FEDERAL COURT OF AUSTRALIA

Zong v Woodcroft (liquidator), in the matter of Sunshine Contracting Group Pty Ltd (in liquidation) [2025] FCA 1521

ORDERS

THE COURT DECLARES THAT:

1.    The result of the resolution to remove the first defendant as liquidator of the second defendant and appoint Edwin Narayan and Domenic Calabretta of Mackay Goodwin as liquidators of the second defendant moved at the meeting of creditors of the second defendant on 16 July 2025 (16 July Meeting) was that the resolution passed.

THE COURT ORDERS THAT:

2.    Pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations) being Sch 2 to the Corporations Act 2001 (Cth):

(a)    the plaintiffs’ appeal of the decisions by the first defendant to admit the proofs of debt lodged by the plaintiffs for $1 be allowed;

(b)    the decision of the first defendant to admit the proofs of debt submitted by each of the first, second and third plaintiffs for $1 be varied such that:

(i)    the proof of debt lodged by the first plaintiff be admitted for $1.5 million for the purpose of voting at the 16 July Meeting;

(ii)    the proof of debt lodged by the second plaintiff be admitted for $700,000 for the purpose of voting at the 16 July Meeting; and

(iii)    the proof of debt lodged by the third plaintiff be admitted for $1,470,545 for the purpose of voting at the 16 July Meeting; and

(c)    the decision on the resolution to replace the first defendant as liquidator of the second defendant be set aside and in lieu thereof the first defendant be forthwith removed as the liquidator of the second defendant and Edwin Narayan and Domenic Calabretta of Mackay Goodwin be appointed as the liquidators of the second defendant.

3.    Subject to Order 4 below, by 18 December 2025 the parties are to provide proposed orders in relation to the costs of this proceeding.

4.    If the parties are unable to reach agreement on the question of costs of this proceeding:

(a)    by 18 December 2025 they are to provide to the Associate to Markovic J their competing orders and submissions, not exceeding two pages in length, addressing the areas and extent of the disagreement between them; and

(b)    unless a party requests an oral hearing, questions of costs will be determined on the papers.

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

REASONS FOR JUDGMENT

MARKOVIC J:

1    On 29 July 2025 Shuxin (Tony) Zong, DIHE Sandstone Ridge Pty Ltd and Unik Capital Pty Ltd commenced this proceeding as the first, second and third plaintiffs respectively. Cameron Woodcroft in his capacity as liquidator of Sunshine Contracting Group Pty Ltd (in liquidation) and Sunshine are the first and second defendants respectively.

2    Mr Zong, DIHE and Unik seek to appeal against certain decisions made by the liquidator when presiding at a meeting of creditors of Sunshine on 16 July 2025 (16 July Meeting). In particular, by amended originating process filed on 30 September 2025 (Amended OP), the plaintiffs appeal against the liquidator’s decisions to admit at the 16 July Meeting for $1 for voting purposes:

(1)    a proof of debt of Mr Zong in relation to a liability said to be owed to him by Sunshine in the amount of $1.5 million (Zong Claim);

(2)    a proof of debt of DIHE in relation to a liability said to be owed to it by Sunshine in the amount of $700,000 (DIHE Claim); and

(3)    a proof of debt of Unik in relation to a liability said to be owed to it by Sunshine in the amount of $1.5 million (Unik Claim),

together, the Claims.

3    The plaintiffs seek declarations in relation to their respective proofs of debt and orders pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations) (IPS) being Sch 2 to the Corporations Act 2001 (Cth) that the Court modify the decision of the liquidator such that each of the Claims be admitted in full for voting purposes, that the decision on the resolution to replace the liquidator moved at the 16 July Meeting be set aside and that the liquidator be removed and new liquidators be appointed to Sunshine.

BACKGROUND

The plaintiffs

4    Mr Zong is the sole director of Sunshine and Unik. He is one of three directors of DIHE.

5    DIHE was incorporated on 29 March 2018. Since that time Mr Zong, Huaguang Chen and Zhikeng Wu have been directors of DIHE and DIHE Group Development Pty Ltd has been its sole shareholder. DIHE was set up for the purpose of developing land in Colebee, New South Wales (NSW). Its funds were sourced through its own property development activities.

6    Unik was incorporated on 9 March 2023. As mentioned, Mr Zong is its sole director. Xiaofei Zhang is the sole shareholder of Unik. Unik, in its capacity as trustee of The Unik Trust, operates as a holding company of Australian Twin Creeks Holdings Limited, which owns a golf course.

Sunshine

7    Sunshine was incorporated on 27 September 2018. Mr Zong has at all times been the sole director of Sunshine. Sunshine is a wholly owned subsidiary of Sunshine Holding Co. Pty Ltd.

8    Prior to its liquidation, Sunshine operated a construction business specialising in commercial fit outs. Its clients have included major hospitals, universities and councils.

Basis of the Claims

9    The Claims are said to be based on loans made to Sunshine pursuant to loan agreements entered into between Sunshine and each of Mr Zong and his son, Alex Shaochen Zong (who, without intending any disrespect and for ease, I will refer to as Alex), DIHE and Unik. A summary of those loan agreements follows.

Unik Claim

10    On or about 26 September 2024 Unik, as borrower, and Finstar Capital Pty Ltd, as lender, entered into a facility agreement under which Finstar was to lend $1.5 million to Unik for a period of 12 months (Finstar Loan Agreement). Unik was to pay interest at a rate of 20% per annum or, if in default, at 24% per annum. Mr Zong was a guarantor under the Finstar Loan Agreement.

11    At around the time of entry into the Finstar Loan Agreement, Unik issued a drawdown notice pursuant to which it sought to fully utilise the funds available to it under that agreement. For the receipt of the funds to be advanced the drawdown notice nominated a Commonwealth Bank of Australia account ending 8109 in the name of Sunshine (Sunshine Account).

12    On 27 September 2025 the amount of $1,470,545 was credited to the Sunshine Account. An extract from the transaction records of the Sunshine Account shows a description for that credit as “Fast Transfer From FINSTAR CAPITAL PTY L Loan Loan”.

13    At or around the same time Sunshine, as borrower, and Unik, as lender, also entered into a loan agreement under which Unik was to lend $1.5 million to Sunshine for a period of 12 months on the terms set out therein (Unik Loan Agreement).

14    Mr Zong says that he directed the funds drawn down by Unik under the Finstar Loan Agreement to be paid to the Sunshine Account for the purpose of Unik satisfying its obligations under the Unik Loan Agreement and to support Sunshine’s operations. He says that the funds were initially borrowed through Unik as Unik had assets (namely the shares in Twin Creeks) that it could provide as security for the loan, which Sunshine did not have.

15    Mr Zong says that Sunshine has not paid any principal or interest in respect of the Unik Loan Agreement.

16    On 4 November 2024 Finstar and Unik entered into a deed of extension and variation of the Finstar Loan Agreement under which, relevantly, the maturity date of the Finstar Loan Agreement was extended to 25 November 2025.

DIHE Claim

17    On 20 December 2024 Sunshine, as borrower, and DIHE, as lender, entered into a loan agreement under which DIHE agreed to loan Sunshine up to $1 million for a period of 12 months (DIHE Loan Agreement). Mr Zong explains that the purpose of the DIHE Loan Agreement was to advance funds to support Sunshine’s operations and assist with business cashflow. Interest under the DIHE Loan Agreement accrues at a rate of 30% per annum.

18    On 24 December 2024 Sunshine issued a drawdown notice under the DIHE Loan Agreement pursuant to which it sought to drawdown $700,000. The notice directed the funds to be paid into the Sunshine Account.

19    On the same date the amount of $700,000 was credited to the Sunshine Account. The account statement for the Sunshine Account shows a description for that credit relevantly as “… DIHE Group Loan to Tony Zong”.

20    Mr Zong says that Sunshine has not paid any principal or interest in respect of the DIHE Loan Agreement.

Zong Claims

21    On or about 5 February 2025 Mr Zong and Alex, as borrowers, and Yuxiang Lin, as lender, entered into a loan agreement pursuant to the terms of which Mr Zong and Alex agreed to borrow $1.5 million from Mr Lin (Lin Loan Agreement). The terms of that agreement include that:

(1)    the loan would be repaid within one year from 5 February 2025;

(2)    interest on the advance would accrue at the rate of 30% per annum;

(3)    the loan was for the sole purpose of providing cashflow; and

(4)    Alex’s property in Hunters Hill, NSW (Hunters Hill Property) was to be provided as security for the loan.

22    Also on 5 February 2025 Sunshine, as borrower, and Mr Zong and Alex as lenders, entered into a loan agreement pursuant to which Sunshine agreed to borrow $1.5 million from Mr Zong and Alex (Zong Loan Agreement). The Zong Loan Agreement relevantly provides that:

(1)    Mr Zong and Alex would make available the sum of $1.5 million at the request of Sunshine;

(2)    interest is to be paid on the advance at the rate of 30% per annum; and

(3)    the loan is to be repaid on the day that is 12 months from the date of actual drawdown of $1.5 million.

23    An extract of the transaction records of the Sunshine Account shows that on 5 February 2025 the amount of $1.5 million was credited to that account. The transaction is described as “250205036098 MR YUXIANG LIN 26 ZHANG GU HU GUANG ZHEITTAN PAI CU GUANG DONG 0000 0409666866”.

24    Mr Zong explains that the purpose of borrowing money from Mr Lin was to provide cash support for Sunshine’s operations. As with the Unik Loan Agreement, the funds were initially borrowed by Mr Zong and Alex as they were able to provide security for the loan, namely the Hunters Hill Property and personal guarantees, which Sunshine could not do.

25    Mr Zong says that Sunshine has not paid any principal or interest in respect of the Zong Loan Agreement.

Default under the Finstar Loan Agreement

26    On 28 February 2025 Finstar issued a default notice to Unik, copied to Mr Zong, on the basis that Unik had failed to pay interest since 27 October 2024 (February 2025 Default Notice). The February 2025 Default Notice sought payment of approximately $1.97 million, comprised of the amount outstanding under the Finstar Loan Agreement as at the date of the notice and enforcement expenses, within 21 days.

