on the originating application, with the proviso that there will be liberty to apply to interested non-parties to vary or revoke the orders within a specified time.

Associate:

Dated:    11 August 2025