Federal Court of Australia

Shaoxing Newtex Imp & Exp Co Ltd, in the matter of Mosaic Brands Limited (in liq) v Strawbridge [2025] FCA 1479

ORDERS

THE COURT ORDERS THAT:

1. The parties confer, prepare and provide to the Associate to Moore J by 4:00 pm on 4 December 2025 either:

(a) agreed short minutes of order to reflect these reasons for judgment, and which include orders as to costs; or

(b) competing short minutes of order.

2. In the event of competing short minutes of order pursuant to Order 1(b) above, the parties are to file and serve and provide to the Associate to Moore J by 2:00 pm on 5 December 2025 any short written submissions in support of those orders.

3. The proceeding be listed for a further hearing for the making of orders at 9:30 am on 8 December 2025.

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

REASONS FOR JUDGMENT

MOORE J:

1 Mr Vaughan Strawbridge and three other members of FTI Consulting (the Liquidators) are the liquidators of Mosaic Brands Limited (Mosaic Brands) and 12 other companies in the Mosaic Brands group of companies (Mosaic Group), including Noni B Holdings Pty Limited (Noni B Holdings). The Mosaic Group formerly operated a substantial retail group with brands such as Noni B, Katies, Rockmans, Rivers, Millers, and others.

2 Until late 2020, Mr Strawbridge was a partner at Deloitte. Deloitte had several engagements for Mosaic Brands in 2020 concerning (inter alia) the impact of COVID-19. Mr Strawbridge himself did work for the Mosaic Group and attended certain board meetings of Mosaic Brands. The plaintiff says that, as a result, Mr Strawbridge lacks independence and might be perceived as not likely to pursue with appropriate rigour claims potentially available to the Mosaic Group. It seeks to replace the Liquidators with alternative liquidators.

3 There is a deed of cross guarantee (DXG) binding on ten of the companies in the Mosaic Group, including Mosaic Brands and Noni B Holdings (DXG Entities). The remaining three companies are not parties to the DXG (non-DXG Entities). Pursuant to the DXG, in the event of the winding up of the DXG Entities, the debts of each DXG Entity become debts owed by each other DXG Entity, and thus the creditors of each DXG Entity become creditors of each other DXG Entity.

4 A resolution to appoint Mr Andrew McCabe, Ms Jessie Wang and Mr Joseph Hayes of Wexted Advisors (the Alternative Liquidators), to prevent Mr Strawbridge and the other administrators from becoming liquidators, was put to creditors of the Mosaic Group at a reconvened second meeting of creditors. For the DXG Entities, a substantial majority of creditors by value supported the resolution. However, the Chairperson of the Meeting (Mr Strawbridge) determined that the resolution in respect of the DXG Entities did not attract the support of a majority of creditors by number, such that the resolution failed to pass. In that regard, he counted many votes of employees who were employees of Noni B Holdings (only). These employees would only be creditors of other DXG Entities by virtue of the operation of the DXG. The plaintiff says that counting these employees in the vote on the resolution to appoint the Alternative Liquidators for any entity other than Noni B Holdings involved error.

5 The plaintiff now seeks relief from the Court that:

(a) the resolution to appoint the Alternative Liquidators as the liquidators of each company of the Mosaic Group be taken to have passed (in respect of both the DXG Entities and the non-DXG Entities);

(b) alternatively, the Liquidators be removed as liquidators of each company in the Mosaic Group and replaced with the Alternative Liquidators;

(c) alternatively, the Alternative Liquidators be appointed as additional liquidators for certain purposes.

6 The plaintiff makes three broad contentions.

(a) The first contention raises an issue of procedural validity about the outcome of the reconvened second meeting of creditors on 1 July 2025. The plaintiff says that the employees were not entitled to cast a vote at this meeting, other than in relation to Noni B Holdings, and therefore, the rejection of the resolution to appoint the Alternative Liquidators in respect of the other DXG Entities (including Mosaic Brands) was incorrect and should be reversed.

(b) The second contention is that Mr Strawbridge, as the Chairperson of the reconvened second meeting of creditors on 1 July 2025, should have exercised his casting vote in favour of the resolution to appoint the Alternative Liquidators.

(c) The third contention is that Mr Strawbridge, one of the administrators and later one of the Liquidators, lacked the requisite independence, and therefore the Liquidators should be replaced, or special purpose liquidators appointed.

7 As the factual background to each allegation is different, I will deal with relevant matters in relation to each contention separately below.

First Contention: Alleged invalid vote

Background

8 The Liquidators were previously the administrators of the Mosaic Group (the Administrators). By the date of the second meeting of creditors, no deed of company arrangement had been proposed and the Administrators contended that each of the companies in the Mosaic Group was insolvent. The Administrators therefore recommended that each of the companies in the Mosaic Group enter into liquidation.

9 The Administrators had sought proofs of debt from creditors of each of the Mosaic Group companies, other than the employee creditors. Proxy forms had also been completed.

10 In relation to employee creditors, the process was different. All employees of the Mosaic Group were employed by Noni B Holdings. The Administrators had obtained information as to employee entitlements. Employees had commenced to receive payments under the Commonwealth Government’s Fair Entitlements Guarantee scheme (FEG), because the relevant Minister had made a declaration giving the employees early access to the FEG (which normally cannot be accessed until the company is in liquidation). The outstanding entitlements were therefore reducing from time to time, and the Administrators received updated information. The employees were not required to submit proofs of debt. Rather, the Administrators treated their entitlements as claims in full against Noni B Holdings. As noted below, the Administrators purported to prepare a “global” proof of debt form on behalf of all the employees.

11 Like other creditors, some employees completed proxy forms.

12 The second meeting of creditors commenced on 20 June 2025 (the 20 June 2025 Meeting). It was a combined meeting of the Mosaic Group companies, including both the DXG Entities and the non-DXG Entities. The 20 June 2025 Meeting was, however, adjourned, because shortly prior to the meeting it became clear that certain creditors wished to propound a resolution seeking that the Alternative Liquidators be appointed as the liquidators of the Mosaic Group companies, and the Administrators considered that more notice was required before that resolution could be put to the meeting. The 20 June 2025 Meeting was adjourned and reconvened on 1 July 2025 (the 1 July 2025 Meeting).

13 At the 1 July 2025 Meeting, Mr Strawbridge, as Chairperson of the meeting, dealt first with the resolution that each of the Mosaic Group companies be wound up (i.e. 13 resolutions to that effect) (Winding Up Resolution). The Winding Up Resolution was passed in respect of each of the 13 entities in the Mosaic Group. The effect of that resolution, pursuant to s 499(2A) of the Corporations Act 2001 (Cth) (the Corporations Act), was that the Administrators would be appointed as the liquidators at the conclusion of the meeting, unless a further resolution was passed to appoint the Alternative Liquidators.

14 Upon the passing of the Winding Up Resolution, the meeting then proceeded to deal with the remaining resolutions, including the resolution that the Alternative Liquidators be appointed. At that point, Mr Strawbridge advised the meeting that as each of the DXG Entities had guaranteed the debts of the other DXG Entities pursuant to the DXG, the further resolutions would be put to the DXG Entities on a collective basis, and would be put to each of the non-DXG Entities separately.

15 For the DXG Entities, Mr Strawbridge determined that the results of the vote for the appointment of the Alternative Liquidators (as recorded in the minutes of the meeting) were that:

(a) the creditors by value voted in favour of the resolution, by a very clear margin: $113.5 million vs. $45.1 million; and

(b) the creditors by number did not vote in favour of the resolution: 55 vs. 157.

16 Mr Strawbridge did not exercise his casting vote in favour of the resolution. Therefore, the resolution failed to pass by virtue of r 75-115(3)(c) of the Insolvency Practice Rules (Corporations) 2016 (Cth) (IPR) which, in summary, requires for a resolution to pass:

(a) a majority in value in favour; and

(b) a majority in number of creditors in favour,

or, if one of the above requirements is not met, that the person presiding at the meeting exercises his or her casting vote in favour of the resolution.

17 The primary reason that the resolution to appoint the Alternative Liquidators was not passed by number is that Mr Strawbridge purported to record the votes of a large number of employees of Noni B Holdings against the resolution (the employees). Without those employees being counted in the creditors by number, the resolution would have passed.

18 The plaintiff relies on r 75-85 of the IPR. Rule 75-85 relevantly provides:

(1)    A person other than a creditor (or the creditor’s proxy or attorney) is not entitled to vote at a meeting of creditors.

(2)    …

(3)    A person is not entitled to vote as a creditor at a meeting of creditors unless:

(a)    his or her debt or claim has been admitted wholly or in part by the external administrator; or

(b)    he or she has lodged, with the person presiding at the meeting, or with the person named in the notice convening the meeting as the person who may receive particulars of the debt or claim:

(i)    those particulars; or

(ii)    if required—a formal proof of the debt or claim.

19 Pursuant to sub-paragraph 3(a), a person can be entitled to vote if his, her or its debt or claim has been admitted by the external administrator, even if that person has not lodged particulars of a debt or claim. It is also relevant to note that the role of the person doing the admitting in sub-paragraph 3(a) above (the external administrator) is different from the role of the person referred to in sub-paragraph 3(b) above (the person presiding at the meeting, or the person named in the notice convening the meeting). That distinction assumes some significance in the plaintiff’s argument.

20 In short, the plaintiff’s contentions are that:

(a) the debts or claims of the employees had not been admitted wholly or in part (and had not been admitted contingently for each of the 10 entities pursuant to the DXG) by the Administrators prior to the passage of the Winding Up Resolution at the 1 July 2025 Meeting, which had the effect of bringing the administration to an end and removing Mr Strawbridge as an external administrator; and

(b) the employees did not ever lodge with the Chairperson any particulars of their debts or claims, or any formal proofs of debt or claim.

21 In relation to the admission of claims, the plaintiff’s contention is not that the Administrators could not have admitted the employees claims and could not have admitted them in relation to companies other than Noni B Holdings. Rather, its contention is that the Administrators did not do so before they ceased to be administrators. The plaintiff contends that the Administrators did not admit the claims of employees as claims against each of the DXG Entities other than Noni B Holdings prior to the passage of the Winding Up Resolution at the 1 July 2025 Meeting, and could not do so afterwards. Although the Administrators appeared to proceed on the basis that the effect of the DXG would be that debts of Noni B Holdings would become debts of the other DXG Entities once the Winding Up Resolution was passed, the plaintiff contends that no step was taken by the Administrators prior to the Winding Up Resolution to admit employee claims against the other DXG Entities in accordance with sub-paragraph 3(a).

22 Once the Winding Up Resolution was passed, the Chairperson (rather than the Administrators) could act on claims or proofs of debt lodged prior to the meeting in accordance with sub-paragraph 3(b). However, the plaintiff contends that no employee claims or proofs of debt were ever lodged.

23 The defendants rely on the decision of J Aron Corporation and The Goldman Sachs Group Inc v Newmont Yandal Operations Pty Ltd (2006) 57 ACSR 149; [2006] NSWCA 46 (J Aron), which affirmed the decision at first instance in J Aron Corporation v Newmont Yandal [2005] NSWSC 238. That case involved circumstances with many similarities to the present case, but also with some important differences.

24 The defendant in that case (NYOL) was part of a group of 14 companies (NYOL Group) that had executed deeds of cross guarantee. The companies lodged consolidated financial statements. They were placed simultaneously into voluntary administration. The administrators decided to treat the NYOL Group as a single commercial and economic entity. A deed of company arrangement was proposed (strictly, 14 deeds). The meetings of creditors for all NYOL Group companies were held concurrently, and only one resolution (as opposed to 14 separate resolutions) approving the resolution to enter into the deed of company arrangement was put to creditors, relying on votes tallied from persons who were creditors for certain companies only because of the effect of the cross guarantee. That resolution passed.

25 On appeal, Bryson JA, with whom Spigelman CJ and Ipp JA agreed, observed as follows (at [11]):

The fact that the debts of all NYOL group companies, no matter which is the principal debtor in relation to any particular creditor, are supported by cross-guarantees of all of them is a dominating reality of the administrations, of all the business of the administrators, of everything in their report and of the business which could arise at the second meeting of creditors. It is this dominating reality which explains why the companies formed a group, and why the administrators conducted all the administrations together as one exercise and reported on the administrations in one report; and why they were proceeding to hold the meetings together.

26 Bryson JA also observed that on a fair reading, the requirement for proofs of debt made in the report and in the circular to creditors and suppliers was not a requirement that each creditor lodge 14 proofs of debt, one for each group company. His Honour observed (at [39]):

No reasonable reader could understand that he might be disqualified from taking a full part in the business of the second meeting of creditors or from voting in any business relating to any other companies which had guaranteed his debt if he did not complete 14 different formal proofs of debt. In the factual context, the requirement for lodgement of a proof of debt was not only a requirement that one proof of debt be lodged, but also an indication that one proof of debt would be treated as sufficient.

27 Mr Korda treated proofs of debts and proxy forms that nominated a single debtor as nominating the principal debtor and not the sole debtor, having regard to the effect of the deed of cross guarantee. Mr Korda decided, prior to the meeting, that all motions to be put to creditors could be put as a single motion provided the 14 meetings were held concurrently, and the results of the voting would apply to all NYOL Group companies as if separate motions had been separately put.

28 The evidence also indicated that the relevant external administrator, Mr Korda, admitted the debts of the external creditors in respect of each of the 14 companies, relying on the deed of cross guarantee. The plaintiffs in the case argued that Mr Korda’s admission of the debts “was unsubstantiated, and that proof of admission of a creditor’s debt requires some documents or action or oral recitation … to that effect.” In response, the primary judge, Austin J, whose finding was not disturbed on appeal, observed at [100] that:

A written record of Mr Korda’s decision would have been helpful but it is not necessary that a decision to admit a debt be taken or recorded in writing, or by recourse to any other formality: Expile Pty Ltd v Jabb’s Excavations, at [95]-[96].