27    On 12 June 2025 Finstar issued a further default notice to Unik, copied to Mr Zong, on like terms to the February 2025 Default Notice. That notice sought repayment of approximately $2.1 million.

28    On 20 June 2025 Finstar, Unik and Mr Zong entered into a deed of settlement and release, an unsigned copy of which was in evidence, pursuant to which Unik transferred its shares in Twin Creeks to Finstar in satisfaction of Unik’s obligations under the Finstar Loan Agreement, including all principal, outstanding interest and enforcement costs.

Appointment of the liquidator

29    On 3 June 2025 the Supreme Court of Queensland made orders on the application of
X-Recruiter Pty Ltd winding up Sunshine and appointing the liquidator.

30    Since his appointment and in carrying out his duties the liquidator, or persons under his supervision, have liaised with Mr Zong and his solicitor, Stefano Calabretta of Emerson Lewis Lawyers, in relation to the affairs of Sunshine.

Convening the 16 July Meeting

31    On 8 June 2025 Mr Calabretta sent an email to the liquidator notifying him that Mr Zong would shortly request that the liquidator convene a meeting of creditors of Sunshine for the purpose of putting a resolution to the creditors to replace him.

32    Between 8 June and 15 July 2025 the liquidator and Mr Calabretta exchanged emails in relation to “a number of key issues” about the affairs of Sunshine including its trading status, employee information and books and records and in relation to Mr Zong’s proposal with respect to the liquidation. This relevantly included:

(1)    on 11 June 2025 Mr Calabretta sent an email to the liquidator attaching a list of Sunshine’s known creditors “not including employees and related party creditors”. Consistent with his covering email, the attached list of creditors did not include Mr Zong, Alex, DIHE or Unik;

(2)    on 18 June 2025 Mr Calabretta provided by email a link to access:

(a)    a report on company activities and property dated 18 June 2025 in respect of Sunshine signed by Mr Zong (ROCAP);

(b)    a balance sheet for Sunshine prepared as at 3 June 2025 (First Balance Sheet). This balance sheet relevantly included a line item under “Assets” for “Loan - Related party loan” in the amount of $1,738,900.38; and

(c)    and a number of other financial statements and reports relating to Sunshine; and

(3)    emails concerning numerous unsuccessful attempts by the liquidator to gain access to the “MYOB” accounting file for Sunshine.

33    On 30 June 2025 Mr Calabretta sent an email to the liquidator attaching, among other things, a notice of consent to act as liquidator of Sunshine signed by Edwin Narayan and Domenic Calabretta of Mackay Goodwin.

34    On 1 July 2025 the liquidator issued a notification of appointment and statutory report to creditors which, among other things, convened the 16 July Meeting. The statutory report included under the heading “1.3 Creditors’ Meeting”:

The Company’s director has requested I convene a meeting of creditors for creditors to consider replacing me as Liquidator and appointing Edwin Narayan and Domenic Calabretta as the replacement Liquidators.

The Director has provided funding for my costs of convening and holding the meeting, in the amount of $12,500 (including GST). …

The meeting of creditors is to be held on Wednesday 16 July 2025 at 9:30AM. The agenda for the meeting is:

•    to discuss this Report to Creditors,

•    to fix the Liquidator’s past remuneration,

•    to fix the Liquidator’s future remuneration,

•    to fix the Liquidator’s past disbursements,

•    to fix the Liquidator’s future disbursements,

•    to remove the external administrator from office and appoint someone else as

•    external administrators of the Company, and

•    any other business lawfully raised.

The proofs of debt

35    On 14 July 2025 Mr Calabretta relevantly provided to the liquidator:

(1)    in relation to the Zong Claim:

(a)    a proof of debt in the amount of $1.5 million signed by Mr Zong stating that the Zong Claim arose on 5 February 2025 and was a related party loan; and

(b)    the Zong Loan Agreement;

(2)    in relation to the DIHE Claim:

(a)    a proof of debt in the amount of $700,000 signed by Mr Zong on behalf of DIHE stating that the DIHE Claim arose on 24 December 2024 and was a related party loan;

(b)    the DIHE Loan Agreement; and

(c)    the drawing notice in the amount of $700,000 addressed to DIHE signed by Mr Zong on behalf of Sunshine dated 24 December 2024;

(3)    in relation to the Unik Claim:

(a)    a proof of debt in the amount of $1.5 million signed by Mr Zong on behalf of Unik stating that the Unik Claim arose on 26 September 2024 and was a related party loan; and

(b)    the Unik Loan Agreement;

(4)    bank statements for the Sunshine Account showing transfers in relation to the Claims;

(5)    a copy of the First Balance Sheet; and

(6)    a balance sheet for Sunshine also prepared as at 3 June 2025 (Second Balance Sheet) which relevantly included:

(a)    a line item under “Assets” for “Related Party Loans”, under which various loans were listed;

(b)    a line item under “Liabilities” for “Loan – DIHE” in the amount of $700,000;

(c)    a line item under “Liabilities” for “Loan - Tony & Alex” in the amount of $1.5 million; and

(d)    a line item under “Liabilities” for “Loan - Unik Capital” in the amount of $1.5 million.

36    In his covering email, Mr Calabretta provided the following explanation about the inconsistency between the First Balance Sheet and the Second Balance Sheet (as written):

This email concerns the related party liabilities in relation to the above company.

You may recall that on ….we provided with the attached balance sheet. That balance sheet included a line item for Related Party Loans in the amount of $1,738,900.38. This represented the net amount of the value of the Related Party loans, factoring in the amounts due to the company (debtors) as well as the amounts payable by the company (liabilities).

We now attach a further, more detailed, balance sheet which separates out the Related Party Loans on either side of the balance sheet.

The related party liabilities include:

1.    A liability to DIHE Sandstone Ridge Pty Ltd (DIHE) in the amount of $700,000;

2.    A liability to Shunxin (Tony) Zong and Alex Shaochen Zong in the amount of $1,500,000; and

3.    A liability to Unik Capital Pty Ltd (UNIK) in the amount of $1,500,000.

37    On 15 July 2025 Mr Calabretta had a discussion with the liquidator in which he queried whether the liquidator had received, among other things, the proofs of debt for the Claims and whether they would be admitted for voting purposes at the 16 July Meeting. The liquidator indicated that Mr Calabretta would be made aware of his decision at the 16 July Meeting.

The 16 July Meeting

38    The 16 July Meeting was convened at the offices of the liquidator. The liquidator chaired the meeting.

39    The attendees at the meeting, either in person or via Microsoft Teams, relevantly included:

(1)    the liquidator and various members of his staff;

(2)    Mr Zong;

(3)    Mr Calabretta, who held proxies for 24 creditors including for Mr Zong, Alex, DIHE and Unik; and

(4)    Andrew Kovacevic on behalf of the Deputy Commissioner of Taxation.

40    The liquidator went through the list of creditors who had lodged proofs of debt and proxy forms and announced whether and in what amounts they would be admitted for the purpose of voting at the meeting.

41    The liquidator considered that, as each of the Claims was a related party transaction in that the creditor was either Mr Zong personally or a person or entities associated with Mr Zong, it was appropriate that he more carefully scrutinise the existence and quantification of each of the Claims before determining whether and in what amount they ought to be admitted for voting purposes.

42    On the basis of the material available to him at the time of the 16 July Meeting the liquidator considered there was insufficient information to substantiate that each of Mr Zong, DIHE or Unik was a creditor of Sunshine for a particular amount, although he considered that there was sufficient information to substantiate that each was a creditor for some amount. Accordingly, for the purpose of the 16 July Meeting the liquidator:

(1)    admitted Mr Zong’s proof of debt for voting purposes in the amount of $1;

(2)    admitted DIHE’s proof of debt for voting purposes in the amount of $1; and

(3)    admitted Unik’s proof of debt for voting purposes in the amount of $1,

together, the Decision.

43    At the meeting the following resolution (Replacement Resolution) was put to the creditors of Sunshine:

That Cameron John Woodcroft be removed as Liquidator of Sunshine Contracting Group Pty Ltd (In Liquidation), and Edwin Narayan and Domenic Calabretta of Mackay Goodwin be appointed as Liquidators of Sunshine Contracting Group Pty Ltd (In Liquidation).

44    The Replacement Resolution was initially put to a vote on the voices. Two creditors voted in favour of it and one voted against it. The liquidator also held a special proxy for one of the creditors of Sunshine which directed him to vote against the Replacement Resolution.

45    The liquidator as chairperson then requested that the Replacement Resolution be determined on a poll. His reasons for doing so are recorded in the minutes of the 16 July Meeting:

The Chairperson requested a poll be conducted for the following reasons:

•    To provide a definitive answer as to the outcome of the vote.

•    There are a large number of creditors of the administration.

•    The creditor who opposed the resolution, being the Deputy Commissioner of Taxation, holds a significant claim compared to the claims of all creditors who voted in favour of the resolution.

•    Mr Calabretta holds a number of special proxies in his favour that he could use in the poll.

46    The general proxy for the Deputy Commissioner of Taxation, the largest claim admitted for voting purposes at the 16 July Meeting, also requested that a poll be conducted.

47    Over the objection of Mr Calabretta, a poll was conducted. Once the votes on the poll were counted the Replacement Resolution did not pass as:

(1)    a majority by number of creditors voted in favour of the resolution, with 25 creditors voting in favour and two voting against it. The creditors who voted against the resolution were the Deputy Commissioner of Taxation and the Chief Commissioner of State Revenue;

(2)    a majority by value of creditors voted against the resolution, with approximately $839,000 in value voting against and approximately $358,000 voting in favour of it. Relevantly the creditors with the Claims, each of which were admitted for $1 for voting purposes, voted in favour of the resolution; and

(3)    the liquidator declined to exercise a casting vote in favour of the resolution and gave reasons for doing so.

Events since the 16 July Meeting

48    On 18 July 2025 Emerson Lewis Lawyers wrote to the liquidator notifying him that the plaintiffs intended to appeal the adjudication of the Claims and requesting the liquidator to provide the minutes of the 16 July Meeting and a copy of the evidence or information relied on by the liquidator in making the Decision.

49    The liquidator’s reasons for the Decision were outlined in his letter to Emerson Lewis Lawyers dated 23 July 2025 (23 July Letter) and in further evidence given by him. I set out a summary below.

The Decision – Zong Claims

50    In the 23 July Letter the liquidator explained in relation to the Zong Claim:

The Chairperson declared Mr Tony Zong was admitted for the purposes of voting in the amount of $1 for the following reasons:

1.    The payment information received to support the loan, an extract of the Company’s bank statements, did not reference the Company and the Creditor in the narration. The narration indicated the advancement of the funds to the Company where from a Mr Yuxiang Lin.

2.    No evidence or explanation was provided to establish a link between the bank narration and the loan agreement.

3.    No independent third-party confirmation was provided to verify the transfer of funds from the creditor to the Company.

4.    I am not aware of any connection of the Company with a Mr Yuxiang Lin, as described in the bank statement narration.

5.    No accounting records or transaction statements were provided to substantiate the drawdown, application, or repayment of funds under the loan agreement. In the absence of such documentation, it was not possible to verify whether the loan existed, the outstanding loan balance, or whether partial or full repayments may have occurred.

6.    The Company bank statements evidenced payments being made to Mr Alex Zong both prior to and after the agreement is alleged to have been entered into by the Company. This cast doubt over the value of any loan that may exist.

7.    The Mr Tony Zong served as a Director of the Company. His own ROCAP of the Company did not disclose this loan or any other related party loan, whether as a payable or receivable.

8.    Apart from the loan agreement, no external documentation or third-party evidence was submitted to substantiate the existence, terms, execution or balance of the loan facility.

9.    The second balance sheet dated 3 June 2025 did not include a reconciliation explaining how the loan balances were derived or how/why they differed from the first balance sheet. No general ledger or transactional records were available from the Company’s books, nor was any supporting documentation provided by Mr Tony Zong or Mr Alex Zong to clarify the loan accounting.

These matters raised a reasonable doubt whether Mr Tony Zong was in fact a creditor and the value of any claim he may have. Based on the information available to me, the Chairperson accepted that he may be a creditor of the Company but determined that the value of any was yet to be substantiated by him or the records of the Company.

51    The liquidator further explains in relation to the Zong Claim that he:

(1)    had received some information to substantiate the existence of a loan from Mr Zong and Alex to Sunshine, being the Zong Loan Agreement; but

(2)    did not consider that he had received sufficient information to satisfy him at the time of the 16 July Meeting that the Zong Claim had a value of $1.5 million as:

(a)    Mr Zong did not disclose the existence or amount of the Zong Claim in the ROCAP;

(b)    no evidence or explanation was provided to establish a link between the bank statements provided and the Zong Claim;

(c)    none of the bank transfer details provided to the liquidator referenced Mr Zong or Alex as creditor or as the persons making the relevant transfer;

(d)    he had not been able to independently access Sunshine’s MYOB accounting file and thus had no way to verify the outstanding balance of the Zong Claim or whether Sunshine had made any repayments;

(e)    the bank statements to which the liquidator did have access evidenced payments being made to Alex both before and after the date of the Zong Loan Agreement suggesting to him that Sunshine may have made repayments; and

(f)    he considered he had not been provided with a sufficient explanation as to how or why the related party loans recorded in the First Balance Sheet and the Second Balance Sheet differed.

The Decision – DIHE Claim

52    In the 23 July Letter the liquidator explained in relation to the DIHE Claim:

The Chairperson declared DIHE was admitted for the purposes of voting in the amount of $1 for the following reasons:

1.    The payment information received to support the loan (i.e., an extract of the Company’s bank statements), did not reference the Company and the Creditor in the narration. The narration, “DIHE Group Loan to Tony Zong” indicated the advancement of the funds to the Tony Zong (not the company) and did not adequately describe the creditor within the proof of debt.

2.    No evidence or explanation was provided to establish a link between the bank narration and the loan agreement.

3.    No independent third-party confirmation was provided to verify the transfer of funds from the creditor to the Company.

4.    No accounting records or transaction statements were provided to substantiate the drawdown, application, or repayment of funds under the loan agreement. In the absence of such documentation, it was not possible to verify whether a loan existed, the outstanding loan balance, or whether partial or full repayments may have occurred.

5.    The Director of DIHE also served as a Director of the Company. The Director’s ROCAP (prepared and submitted by the Director) did not disclose this loan or any other related party loan, whether as a payable or receivable.

6.    Apart from the loan agreement, no external documentation or third-party evidence was submitted to substantiate the existence, terms, or execution of a loan facility with the company.

7.    The second balance sheet dated 3 June 2025 did not include a reconciliation explaining how the loan balances were derived or how/why they differed from the first balance sheet. No general ledger or transactional records were available from the Company’s books, nor was any supporting documentation provided by DIHE to clarify the loan accounting.

These matters raised a reasonable doubt whether DIHE was in fact a creditor and the value of any claim it may have. Based on the information available to me, the Chairperson accepted that DIHE may be a creditor of the Company but determined that the value of any claim was yet to be substantiated by DIHE or the records of the Company.

53    The liquidator further explained that in relation to the DIHE Claim he:

(1)    had received some information to substantiate the existence of a loan from DIHE to Sunshine, being the DIHE Loan Agreement; but

(2)    did not consider that he had received sufficient information to satisfy him at the time of the 16 July Meeting that the DIHE Claim had a value of $700,000 as:

(a)    Mr Zong did not disclose the existence or amount of the DIHE Claim in the ROCAP;

(b)    no evidence or explanation was provided to establish a link between the bank statements provided and the DIHE Claim;

(c)    the bank transfer details provided to the liquidator:

(i)    did not reference Sunshine but instead suggested that $700,000 was intended to be a loan to Mr Zong in his personal capacity; and

(ii)    described a loan by the “DIHE Group” which the liquidator considered may or may not have been DIHE;

(d)    he had not been able to independently access Sunshine’s MYOB accounting file and thus had no way to verify the outstanding balance of the DIHE Claim or whether Sunshine had made any repayments; and

(e)    he considered he had not been provided with a sufficient explanation as to how or why the related party loans recorded in the First Balance Sheet and the Second Balance Sheet differed.

The Decision – Unik Claim

54    In the 23 July Letter the liquidator explained in relation to the Unik Claim:

The Chairperson declared UNIK was admitted for the purposes of voting in the amount of $1 for the following reasons:

1.     The payment information received to support the loan, an extract of the Company’s bank statements, did not reference the Company and the Creditor in the narration. The narration indicated the advancement of the funds to the Company from Finstar Capital Pty Ltd.

2.     No evidence or explanation was provided to establish a link between the bank narration and the loan agreement, if there is any.

3.     No independent third-party documentation was provided to verify the transfer of funds from the creditor to the Company.

4.     The Chairperson was not aware of any connection of the Company with a Finstar Capital Pty Ltd, as described in the bank statement narration.

5.     No accounting records or transaction statements were provided to substantiate the drawdown, application, or repayment of funds under the loan agreement. In the absence of such documentation, it was not possible to verify the outstanding loan balance, particularly given the possibility that partial or full repayments may have occurred.

6.     The POD of $1,500,000 did not match extract of a Company bank statement indicating a receipt of $1,470,545.

7.     The Director of UNIK also served as a Director of the Company. The Director’s ROCAP prepared and submitted by the Director did not disclose this loan or any other related party loan, whether as a payable or receivable.

8.     Apart from the loan agreement, no external documentation or third-party evidence was submitted to substantiate the existence, terms, balance or execution of the loan facility.

9.     The second balance sheet dated 3 June 2025 did not include a reconciliation explaining how the loan balances were derived or how they differed from the first balance sheet. No general ledger or transactional records were available from the Company’s books, nor was any supporting documentation provided by UNIK to clarify the loan accounting.

These matters raised a reasonable doubt whether UNIK was in fact a creditor and the value of any claim it may have. Based on the information available to me, the Chairperson accepted that UNIK may be a creditor of the Company but determined that the value of any claim it may have was yet to be substantiated by it or the records of the Company.

55    The liquidator further explains that in relation to the Unik Claim he:

(1)    had received some information to substantiate the existence of a loan from Unik to Sunshine, being the Unik Loan Agreement; but

(2)    did not consider that he had received sufficient information to satisfy him at the time of the 16 July Meeting that the Unik Claim had a value of $1.5 million as:

(a)    Mr Zong did not disclose the existence or amount of the Unik Claim in the ROCAP;

(b)    no evidence or explanation was provided to establish a link between the bank statements provided and the Unik Claim;

(c)    none of the bank transfer details provided to the liquidator referenced Unik as creditor or as the entity making the relevant transfer;

(d)    he had not been able to independently access Sunshine’s MYOB accounting file and thus could not verify the outstanding balance of the Unik Claim or whether Sunshine had made any repayments; and

(e)    he considered he had not been provided with a sufficient explanation as to how or why the related party loans recorded in the First Balance Sheet and the Second Balance Sheet differed.

STATUTORY FRAMEWORK AND LEGAL PRINCIPLES

56    This application is brought pursuant to s 90-15 of the IPS and s 75-100(4) of the Insolvency Practice Rules (Corporations) 2016 (Cth) (IPR).

57    Section 90-15(1) of the IPS provides that the Court may make such orders as it thinks fit in relation to the external administration of a company: see s 5-15 and s 90-15(1) of the IPS.

58    Section 90-15(3) sets out a non-exhaustive list of the types of orders the Court can make and relevantly provides:

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

(a)    an order determining any question arising in the external administration of the company;

(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;

…

59    The Court’s power is informed by the non-exhaustive examples of the matters which the Court may take into account in making orders in s 90-15(4) which provides:

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.