29 The passage referred to by Austin J from Expile Pty Limited v Jabb's Excavations Pty Ltd [2004] NSWSC 284 (Palmer J) relevantly provides (at [96]) as follows:

In my opinion, whether or not a proof of debt has been admitted to vote, either under [IPR r 75-85(3)(a) or (b)] is a question of fact. Proof of that fact is not confined to the production of a document in any particular form or to the oral recitation by the administrator or liquidator of some formula of words. The fact of admission of creditors to vote will often be proved by a combination of documents and actions, for example, the recording by the administrator or liquidator of the identities of creditors and the amounts which they claim coupled with the counting of votes at the meeting by such creditors, either upon a show of hands or pursuant to a poll.

30 The plaintiff says that what happened in the present case may be distinguished from J Aron, but this submission was not developed with much precision. The submission appears to be that in J Aron, Mr Korda as both chairperson and administrator at the meeting of creditors had at his disposal the power to both admit a debt or claim pursuant to the equivalent of sub-paragraph 3(a) of IPR r 75-85, and accept the lodgment of a proof of debt pursuant to the equivalent of sub-paragraph 3(b). There was never any limitation on Mr Korda’s power to do either of those things, unlike Mr Strawbridge who could no longer admit debts under sub-paragraph 3(a) after the Winding Up Resolution had passed.

31 What is apparent from J Aron is the need to consider the practical and objective reality of what is occurring, and that this reality may not be formally recorded. That is relevant to the circumstances of the present case. Each case is otherwise likely to turn on its particular facts.

Relevant events

32 It is necessary to consider what occurred in a little more detail.

33 In a Report to Creditors dated 13 June 2025 (the 13 June 2025 Report), creditors were given the following instructions:

(a) “Creditors are required to have lodged particulars of the debt or claim and the claim has been admitted, wholly or in part, for voting purposes”;

(b) creditors should complete a proxy form nominating someone to represent them at the meeting;

(c) the person nominated as the representative must register for the meeting using the Unique Creditor ID sent to the creditor; and

(d) “Please note if you are a creditor of more than one Company, you must complete a Proof of Debt for each Company of which you are a creditor.”

34 However, the position is complicated by the fact that, in respect of employees, the Administrators did not require proofs of debt to be completed by those employees. In a section headed “Other Information”, there was information provided to employees, as follows (emphasis added):

For former employees, the Administrators have liaised with the Receivers to obtain a listing of outstanding employee entitlements.

The Administrators will have your claim registered on your behalf.

If you have already submitted your claim for your outstanding employee entitlements through the FEG Scheme, but have not yet been paid by FEG, you will still be a creditor and entitled to attend the meeting.

35 In the Formal Proof of Debt or Claim form attached to the 13 June 2025 Report, the instructions were for the person completing the form to tick a box selecting only one company from the group of companies, and the following statement appearing:

if you are a creditor of more than one Company, you must complete a new Formal Proof of Debt for the other Company/s.

36 The same instructions were given on the form for the Appointment of Proxy.

37 As outlined above, the second meeting of creditors commenced on 20 June 2025, and was adjourned that day. Mr Strawbridge was the Chairperson of the meeting. At the commencement of the meeting, Mr Strawbridge advised that the meeting of the 13 companies in the Mosaic Group was being held concurrently. Under “Procedural Matters”, the minutes of the meeting record that Mr Strawbridge advised that proofs of debts and proxies had been received ahead of the meeting, and that:

(a) non-employee proofs of debt had been received in accordance with IPR rr 75-85 and 75-100 and the creditors participating in the meeting were deemed to have satisfied the requirements to be able to vote at the meeting, but the proofs of debt received were for voting purposes only; and

(b) “The Administrators have received updated details of the employee claims and amended these for those that FEG have paid, reducing their residual claims. The Administrators have admitted these employee claims for the purpose of the meeting and these claims will continue to change as FEG makes payment to employees.”

38 That last statement, although indicating that employee claims had been admitted, did not spell out how they had been admitted. In particular, it did not indicate whether the claims had been admitted only against the relevant employer (i.e. Noni B Holdings) or contingently against all DXG Entities.

39 Mr Strawbridge, in his affidavit, sheds little additional light on the critical issue of what the Administrators did in relation to employee claims. Somewhat unhelpfully, he merely states:

The revised employee claims were admitted for the purposes of voting at the Second Meeting (and also the Reconvened Second Meeting).

40 He does not identify how they were admitted, or in what sense.

41 Mr Strawbridge explained in evidence that there was a change between the 20 June 2025 Meeting and the 1 July 2025 Meeting, which is that the Administrators became aware that there would be additional resolutions at the 1 July 2025 Meeting after the Winding Up Resolution, including the resolution to appoint the Alternative Liquidators, and that once the companies were placed in liquidation, the DXG operated to render creditors of one DXG Entity creditors of the other DXG Entities.

42 In a circular to creditors dated 24 June 2025 (the 24 June 2025 Circular), the Administrators relevantly referred to the DXG, and identified the 10 companies in the Mosaic Group that were party to the DXG, including Mosaic Brands and Noni B Holdings. The 24 June 2025 Circular then continued (emphasis in original):

Given we have not received a proposal for a deed of company arrangement (“DOCA”), it is likely that the Companies will be placed into liquidation at the Reconvened Second Meeting. On that basis, in the event creditors resolve that the DXG Entities are to be wound up and placed into liquidation, our view is that for any subsequent resolution, including whether to appoint the [Alternative] Liquidators, the creditors of a DXG Entity will be able to vote in respect to other DXG Entities. The FTI Administrators will register creditors’ claims against each of the DXG Entities and creditors will not be required to submit a claim or proof of debt for each entity.

If creditors have submitted a proxy form or intend to submit a proxy form for the Reconvened Second Meeting, we will register any special proxies as a vote in respect to each of the DXG Entities, not just the company that originally owed the debt.

43 The reference to the Administrators registering creditors’ claims against each of the DXG Entities and creditors not being required to submit a claim or proof of debt for each entity suggests that the Administrators were adopting an approach whereby any claim in respect of any DXG Entity would be treated as a claim against each other DXG Entity without the need for separate claiming. There was no express statement about employees, but there is no obvious reason why the general statement about creditors would not also apply to employee creditors.

44 There is no contradiction between the statement that the creditors will not be required to submit a claim for each of the DXG Entities and the earlier statement that creditors of more than one entity should submit a claim for each entity. The latter is a reference to a primary debt, whereas the former is a reference to a debt that has effect only because of the DXG. For example, if a creditor had a claim for $20,000 against Mosaic Brands and a claim for $10,000 against Noni B Holdings, then that creditor would submit separate claims against two entities, but then would have a claim for $30,000 against each of the DXG Entities once the Winding Up Resolution was passed and there would be no need to submit a claim for $30,000 against each of the DXG Entities.

45 The plaintiff relies upon certain answers given by Mr Strawbridge in cross-examination, submitting that he was “emphatic” that employee claims had not been admitted by the Administrators as contingent claims in the external administrations. However, that was not the effect of Mr Strawbridge’s evidence.

46 The relevant exchange, to which the plaintiff refers, was as follows:

MR PESMAN:  So the creditors were informed of two facts: they need to put a separate [proof of debt] in for each company and a separate proxy in for each company?---Correct.

So you cannot have been proceeding on the basis at this point that the deed of cross guarantee applied?---The companies were not [in] liquidation at this point, no.

And you hadn’t, for example, asked them to make – creditors to make contingent claims on the assumption the DXG would apply?---There was no – there was no need at the – at this point in time. There was only one likely outcome with respect to the entities, and that was to be put into liquidation because there was no deed of company arrangement, and we’ve clearly identified it wasn’t appropriate for the companies to be returned to the directors.

And if you then go to – and you changed your position in relation to this meeting, didn’t you, after it was adjourned?---We clarified to creditors what we would be doing at the reconvened meeting of creditors in respect to proofs of debts and treatment of proxy forms.

47 The evidence does not support the plaintiff’s contention for the following reasons. First, the references to “at this point” and “at this point in time” are significant. Mr Strawbridge was being asked about the 13 June 2025 Report, at a time prior to the proposal to put a resolution to creditors to appoint the Alternative Liquidators. At that time, there was no real scope for the operation of the DXG. His answer therefore has no relevance to the period after such a resolution was on the table, and Mr Strawbridge elsewhere explained the distinction between the two situations.

48 Secondly, he was asked whether the Administrators had asked creditors to make contingent claims on the assumption the DXG would apply. That is not a question about the admission of claims. The relevant question was not asked.

49 Thirdly, Mr Strawbridge said:

We clarified to creditors what we would be doing at the reconvened meeting of creditors in respect to proof of debts and treatment of proxy forms.

That is a different situation from the one he was being asked about.

50 None of this amounts to any concession that the Administrators did not admit claims for the purposes of the 1 July 2025 Meeting or did not do so on a contingent basis.

51 At the 1 July 2025 Meeting, Mr Strawbridge gave the same advice as at the 20 June 2025 Meeting in relation to non-employee proofs of debt, and similar advice in relation to employee claims, noting that FEG payments had reduced the employees’ residual claims. The minutes record:

And the Administrators admitted the revised employee claim amounts for the purpose of voting (it was noted that the quantum of employee claims would continue to change as FEG processes additional claims).

52 The minutes of the meeting record that, prior to any resolutions being put to a vote, Mr O’Neill from ERA Legal requested to speak to raise a “point of order”, noting that:

(a) in the 24 June 2025 Circular, the Administrators stated that if the creditors resolve that the DXG Entities are to be wound up and placed into liquidation, the Administrators intend to admit the creditors of a DXG Entity to vote in respect of other DXG Entities for any subsequent resolutions (including the appointment of liquidators to the Mosaic Group); and

(b) this was a “change in position”, and “appears to have been done in an effort by FTI to keep the appointment, noting that now a further 126 proxies are held by you in relation to Noni B.”

53 That reference to 126 proxies was clearly a reference to the employees of Noni B Holdings. The debate at the reconvened meeting was therefore proceeding on the basis that the employees would be counted, by number, in relation to the DXG Entities, including Mosaic Brands.

54 The reconvened meeting proceeded to deal with the Winding Up Resolution, which passed for each entity. The minutes then record the following:

Before moving to the next resolutions, the Chairperson referenced the 24 June Circular and the explanation in that document regarding the operation of the DXG in the context of the prospective liquidation of the Companies.

…

The Chairperson advised that as all of the DXG Entities have guaranteed the payment of the debts of the other DXG Entities, the proposed resolutions 2, 3, 4 and 5 set out in the Notice of Meeting, will be put to the DXG Entities on a collective basis. The Chairperson noted that the following Companies are not parties to the DXG (together, “Non-DXG entities”), and accordingly resolutions 2, 3 and 4 will be put to the meeting separately:

* W. Lane Pty Ltd

* Noni B Holdco Pty Ltd

* EziBuy Pty Ltd

55 Subsequently, but prior to the resolution to appoint the Alternative Liquidators, there was the following exchange recorded in the minutes of the meeting:

* Mr O’Neill stated that now the Chairperson holds 120+ special proxies in relation to Noni B, and invited the Chairperson to confirm the creditor composition of Noni B.

* The Chairperson advised that the majority of creditors of Noni B were employees.

* Mr O’Neill asked whether the proofs of debt in respect of the employees were submitted to the Administrators after last week’s meeting before it was adjourned [sic].

* The Chairperson advised that the claims in respect of all employees of Noni B were lodged for the purpose of the meeting and that the Chairperson had made a specific comment to that effect at the 20 June 2025 meeting.

* Mr O’Neill asked the Chairperson to confirm that, as at the 20 June 2025 meeting, the Chairperson did not hold 120+ special proxies from employees.

* The Chairperson confirmed that was correct.

…

* The Chairperson confirmed the position for the purposes of voting on resolutions before the reconvened second meeting today is consistent with how the DXG operates at law.

56 The minutes record that when the resolution was put forward to creditors of the DXG Entities for the appointment of the Alternative Liquidators, the poll recorded 157 by number against the resolution, with only 55 in favour of the resolution. Those voting against the resolution included numerous employees of Noni B Holdings.

The plaintiff’s contentions

57 The plaintiff contends that:

(a) pursuant to r 75-85(3)(a) of the IPR, employees could only have been admitted to vote by an act of the Administrators;

(b) the Administrators had no ability to admit employees to vote after the Winding Up Resolution was passed, and even if Mr Strawbridge said that he was admitting employees at this point, he had no power to do so (being no longer an administrator at this point);

(c) employees were not admitted to vote in respect of any company other than Noni B Holdings prior to the Winding Up Resolution being passed;

(d) there is no scope for the operation of r 75-85(3)(b) of the IPR because the employees did not lodge proofs of debt; and

(e) therefore, the employees could only vote on the resolution for Noni B Holdings and could not vote on any resolution in respect of any other Mosaic Group company.

58 In relation to admission by the Administrators, the plaintiff rely upon a document kept by the Administrators headed “01 1 July reconvened meeting > 01.15 Mosaic Brands – Proof of Debt Adjudication Reconvened Meeting.pdf”. A sub-heading reads “Mosaic Brands Group – Adjudication on PODs for Reconvened Second Meeting of Creditors 1 July 2025”. That document contains a list of creditors. It tabulates information including the creditor’s ID, the creditor’s name, a statement of the status of the review (e.g. “Review Complete”), the “Entity POD submitted in”, the category of creditor (e.g. “Employees”), a “POD amount”, and a statement of whether the proof of debt value matches the supporting documents and/or the books and records of the company. In the case of creditors which had claims against more than one group company, the document records the claim against each company (e.g. the Australian Taxation Office had a different claim against each of ten companies). In the case of each employee, the document records the “Entity POD submitted in” as Noni B Holdings.

59 The plaintiff says that this document reflects the way in which the Administrators were treating the claims of creditors: namely, recording the claims against particular entities, rather than treating claims against DXG Entities as claims against all.

60 However, this document is not conclusive as to how the Administrators were treating claims. As a natural first step, the Administrators would need to work out the claims against each entity. If there were claims against more than one entity, these would each need to be counted when applying the terms of the DXG. A further step needed to be taken, which was to sum the claims across the DXG Entities (as explained earlier, with the example of $10,000 + $20,000 = $30,000). This particular document did not do this. But that was nevertheless done for the purposes of the voting process. It cannot sensibly be said that, in circumstances where claims against particular entities had to be identified, including for the purposes of applying the DXG, a document identifying those claims precludes the further step of recognising the claims that flow from the operation of the DXG. The Administrators did not say, in relation to this document, “these are the only claims we will admit and only in respect of these entities.”

Conclusion on the plaintiff’s first contention

61 I find that the Administrators admitted the claims of the Noni B Holdings employees against each of the DXG Entities contingently (i.e. on the basis that the claims would be given effect if the Winding Up Resolution was passed), and that this was done prior to the passage of the Winding Up Resolution. Consistently with the approach in J Aron, this was the reality of the way in which the Administrators were proceeding.

62 In the 24 June 2025 Circular, the Administrators stated that they would register creditors’ claims (i.e. including employees) against each of the DXG Entities, and that creditors would not be required to submit a claim or proof of debt for each entity. They also stated that if creditors had submitted a proxy form or intended to submit a proxy form for the reconvened second meeting, they would register any special proxies as a vote in respect to each of the DXG Entities, not just the company that originally owed the debt. The Administrators were thus proceeding on the basis that a claim against a DXG Entity would be treated as a claim against each other DXG Entity without the need for any separate claim. They had communicated as much to relevant parties.

63 The Administrators did not simply admit the claims of the employees against Noni B Holdings. They admitted the claims against Noni B Holdings on the express basis that those claims would also be claims against the other DXG Entities in the event that those entities commenced to be wound up. The 1 July 2025 Meeting was conducted on this basis.

Defendants’ alternative arguments

64 In these circumstances, it is not necessary to consider the defendants’ alternative arguments on the plaintiff’s first contention. However, for completeness, I will say something brief about them.

65 First, the defendants also rely upon r 75-85(3)(b) of the IPR, and say that proofs of debt had been lodged by the Administrators on behalf of the Noni B Holdings employees (i.e. without any step by the employees, but purportedly on their behalf).

66 This issue arose at the very conclusion of the hearing, and in a somewhat unsatisfactory way. The defendants submitted that the late reference to the lodging of proofs of debt on behalf of employees was because they had not hitherto understood how the plaintiff was putting its case. However, the plaintiff’s argument, to which these documents were said to respond, had been made in the written submissions filed more than two weeks prior to the hearing. The argument could perhaps have been put more simply, but it was not hidden. Further, the position of the plaintiff throughout has been that no proofs of debt had been submitted in respect of employee claims. That was said in terms in the plaintiff’s written submissions filed prior to the hearing. Nothing was said by the defendants to the contrary in their submissions or at any point in the hearing prior to its conclusion. In the meantime, Mr Strawbridge had come and gone as a witness.

67 In the course of the plaintiff’s oral submissions in reply, the defendants sought the opportunity to tender fresh evidence constituting “proofs of debt” which were prepared by the Administrators on behalf of the employees. That took the form of a document which contained the aggregate position of Noni B Holdings employees. I admitted this late evidence, because the plaintiff ultimately did not object to it. However, the defendants went further and sought to tender additional documents by email to Chambers after the hearing had concluded, having foreshadowed at the hearing that they might seek to do that. Those documents comprise an email chain between Mr Strawbridge and FTI staff between 16 and 19 June 2025, and a Word document titled “F536 – Formal Proof of Debt or Claim on behalf of Employees.docx”, being the document embedded in a link in the email chain. In the circumstances, I will not admit these further documents sent to Chambers after the hearing.

68 There were also short supplementary submissions dealing with the defendants’ new contention, but no further hearing.

69 It may be recalled that r 75-85(3) of the IPR is in the following terms:

(3)    A person is not entitled to vote as a creditor at a meeting of creditors unless:

(a)    his or her debt or claim has been admitted wholly or in part by the external administrator; or

(b)    he or she has lodged, with the person presiding at the meeting, or with the person named in the notice convening the meeting as the person who may receive particulars of the debt or claim:

(i)    those particulars; or

(ii)    if required—a formal proof of the debt or claim.

70 The employees did not themselves take any step to bring forward any proof of debt, or make any other claim. There is no evidence before me as to the conferral by the employees of any authority on the Administrators to submit proofs of debt on behalf of employees of Noni B Holdings.

71 The defendants submitted that this was not necessary. This submission was put on two bases. First, it was submitted that:

It would be nonsensical for administrators to have power to admit a debt or claim for voting purposes without any action required by employees, but not to have authority to record and lodge the particulars of that debt or claim.

72 In considering that submission, it is relevant to note that the two mechanisms recognised by IPR r 75-85(3) are distinct and involve different roles. The power given to Administrators to admit a claim is distinct from the question of whether they are authorised to take a step that, by r 75-85(3)(b), is to be taken by creditors. There is a question as to whether the requirement in r 75-85(3)(b) should be construed such that it is satisfied by an unauthorised action of someone other than a creditor.

73 Secondly, the defendants rely on reg 5.6.45 of the Corporations Regulations 2001 (Cth) (Corporations Regulations). Regulation 5.6.45 creates a regime for the lodgment of a “global” proof of debt specifically for employee creditors, and provides that if the employees of a company “make demands” for wages or salaries or for retrenchment payments, then “one proof of debt or claim may be prepared and submitted on behalf of those employees” which must have annexed to it a schedule setting out the names of the employees and the amounts due to each of them, and “has the same effect as if separate proofs had been prepared and submitted by each of the employees named in the schedule.”

74 The defendants submit that, in the present circumstances, reg 5.6.45 of the Corporations Regulations permits the Liquidators to submit a proof of debt on behalf of the employees without their authority, and that such a proof of debt is taken to be lodged by the employees for the purposes of r 75-85(3)(b) of the IPR. The defendants submit that the purpose of reg 5.6.45 would be undermined if, nonetheless, each employee was required to submit an express authorisation in writing.

75 By contrast, the plaintiff emphasises the words “make demands” in reg 5.6.45, and says there is no evidence of any demands being made in the present case. Further, the plaintiff relies on the general provision in reg 5.6.40 of the Corporations Regulations, which provides that a proof of debt can only be submitted “by the creditor personally or a person authorised by the creditor.”

76 Resolution of this question would require consideration, inter alia, of the meaning of “make demands”, the interrelationship between reg 5.6.40 and reg 5.6.45, and the meaning of “he or she has lodged” in r 75-85(3)(b) of the IPR. It would require consideration of whether reg 5.6.45 is a deeming provision that avoids the need for any authority to be given by employees before taking any steps on their behalf.

77 Because of the manner in which this issue arose, in the dying moments of the hearing, the Court did not receive any proper submissions on any of these questions. The Court was not taken to any authorities, or to the legislative history of the relevant provisions. There was no opportunity to have any dialogue with counsel. I would prefer to reserve the consideration of these questions to a case in which they have been fully argued. The present case is therefore not one in which it is appropriate to decide the first of the defendants’ fallback arguments, having regard to their success on the first ground.

78 The second fallback argument from the defendants was an argument that, even if there had been no admission of claims by the Administrators, the effect of r 75-100(1) of the IPR is that it was for Mr Strawbridge (as the person presiding at the meeting) to determine any question that arose as to the entitlement of a person to vote at the meeting. Further, the defendants submitted that, pursuant to r 75-100(4), any such decision had to be appealed within 10 business days. It was submitted that even if the plaintiff’s contentions had been accepted, this does not result in the resolution to appoint the Alternative Liquidators having been passed.

79 This submission does not quite capture the effect of r 75-100 of the IPR. Rule 75-100(4) refers to a decision “by the person presiding to admit or reject a proof of debt or claim for the purposes of voting.” However, in the present case, the relevant question was whether the Administrators had admitted a claim on a contingent basis. Any decision by the Administrators to admit the employee claims on a contingent basis was not a decision of a type referred to in in r 75-100(4) (because it was not a decision by the person presiding to admit or reject a proof of debt or claim). Nor was it a decision by Mr Strawbridge, in his capacity as the person presiding at the meeting, on any question that arose at the meeting as to the entitlement of the employees to vote. I therefore do not consider that r 75-100 has any application in the present circumstances. The balance of s 75-100 of the IPR indicates that the rule as a whole is concerned with decisions to admit or reject a proof of debt or claim, or related decisions.

80 The defendants also submitted that any technical non-compliance could be cured by r 75-270 of the IPR. Rule 75-270 provides that a meeting, or anything done at a meeting, is not invalid “because a requirement of this Division has not been strictly complied with, if the requirement has been substantially complied with.” It is not apparent that r 75-270 has any role to play in the present circumstances. The plaintiff’s contention is not one about “strict compliance”, but is a more fundamental point about entitlement to vote. If the plaintiff was otherwise right, then the voting process would simply have miscarried, and there would have been no substantial compliance.

Second Contention: Mr Strawbridge should have exercised his casting vote

81 The plaintiff’s second contention is that Mr Strawbridge, as the Chairperson of the 1 July 2025 Meeting, should have exercised his casting vote in favour of the resolution to appoint the Alternative Liquidators.

82 Pursuant to s 75-43 of the Insolvency Practice Schedule  (IPS), at sch 2 to the Corporations Act, upon an application being made, the Court may make an order that a proposed resolution is taken to have been passed at a meeting of creditors in circumstances where the person presiding at the meeting refused or failed to exercise a casting vote. The Court may also make such further orders as it thinks fit.

83 Section 75-43(3)(a) of the IPS provides that the Court may make such an order only if the person making the application voted for the proposed resolution in some capacity. In the present case, the plaintiff was a creditor of Mosaic Brands, and ERA Legal, in its capacity as its proxy, voted in favour of the resolution to appoint the Alternative Liquidators (and thus likewise voted in favour of the resolution insofar as it was a resolution of each of the DXG Entities).

84 Section 90-15(1) of the IPS, which empowers the Court to “make such orders as it thinks fit in relation to the external administration of a company”, would also enable the Court to make the order sought: Glenfyne International Holding Ltd v Glenfyne Farms International AU Pty Ltd (in liq) (2019) 101 NSWLR 358; [2019] NSWCA 304 (Glenfyne) at [59] – [61] (Bell P, Bathurst CJ and Macfarlan JA agreeing).

85 In light of the conclusions expressed elsewhere in these reasons, I will deal with this second ground in brief terms.

86 It has been recognised that s 75-43 of the IPS permits the Court to review the reasonableness of the exercise or non-exercise (as the case may be) of the casting vote. In that regard, it has been said that the Court does not automatically accept an honest decision as an appropriate one, and the Court’s decision will depend on factors such as:

whether the [decision-maker] has properly exercised the casting vote in the interests of creditors as a whole, such as in circumstances where the vote or votes which prevent one of the two conditions being fulfilled [approved by numerical majority and by value of debts] would represent an outcome unfair to the remaining creditors if not reversed by a casting vote.

(Cresvale Far East Ltd (in liq) v Cresvale Securities Ltd (2001) 37 ACSR 394; [2001] NSWSC 89 (Cresvale) at [111] (Austin J), adopting observations of Santow J in Re Martco Engineering Pty Ltd (admin apptd); Deputy Commissioner of Taxation v Martco Engineering Pty Ltd (1999) 32 ACSR 487; [1999] NSWSC 702 at 489).

87 Factors to be considered may include: (1) the position of the major creditor(s), particularly where there is a significant disproportion between the major creditor(s) and other creditors; (2) whether any party has been misled; (3) whether creditors will be prejudiced if the outcome is altered: Cresvale at [112]. These observations in Cresvale were approved by the New South Wales Court of Appeal in Glenfyne at [66] (Bell P, Bathurst CJ and Macfarlan JA agreeing).

88 In Brisconnections Management Company Ltd v Burness; Re Thames Blund Holdings Pty Ltd (in liq) (2009) 72 ACSR 233; [2009] FCA 626 at [12] (Gordon J), it was observed that:

The exercise of the casting vote is most appropriate in circumstances where a creditor with a majority in value (such as the Applicant) has such an overwhelming interest that it is inappropriate to allow a majority in number who do not have the same monetary interest to carry the day. As the case law and the Code makes abundantly clear, there is no presumption in favour of the majority in value. However, where there is large disproportion between the values of the debts of the numerical minority and the numerical majority (as is the position here) it must be a factor to be taken into account.

89 These observations were approved in Glenfyne at [65]. The use of terms such as “overwhelming” and “large disproportion” is appropriate, given that r 75-115 of the IPR gives effect to a policy that the default position is that there should be both a majority in value and a majority in number before a resolution is passed.

90 The present case involves circumstances somewhat removed from the cases cited above. Each of the plaintiff and the defendants made submissions that reflected their positions on other matters in dispute. In addition, the plaintiff submitted that the employee claims should have been discounted in circumstances where:

(a) the employees had limited financial interests in the insolvency as they were priority creditors and stood to be paid in full, either through payment from the FEG or, subject to the outcome of an application as to who was the true employer, from the assets of the Mosaic Group; and

(b) the employees were provided with material prior to the 1 July 2025 Meeting which was apt to mislead them.

91 As to the second of these matters, the relevant circumstances were as follows. On 26 June 2025, Mr Walker, the “Employee Representative” (and Chief People Officer) of the Mosaic Group, sent an email to the employees. Mr Walker referred to the upcoming 1 July 2025 Meeting and stated (emphasis in original):

Here is the issue:

* FTI Consulting are the current Administrators and have already done a lot of work to prepare for their appointment as Liquidators.