60    In Lewis (liquidator), in the matter of Concrete Supply Pty Ltd (in liq) [2020] FCA 841; (2020) 145 ACSR 459 at [30]-[31] White J set out the principles applicable to the exercise of the power under s 90-15(1) of the IPS:

30    The principles applied by the courts in the exercise of the power under cl 90-15 are, in effect, the same as those which were applied in the exercise of the power under the former s 479(3) (in the case a court-ordered winding up) or under s 511 (in the case of a voluntary winding up) of the Act: In the matter of HIH Casualty and General Insurance Limited (in liquidation and Subject to Schemes of Arrangement) ACN 008 482 291 [2018] NSWSC 1886 at [4]-[5]; Warner (Liquidator), in the matter of Sakr Bros Pty Ltd (in liq) [2019] FCA 547 at [18]. In In the matter of Hawden Property Group Pty Ltd (in liq) (ACN 003 528 345) [2018] NSWSC 481, Gleeson JA noted at [8], that the power under cl 90-15 to “make such orders as it thinks fit in relation to the external administration of a company” (cl 90-15(1)), including “an order determining any question arising in the external administration of the company” (cl 90-15(3)(a)), is wider than s 479(3) and accommodates the determination of substantive rights. His Honour noted that the Court would not make a determination of substantive rights without affording potentially affected parties an opportunity to be heard: ibid.

31    The established principles indicate:

(a)     the power to give directions is intended to facilitate the performance of the liquidator’s functions and should be interpreted widely to give effect to that intention: Re Octaviar Administration Pty Ltd (in liq) [2017] NSWSC 1556 at [9];

(b)     the power is available to give a liquidator advice as to the proper course of action to be taken in the liquidation: Re Bell at [47]; Re MF Global Australia Ltd (in liq) [2012] NSWSC 994 at [7];

(c)     the Court may give directions that provide guidance on matters of law and the reasonableness of a contemplated exercise of discretion but will usually not do so when the subject of the directions sought relates to the making and implementation of a business or commercial decision and when there is no particular legal issue raised and no attack on the proprietary or reasonableness of the decision: Re MF Global at [7];

(d)     the Court does not interfere with or seek to second guess the liquidator’s judgment unless there is evidence of a lack of good faith, an error of law or principle, or real and substantial grounds for doubting the prudence of the liquidator’s conduct or when the Court considers that the liquidator’s decision is not a proper and reasonable one: Re One.Tel at [36]; Re Bell at [31], [47] and [50]; Re Octaviar at [10];

(e)     the effect of a direction is to sanction a course of conduct on the part of the liquidators so that, providing full disclosure has been made to the Court, the liquidator may adopt the course free from the risk of personal liability for breach of duty: Re Bell at [47]; Re One.Tel at [32]; and

(f)     the directions do not bind third parties, and do not determine substantive matters in dispute between the liquidator and third parties: Re Bell at [47].

61    Prior to its repeal, a party seeking to review a liquidator’s decision proceeded under s 1321 of the Corporations Act (now repealed). It was not in dispute that now the appropriate avenue to seek review of a liquidator’s decision in the circumstances which arise in this matter is to seek an order under s 90-15(1) of the IPS. Relevantly and insofar as the plaintiffs seek to challenge the Decision, it is well established that the case law in relation to former s 1321 of the Corporations Act remains relevant to consideration of their application under s 90-15 of the IPS: see Sentinel Orange Homemaker Pty Ltd v Bailey, in the matter of Davis Investment Group Holdings Pty Ltd (in liq) (No 2) [2022] FCA 1200 at [5] (Stewart J) and the cases referred to therein.

62    Division 75 of the IPR concerns meetings of companies under external administration.

63    Rule 75-1(a) provides that Div 75 of the IPR is made for the purpose of s 75-50 of the IPS. It replaced a number of regulations in the Corporations Regulations 2001 (Cth) relating to meetings.

64    Rule 75-50 of the IPR relevantly provides that if a meeting is convened by an external administrator and is not convened under s 439A of the Corporations Act, then the external administrator, or a person nominated by the external administrator, must preside at the meeting.

65    Rule 75-75 is headed “Virtual meetings” and relevantly provides:

(1)    Virtual meeting technology may be used in holding a meeting, provided the technology gives all persons entitled to attend the meeting a reasonable opportunity to participate without being physically present in the same place.

(2)    All persons so participating in the meeting are taken for all purposes to be present in person at the meeting while so participating.

(3)    A vote taken at the meeting must be taken:

(a)    on a poll, if:

(i)    the notice of the meeting specifies that votes taken at the meeting must be taken on a poll; or

(ii)    a poll is requested by the person presiding at the meeting or by a person participating and entitled to vote at the meeting; or

(b)    otherwise--on a show of hands.

…

66    Only a creditor (or their proxy or attorney) is entitled to vote at a meeting of creditors: r 75-85(1) of the IPR. Each creditor is entitled to and has one vote: r 75-85(2) of the IPR. Rule 75-85(3) (which replaced reg 5.6.23(1) of the Corporations Regulations) provides:

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.

67    Rule 75-85(4) (which replaced reg 5.6.23(2) of the Corporations Regulations) provides:

A creditor must not vote in respect of:

(a)     an unliquidated debt; or

(b)     a contingent debt; or

(c)     an unliquidated or a contingent claim; or

(d)     a debt the value of which is not established;

unless a just estimate of its value has been made.

68    Rule 75-95 requires an external administrator to ask a creditor to give evidence in writing in relation to a debt claimed by the creditor to establish the liability of the company for the debt, if necessary.

69    Rule 75-100 concerns decisions in relation to entitlement to vote at a creditors’ meeting. It is in substantially the same form as former reg 5.6.26 of the Corporations Regulations. Rule 75-100 provides:

(1)    The person presiding at a meeting may determine any question that arises as to the entitlement of a person to vote.

(2)    In deciding whether a person is entitled to vote at a meeting of creditors, the person presiding must:

(a)    have regard to the merits of the person’s claim; and

(b)    act impartially and independently.

(3)    If the person presiding is in doubt whether a proof of debt or claim should be admitted or rejected, her (sic) or she must mark that proof as objected to and allow the creditor to vote, subject to the vote being declared invalid if the objection is sustained.

(4)    A decision by the person presiding to admit or reject a proof of debt or claim for the purposes of voting may be appealed against to the Court within 10 business days after the decision.

70    Voting on a resolution is regulated by r 75-110 of the IPR which relevantly provides:

(1)     A resolution put to the vote at a meeting is to be decided:

…

(b)    if virtual meeting technology is used in holding the meeting--in accordance with subsection 75 - 75(3).

The nature of the appeal

71    It was not in dispute that s 90-15 of the IPS and s 75-100 of the IPR empower the Court to grant the relief sought in the Amended OP in relation to the Decision. However, the parties were not agreed on the nature and standard of review that applies to an application to review a decision to admit or reject a proof of debt for voting purposes.

72    The plaintiffs contend that the review of a decision to admit a proof of debt for voting purposes involves a hearing de novo such that new evidence can be considered on appeal and the matter considered afresh, citing among others El-Saafin v Franek (No 3) [2019] VSC 155; 143 ACSR 452 at [75] (Lyons J). The defendants do not agree. They submit that the proper approach when the Court is asked to review a decision to admit or reject a proof of debt for voting purposes at a meeting of creditors is that the plaintiffs must establish error in the liquidator’s decision, referring to Re Free Wesleyan Church of Tonga in Australia Inc (administrators appointed) [2012] NSWSC 214; (2012) 260 FLR 348 at [33] where Black J said:

A chairperson’s decision made under reg 5.6.26 will not be interfered with on appeal unless it can be shown that the chairperson was in error and, where the dispute concerns a matter of professional judgment, that will ordinarily require demonstrating the decision was effected by bad faith, a mistake as to the facts, an erroneous approach to the law or an error of principle: Bacnet Pty Ltd v Lift Capital Partners Pty Ltd (in liq) [2010] FCAFC 36; (2010) 183 FCR 384; 78 ACSR 57 at [72].

73    The question is not easily resolved given the different approaches of judges at first instance and the absence of any decision of an intermediate appellate court determining the issue. A complexity arises because the principles identified in early decisions concerning the rejection of proofs of debt by liquidators for the purposes of a final distribution have been applied when considering the rejection of a proof of debt for voting purposes at a creditors’ meeting. The defendants submit that the two processes are different and that accordingly they call for different approaches to an appeal from the decision of the liquidator rejecting the proof of debt in each case. The plaintiffs submit that the same approach is to be applied in either case. That is because the ultimate question to be determined is the same: what is the true liability of the company.

74    I set out a summary of some of the authorities below.

75    In Tanning Research Laboratories Inc v O’Brien (1990) 169 CLR 332 Mr O’Brien, the liquidator of Hawaiian Tropic Pty Ltd, rejected a proof of debt lodged by Tanning Research Laboratories Inc. Tanning Research applied to the Supreme Court of New South Wales for a review of that decision. At first instance Cohen J ordered that the liquidator’s rejection be varied by allowing the proof of debt in the sum of approximately $55,000. On appeal, the New South Wales Court of Appeal set aside the trial judge’s order and ordered that the proceeding be stayed pursuant to s 7(2) of the Arbitration (Foreign Awards and Agreements) Act 1974 (Cth) and that the determination of the amount by which Hawaiian Tropic was indebted to Tanning Research be referred to arbitration in accordance with the agreement between the parties.

76    Hawaiian Tropic appealed to the High Court where the primary question for determination was whether the conditions governing the application of s 7(2) of the Arbitration Act were satisfied. In considering that question Brennan and Dawson JJ referred to the role of a liquidator in determining whether to admit or reject a proof of debt saying at 338-339:

In determining whether to admit or reject a proof of debt, a liquidator has been said to act in a quasi-judicial capacity (Re Britton & Millard Ltd) according to standards no less than the standards of a court or judge: Commissioner for Corporate Affairs v. Harvey. This description of the liquidator’s function reflects his duty to distribute the assets in his hands or under his control among the persons truly entitled. That duty was stated by Viscount Simonds in Government of India v. Taylor:

“I conceive that it is the duty of the liquidator to discharge out of the assets in his hands those claims which are legally enforceable, and to hand over any surplus to the contributories. I find no words which vest in him a discretion to meet claims which are not legally enforceable. It will be remembered that, so far as is relevant for this purpose, the law is the same whether the winding up is voluntary or by the court, whether the company is solvent or insolvent, and that an additional purpose of a winding up is to secure that creditors who have enforceable claims shall be treated equally, subject only to the priorities for which the statute provides.”