* One of the suppliers has proposed a different liquidator to FTI Consulting

* My personal view is that appointing a different liquidator will add unnecessary additional time & cost to the liquidation process, and delay payments for things that FEG don’t cover, like superannuation.

* If you agree, please vote to have FTI appointed as Liquidators by lodging a Special Proxy form using the template Word doc attached.

…

92 On 29 June 2025, Mr Walker sent a follow up email to employees and stated “Just a quick follow-up on the Special Proxy form attached. Detail below. … If you’re in touch with any other former Mosaic team, please give them a nudge too.”

93 An email in the form of the 26 June 2025 email was hardly a balanced summary of the issues for determination at the meeting, and by focussing on a suggestion that employees might be delayed in receiving their entitlements, was apt to induce a vote against the proposed resolution to appoint the Alternative Liquidators.

94 The defendants in turn said that the information provided by the plaintiff’s advisers to the creditors had misrepresented the position of Mr Strawbridge, for example by incorrectly suggesting that Mr Strawbridge had been involved in providing safe harbour advice to the Mosaic Group.

95 It is not practicable to resolve any question as to the basis on which those who voted at the meeting may have been acting, so as to in effect disregard or discount their vote. The present case is also not one in which there was an overwhelming preponderance of value in favour of the resolution, or any other unfairness to one group of creditors. Nor is there a clear case to ignore the wishes of the employee creditors. Particularly in light of the conclusions on other grounds, I do not consider that the present case is one where it is appropriate to make an order pursuant to s 75-43 of the IPS, or an equivalent order pursuant to s 90-15(1) of the IPS.

Third Contention: That the liquidators lack independence

Relevant facts

96 For the purpose of determining this ground, it becomes necessary to consider the facts in some detail, being more detail than either of the parties addressed in their submissions.

97 Mr Strawbridge was a partner at Deloitte from 1 July 2008 to 23 November 2020. From around March 2020, Deloitte was retained to provide services to the Mosaic Group pursuant to three engagements in which Mr Strawbridge was either primarily responsible or the “review partner”.

First Engagement

98 On 26 March 2020, Mr Strawbridge sent Mr Edwards, a partner at Hamilton Locke (the Mosaic Group’s lawyers at the time), an engagement letter regarding the provision of commercial advice that would “feed into and be part of” Hamilton Locke’s legal advice to the Mosaic Group (First Engagement). While the engagement letter was addressed to Hamilton Locke, Mr Strawbridge gave evidence that he understood that the work to be conducted by Deloitte would ultimately be incorporated into work for the Mosaic Group. A fixed fee retainer of $25,000 per month (plus GST) applied to the First Engagement. The First Engagement was signed by Mr Edwards on 17 April 2020.

99 Under the First Engagement, Mr Strawbridge would be “primarily responsible” for providing the following services:

* Undertake a high-level strategic review of the current situation that the Group finds itself [in] as a [consequence] of the impact of Covid-19; and

* Provide options for the Group as to possible actions going forward.

100 While the First Engagement contemplated the provision of broader strategic advice, Mr Strawbridge gave evidence that work under this engagement was confined to a review of the calculations for the Mosaic Group’s entitlement to JobKeeper payments under the Commonwealth Government’s wage subsidy program introduced in response to the COVID-19 pandemic, which was set out in a report relating to “Project Roman” (JobKeeper Report). Mr Strawbridge confirmed that “Project Roman” was a project name that Deloitte gave to all engagements for the Mosaic Group. No other work product has been located in relation to the First Engagement. The Administrators informed creditors that Deloitte was paid $48,000 (plus GST) in respect of this work.

101 Between 27 March 2020 and 3 April 2020, Mr Strawbridge attended three meetings of the board of directors of Mosaic Brands (the Board) to “observe and gather information” as part of the First Engagement. Mr Strawbridge gave evidence that “it was common for insolvency practitioners to have these sorts of meetings (which were not formal engagements) during 2020 when the COVID legislation was introduced and there was significant uncertainty about company earnings.”

102 On 27 March 2020, Mr Strawbridge attended part of a Board meeting (First Board Meeting). The minutes of the Board meeting record that the following occurred during his attendance:

Mr Strawbridge explained the latest developments on the Australian Federal Government’s stimulus package and the potential impact this would have on tenants and landlords. Mr Strawbridge set out some of the options available to retailers for dealing with leases should they be unable to pay rent during COVID-19 and highlighted that landlords would technically have, despite the relief offered by the Government’s stimulus package, a right to enter the premises and realise stock. It was noted that a court application had been made to seek clarification on this point. Mr Strawbridge advised the Company to seek written agreement from Landlords where possible in order to avoid such consequences.

There was a question regarding the order of payment priorities during an insolvency and it was explained that the Receiver gets first priority with an indemnity over the assets of the Company. The order of priority then depends on the nature of the asset, but is typically secured creditors, followed by employees, inventory then debtors.

The Board briefed Mr Strawbridge on the plans underway for managing cash flow in short-term and the plans for restructuring the business in the longer-term.

The Board received an update on the latest discussions with ANZ. It was noted that the Company had formally asked ANZ to relax the covenants, to maintain the $40m working capital facility and to provide an additional $20m in working capital for the next six months. The Company would agree to doing an equity raise as soon as it was feasible.

It was agreed that Mr Strawbridge should be invited to attend the next Board meeting.

103 On 30 March 2020, Mr Strawbridge attended another meeting of the Board (Second Board Meeting). At this meeting, the Board discussed (inter alia) the following topics:

(a) An analysis of the company’s cash flow indicated that there would be a $20 million cash deficit within the next few months, over and above the company’s current $40 million working capital facility with ANZ. ANZ would be asked to increase the working capital facility by $20 million to enable employees and some suppliers to be paid and to limit longer term supply chain issues.

(b) As at 30 June 2020, the company’s forecast cash balance, excluding supplier payments and prior to any additional working capital facility, was $33 million. Of this $33 million, a minimum of $22 million would be required for selected supplier payments.

(c) The Board also approved the winding up of approximately $6 million in Foreign Exchange Contracts, with the funds realised to be used to pay suppliers.

104 At the Second Board Meeting, Mr Strawbridge was asked to undertake a valuation of the company’s inventory. Mr Strawbridge gave evidence that this valuation did not proceed.

105 On 3 April 2020, Mr Strawbridge attended a third meeting of the Board. At this meeting, the following matters were discussed:

(a) The company’s latest cash flow forecasts indicated that it needed an additional $15 million of working capital until October 2020 as well as a $10 million working capital bridge until the end of May 2020, pending receipt of the Australian Government JobKeeper subsidy.

(b) ANZ had agreed to waive its covenants as at 31 March 2020.

(c) The Australian Federal Government had recently announced a “job keeper subsidy of $1,500 per fortnight” which was expected to result in a “material improvement in the company’s cash flow.”

(d) Deloitte was asked to review the company’s cash flow assumptions following ANZ’s request for an external review of the company’s interpretation and calculation of the JobKeeper subsidies.

106 The minutes do not record that Mr Strawbridge provided any advice or comments to the Board at this meeting.

107 Between 27 March 2020 and 6 April 2020, Mr Strawbridge recorded 4.6 hours of time in relation to “Project Mosaic”, including time on the days he attended the Board meetings. It is not clear whether the amount Deloitte was paid in relation to the JobKeeper Report (being $48,000 plus GST) included the time Mr Strawbridge recorded.

108 On 29 April 2020, a Board meeting was held which Mr Strawbridge did not attend. At that meeting, the minutes record that the Board noted and discussed that “[a] review of Goodwill and Brand Names will occur as part of the year-end process and the Board were informed that given the current COVID environment that an impairment may be booked. This will be in accordance [with] the calculation completed by expert partners Deloitte.” There was no evidence as to what “calculation” was completed by Deloitte, e.g. whether this was a reference to the JobKeeper Report.

Second Engagement

109 On 19 May 2020, an engagement letter was sent by Mr Marsden, a partner of Deloitte, to Mr Wilshire, a director of the Mosaic Group (Second Engagement). Under this engagement, Deloitte was asked to provide the following services:

Phase 1

1.    Review and analyse the financial and cash flow forecasts for FY20 and FY21, taking into account the current COVID-19 disruptions, and including:

ο  a review of the financial model used to prepare the cash flow forecast (including the basis of preparation, degree of accuracy achieved from prior forecasting, and the overall robustness of the process used);

ο review and comment on the key underlying assumptions, including with regards to payments owing to landlords and usage of stock received/purchased/produced in FY20 for the corresponding season in FY21 (as proposed by the Company); and

ο undertake a sensitivity analysis to identify risks to achieving forecasts especially with regards to cash generation and the impact of non-payment of proposed supplier payments.

2.    Provide analysis on recent and projected trading performance by brand, by channel, by store, and by geographic region providing insights on loss making stores/sustainable store network and relative brand performance.

Phase 2

1.    consider if there are any additional cash generation/preservation initiatives available to the Company, including review of the cash conversion cycle (including industry benchmarking).

110 The terms of the Second Engagement were broad. While Mr Marsden had primary responsibility for the services under the Second Engagement, Mr Strawbridge was named as the “review partner”. Mr Strawbridge gave evidence that the purpose of a “review partner” was to “review the final work product and provide input at that stage (if any), not to actually perform any of the day-to-day work.” The engagement letter was signed on 20 May 2020 by a director of the Mosaic Group.

111 On 14 August 2020, Deloitte issued a bill to Mosaic Brands, addressed to the Mosaic Group’s Chief Financial officer Mr Softa, for $170,500. The bill was not itemised and did not identify what work had been performed or by whom, but indicated it was in relation to “Project Roman” for “[p]rofessional fees as per engagement letter dated 19 May 2020” which indicates that the bill was in relation to the Second Engagement.

112 Mr Strawbridge gave evidence that he does not recall looking at any final work product in relation to the Second Engagement and it appears no time was recorded by Mr Strawbridge in relation to this engagement.

113 On 29 October 2020, a Board meeting was held (which Mr Strawbridge did not attend). The minutes of that meeting record that the Mosaic Group “received an Information Request Letter from ASIC with questions on the going concern and goodwill calculations. BDO and Deloitte have reviewed the responses.”

114 The 13 June 2025 Report states that in October to November 2020, as a result of ANZ advising that its core debt facility of $20 million would not be extended beyond the expiry date of July 2021, “Deloitte were engaged to seek extension of ANZ facilities or assist with a full refinance.”

Third Engagement

115 There is a further letter of engagement from Deloitte to the Mosaic Group dated 27 November 2020 (Third Engagement). Deloitte was asked to provide the following services:

1.    Provide assistance in the preparation of a 3-way model for use by the Group in presenting its forecasts for the periods FY21, FY22 and FY23.

2.    Review and comment on the YTD trading results to 31 December 2020.

3.    Review and analyse the trading and cash flow forecasts for FY21, FY22 and FY23, providing comment on the following:

* the suitability of the financial model used to prepare the forecast (including the basis of preparation, degree of accuracy achieved from prior forecasting, and the overall robustness of the process used);

* the underlying assumptions, including the following:

ο forecast working capital requirements for the forecast period

ο the store closure program

ο continued impacts (if relevant) of the outstanding supplier and landlord position following the initial Covid-19 disruptions

4.    Provide an update on the recent and projected trading performance by brand, by channel, by store and by geographic region, providing insights on loss making stores/sustainable store network and relative brand performance.

5.    Report on different capital strategies and solutions available to the Group under different scenarios identified, including the impact on the ANZ’s facilities.

6.    Help develop a plan and strategy for the ongoing debt facilities of the Group, by providing ‘soft soundings’ of lenders in the market to help understand availability and structure of refinancing options and anything else required by the Group.

7.    Provide ongoing monthly reporting to the ANZ in an agreed form and any other updates required to enable ANZ to continue to assess its position and options.

116 Some of these tasks overlapped with the Second Engagement, including with an overlapping period. Mr Marsden of Deloitte had primary responsibility for the services under the Third Engagement. While Mr Strawbridge was named as the “review partner”, it appears he had resigned on 23 November 2020 or shortly thereafter. A draft version of the Third Engagement letter has been located which is dated 12 November 2020. That raises at least the possibility that the Third Engagement commenced while Mr Strawbridge was still a partner, with the scope finalised in the letter dated 27 November 2020. However, as this was not explored in evidence, I will not give it any further consideration. There is no evidence suggesting Mr Strawbridge was involved in doing work under the Third Engagement.

Fourth Engagement

117 Following Mr Strawbridge’s resignation, Deloitte sent an engagement letter on 16 December 2020 to Hamilton Locke to provide services to assist with the provision of safe harbour advice to the directors of Mosaic Group (Fourth Engagement). The services to be provided by Deloitte were relevantly described as follows:

We understand that you [i.e. Hamilton Locke] have been engaged to provide Safe Harbour advice to the directors of the Group and you have asked us to provide the following limited services to you:

a.    meet with management board of the Group to obtain an understanding of the legal, financial and management structure, operations and business of the Group sufficient to provide the services described in b), c) and d) below.

b.    Review and gain an understanding of the Restructuring Plan developed by the Group that the Board of Directors has resolved to develop and implement.

c. perform analysis of the relevant information provided by the Group to show the estimated outcome of an immediate appointment of an administrator, or liquidator, to the Group;

d. gain an understanding of and report on the Group's compliance with its:

* tax reporting and lodgment obligations;

* financial records maintenance requirements; and

* obligations to pay employee entitlements;

118 There is no suggestion that Mr Strawbridge was involved in the Fourth Engagement. Mr Strawbridge has given evidence and informed the creditors that he did not discuss or provide any advice to the Mosaic Group in relation to safe harbour or insolvent trading in relation to any engagement while a partner at Deloitte.