The principles which determine enforceability of the liability to which a proof of debt relates are, in the main, the same as the principles which would be applied in an action brought directly against the company to enforce that liability. Those principles include the law relating to the barring of actions by time: see, e.g., Motor Terms Co. Pty. Ltd. v. Liberty Insurance Ltd. But this general rule is qualified. As the parties whose interests are affected by admission of a proof of debt are the general body of creditors and the contributories rather than the company in liquidation, there are some liabilities which would be enforceable against the company but which a liquidator is not bound to admit to proof of debt lest the interests of creditors and contributories may be unjustly affected. A liquidator may properly reject a proof of debt if the liability, though enforceable against the company, is not a true liability of the company but is founded merely on some act or omission on the part of the company which unjustly prejudices the interests of the creditors or contributories in the assets available for distribution. In this respect, there is no reason to distinguish between the position of a liquidator and that of a trustee in bankruptcy: see Ayerst v. C. & K. (Construction) Ltd. …

(Footnotes omitted.)

77    Their Honours also considered the remedy available to a person claiming to be a creditor where the liquidator rejects that person’s proof of debt and the approach the Court takes on an appeal from a liquidator’s rejection of a proof of debt observing at 340-341:

The proceedings thus instituted, though often referred to as an “appeal” from the liquidator’s decision to reject, are originating proceedings which the court hears de novo: In re Birds Stores Pty. Ltd; In re Kentwood Constructions Ltd; In re Trepca Mines Ltd. In such a proceeding, a liquidator who defends his decision to reject a proof of debt is no longer acting in a quasi-judicial capacity; he is cast in the role of an adversary, defending the assets available for distribution against a liability which, according to the view he formed when acting quasi-judicially, is not legally enforceable. The liquidator may defend those assets against the creditor’s claim on any ground on which the company might have defended the claim had it been sued by the creditor. If the liquidator relies on those special defences which allow him to go behind a judgment, an account stated, a covenant or an estoppel in order to ascertain the true liability of the company, he is none the less in the role of an adversary. The issue in the proceeding is whether the liability referred to in the proof of debt is a true liability of the company enforceable against it. The issue is contested between the putative creditor on the one hand and the liquidator on the other; the liquidator is a party litigant. And none the less so though the liquidator is required to act fairly in conducting the litigation.

(Footnotes omitted.)

78    The joint judgment of Brennan and Dawson JJ in Tanning was relied on in De Bortoli Wines Pty Ltd v HIH Insurance Ltd (in liq) (2011) 200 FCR 253. That case concerned an application under former s 1321 of the Corporations Act appealing the rejection of a proof of debt lodged for distribution purposes by the liquidators of HIH Insurance Ltd (in liquidation). Justice Stone concluded that the nature of the application before the Court was “not a review of the Liquidators’ decision but a hearing de novo”: De Bortoli Wines at [25], cited with approval in Wang v HACCP Cleaning Australia Pty Ltd [2016] SASC 161 at [33]-[34] (Doyle J). An appeal from the decision in De Bortoli Wines was dismissed: De Bortoli Wines Pty Ltd v HIH Insurance Limited (in liq) [2012] FCAFC 28.

79    In Capocchiano v Young [2013] NSWSC 879 Kunc J considered an appeal under former s 1321(1)(d) of the Corporations Act from a rejection by a liquidator of a proof of debt lodged by the plaintiffs. Although the liquidator had not formally called for proofs of debt and had no intention of declaring a dividend, the plaintiffs lodged their proof of debt and required the liquidator to adjudicate on it. His Honour summarised the principles at [46]:

The relevant legal principles are not in doubt. An appeal against the rejection of a proof of debt is a hearing de novo. The Court must take into account all relevant evidence, whether or not it was before the liquidator at the time the proof was rejected. The fundamental question is whether the claim sought to be proved is a true liability of the company enforceable against it according to law. Nevertheless, the claimant bears the onus to demonstrate that the liquidator was wrong in rejecting the proof. If that onus is not discharged, the Court will not overturn the liquidator’s decision. If the Court is unable to conclude either way whether the proof should be admitted, then the liquidator’s decision must stand.

80    In Davis Investment Group Stewart J in considering an appeal from a liquidator’s rejection of a proof of debt lodged for distribution purposes in a liquidation proceeded on the basis that the hearing was a hearing de novo. His Honour observed at [6]:

The court must decide whether the liability claimed in the proof of debt is a true liability of the company and enforceable against it – it must “make its own decision on the evidence before it and not merely decide if there was error on the part of the primary decision-maker”: Marsland v Gamble [2002] WASC 213 at [12] per Barker J.

81    There are other decisions which, in considering an appeal against a liquidator’s rejection of a proof of debt for distribution purposes, proceed on the same basis. That is, treating the “appeal” as a hearing de novo and observing that the question to be addressed is whether the claim is a true liability of the company which is enforceable against it. No issue arises in this proceeding about the accepted approach to such an appeal which was formerly brought under s 1321 of the Corporations Act (now repealed) but which would now be brought under s 90-15(1) of the IPS.

82    The question which arises is whether the same approach is to be adopted in the case of an appeal from a decision of an administrator or liquidator to reject a proof of debt for the purposes of voting at a meeting of creditors.

83    In Ball v Jeremy Joseph Nipps as Liquidator of Ochre Group Holdings Ltd (in Liquidation) [2023] WASC 348 Strk J considered, among other things, an application by a director, Made Sumarya, under reg 5.6.54(2) of the Corporations Regulations for revocation of the decision by Mr Nipps, the liquidator of Ochre Group Holdings Pty Ltd (in liquidation), rejecting his proof of debt, an order that Mr Nipps admit his proof of debt in a specified sum or such other amount as the court determined and an order requiring Mr Nipps to call a meeting of creditors of Ochre Group for the purpose of voting on a resolution that Mr Nipps be removed as the liquidator of the company. The proof of debt in question was submitted in support of a written direction from the director issued pursuant to s 75-15(c) of the IPS to call a meeting of creditors of Ochre Group for the purpose of voting on a resolution removing Mr Nipps as liquidator of Ochre Group and to appoint a new liquidator. Section 75-15(c) requires an external administrator of a company to convene a meeting of creditors if at least 25% in value of the creditors direct the external administrator to do so in writing.

84    Although not a question raised by the parties, Strk J, referring to, among others, Tanning at [56], observed that an appeal against a liquidator’s rejection of a proof of debt “is not a proceeding against a company but an appeal from the liquidator when he or she was acting as an officer of the court in a quasi-judicial function” and that part of the application made pursuant to reg 5.6.54(2), though referred to as an appeal, is to be heard as a hearing de novo. Her Honour continued at [57] and [59]:

57     In considering Mr Sumarya’s appeal, I proceeded on the basis that I ought consider the merits of Mr Sumarya’s claim and decide for myself as to the existence and amount of the debt, but it remained incumbent on Mr Sumarya to show that Mr Nipps was wrong. If that onus is not discharged the court will not overturn the liquidator’s decision. If the court is unable to conclude either way whether the proof should be admitted, then the liquidator’s decision must stand.

…

59     In hearing an appeal, the court must take into account all relevant evidence, whether or not it was before the liquidator at the time the proof was rejected. I also proceeded on the basis that on an appeal such as this, the court acts on the evidence that is placed before it, as there is no rule or practice whereby the material before the liquidator is automatically material before the court when considering whether to affirm the liquidator’s decision or not.

(Footnotes omitted.)

85    In Bacnet Pty Ltd v Lift Capital Partners Pty Ltd (in liq) (2010) 183 FCR 384, a Full Court of this Court (Keane CJ, Finkelstein and Jacobson JJ) considered the question of the nature of an appeal against a decision by the chair of a meeting to reject a proof of debt for the purpose of voting at scheme meetings but did not finally resolve it.

86    Relevantly, the case concerned the rejection of proofs of debt submitted by the “Famularo Parties” for the purpose of voting at scheme meetings. The Famularo Parties appealed against the refusal by the chair of those meetings, Mr McGrath, to permit them to vote. Their appeal was heard at the same time as the applications brought by Lift Capital Partners Pty Ltd (in liquidation) and Lift Capital Nominees Pty Ltd (in liquidation) for approval of the schemes of arrangement. The primary judge dismissed the appeals against the decision of the chair of the meetings and approved the schemes of arrangement.

87    On the question of the nature of the appeal against the chair’s decision to reject a proof of debt, Keane CJ and Jacobson J observed that the effect of the authorities to which the Court was taken is that the statutory scheme under which Mr McGrath decided to reject the proofs vested in him a discretion which would not be interfered with on an appeal unless error is shown. Their Honours continued at [72]-[73]:

72    … Where the dispute concerns a matter of professional judgment, ordinarily, proof of error will involve demonstrating that the decision was affected by bad faith or a mistake as to the facts or an erroneous approach to the law or an error of principle: Selim v McGrath 177 FLR 85 at [36]-[38]; Rosseau Pty Ltd (in liq) v Jay-O-Bees Pty Ltd (in liq) (2004) 50 ACSR 565 at [46] per Campbell J.

73    Importantly, for present purposes, those authorities indicate that the role of the Court on such an appeal is not to engage in a valuation of a claim as a valuation exercise in which the Court acts as a judicial valuer making its own just estimate of the value of the claims: cf Re Pan Pharmaceuticals Ltd (admins apptd); Selim v McGrath (2003) 47 ACSR 139 at [39]-[42] per Allsop J.

88    However, their Honours also observed that there were other authorities, referred to by Finkelstein J, to which the Court was not taken in argument, which suggest that an appeal from a decision by the chairperson to accept or reject proofs of debt may be a hearing de novo where it is unnecessary to show error on the part of the chair. Ultimately Keane CJ and Jacobson J did not consider it necessary to resolve the question of the nature of the appeal and, in the absence of full argument, preferred to leave it open.

89    That being said, after referring to Selim v McGrath (2003) 177 FLR 85; [2003] NSWSC 927 in which Barrett J explained the statutory scheme in former regs 5.6.23 and 5.6.26 Keane CJ and Jacobson J observed (at [80]) that even if the hearing before the primary judge on the appeals against Mr McGrath’s decision was a hearing de novo, the scope for admission of further evidence was limited to the correctness of the chair’s decision on the question of the eligibility to vote. Their Honours also observed (at [81]) that the primary judge gave the Famularo Parties an opportunity to adduce further evidence about Mr McGrath’s decision to reject their proofs of debt and any defects in that decision.

90    Justice Finkelstein took a different approach and considered the nature of an appeal under former reg 5.6.26(3) of the Corporations Regulations, despite the question not being fully argued before the Court. His Honour undertook an analysis of both the English and Australian authorities. His Honour observed at [172]:

It is not, to my mind, immediately apparent why an appeal under reg 5.6.26(3) should be regarded as an appeal in the strict sense. One possible explanation is that courts are mindful of the speed with which voting disputes must be resolved: see, for example, the discussion by Barrett J in Selim 177 FLR 85 at [78]-[81] regarding the application of regulations to the expedited nature of the Pt 5.3A process. On this view, it might be reasoned that the objectives of Pt 5.3A would be subverted if appeals under reg 5.6.26(3) were based on new material and required final resolution of rights which, if undertaken, would hold up the process. But, in the end, one can only speculate about the rationale for the assumption of a strict appeal in Selim and like cases.

91    Justice Finkelstein noted that the nature of an appeal under reg 5.6.26(3) of the Corporations Regulations is ultimately a matter of construction, that it can be brought against different types of decisions and that it will not vary depending on the type of the decision or the “importance of the nature of the defects” in the chair’s decision: Bacnet at [173]. His Honour continued at [174]-[175]:

174    In determining the nature of the appeal, reg 5.6.26(2) is of some importance. That regulation provides that if the chairperson is in doubt about whether to admit a proof, the chairperson should mark the proof as objected to and allow the putative creditor to vote, “subject to the vote being declared invalid if the objection is sustained” (emphasis added). The reference to the objection being sustained no doubt assumes a decision on an appeal under reg 5.6.26(3). The language “the objection is sustained” seems to speak of a fresh consideration of the issue.

175    This is not surprising. A chairperson’s decision is only a temporary ruling, made in a summary manner, often based on limited evidence. Further evidence may come to light which was not available at the time of the meeting. While there are doubtless good practical reasons for streamlining the chairperson’s assessments of voting entitlements, it must always be remembered that the decision potentially has important consequences for substantive rights. A good example is a scheme of arrangement (like the one in the present case) which provides for the release of creditor’s claims against third parties. Given the limitations of the manner in which a chairperson assesses voting entitlements, and given the potential importance of this decision, this rather suggests that new evidence should be permitted on the appeal and that the matter should be considered afresh.

92    His Honour concluded that an appeal under reg 5.6.26(3) is a hearing de novo, noting that he was influenced by the English authorities to which he referred: Bacnet at [176].

93    A more recent decision is El-Saafin (No 3). It concerned an appeal against decisions of the chair of a second meeting of creditors of Saafin Constructions Pty Ltd (in administration) convened pursuant to s 439A of the Corporations Act to reject in whole or in part and to admit for voting purposes certain proofs of debt. At the meeting, the creditors whose debts were admitted by the chairperson voted by value, but not by number, to place the company into liquidation. The chairperson exercised his casting vote to resolve to place the company into liquidation. The plaintiffs appealed to the Supreme Court of Victoria against the chairperson’s decisions to reject in whole or in part, and to admit, certain proofs of debt for voting purposes.

94    After setting out the relevant statutory regime, Lyons J considered the question of the role of the Court in an appeal from a decision to reject or admit a proof of debt or claim at a creditors’ meeting convened under s 439A of the Corporations Act. His Honour’s analysis commenced by referring to the joint judgment of Brennan and Dawson JJ in Tanning and the principles set out therein. His Honour observed (at [68]) that the principles in relation to an appeal from a decision to admit or reject a proof of debt have largely developed in the context of challenging proofs of debt for distributions in a liquidation.

95    Justice Lyons noted: first (at [71]) that there are single judge decisions in which the court has held that a decision of a chair at a creditors’ meeting is not to be interfered with on appeal unless it is shown that the chair was in error and, where the dispute concerns a professional judgment, the party challenging the decision is ordinarily required to demonstrate that the decision was affected by bad faith, a mistake as to the facts, an erroneous approach to the law or an error of principle, referring to Re Free Wesleyan Church and Weriton Finance Pty Ltd v PNR Pty Ltd (in administration); Australian Residential and Commercial Finance Pty Ltd v PNR Pty Ltd (administrator appointed) (2012) 92 ACSR 88; and secondly (at [73]) that there are also single judge decisions which have applied the principles in Tanning to appeals from decisions of the chair of a creditors’ meeting to admit proofs of debt for voting purposes.

96    In the absence of any real argument by the parties before him, Lyons J concluded that he should follow Tanning to the effect that the appeal before his Honour was a hearing de novo and that the decision to admit or reject a proof of debt does not involve a discretion: El-Saafin (No 3) at [75].

97    His Honour said that he would determine the application on the basis that there was no requirement to show error on the part of the chair of the meeting in deciding whether to admit or reject the proofs of debt but that the plaintiffs would have to establish, on the evidence, whether a particular proof of debt should have been admitted or rejected. In the event he was wrong in his approach his Honour also considered whether the chair of the meeting in fact erred in making the decisions the subject of the appeals: El-Saafin (No 3) at [75]-[76].

98    By contrast, in Re Free Wesleyan Church Black J came to a different view about the nature of an appeal from a decision to reject or accept a proof of debt for voting purposes. In that case Phoenix Lacquers & Paints Pty Ltd applied for declarations about the validity of a resolution of creditors to remove and replace the joint and several administrators appointed to Free Wesleyan Church of Tonga in Australia Inc, which was an association established under the Associations Incorporation Act 2009 (NSW). At the first meeting of creditors the chair of the meeting, Mr Parbery, admitted Phoenix’s proof of debt on the basis of a just estimate of $1.48 million which was an amount less than that stated in the proof of debt. At the meeting a majority in number of creditors voted for the resolution to remove and replace the administrators and a majority in value, calculated on the basis of the lower amount for which Phoenix’s proof of debt had been admitted, voted against it. Mr Parbery as chair exercised his casting vote against the resolution.

99    Phoenix sought a number of declarations and orders in relation to the conduct of the meeting including an order under (former) reg 5.6.26(3) of the Corporations Regulations that the decision made by Mr Parbery as chair at the first meeting of creditors to admit Phoenix’s proof of debt in the amount of $1.48 million be set aside and in lieu thereof it be determined that its vote at the same meeting was to a value of $9,795,217.27 (which was the amount included in its proof of debt) and an order that the motion to remove and replace the administrators as administrators be declared to be carried.

100    In considering that relief, Black J observed in relation to the nature of the appeal (at [33]) that “[a] chairperson’s decision made under reg 5.6.26 will not be interfered with on appeal unless it can be shown that the chairperson was in error and, where the dispute concerns a matter of professional judgment, that will ordinarily require demonstrating the decision was effected by bad faith, a mistake as to the facts, an erroneous approach to the law or an error of principle”, referring to Bacnet at [72].

101    In Weriton Finance, among other things, Weriton Finance Pty Limited appealed under former s 1321 of the Corporations Act from a decision by the administrator of PNR Pty Ltd (in administration), who also acted as chair of the meeting, refusing to admit its proof of debt for its face value of approximately $15 million and admitting it for $1 for voting purposes at the first meeting of creditors. In addressing the nature of the appeal on this issue Black J said at [35]:

Weriton submits that, when an appeal is made under s 1321 with respect to the rejection of a proof of debt, the appeal is in the form of a hearing de novo, with evidence not being restricted to the evidence before the administrator at the time of his decision: Westpac Banking Corporation v Totterdell (1997) 25 ACSR 769; 16 ACLC 53. At the same time, the case law recognises that, where an appeal is brought against a discretionary decision by an administrator or liquidator, the court will recognise that the discretion has been vested by statute in the administrator or liquidator and will not interfere unless it is shown that: he or she made errors of law; failed to take into account relevant matters or took into account irrelevant matters; or if the liquidator’s decision in the circumstances appears such that no reasonable person could arrive at it or was made in bad faith: Selim v McGrath (2003) 47 ACSR 537; [2003] NSWSC 927 at [36]–[38] (Selim); Bacnet Pty Ltd v Lift Capital Partners Pty Ltd (in liq) (2010) 183 FCR 384; 266 ALR 666; [2010] FCAFC 36 at [72] (Bacnet) (although the Full Court of the Federal Court there noted other authorities suggesting that such an appeal may be a hearing de novo and did not decide which approach was correct (at [74]); McGrath v Sturesteps (2011) 284 ALR 196; 254 FLR 384; [2011] NSWCA 315).

102    I accept, as the defendants submit and the case law reflects, that the process of deciding whether to admit proofs of debt for voting purposes is intended to be a summary one which is usually conducted by the liquidator, acting as chairperson, using his or her professional judgment. However, this does not of itself explain why the proper approach for review of this type of decision is as set out in Re Free Wesleyan Church at [33] (see [72] above). There is an argument of equal force, identified by Finkelstein J in Bacnet at [175], that the summary nature of the process lends itself to an appeal by way of a hearing de novo (see [91] above).

103    The question is not settled. Although it was raised and argued before me, neither party submitted that any decision referred to (and thus the approach) was plainly wrong. The highest the submissions went was to posit a better approach based on the unsettled state of the authorities. In the circumstances, like Lyons J in El-Saafin (No 3) I will follow Tanning and treat the plaintiffs’ appeal pursuant to r 75-100(4) of the IPR (and the application pursuant to s 90-15(1) of the IPS) as a hearing de novo. I am fortified in that approach by two further matters: first, the thorough and, in my view, compelling analysis of Finkelstein J in Bacnet; and secondly, while the admission of a proof of debt occurs at different points and for different purposes in external administrations, it would be incongruous, in my view, for there to be different approaches to an appeal from a decision rejecting a proof of debt depending on the purpose for its lodgement, ie for voting purposes or for distribution purposes.

104    Finally, and for completeness, as was the case in El-Saafin (No 3), in the event I am wrong in my approach I will also consider whether the liquidator as chair of the 16 July Meeting erred in admitting the plaintiffs’ proofs of debt for $1.

CONSIDERATION

Should the proofs of debt have been admitted for their full amounts?