119 Somewhat imprecise references to safe harbour advice given by Deloitte to the Mosaic Group and/or its directors were made by the parties throughout their submissions and the hearing. Mr Strawbridge appeared to confirm that “the Safe Harbour advisor to the directors and the Companies was Deloitte” in the minutes of the first meeting of the creditors on 7 November 2024 (the 7 November 2024 Meeting). However, no party was able to precisely identify or articulate what advice was given (or whether privilege was claimed) and the date of that advice.

Conduct following Mr Strawbridge’s appointment

120 In their first circular to creditors on 29 October 2024, the Administrators attached a “Declaration of Independence, Relevant Relationships and Indemnities” (DIRRI) which disclosed, among other things, that the appointment was referred to FTI Consulting by Mr Edwards of Hamilton Locke, and that Mr Strawbridge “has known Richard Facioni [the Chairman of Mosaic Brands Limited] for a number of years in a professional manner.” Mr Strawbridge gave evidence that he did not consider his attendance of the Board meetings or his work on the JobKeeper Report to be relevant to disclose in the DIRRI for the following reasons:

(a)    the work had been performed more than 2 years prior to the Appointment Date;

(b)    the engagements had no connection with the provision of safe harbour advice;

(c)    the professional services provided under these engagements are not of the kind that the ARITA Code (and its associated guidelines and standards) identify as prior engagements that could impact an insolvency practitioner's independence.

121 At the 7 November 2024 Meeting, Mr Anderson of ERA Legal, who appeared to be acting as proxy for a number of creditors, raised the independence concerns ERA Legal had received. In response, Mr Strawbridge, as Chairperson of the meeting, “referred to the Administrators’ DIRRI sent to all creditors on 29 October 2024 which sets out the Administrators [sic]  relevant relationships” and the basis for the Administrators’ independence. When asked whether Hamilton Locke was one of the Mosaic Group’s safe harbour advisers, Mr Strawbridge stated that the Administrators understood that the safe harbour adviser to the directors and the Mosaic Group was Deloitte. While resolutions to replace the Administrators of Mosaic Brands and one other company in the Mosaic Group were put to the creditors at the 7 November 2024 Meeting, these resolutions did not pass.

122 In the 13 June 2025 Report, the Administrators stated that they had formed the preliminary view that the Mosaic Group “was likely insolvent from at least 31 December 2020 and remained insolvent up until the date of [the Administrators’] appointment, being 28 October 2024” (emphasis added). Following initial investigations, the Administrators identified possible breaches by (one or more of) the directors including breaches of directors’ duties, and formed the preliminary view that “[t]here is a strong prima facie claim for insolvent trading against the directors” for at least some, if not all, of the investigation period between 1 July 2019 and 28 October 2024, which “will require further investigation by a liquidator.” The report indicated that the directors of the Mosaic Group had advised that they would seek to rely on safe harbour protections in respect of insolvent trading under the Corporations Act. The Administrators indicated that “it was not clear whether the Safe Harbour eligibility criteria were met at all times and further investigation is required.”

123 Prior to and following the 20 June 2025 Meeting, ERA Legal sent a number of letters and emails to King & Wood Mallesons (KWM) (the Mosaic Group’s current lawyers) reiterating, inter alia, “the obvious, irreconcilable and incurable independence issues” attending Mr Strawbridge’s appointment as an administrator in circumstances where Deloitte had been providing advice to the Mosaic Group and/or directors either directly or indirectly in relation to safe harbour and Mr Strawbridge was a “review partner” from at least June 2020. In response, KWM sent correspondence claiming that the allegations made against Mr Strawbridge were “incorrect, misleading and deceptive, and potentially defamatory.”

124 During the hearing, Mr Strawbridge confirmed that he gave instructions for the various correspondence from KWM to be sent. However, the defendants submitted that ERA Legal’s assertions did contain certain misleading statements, namely (a) the unqualified conclusion that the appointment of Mr Strawbridge was tainted with “obvious, irreconcilable and incurable independence issues”, and (b) the false assertion that “Mr Strawbridge was directly involved in the provision of [the safe harbour] advice.”

125 ERA Legal also made a request for documents and information including, inter alia:

(a) any reports or advice provided by Deloitte to the Mosaic Group (or any entity therein) or its directors prior to 27 November 2020;

(b) any previous or draft iterations of the “Project Roman engagement letter” signed on 27 November 2020 (i.e. the Third Engagement); and

(c) any correspondence to or from Mr Strawbridge prior to 27 November 2020.

126 In relation to the JobKeeper Report, KWM noted that the Administrators had not been able to locate a copy of the relevant engagement agreement, or any materials otherwise related to this engagement, and “consider it is not reasonable for them to conduct further searches.”

127 The correspondence between ERA Legal and KWM was only provided to two creditors, the Scentre Group and the ATO.

128 In the 24 June 2025 Circular, the Administrators addressed the reasons for adjourning the 20 June 2025 Meeting and purported to provide information to creditors on the proposed resolution to appoint the Alternative Liquidators at the reconvened second meeting. The following background was provided in relation to that proposed resolution (emphasis in original):

…ERA Legal has expressed a series of concerns regarding perceptions that the FTI Administrators lack the requisite degree of independent to act as administrators and as prospective liquidators of the Companies. ERA Legal have taken a series of further steps to procure the nomination of the Alternate Liquidators to replace the FTI Administrators.

The FTI Administrators’ position is clear. We have never lacked the requisite degree of independence to perform our role as the Companies’ administrators and we remain independent for the purposes of performing our prospective role as the Companies’ liquidators. We have always complied with our relevant statutory and professional obligations.

The concerns raised by ERA Legal are based on incorrect information and a series of misunderstandings as to the work that the FTI Administrators conducted with the Companies prior to their appointment as administrators…

129 The circular asserted that Mr Strawbridge was not involved in any services associated with safe harbour. The circular also summarised the “relevant facts” which referred to Mr Strawbridge’s attendance of three Board meetings but noted they were “in no formal capacity” and “no formal engagement advice [was] provided or remuneration received by Deloitte.” However, when cross-examined, Mr Strawbridge admitted that he attended the three Board meetings pursuant to the First Engagement, albeit it was for the purpose of obtaining information about the current position of the Mosaic Group and ascertaining the scope of work to be performed under the engagement. He agreed that he was not attending the Board meetings on an “informal” basis, and that it is likely (though he cannot confirm) that Deloitte was paid for that work.

130 During the 1 July 2025 Meeting, Mr Klineberg, a partner of KWM, addressed the creditors prior to the vote on the resolution to appoint the Alternative Liquidators. Mr Klineberg reasserted that the allegations made by ERA Legal regarding the Administrators’ lack of independence were “misleading, deceptive, and potentially defamatory to the Administrators and FTI Consulting.” Following this, Mr O’Neill of ERA Legal asked Mr Strawbridge, acting as Chairperson, a series of questions, including in relation to his independence, which are recorded as follows in the minutes (emphasis added):

* Mr O’Neill asked the Chairperson whether the Mosaic Brands board [at the First Board Meeting] briefed the Chairperson on plans underway to manage cashflow in the short term and a plan to restructure the business in the longer term.

* The Chairperson advised that given the passage of time, he did not remember the specifics of the discussion at that meeting, however, he recalled they were general in nature and confined to the Mosaic Brands’ present position at that time. The Chairperson confirmed that no engagement with Mosaic arose from that meeting, nor was any remuneration received and confirmed that it is not unusual for insolvency practitioners to attend board meetings with companies to hold preliminary and general discussions.

* Mr O’Neill asked whether between 28 March 2020 and 11 July 2020 Deloitte received its first engagement and was paid for that work.

* The Chairperson advised that was correct and that engagement was via Hamilton Locke to review JobKeeper payments received by Mosaic Brands during COVID.

* Mr O’Neill asked was Deloitte’s advice provided to Mosaic.

* The Chairperson advised it was not. Deloitte’s advice was provided to Hamilton Locke who had engaged Deloitte.

* Mr. O’Neill stated that on 30 March 2020, the Chairperson was recorded as attending a second meeting with Mosaic’s board of directors and asked if the Chairperson recalled that ANZ had been asked to approve an increase [to] the working capital facility by $20 million in order to allow employees and some suppliers to be paid, and to limit longer term supply chains and to discuss other financial issues.

* The Chairperson advised he was not able to comment as he does not have access to his former records from when he worked at Deloitte, and that he did not have a copy of those minutes (from the records in his possession) in front of him at the meeting. The Chairperson re-iterated there was no engagement in place for this attendance, no advice provided, no remuneration was received, and it is not unusual for an insolvency practitioner to attend such meetings.

* Mr. O’Neill stated that on 3 April 2020, the Chairperson attended the third Mosaic board of directors meeting. At that meeting there were updates on the bank and cash flow. In April 2020 there was a report issued by Deloitte to Mosaic Brands, rather than Hamilton Locke, do you agree?

* The Chairperson advised that as he did not have that report in front of him he could not comment.

* Mr. O’Neill asked whether the Chairperson recalled such a report.

* The Chairperson advised not off hand, no.

131 Again, during cross-examination, Mr Strawbridge, while not accepting he had misled creditors, acknowledged that the statements that he did not attend the Board meetings pursuant to any engagement or in a formal capacity were incorrect.

Principles

132 The Court is empowered to make orders for the removal and replacement of liquidators of companies in external administration pursuant to s 90-15 of the IPS

133 Subsection 90-15(1) of the IPS confers general power on the Court to “make such orders as it thinks fit in relation to the external administration of a company.”

134 Section 90-15(3) of the IPS provides examples of orders the Court may make pursuant to s 90-15(1), which includes, at paragraphs (b) and (c), orders for the removal and replacement of the liquidators of a company:

(3)    Without limiting subsection (1), those orders may include any one or more of the following:

…

(b)    an order that a person cease to be the external administrator of the company;

(c)    an order that another registered liquidator be appointed as the external administrator of the company;

…

135 Section 90-15(4) provides a non-exhaustive list of matters the Court may take into account when making orders:

(4)    Without limiting the matters which the Court may take into account when making orders, the Court may take into account:

(a)    whether the liquidator has faithfully performed, or is faithfully performing, the liquidator’s duties; and

(b)    whether an action or failure to act by the liquidator is in compliance with this Act and the Insolvency Practice Rules; and

(c)    whether an action or failure to act by the liquidator is in compliance with an order of the Court; and

(d)    whether the company or any other person has suffered, or is likely to suffer, loss or damage because of an action or failure to act by the liquidator; and

(e)    the seriousness of the consequences of any action or failure to act by the liquidator, including the effect of that action or failure to act on public confidence in registered liquidators as a group.

136 The Corporations Act previously provided, pursuant to s 503, that “[t]he Court may, on cause shown, remove a liquidator and appoint another liquidator.” That provision, among other provisions, was repealed by the Insolvency Law Reform Act 2016 (Cth) which also enacted the IPS at sch 2 to the Corporations Act. Section 90-15 of the IPS does not use the language of “cause shown”.

137 It has been recognised that a liquidator will not be removed without good reason, because removal applications are productive of disruption and costs. In Re St Gregory’s Armenian School (in liq) (2012) 92 ACSR 588; [2012] NSWSC 1215 (St Gregory’s), Brereton J observed at [24] – [25]:

The burden of showing cause for removal rests with the applicant… This onus is not lightly discharged, as it should not be seen to be easy to remove a liquidator merely because it can be shown that in one or possibly even more respects, his or her conduct has fallen short of the ideal. Otherwise, applications for removal by creditors who have not had their preferred liquidator appointed, or who are for some other reason disgruntled, would be encouraged…

An order for removal will be made only if it is demonstrated that it would be “for the better conduct of the [liquidation]” or “to the general advantage of persons interested in the winding up” or “in the best interests of the liquidation”.

138 The principles concerning the appointment of a liquidator also apply to the removal of one: Advance Housing Pty Ltd (in liq) v Newcastle Classic Developments Pty Ltd as trustee for The Albans Unit Trust (1994) 14 ACSR 230 (Advance Housing) at 234 (Santow J); Re Club Superstores Australia Pty Ltd (in liq) (1993) 10 ACSR 730 (Club Superstores) at 734 (Thomas J).

139 Notwithstanding the caution about the removal of a liquidator, the existence of actual or apprehended bias is a well-recognised reason for removal. A guiding principle is that liquidators must be independent and be seen to be independent: Australian Securities and Investments Commission v Franklin (2014) 223 FCR 204; [2014] FCAFC 85 (Franklin) at [58] (White J, Jessup and Robertson JJ agreeing at [1] and [3]); Advance Housing at 233; Re National Safety Council of Australia [1990] VR 29 (National Safety Council) at 34 (Young CJ, Murphy and Marks JJ); Keay AR, McPherson & Keay’s Law of Company Liquidation (5th ed, Sweet & Maxwell, 2021) at [8.030].

140 Where a liquidator’s independence is called into question, the relevant test to be applied is similar to the “double might” test stated by the plurality in Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337; [2000] HCA 63 (Ebner) at [6] – [8], namely, whether a fair-minded lay observer might reasonably apprehend that the liquidator might not bring an impartial and unprejudiced mind to the resolution of questions they may be called upon to decide.

141 Consistent with the observations of the plurality in Ebner (at [8]), but adapted to the circumstances of a liquidator, the application of the test requires:

(a) first, the identification of what is said might lead the liquidator to act other than in the best interests of the liquidation and the persons interested in it; and

(b) secondly, the articulation of a logical connection between the matter identified and the feared deviation from the course of making decisions in those best interests.