105    In proceeding on the basis that the appeal from the Decision is a hearing de novo the question to be determined is whether the liability claimed in the proofs of debt is each a true liability of Sunshine and enforceable against it. In answering that question, I am required to make my own decision based on the evidence before me, which includes evidence that was not before the liquidator, and not merely decide if there was error on the part of the liquidator: see Davis Investment Group at [6]-[7].

106    Thus, in considering this question for determination I have had regard to the evidence before the chair of the meeting as well as the further evidence relied on by the plaintiffs before me and the requirements of r 75-85 of the IPR. I address each of the Claims and the associated proof of debt in turn below.

107    First, in relation to Mr Zong’s proof of debt, the evidence before me establishes that on 5 February 2025:

(1)    Mr Lin as lender and Mr Zong and Alex as borrowers entered into the Lin Loan Agreement pursuant to which Mr Lin agreed to loan $1.5 million to Mr Zong and Alex;

(2)    Mr Zong and Alex as lender and Sunshine as borrower entered into the Zong Loan Agreement pursuant to the terms of which Mr Zong and Alex agreed to loan Sunshine the sum of $1.5 million; and

(3)    a sum of $1.5 million was deposited into the Sunshine Account by, among others, Mr Lin.

108    This evidence considered together satisfies me that Mr Zong (and Alex) are creditors of Sunshine. The Zong Loan Agreement establishes Sunshine’s liability to Mr Zong and Alex and the extract from the Sunshine Account establishes that on the day of entry into the Zong Loan Agreement, $1.5 million, which was the principal sum to be advanced under the Zong Loan Agreement, was deposited into that account. While the description for the deposit is a series of names, those names include Mr Lin who had on the same day loaned $1.5 million to Mr Zong and Alex pursuant to the Lin Loan Agreement.

109    There were two balance sheets available to the liquidator. The First Balance Sheet did not disclose the loan from, among others, Mr Zong and Alex. However, the Second Balance Sheet did so listing it as a liability. Mr Calabretta explained the difference between the First Balance Sheet and the Second Balance Sheet, insofar as they recorded related party loans from and to Sunshine.

110    The unchallenged evidence before me is that Sunshine has not made any payments in reduction of the Zong Claim and/or the amount due under the Zong Loan Agreement. The same unchallenged evidence was given in relation to the DIHE Claim and the Unik Claim which are both considered below.

111    I am satisfied, based on the evidence before me, that the Zong Claim and thus Mr Zong’s proof of debt should be admitted for $1.5 million.

112    Secondly, in relation to DIHE’s proof of debt, the evidence before me establishes that:

(1)    on 20 December 2024 DIHE as lender and Sunshine as borrower entered into the DIHE Loan Agreement pursuant to the term of which DIHE agreed to provide a cash advance facility to Sunshine for “Business Cashflow”;

(2)    clause 4 of the DIHE Loan Agreement titled “Conditions precedent to drawdown” provides:

The Borrower may draw an Advance if:

(a)    the Lender has received from the Borrower a Drawing Notice receipt of which obliges the Borrower to draw the Advance requested, on the Advance Date nominated and on the terms and conditions stated in the Drawing Notice and in this document;

(b)    the proposed Advance Date is a Business Day;

(c)    the proposed Advance does not exceed the Limit;

(d)    no event has occurred which constitutes or which with the giving of notice, the lapse of time, and/or a relevant determination by the Lender would constitute an Event of Default;

(e)    the Lender holds the Security and the Guarantee in form and substance satisfactory to the Lender; and

The Lender may waive any one or more of these conditions.

Relevantly, the term “Advance” is defined to mean “any drawing” under the DIHE Loan Agreement and the “Limit” is specified to be $1 million;

(3)    annexure A to the DIHE Loan Agreement is a drawdown notice dated 24 December 2024 in which Sunshine sought to draw down an “Advance” of $700,000; and

(4)    on 24 December 2024 Huaguang Chen deposited $700,000 into the Sunshine Account with the narratives “Loan to Tony ZONG DIHE Group” and “Direct Credit 301500 DIHE Group Loan to Tony Zong” showing respectively in the Transaction Group and Transaction History documents for the Sunshine Accounts.

113    Once again, this evidence considered together satisfies me that DIHE advanced $700,000 to Sunshine in December 2024. While the facility limit under the DIHE Loan Agreement was $1 million, at the time Sunshine’s drawdown was for a lesser amount, namely $700,000. There is nothing unusual about this. There is sufficient evidence to establish that payment was made to Sunshine pursuant to the DIHE Loan Agreement. In that regard:

(1)    the transaction group document records the account name from which the sum of $700,000 was paid to be “Huaguang Chen”. Mr Chen is one of the directors of DIHE Group who signed the DIHE Loan Agreement; and

(2)    nothing turns on the fact that the statements of account describe the payment as a “loan to Tony Zong”. I infer that to be the description given by the payer of the funds. Mr Zong was the sole director of Sunshine and was a director of DIHE and he signed the DIHE Loan Agreement in those capacities.

114    My observations about the First Balance Sheet and the Second Balance Sheet at [109] apply equally here and the evidence is that there have been no repayments of principal or interest owing to DIHE pursuant to the DIHE Loan Agreement.

115    It follows that the DIHE Claim and DIHE’s proof of debt should be admitted for $700,000.

116    Thirdly, in relation to Unik’s proof of debt, the evidence before me establishes that:

(1)    on 26 September 2024:

(a)    Finstar as lender, Unik as borrower and Mr Zong as guarantor entered into the Finstar Loan Agreement pursuant to the terms of which Finstar agreed to make a facility available to Unik up to the amount of $1.5 million;

(b)    Unik as lender and Sunshine as borrower entered into the Unik Loan Agreement; and

(c)    Mr Zong directed Finstar to pay the net amount advanced under the Finstar Loan Agreement to the Sunshine Account; and

(2)    on 27 September 2024 the sum of $1,470,545 was paid by Finstar into the Sunshine Account.

117    When this evidence is considered as a whole, I am satisfied that there was in effect a back-to-back arrangement whereby Unik loaned moneys from Finstar and, in turn, made those funds available to Sunshine pursuant to the Unik Loan Agreement. In accordance with a direction from Mr Zong, who is a director of Unik, the funds were paid directly by Finstar to Sunshine. While the Unik Loan Agreement records the amount of the loan as $1.5 million, that a lesser sum was paid is of no consequence; it represents the net amount paid by Finstar to Unik after deduction of expenses which Unik then loaned to Sunshine.

118    Once again, my observations about the First Balance Sheet and the Second Balance Sheet at [109] apply equally here. The evidence is that Unik has not received any payment due to it under the Unik Loan Agreement.

119    There are two further observations to be made about the Unik Claim.

120    First, the Finstar Loan Agreement was not before the liquidator. As a result, unsurprisingly and in the absence of any explanation, the liquidator was unable to conclude that funds had been advanced by Unik to Sunshine.

121    Secondly, the Unik Claim and its proof of debt is for $1.5 million. However, the evidence before me establishes that the only sum advanced was for a lesser amount, namely $1,470,545.

122    Thus, the Unik Claim and Unik’s proof of debt should be admitted for $1,470,545.

123    It follows from the above that I am satisfied that each of the Claims is a true liability of Sunshine. Each of the Claims remains outstanding, no amounts due under the loan agreements have been repaid and the liability in each case is enforceable against Sunshine. I am satisfied that the value of the Claims has been established either in whole or part and therefore that each of Mr Zong, DIHE and Unik are persons who were entitled to vote at the 16 July Meeting: IPR r 75-85.

124    The proofs of debt lodged by each of Mr Zong, DIHE and Unik should have been admitted for $1.5 million, $700,000 and $1,470,545 respectively.

The alternative approach: was there error on the part of the liquidator?

125    In the event that I am wrong in proceeding on the basis that an appeal under s 75-100(4) is a hearing de novo, I consider briefly below whether the liquidator erred in admitting the plaintiffs’ proofs of debt for $1.

126    The plaintiffs contend that the liquidator made two errors in admitting the proofs of debt for $1, both of which can be characterised as errors of law or principle. The first alleged error concerns the application of r 75-85(4) of the IPR and the second alleged error concerns the application r 75-100(3) of the IPR. These alleged errors are inter-related.

127    Rule 75-85 of the IPR (formerly reg 5.6.23 of the Corporations Regulations) is set out at [67] above. It relevantly provides that a person is not entitled to vote as a creditor at a meeting of creditors unless his or her debt or claim has been admitted in whole or in part by the external administrator. In addition, a creditor must not vote in respect of an unliquidated or contingent debt, an unliquidated or contingent claim or a debt the value of which has not been established unless a just estimate of its value has been made.

128    Rule 75-100 of the IPR (formerly reg 5.6.26 of the Corporations Regulations) is set out at [69] above. It relevantly provides that where a person presiding at a meeting is in doubt about whether a proof of debt should be admitted to rejected, he or she must mark the proof as objected to and allow the creditor to vote, subject to the vote being declared invalid if the objection is sustained.

129    The relationship between former regs 5.6.23 and 5.6.26 of the Corporations Regulations, the substance of which are now found in r 75-85 and r 75-100 of the IPR, is not clear and “has exercised judicial minds”: see Kirwan v Cresvale Far East Pty Ltd (2002) 44 ACSR 21 at [244]. In El-Saafin (No 3) Lyons J made a similar observation: El-Saafin (No 3) at [98]. His Honour conveniently set out some of the authorities which had considered the relationship between the former regulations including Bovis Lend Lease Pty Ltd v Wily (2003) 45 ACSR 612, 677-678; [2003] NSWSC 467 at [269] and Selim at [82] and [89]-[106].

130    In El-Saafin (No 3) in referring to Barrett J’s analysis in Selim in relation to the obligation under reg 5.6.23(2) of the Corporations Regulations to provide a “just estimate” (now found in r 75-85(4)) Lyons J said at [99]:

… [Justice Barrett] concluded that the decision of whether to admit or reject the debt and the decision to estimate the just value of a debt or claim to be taken at the meeting will ‘of necessity, be of somewhat summary nature’ and that situation is accordingly not one in which extensive debate or deliberation or detailed consideration will be possible. He continued in relation to estimating a value:

He or she will do the best that can be done by reference to the factual material the claimant furnishes, viewed in the total context with which the decision-maker is dealing. If that material provides reasonable grounds, within that context, for ascribing a particular figure to the particular claim, the chairperson or administrator is no doubt expected to accept that position. If, on the other hand, there is little or no material from which a conclusion as to value can be drawn, a just estimate may be zero or perhaps the nominal amount of $1 assuming that admission is warranted.