142 The adoption of the Ebner “double might” test for the removal of a liquidator or administrator has been affirmed in Franklin at [59]; Accord Pacific Holdings Pty Ltd v Gleeson as liquidator of Accord Pacific Land Pty Ltd (in liq) [2011] NSWSC 1021 (Accord) at [35] – [36] (Ward J); Pinklillies Pty Ltd (Trustee), in the matter of Northwest Motel Group Pty Ltd (in liq) v Huxtable [2011] FCA 1543 at [21] (Logan J); Habrok (Dalgaranga) Pty Ltd v Gascoyne Resources Ltd (2020) 149 ACSR 1; [2020] FCA 1395 (Habrok) at [442] (Beach J).

143 In their submissions, the plaintiff referred to the higher “would” test for apprehended bias, in stating that the question is whether “the hypothetical fair minded observer would perceive a lack of independence or impartiality on the part of the liquidator in the discharge of his or her functions” (emphasis added). This is consistent with the language of Advance Housing at 234 (Santow J) and Re Biposo Pty Ltd (1995) 17 ACSR 730 (Biposo) at 735 (Young J), both of which preceded Ebner. I observe that there are a small number of instances where the “would” test has been applied by courts post-Ebner: see Domino Hire v Pioneer Park [2003] NSWSC 496 at [64] – [65] (Austin J) and St Gregory’s at [102].

144 In Franklin (at [73] – [81]), the Full Court held that the application of the “would” test for the removal of a liquidator involves error. I adopt the “double might” test.

145 In relation to the standard of reasonable apprehension that must be met, there must be a “real and not merely a theoretical possibility of conflict”: Queensland Mining Corporation Ltd v Butmall Pty Ltd, in the matter of Butmall Pty Ltd (in liq) [2016] FCA 16 at [9] (Jagot J); Franklin at [77]; Advance Housing at 232; Club Superstores at 735; Bovis Lend Lease Pty Ltd v Wily (2003) 45 ACSR 612; [2003] NSWSC 467 at [124] (Austin J). “The question is one of possibility (real and not remote), not probability”: Ebner at [7].

146 The precise application of these tests may be influenced by the context in which they fall to be applied. The following observations were made in Isbester v Knox City Council (2015) 255 CLR 135; [2015] HCA 20 (Isbester) at [23] (Kiefel, Bell, Keane and Nettle JJ) in the context of statutory decision-making (citations omitted):

How the principle respecting apprehension of bias is applied may be said generally to depend upon the nature of the decision and its statutory context, what is involved in making the decision and the identity of the decision-maker… The hypothetical fair-minded observer assessing possible bias is to be taken to be aware of the nature of the decision and the context in which it was made as well as to have knowledge of the circumstances leading to the decision.

147 In Isbester, at [24], their Honours referred to examples of:

how the above-mentioned factors assume relevance to the question of what a fair-minded observer may reasonably expect as to the level, or standard, of impartiality which should be brought to decision-making by certain non-judicial decision-makers.

148 In Habrok at [442], Beach J observed that the context and nature of the office holder are all important in applying the Ebner test. In Franklin, at [60] – [61], the following observations were made:

60    The “double might” test stated in Ebner has been regarded as relatively undemanding and, on occasion, has been described as “Spartan”. Nevertheless, the degree of independence and impartiality to be expected of a decision-maker may differ from one statutory context to another. As Spigelman CJ observed in McGovern v Ku-ring-gai Council [2008] NSWCA 209; (2008) 72 NSWLR 504 at [11], “the judicial paradigm is not universally applicable”. Similarly, this Court observed in Cabcharge Australia Ltd v Australian Competition and Consumer Commission [2010] FCAFC 111 at [27] that, “although the test for apprehended bias is ordinarily the same wherever it arises, the precise language used in applying the test has frequently varied depending on the context in which it falls to be applied”. This means, in the present case, that particular regard must be had to the position of liquidators in a voluntary winding up.

61    Liquidators are officers of the court and are, accordingly, expected to conduct themselves with independence, impartiality and integrity. However, questions of bias in relation to liquidators arise in a context which differs in material respects from that of the judiciary or administrative decision-makers. Liquidators are themselves engaged in business in a competitive environment. They have to attract work. This makes it almost inevitable that they will develop contacts and relationships with those who are actual or prospective sources of referrals. Further, the success or otherwise of liquidators will depend in part on their maintaining good professional reputations.

149 It is in this context that the observations in some of the authorities as to the particular position of liquidators fall to be considered. A fair-minded observer is to be taken to know and understand the conventional roles and conduct of liquidators. That conventional role and conduct is different from that of a judicial officer.

150 It is well accepted that prior involvement or association by the liquidator in the company is not, by itself, cause to remove a liquidator: Advance Housing at 234; In the matter of FW Projects Pty Limited (in liquidation) [2019] NSWSC 892 (FW Projects) at [100] (Black J); Re Monarch Gold Mining Co Ltd; Ex Parte Hughes [2008] WASC 201 at [16] (Master Sanderson). For example, in Commonwealth of Australia v Irving (1996) 65 FCR 291 at 296, Branson J observed that:

It is now common place for a company to seek professional advice respecting actual or apprehended insolvency and for the advice received to be to appoint an administrator… Not infrequently, and, in my view, not improperly, the proponent of the advice to appoint an administrator then accepts appointment as that administrator. There would, I consider, be an air of commercial unreality about any suggestion that this course of events is necessarily improper.

151 Similarly, it was accepted by Thomas J in Club Superstores (at 736) that it was common practice in Queensland for potential liquidators to attend pre-appointment conferences with the company’s directors or a creditor which would not contravene the duties of independence and impartiality.

152 However, in Club Superstores (at 736), Thomas J held that “the line was clearly crossed” by the liquidator when, prior to his appointment, the liquidator (inter alia) provided specific advice to one of the directors regarding the consequences of liquidation. Thomas J observed that while it was unrealistic to assume that the liquidator would be joined as a third party to any insolvent trading claim against the director, it was not inconceivable that the liquidator could be called as a potential witness if such a claim was advanced.

153 In National Safety Council (at 34), the Court held that the liquidator could not be seen as independent because he was a partner of an accounting firm who had been advising the company and might potentially be the subject of a claim for negligence in not identifying earlier that the company was insolvent.

154 There are “no hard and fast rules” as observed by Beach J in Habrok (at [450]). Ultimately, “[w]hat the court has to do is to make up its mind by looking at the overall picture” and the liquidator’s conduct as a whole to determine whether a fair-minded lay observer might reasonably apprehend that the liquidators might not bring an impartial mind to the winding up of the company: Biposo at 736.

155 A liquidator may retain their appointment if it can be established that their prior involvement in the company is not likely to impede or inhibit him or her from acting impartially in the interests of all creditors, or give rise to a reasonable apprehension that he or she might be so inhibited or impeded: FW Projects at [100].

156 When assessing the independence of a liquidator “one looks to the conduct both before and after the liquidation commenced”: Biposo at 732.

157 The following further matters, which are by no means exhaustive, have also been cited in the authorities as relevant considerations when determining whether to replace a liquidator:

(a) whether replacement will result in wasted costs, additional costs and/or delay: Accord at [129]; FW Projects at [87]; St Gregory’s at [27]; Biposo at 734;

(b) whether the liquidation is well advanced and the liquidator has become well acquainted with the affairs of the company, or whether the investigations undertaken to date have been limited: Advance Housing at 233; FW Projects at [89]; Biposo at 734; SingTel Optus Pty Ltd v Weston (2012) 90 ACSR 225; [2012] NSWSC 674 (Singtel) at [165] (Bergin CJ); Re Ten Network Holdings Ltd (2017) 252 FCR 519; [2017] FCA 914 (Ten Network) at [68] (O’Callaghan J); and

(c) whether there has been a loss of confidence in the liquidator based on reasonable grounds by the creditors: FW Projects at [86]; St Gregory’s at [29]; SingTel at [162].

158 As to (c) above, it was observed in St Gregory’s (at [29]) that a “mere loss of confidence, without more, does not justify removal of a liquidator.” The existence of rancour and hostility between the party seeking the removal and the liquidator would not be a sufficient ground.

159 I note that both parties referred me to various sections of the Australian Restructuring Insolvency & Turnaround Association (ARITA) Code. While it would be permissible for me to take the “requirements” of the ARITA Code into consideration as indicating the profession’s own view of proper professional standards (and thus potentially relevant to the proper standard applicable to the conduct of liquidators for the purpose of Ebner test), the Code has no legal status and a failure to comply with its terms is not determinative of the issue for the Court. In that respect, I agree with O’Callaghan J’s comments in Ten Network at [94] – [96].

160 In terms of available remedies, in Markey (Liquidator), in the matter of Bestjet Travel Pty Ltd (in liq) v Bestjet Travel Pty Ltd (in liq) [2020] FCA 1881 (Markey) at [4], Reeves J outlined three recognised options that the Court has at its disposal when presented with a liquidator who is affected by an actual or apprehended conflict of interest:

(a)    firstly, by an order for the appointment of a special purpose liquidator to determine the particular issue which has created the conflict of interest and only that issue…;

(b)    secondly, by a direction to the conflicted liquidator that he or she would be justified in performing an act which would otherwise involve a conflict, for example, by admitting or rejecting the contentious proof of debt (see, for example, Warner (liquidator), in the matter of Sakr Bros Pty Ltd (in liq) [2019] FCA 547 (Sakr) at [21]); and

(c)    thirdly, by an order removing the conflicted liquidator from one or more of the companies and appointing a new liquidator in his or her place (see, for example, Handberg, in the matter of Greight Pty Ltd (in liq) (2006) 56 ACSR 334; [2006] FCA 17).

161 The appointment of a special purpose liquidator may be warranted:

…where the liquidator is prevented from investigating or pursuing causes of action which will benefit creditors because of an actual or perceived conflict of interest, or where it has been demonstrated that there are matters that require investigation with a view to possible recovery for creditors in circumstances where it is of utility and just for such matters to be investigated by a different liquidator.

(Shangri-La Construction Pty Ltd v GVE Hampton Pty Ltd (in liq) (2021) 152 ACSR 19; [2021] VSC 161 at [85] (Connock J)). See also Re Obie Pty Ltd (in liq) (No 4) (1984) 8 ACLR 967 (Re Obie) at 971 (Thomas J) and Markey at [16].

162 In those circumstances, a special purpose liquidator is “appointed to co-exist with the existing liquidators, to fulfil a specific purpose which would otherwise form part of the responsibilities of the original liquidator, but which is carved out from those usual responsibilities because of difficulties in the original liquidator performing it”: Honest Remark Pty Ltd v Allstate Explorations NL (2006) 234 ALR 765; [2006] NSWSC 735 at [61] (Brereton J). In Re Obie, Thomas J observed (at 971) that:

courts have made such orders when there is a matter to be dealt with in a liquidation which it would be embarrassing for the liquidators to handle. In such circumstances an additional liquidator is appointed to handle that matter, and the great expense and loss of efficiency involved in resignation and replacement in a partially completed administration is avoided.

163 Generally, there must be a good reason for the appointment of a special purpose liquidator which “usually involves the assertion of some suspicion as to the inability of the general purpose liquidator to fully administer the winding up”: Commonwealth of Australia, in the matter of ACN 093 117 232 Pty Ltd (in liquidation) v ACN 093 117 232 Pty Ltd (in liquidation) [2018] FCA 1922 at [4] (Derrington J).

164 Section 90-15 of the IPS confers power on the Court to make an order for the appointment of a special purpose liquidator: see e.g. Melhelm Pty Ltd v Boka Beverages Pty Ltd (in liq) (2019) 138 ACSR 95; [2019] FCA 1184 at [49] (Gleeson J); In the matter of ACN 152 546 453 Pty Ltd (formerly Hemisphere Technologies Pty Ltd) (in liq) [2018] NSWSC 1002 at [15] – [16] (Gleeson JA); In the matter of Aus Streaming (In Liq) [2020] VSC 313 at [37] (Connock J).

165 The same general principles that apply to the replacement or removal of a liquidator apply when considering whether a special purpose liquidator ought to be appointed: Onefone Australia Pty Ltd v One.Tel Ltd (in liq) (2003) 48 ACSR 562; [2003] NSWSC 1228 at [10] (Windeyer J).

Relevant context in the present case

166 Having regard to the matters identified in the preceding discussion of the principles, it is not sufficient for the plaintiff to identify merely that Mr Strawbridge had advised the Mosaic Group or had acted for the Mosaic Group. Rather, it is necessary to identify what is said might lead Mr Strawbridge to act otherwise than in the best interests of the liquidation, and articulate the logical connection between that matter and the feared deviation from acting in the best interests of the liquidation.

167 In the course of the hearing, the plaintiff was invited to identify the mechanism by which the concern would arise: i.e. what type of claim might be made that might involve Mr Strawbridge, and why the potential for that claim might cause him to act otherwise than in accordance with the best interests of the liquidation of the Mosaic Group. However, despite this invitation, the plaintiff addressed the question at a relatively high level of generality, which created certain practical challenges. For example, the plaintiff did not gather together the detailed factual matters set out above, or consider the question of potential claims by reference to the actual terms of the engagements undertaken by Deloitte.

168 This issue was of particular significance in the present case because Mr Strawbridge resigned as a partner of Deloitte on 23 November 2020, but was not appointed as an administrator until 28 October 2024. In considering whether a fair-minded lay observer might reasonably apprehend that a liquidator might not bring an impartial and unprejudiced mind to the carrying out of his functions, it becomes necessary to consider the basis on which Mr Strawbridge might have some liability either directly or as a partner of Deloitte for the period prior to 23 November 2020, or the basis on which his conduct in that period might otherwise come under scrutiny (or lead him to be required to give evidence). That requires a proper consideration of:

(a) the scope of the work that was performed prior to 23 November 2020 (as opposed to work carried out by Deloitte after that date); and

(b) how that work might relate to any claims that might be made now.

There was a paucity of that analysis.

169 Further, the plaintiff had a particular focus on the response by the Liquidators, and especially Mr Strawbridge, to the raising of the issue by the solicitors for the plaintiff and the conduct of the creditors’ meetings, which it termed “the Liquidators’ conduct following their appointment as administrators.” Whilst, in a given case, a liquidator’s conduct in the course of an administration or liquidation could betray a level of partiality incompatible with continuing in the role, in the present case the issue involved a considerable degree of circularity. The plaintiff complained of Mr Strawbridge’s defensiveness and failure to concede there was a serious issue, whereas the defendants say that Mr Strawbridge was not required to make concessions in circumstances where there was nothing to make a concession about. The focus on this issue at the hearing was perhaps a product of the heated battles in correspondence that preceded the hearing. However, I found it of very limited assistance and this collateral or secondary issue was a considerable distraction from the real issue.

The contentions of the parties

170 The plaintiff describes the work done by Mr Strawbridge personally, and by Deloitte during Mr Strawbridge’s tenure, as financial advice provided to the Mosaic Group which “[p]lainly… will need to be investigated” and “may result in a potential claim against Deloitte and, depending on the terms upon which Mr Strawbridge exited Deloitte (including whether a release of claims was given), Mr Strawbridge personally.” The plaintiff characterises the work as either safe harbour advice or “financial advice provided by Deloitte to Mosaic and/or its board, for which Mr Strawbridge was either the responsible or review partner…, which could give rise to, inter alia, a claim for negligence.”

171 The plaintiff submits that in discharging their duties as liquidators of the Mosaic Group, the Liquidators will need to investigate, form views, and if appropriate, bring proceedings in respect of:

(a) any claims against directors of the company for insolvent trading under s 588G of the Corporations Act, where the matters to be investigated would necessarily have included the period in which Deloitte and Hamilton Locke were appointed to provide safe harbour advice and could well go to the sufficiency of that advice itself; and

(b) claims against the Mosaic Group’s advisers (including Deloitte), including for negligence.

172 The plaintiff relies on the circumstances that, in the 13 June 2025 Report, the Administrators identified that the Mosaic Group was likely trading insolvent from at least 31 December 2020, and that the investigation period is 1 July 2019 to 28 October 2024.

173 The plaintiff submits that Mr Strawbridge lacks, or there is a reasonable apprehension that he lacks, the requisite independence to investigate advice the Mosaic Group and/or its directors received from Deloitte relating to safe harbour or insolvent trading in circumstances where he was either the person providing that advice or he was a partner of the firm that provided that advice. The plaintiff says it is likely that in addition to being the subject of investigations by the liquidators in relation to insolvent trading or negligent advice, Mr Strawbridge would be a key witness in any proceedings the liquidators commence.

174 The plaintiff identifies two grounds for a reasonable apprehension that Mr Strawbridge may act other than in the best interests of the liquidation:

(a) First, matters relating to Mr Strawbridge’s prior business association with the Mosaic Group would necessarily fall within the scope of the liquidators’ investigations, particularly in light of the preliminary views expressed by the Administrators in the 13 June 2025 Report. The plaintiff also relies on Mr Strawbridge’s conduct following his appointment as liquidator which it submits supports the general impression that Mr Strawbridge would not be able to carry out the duties of liquidator impartially.

(b) Secondly, and alternatively, Mr Strawbridge, in his capacity as a partner of Deloitte, could be held personally liable for any claim of negligence or breach brought against Deloitte in connection with its provision of safe harbour or financial advice, even if he was not directly responsible or involved in giving such advice.

175 The “feared deviation” relied upon by the plaintiff is that the Liquidators may lack the “appetite to investigate and prosecute claims against Deloitte.”

176 In oral submissions, the plaintiff relied upon both the First Engagement and the Second Engagement. It was submitted that:

(a) Deloitte are one of a very small number of possible cross-defendants to any claim for insolvent trading;

(b) at a time when it was certainly possible, according to the Liquidators, that the Mosaic Group was insolvent, Mr Strawbridge was retained to undertake a high level strategic review of the current situation and provide options going forward;

(c) the nature of the Deloitte engagements, why they were entered into, and what was done pursuant to the relevant engagements, are all “proper matters for investigation”; and

(d) there is a realistic possibility that Mr Strawbridge would be a witness in any event, which is incompatible with his present role.

177 In response, the defendants relied upon a number of points, some said to be “complete answers”.

178 First, it was submitted that the liquidators could not directly commence proceedings against Deloitte (or any adviser for that matter) with respect to negligent safe harbour advice, because any safe harbour advice provided could only be given for the benefit of directors and not the Mosaic Group itself. As a consequence, the only route by which Deloitte could become a party to a proceeding commenced by the liquidators with respect to an insolvent trading claim would be entirely a matter for the directors e.g. if the directors chose to join Deloitte as a cross-defendant to an action commenced by the liquidators.

179 Secondly, it was submitted at the hearing that all relevant outstanding debts of the Mosaic Group were incurred “long after” 2020 and after Mr Strawbridge had resigned from Deloitte. Therefore, any insolvent trading claim would only be focused on the period after 2020. In support of this contention, the defendants pointed to Mr Strawbridge’s file note of the Committee of Inspection Meeting held on 8 May 2025 at which Mr Strawbridge apparently stated:

Our preliminary assessment indicates the Group was potentially insolvent from 31 December 2020, and potentially earlier. There is little utility in proving up an earlier date as all the debts due to creditors were incurred after this date and significant more work would be required to be undertaken.

There was also a brief statement in the course of Mr Strawbridge’s evidence that the relevant debts that might give rise to insolvent trading were incurred “well after” the period around 26 March 2020, although it is unclear how that relates to the period after December 2020. There was no other evidence before me that relevant debts were incurred “long after” December 2020, and only the file note directly supports the conclusion that the relevant debts were incurred after December 2020. The distinction between “long after” and “after” may be significant.

180 Thirdly, it was submitted that the existence of a safe harbour moratorium between 25 March 2020 and 31 March 2021 pursuant to s 588GAAA of the Corporations Act (not to be confused with the safe harbour advice the subject of the Fourth Engagement or other safe harbour protections under the Corporations Act) essentially removed this period from investigation. As observed below, this date was not accurate.

181 Fourthly, it was submitted that the evidence as to what the Liquidators had been doing, and the claims they had identified, removed any apprehension that they would not actively pursue directors for insolvent trading, or would be concerned about the liability of Deloitte. In that regard, the Liquidators have:

(a) advised creditors that there are viable claims for insolvent trading, with potential insolvent trading exposure as high as $196 million and potential recoverable amounts in the range of $38 – $77 million (before costs and funding);

(b) obtained legal advice from senior and junior counsel that prospective claims exist against directors and officers for breaches of director duties and insolvent trading, which includes independent advice on the availability of safe harbour defences;

(c) instructed KWM to send demands and requests for documentation to each of the directors;

(d) identified potential preference claims, including against Deloitte and Hamilton Locke, with potential recoverable amounts in the range of $3 – 4 million;

(e) indicated that they intend to issue examination summonses and orders for production to the directors as well as to Deloitte and Hamilton Locke; and

(f) indicated they are considering further claims against the advisers, and if viable (both legally and commercially) will commence actions against those parties.

182 Fifthly, the defendants submitted that the Liquidators had funding that was not likely to be available to the Alternative Liquidators. The evidence suggests that the current liquidators have a capped funding offer of around 9.7 million. The terms of the funding deed are confidential, and it is not clear whether this offer would accommodate the appointment of additional liquidators. The plaintiff suggests that the Alternative Liquidators have obtained an indicative proposal from Clover Risk capped at $300,000 for conducting preliminary investigations, and a further funding proposal from Clover Risk capped at $150,000 for storing the data of the Mosaic Group. It is not clear whether any of the additional funding available to the Liquidators would be available to the Alternative Liquidators.

183 Sixthly, the defendants emphasised the limited work performed by Mr Strawbridge himself, based on the amount of time he billed. That was very much a focus of the defendants’ analysis – i.e. on the work of Mr Strawbridge, rather than the work of the firm of which he was a partner.

Consideration

184 The evidence before the Court suggests, and I find, that Mr Strawbridge’s work for the Mosaic Group was limited to 4.6 hours between 27 March 2020 and 6 April 2020 in relation to:

(a) the preparation of the JobKeeper Report; and

(b) the attendance of three Board Meetings which involved the provision of general advice to the Board on COVID-19 rent relief measures at the First Board Meeting.

185 This appears consistent with Mr Strawbridge’s evidence that on 21 April 2020 he was appointed the voluntary administrator of the Virgin Airlines group of companies, after which time he was “engaged almost exclusively on that engagement” until his resignation. There is therefore a credible possibility that Mr Strawbridge’s involvement did not extend to the matters relating to the Second Engagement, despite being named a “review partner” in the engagement letter. Similarly, his involvement was unlikely to extend to the Third Engagement as he had resigned before the engagement letter was sent.

186 As recorded above, Mr Strawbridge also gave evidence that the work performed under the First Engagement was limited in scope, notwithstanding the apparent width of the scope of the engagement letter.

187 However, the defendants’ focus on the personal involvement of Mr Strawbridge tended to ignore that Mr Strawbridge is also potentially liable (as a partner) for any work performed by Deloitte prior to his retirement, or for any advice that should have been provided by Deloitte. The Second Engagement, in particular, was in broad terms. Under the Second Engagement, Deloitte was engaged to:

(a) review and analyse the financial and cash flow forecasts for FY20 and FY21, including:

(i) review the financial model used to prepare the cash flow forecast (including the basis of preparation, degree of accuracy, and robustness of the process used);

(ii) review the underlying assumptions;

(iii) undertake a sensitivity analysis to identifying risks to achieving forecasts including with regards to cash generation;

(b) provide analysis on recent and projected trading performance by brand, by channel, by store, and by geographic region to assess loss making stores, a sustainable store network and relative brand performance; and

(c) consider if there are any additional cash generation or preservation initiatives available to the company.

188 The Liquidators have expressed the view that the Mosaic Group was insolvent from 31 December 2020 “and potentially earlier,” and have an investigation period of 1 July 2019 to 28 October 2024. Mr Strawbridge departed on 23 November 2020. The Liquidators have identified a “material transaction” which has the potential to be classified as a “related entity uncommercial transaction” involving the acquisition of the Ezibuy business by the Mosaic Group in 2019. They have expressed a preliminary view that there is a strong prima facie claim for insolvent trading against the directors for “at least some, if not all, of the Investigation Period.”

189 These matters raise the possibility, if not the likelihood, that there may be an insolvent trading claim against the directors in respect of the period from 31 December 2020, and potentially earlier. It is not unlikely that directors sued in that way may point to the retention by the Mosaic Group (either directly or indirectly via Hamilton Locke) of skilled advisers upon whom they relied. Deloitte was retained, inter alia, to consider likely future cashflows and the financial position of the Mosaic Group, to consider the reliability of the financial model used by the Mosaic Group, and to recommend actions and initiatives to maintain or improve the financial position. Directors are not unlikely to say that they relied on this work to inform them as to whether the Mosaic Group would have sufficient cash and whether the Mosaic Group’s analysis and forecasting was reliable. Further, they may allege reliance upon work performed by Deloitte to identify strategies or initiatives to maintain or improve the financial position of the Mosaic Group.

190 The Liquidators have identified the potential size of the claim for insolvent trading as up to $196 million, with an estimate of recoverable amounts in the order of $38 – $77 million before costs and funding. Common experience suggests that a claim of that magnitude is likely to generate cross-claims where available, and the available material raises the possibility of a cross-claim against Deloitte, including potentially in respect of the period while Mr Strawbridge was a partner. It is not necessary to conclude that a cross-claim against Deloitte affecting or involving Mr Strawbridge is more likely than not.

191 In addition to Mr Strawbridge’s potential liability as a partner of Deloitte during a relevant period, Mr Strawbridge was a partner responsible for the First Engagement and a review partner on the Second Engagement and attended three Board meetings during the course of 2020 at which issues concerning the management of cashflow were discussed. At the very least, it is on the cards that Mr Strawbridge may need to give evidence about what occurred during this period.

192 One area of uncertainty is that the evidence does not disclose what specific advice was provided by Deloitte to the Mosaic Group and/or its directors prior to Mr Strawbridge’s departure. Relevant advice was not in evidence. However, given that the Second Engagement commenced by 19 May 2020, it is likely that at least some relevant advice was provided prior to 23 November 2020. That conclusion is fortified by the fact that Deloitte invoiced Mosaic Brands for $170,500 on 14 August 2020 in respect of work on the Second Engagement.

193 Taking these matters together, and subject to consideration of the defendants’ various “answers” to the application, a scenario in which Mr Strawbridge is involved in a claim for insolvent trading is not merely hypothetical and remote, but is a credible possibility. In the circumstances, there is at least a possibility (real and not remote) that Mr Strawbridge might not bring an impartial mind to bear to the conduct of claims against directors. There is a real and not merely a theoretical possibility of conflict. Put shortly, Deloitte was retained to provide advice on cashflow, cashflow forecasts and company systems likely to be the very subject of a claim for insolvent trading. A fair-minded lay observer might reasonably apprehend that Mr Strawbridge might not bring an impartial and unprejudiced mind to the conduct of any claim for insolvent trading because of the credible scenario that the bringing of such a claim might give rise to a claim against Mr Strawbridge himself as a partner of Deloitte, or otherwise involve him in the claim. An observer might also apprehend that this might impact not only the decision as to whether to bring an insolvent trading claim, but also how such a claim might be conducted – e.g. the vigour with which it is pursued, or the readiness to compromise the claim. A fair-minded lay observer might reasonably apprehend that even if Mr Strawbridge strived to act with complete integrity and diligence, it might be difficult to put the relevant consideration entirely out of his mind, that being the very vice of a conflict.

194 In relation to the conduct of the Liquidators relied upon by the plaintiff, for the reasons given earlier this does not add much to the analysis. I accept that Mr Strawbridge was dismissive of the concerns raised by the lawyers for the plaintiff. That is no doubt because those complaints were directed at Mr Strawbridge’s provision of safe harbour advice, and Mr Strawbridge’s response was focussed on his own limited involvement in the provision of advice to the Mosaic Group.