131    Here the plaintiffs provided particulars and information with their proofs of debt in support of the Claims. The liquidator found that there was insufficient information provided to him to substantiate that the plaintiffs were creditors for a particular amount but there was sufficient information for the liquidator to substantiate that the plaintiffs were creditors for some amount and thus he admitted them as creditors for the purpose of voting for a nominal amount. The plaintiffs allege that the liquidator had sufficient material before him to establish the value of their claims.

132    In Re Free Wesleyan Church Black J considered the concept of “not established” in reg 5.6.23(2) of the Corporations Regulations (now r 75-85(4)(d) of the IPR). At [19]-[20] his Honour relevantly said:

19    … The administrators drew my attention to dictionary definitions of the term “establish” which include “validate; place beyond dispute in fact” or “generally recognised as being true or valid” or “proved”. By contrast with the reasoning in Levy, it seems to me that reg 5.6.23(2) requires a focus on whether the value of a debt is presently established. While it may be a rare or very rare case where the “value of a debt” which is capable of being calculated from the terms of a loan facility can be said to be not ascertainable or not established because of doubt as to the enforceability of those terms, the recognition of the relevance of defences in Abeyratne indicates that such a case may exist.

20    Phoenix has not persuaded me of its primary position that the value of its debt is established by reference only to the terms of the loan agreements. In my view, once the characteristics of the loan and the fact that the church has brought proceedings to challenge it are taken into account, this was one of the rare cases where the value of the loan could not be ascertained merely by reference to its terms and substantial further factual inquiries would be required.

133    That is Black J considered that what was required was a focus on whether the “value of the debt is presently established”. In that case there were ongoing proceedings about the validity of the loan making it “one of the rare cases” where the value of the loan could not be ascertained by refence only to its terms. In contrast, here there are no extant proceedings challenging any of the loan agreements. Those agreements specified the maximum principal sums to be advanced and the Sunshine Account statements showed the amounts received by Sunshine on or about the date of each of the loan agreements.

134    In Weriton Finance (at [51]) Black J found that the administrator could properly hold the view that Weriton’s debt had not been established for the purposes of reg 5.6.23(2) of the Corporations Regulations because it had failed to provide adequate documentation to support it. Given the insufficiency of the material, his Honour found that the approach of valuing his claim at $1 for voting purposes was open to the administrator. In the case before his Honour the creditor had provided a schedule of its claimed debt and no supporting documents. That was not the case here.

135    Another example is found in Re Sovereign MF Ltd (in liquidation) [2014] VSC 681 in which Sovereign MF Ltd (in liquidation) lodged proofs of debt in two administrations of which Mr Vartelas was the administrator, both of which were admitted for $1 for voting purposes. This was because he was of the view that while Sovereign was a creditor for some amount, in the time available he was not able to ascertain what that amount was and so, in order to allow it to vote at the first meetings of creditors, he admitted Sovereign as a creditor for $1.

136    After referring to the evidence relied on by the parties and the authorities, Robson J said at [99]:

In my view, the position is as follows. If the chairman is in doubt whether a proof of debt or claim should be admitted or rejected, the proper procedure is to mark the proof as objected to and allow the creditor to vote as required under reg 5.26(2). If the debt or claim is for an unliquidated amount, or it is contingent on, or is a debt, the value of which is not established, a just estimate may be made.

137    At [100] his Honour found that the principles he had summarised did not apply in the case before him because the claim “was not for an unliquidated sum, nor was it contingent, and nor was it one the value of which was not established”. Rather the sums claimed were “liquidated and precisely stated” and thus the just estimate clause in reg 5.6.23(2) was not enlivened and the authorities concerning the admission of a creditor for a nominal amount were not relevant.

138    In my view the same can be said in relation to the Mr Zong’s and DIHE’s proofs of debt which were for liquidated amounts as specified in the loan agreements with Sunshine. Their respective claims were precisely stated and were not contingent. They were supported by the extracts from the Sunshine Account and were identified in the Second Balance Sheet which was provided with an explanation about their omission from the First Balance Sheet. Insofar as each of the Zong Claim and DIHE Claim and their respective proofs of debt was concerned the just estimate clause in r 75-100(4) of the IPR was not enlivened. The liquidator erred in proceeding in the way he did in relation to Mr Zong’s and DIHE’s proofs of debt.

139    I do not come to the same conclusion in relation to the Unik Claim. This is because, while the Unik Loan Agreement was available to the liquidator, the accompanying extract from the Sunshine Account showed a payment by Finstar, not Unik. There was no explanation given to the liquidator for why the payment was made by Finstar. On the face of the material before the liquidator no funds had been advanced by Unik to Sunshine. However, given the Unik Loan Agreement and the Second Balance Sheet, which recorded a loan from Unik of $1.5 million (which I note was not in fact the amount paid to Sunshine by Finstar), the liquidator formed the view that there was sufficient evidence before him to substantiate that Unik was a creditor for some amount and that there was a debt to Unik but its value could not be established. Accordingly, the liquidator estimated Unik’s debt at $1. There was no error in the liquidator doing so. Where there is insufficient material before an external administrator to allow a conclusion about value to be drawn it is open to him or her to value the claim at a nominal value of $1 for voting purposes: see for example Weriton Finance at [51].

140    Given that conclusion, it is not necessary for me to consider the second alleged error about the operation r 75-100(3) of the IPR nor the question of whether, as the plaintiffs contend, that whenever there is doubt about the amount of the debt claimed by a creditor the chairperson must allow the creditor to vote in the amount claimed but mark the proof of debt as objected to in accordance with r 75-100(3) of the IPR. I observe in that regard that there is a divergence in the authorities about the correct approach which does not need to be examined or resolved on this application.

141    In light of the above, the value of the debts owing to Mr Zong and DIHE were established to be $1.5 million and $700,000 respectively. There was no need for the liquidator to make a just estimate of the value of those debts. It follows that the proofs of debt lodged by each of Mr Zong and DIHE should have been admitted for their full amounts.

Relief

142    Based on my findings above:

(1)    in approaching the appeal as a hearing de novo, each of the Zong Claim and the DIHE Claim is established in full and the Unik Claim is established in part and the proofs of debt lodged by each of Mr Zong, DIHE and Unik should have been admitted for voting purposes in the amounts recorded at [124] above; or

(2)    in approaching the appeal as a strict appeal, the liquidator erred in applying r 75-85(4) of the IPR in relation to the debts claimed by each of Mr Zong and DIHE which should have been valued in the amounts claimed and, it follows their proofs of debt for those amounts admitted in full for voting purposes.

143    On the findings I have made, on either approach, the Replacement Resolution would have carried as a majority by number of creditors voted in favour of the resolution and the value of the votes in favour of the resolution would have increased to just over $4 million based on the conclusions reached on the de novo approach and to a little under $2.6 million on the alternative approach. In each case the value exceeds the value of the votes cast against the Replacement Resolution of $839,000.

144    The liquidator submits that the Court ought not make the consequential orders the plaintiffs seek in paras 2(b) and (c) of the Amended OP admitting the claims in full and ordering the replacement of the liquidator with Messrs Calabretta and Narayan. This is because the liquidator has deposed that, at any meeting of creditors, he will consider afresh, having regard to the information and evidence available to him at the time, whether the Claims should be admitted and, if so, for what value and, as a registered liquidator, he will adhere to the guidance provided by the Court as to the admission of the Claims. The liquidator submits that orders for his replacement should not be made by the Court, but that matter should be considered by the creditors of Sunshine.

145    The liquidator also submits that he is now in a position to call for proofs to adjudicate on them for dividend purposes. However, his evidence is to the contrary. In his affidavit affirmed on 18 September 2025, the liquidator deposes that he is “not now in a position to call for proofs to adjudicate on them for dividend purposes”. The liquidator then submits that the best interests of the liquidation are better promoted by enabling him to continue in his role, with the assistance of any guidance provided by the Court through this proceeding. He says that this is particularly so given that the “onus of proof” for removal of a liquidator “will not be easy to discharge where a liquidator has become well acquainted with the business and affairs of the company”, which is the case here.

146    I am not persuaded that in the circumstances I should send this matter back to the creditors to consider. The effect of my findings is that the Replacement Resolution would have passed at the 16 July Meeting. It is not in the interests of the creditors to require the liquidator to reconsider the question of the admission of the plaintiffs’ proofs of debt in light of the Court’s findings or for there to be a further meeting of creditors to reconsider the Replacement Resolution. The findings are clear as is what follows from them. To put the estate to the further cost of an additional meeting seems to me to be of little or no utility. Further, as this is not an application for removal of a liquidator, but an appeal from the Decision, the question of onus of proof for removal of a liquidator does not arise.

147    I will grant relief on the basis of my findings approaching the appeal as a hearing de novo. In that regard I am not satisfied that there is utility in making all of the declarations sought by the plaintiffs. Having regard to my findings, I will make a declaration about the result of the Replacement Resolution and will otherwise make the orders sought by the plaintiffs in para 2 of the Amended OP but amended to reflect the amount for which I have determined Unik’s proof of debt is to be admitted.

CONCLUSION

148    I will make a declaration in the terms set out above and the orders sought by the plaintiffs subject to the amendment referred to in the preceding paragraph.

149    That leaves the question of costs. The plaintiffs have been successful, and they should have their costs. However, the liquidator sought to be heard on costs, in the event he was unsuccessful. I will thus make an order requiring the parties to confer on the question of costs and, within 14 days of the date of publication of these reasons, to provide: any proposed orders by consent addressing that question; or, if they are unable to agree, their competing orders accompanied by submissions, not exceeding two pages in length, in which case, unless a party seeks an oral hearing, I will address the question of costs on the papers.

Associate:

Dated:    4 December 2025