195 I also accept that, in the course of responding to the criticism, Mr Strawbridge said things that were inaccurate. For example, incorrect information was provided to creditors in the 24 June 2025 Circular and at the 1 July 2025 Meeting that he attended the Mosaic Board meetings in “no formal capacity” and not pursuant to any formal engagement. In the course of cross-examination, Mr Strawbridge accepted that those statements were inaccurate. There is no evidence to suggest that this inaccuracy was deliberate. Rather, Mr Strawbridge’s evidence was that he had not reviewed the letters of engagement at the time that he made the statements. I do not think this adds anything useful to the analysis of whether Mr Strawbridge might be perceived to have a conflict or lack independence.

196 Turning then to the points raised by the defendants, in relation to the first point (that a claim for negligent safe harbour advice could not be made against Deloitte directly), this is not the apprehended basis of the conflict, and so this point can be put to one side. The scenario that is not unlikely is, instead, a claim against a director that leads to a cross-claim by that director against Deloitte (or against Hamilton Locke that in turn received advice from Deloitte).

197 In relation to the second point raised by the defendants (that outstanding debts were incurred after 2020), this is a relevant factor. However, advice received as to forecast cashflow, likely solvency, the adequacy of financial recording systems, or strategies for future trading and cashflow maintenance, is likely to remain current and applicable for a reasonable period of time after 31 December 2020 until rendered obsolete by some relevant change of circumstances. Strategic advice, in particular, may remain relevant for an extended period. Even advice as to the then-current cashflow position is likely to remain relevant for at least some time. Further, having regard to the terms of the four engagements summarised above, it is likely that any advice from Deloitte was an ongoing exercise which developed and matured over time, such that there may be no neat chronological division between episodes of advice and Mr Strawbridge may well be involved in respect of the early period: i.e. there may be allegations that later work built upon flawed earlier work.

198 In relation to the third point, s 588GAAA of the Corporations Act provides that the proscription against insolvent trading in s 588G(2) does not apply to a person and a debt incurred by a company if the debt is incurred in the ordinary course of the company’s business and during the 6 month period starting on the day the section commences or any longer period that is prescribed by the Corporations Regulations.

199 The original six month period ran from 25 March 2020 to 30 September 2020. It was extended by reg 5.7B.01 of the Corporations Regulations to 31 December 2020. The defendants say that the period ran until 31 March 2021. No basis for that assertion has been identified, and the Court was not directed to any relevant further extension. The defendants may be confusing this protection with other provisions the operation of which ran until 31 March 2021. I note for completeness that this was the date also identified by the Administrators in the 13 June 2025 Report.

200 This third point is relevant. It means that the directors are only potentially liable under the insolvent trading provisions for debts incurred prior to 25 March 2020 or after 31 December 2020. However, the consideration is otherwise the same as for the second point, and would remain broadly the same even if the relevant date had been 31 March 2021. It is not an answer to the concern raised by the plaintiff. Further, there may be other types of liability for directors (i.e. other than for insolvent trading), such as breaches of director’s duties.

201 In relation to the fourth point (that the conduct of the Liquidators since the commencement of the administration, including in identifying insolvent trading claims, demonstrates that there is no relevant bias), this is a relevant factor and I take it into account, including in relation to remedy. However, the conduct of a person in a position of conflict is rarely a complete answer to the issue raised by the conflict. It may often be the case that persons in a position of potential conflict strive to demonstrate the diligent performance of their role. As observed earlier, the guiding principle is that a liquidator must be independent and must be seen to be independent. Conflicts can influence behaviour in unpredictable or even unobservable ways. For example, a settlement offer by a director may seem just that little bit more attractive if it also means there will be no claim against Deloitte, and at the very least the offer may become difficult to assess objectively in those circumstances.

202 I emphasise that nothing I have said in these reasons should be taken to suggest that Mr Strawbridge has been acting with anything other than integrity, or to suggest that Mr Strawbridge suffers from any actual bias. The Court is instead concerned with whether a fair-minded observer might consider that Mr Strawbridge might not be able to bring an impartial and unprejudiced mind to the task at hand.

203 The present case is not one in which Mr Strawbridge has simply done some previous work for the Mosaic Group. Rather, the apprehended mechanism by which a fair-minded lay observer might reasonably apprehend that the liquidator might not bring an impartial and unprejudiced mind to the resolution of questions they may be called upon to decide is one where Mr Strawbridge is potentially impacted by the risk of personal liability, and in any event by the risk that he may be embroiled in litigation other than as a liquidator (for example, by becoming a witness).

204 In relation to the fifth point, the funding of the Liquidators is a relevant consideration that points against replacement. I discuss this in the next section.

Appropriate relief

205 The defendants submit that the removal and replacement of the Liquidators would cause significant prejudice to the creditors, who will not only lose the benefit of the investigations performed to date and the substantial funding available to the Liquidators, but will have the detriment of the considerable time that a replacement liquidator would need to spend familiarising themselves with the Mosaic Group’s books and records and the complex business affairs of the Mosaic Group. I accept this submission. Mr Strawbridge and the other Liquidators have been considering and investigating the affairs of the Mosaic Group for over a year, since 28 October 2024. Their removal will necessarily result in delay and duplication of work, and the identified funding available to the replacement liquidators was considerably less.

206 Mr Strawbridge has provided the following evidence:

169.    In my opinion, due to the size and complexity of the Mosaic Companies and their operations, as well as the advanced stage of the external administration, there is significant potential for wasted costs and delay in the conclusion of the winding up if alternative officeholders are appointed as liquidators of the Mosaic Companies.

170.    We have become well acquainted with the complex business and affairs of the Mosaic Companies and have gained extensive information, evidence and knowledge which would enable us to expeditiously pursue the Potential Claims once funding is secured and approved.

171.    We have performed significant preparatory work that is required to assess the Potential Claims, and our replacement would delay pursuit of those claims as the that [sic] work would need to be reviewed and replicated to place alternate liquidators in the same position that we are presently in. That duplication of investigatory work would be to the detriment of creditors as significant costs would be incurred with a commensurate delay to commencing public examinations and any litigation that follows.

172.    An appointment of alternate liquidators would require us to handover the significant Books and Records which we have already spent time and costs in reviewing, securing and backing up.

…

174.    Given the accumulated knowledge and information in our (and staff at FTI’s) possession, I am of the opinion that there would be significant inefficiencies and costs to creditors if we are replaced as liquidators at this stage of the external administration.

I accept this evidence.

207 The defendants say that these matters are a relevant consideration in determining whether it is appropriate to remove a liquidator, and that the disruption caused where a liquidation is well advanced can tell decisively against the removal of a liquidator. I accept that the disruption caused by the removal of a liquidator can be a relevant factor in considering whether an order for removal should be made, in that it may be necessary to establish that the removal is for the general advantage of persons interested in the winding up: Advance Housing at 233. However, it is also important to bear in mind that a liquidator must be independent and must be seen to be independent, which was described as a “guiding principle” in Franklin at [58] (among other authorities). In Franklin, it was concluded that there was “a conflict which is more than theoretical” (at [124]) and that this justified removal of the liquidators, even though “an order [for removal] is likely to be productive of considerable inconvenience and expense in the liquidations” (at [128]), including because the liquidators must have carried out a considerable amount of work and acquired a considerable body of knowledge. Where a perceived conflict may exist, the Court would not lightly refrain from taking steps to deal with that potential conflict on the grounds that this would cause disruption to the liquidation, recognising that this is a question of degree in all of the circumstances.

208 Having regard to the nature of the conflict issue in the present case, and notwithstanding the practical considerations against removal, I do not consider it to be appropriate for Mr Strawbridge to continue to have the conduct of the potential claims against the directors. I also do not consider it to be appropriate for Mr Strawbridge to have the conduct of potential claims against Hamilton Locke or Deloitte, unless there is some clear disconnection between the claim and the period prior to Mr Strawbridge’s retirement from Deloitte – for example, some claim for a preferential payment to Deloitte or Hamilton Locke after Mr Strawbridge had left.

209 However, where the relevant considerations point in opposite directions, as they do in the present case, it also becomes relevant to consider the alternative form of relief sought by the plaintiff, being that additional special purpose liquidators be appointed for the purpose of investigating and pursuing the claims that give rise to the potential conflict. While the alternative form of relief was identified in the plaintiff’s Amended Originating Process dated 1 August 2025, the plaintiff did not address this at the hearing or in their written submissions and it received no attention at the hearing.

210 The plaintiff proposes that the Alternative Liquidators be appointed as special purpose liquidators (the Special Purpose Liquidators). This would be in addition to the four existing liquidators. The Amended Originating Process identified a number of purposes in respect of which the Special Purpose Liquidators should be appointed:

(a)    conducting investigations, in relation to:

(i)    whether any of the directors or officers of the DXG Entities breached their statutory and/or fiduciary duties owed to the DXG Entities;

(ii)    whether any of the directors or officers of the DXG Entities breached s 588G of the Corporations Act 2001 (Cth) (Act) (including, without limitation, any defences under Subdivision C of Division 3 of Part 5.7B of the Act);

(iii)    any claims against the advisors of the DXG Entities (including, without limitation, Hamilton Locke, Deloitte Financial Advisory Pty Ltd and BDO Audit Pty Ltd) that may be available to any of the DXG Entities or the Special Purpose Liquidators;

(together, the Matters) including, if thought by the Special Purpose Liquidators to be appropriate, by:

(iv)    inspecting the books and records of the DXG Entities, excluding any files and working papers of the First to Fourth Defendants;

(v)    conducting examinations pursuant to sections 596A and 596B of the Act or obtaining orders for production pursuant to section 597(9) of the Act; and

(vi)    requiring statements to be provided pursuant to section 475(2) of the Act;

(b)    commencing and pursing any claim, including by commencing legal proceedings, that may be available to the DXG Entities or the Special Purpose Liquidators in relation to any of the Matters, including obtaining and considering legal advice in respect of any such claim;

(c)    taking any steps as Special Purpose Liquidators in relation to any of the Matters, including by commencing legal proceedings to preserve or protect the assets of the DXG Entities, or the assets to which the DXG Entities or the Special Purpose Liquidators claim to be entitled, and whether or not those assets are in the possession of the DXG Entities; and

(d)    exercising any powers conferred on the liquidators by sections 477 and 506(1) of the Act for the purposes set out in orders 7(a)(iv) to (vi) above, except for the powers contained in sections 477(1)(a) – (c) and 477(2)(f) and (g) of the Act.

211 The appointment of the Special Purpose Liquidators would have the advantage that the benefit of other work conducted by the Liquidators (including the knowledge of the Liquidators) would not be entirely lost. I consider that this is a good reason for ordering the appointment of special purpose liquidators, rather than simply ordering the replacement of the Liquidators.

212 In relation to funding, as noted above, the evidence suggests that Liquidators have a capped funding offer of around $9.7 million. The terms of the funding deed are confidential, and it is not clear what would happen in the event of the appointment of the Special Purpose Liquidators. The plaintiff suggests that the Alternative Liquidators have obtained an indicative proposal from Clover Risk capped at $300,000 for conducting preliminary investigations, and a further funding proposal from Clover Risk capped at $150,000 for storing the data of the Mosaic Group. It is not clear whether the funding proposal from Clover Risk would be available to the Alternative Liquidators if they were appointed as the Special Purpose Liquidators.

213 Without the terms of the funding proposals, the Court lacks sufficient information to determine what funding would be available if special purpose liquidators are appointed. In those circumstances, I cannot give this factor any real weight in choosing between an order for replacement of liquidators and an order for appointment of special purpose liquidators. That is not to say that funding is not taken into account at all: the greater certainty of $9.7 million of funding if the status quo remains is a consideration against any change to the liquidators. However, that factor is insufficient to weigh against the appearance of a possible conflict.

214 For completeness, I note that, although only Mr Strawbridge is directly affected by the issues discussed above, I do not consider that the removal of Mr Strawbridge alone (amongst the Liquidators from FTI Consulting) is a viable outcome. No party suggested such an approach.

215 Mr Strawbridge is a Senior Managing Director in the Financial Advisory Group at FTI Consulting. Mr Strawbridge joined FTI Consulting, following his departure as a partner from Deloitte, at some point in 2021. Mr Strawbridge is a chartered accountant and registered liquidator with more than 25 years’ experience assisting companies restructure their businesses. It is apparent that Mr Strawbridge is the lead liquidator of the Mosaic Group. He has been the sole signatory on every notice or circular to creditors since the Liquidators’ appointment in October 2024, and presided as Chairperson at the 7 November 2024 Meeting, 20 June 2025 Meeting, and 1 July 2025 Meeting. As at 11 May 2025, Mr Strawbridge had performed around 305 hours of work in relation to the administration (compared with around 306 hours performed by Ms Evans, 26.8 hours performed by Ms Warwick and 7 hours performed by Mr McGrath), and had the highest charge out rate of the Administrators. In circumstances where Mr Strawbridge has held such a role, the conduct of the liquidation by others in his team would not avoid the issue.

216 I have concluded that there should be an appointment of special purpose liquidators to deal with claims against directors, Hamilton Locke and Deloitte, other than claims against Hamilton Locke or Deloitte that can have no connection with the period prior to Mr Strawbridge’s retirement from Deloitte. As noted above, I received limited assistance at the hearing as to the form of any orders that would be made in such an eventuality, including because I was not addressed on the plaintiff’s alternative prayers for relief. I will therefore order that the parties bring in proposed agreed or competing short minutes to give effect to these reasons for judgment, and that the matter be listed for a further short hearing for the purpose of making final orders consistent with these reasons for judgment, including any order as to costs.

Associate:

Dated:    1 December 2025

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