Federal Court of Australia

Scott (Administrator), in the matter of Brookhollow Investments Pty Ltd (Administrators Appointed) [2026] FCA 822

ORDERS

THE COURT ORDERS THAT:

1.    This matter be referred to the National Operations Registrar for allocation to a docket judge.

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

REASONS FOR JUDGMENT

Delivered ex tempore, revised from transcript

YOUNAN J:

1    The liquidators of Brookhollow Investments Pty Ltd (in liq) seek a direction pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations) (IPS), being Schedule 2 to the Corporations Act 2001 (Cth), that they are justified in admitting a proof of debt lodged by Paintball Developments Pty Ltd (subject to a deed of company arrangement) (receivers and managers appointed) in the sum of $1,836,702.59 in the liquidation of Brookhollow, but pay no more than 50% of the principal debt paid out by Paintball, being the proportion that Brookhollow is liable to pay.

2    The direction is sought given the acknowledged “potential conflict” whereby one of the liquidators of Brookhollow is also one of the deed administrators of Paintball.

3    The reason that the plaintiffs come before the duty judge is that, as claimed in the Certificate of Urgency dated 23 June 2026: “If the Plaintiffs are not able to admit and pay the proof of debt lodged on behalf of the Deed Administrators of [Paintball], before 30 June 2026, it will result in a loss of an estimated CGT benefit of $744,957 and materially reduce the dividend payable to unsecured creditors.”

4    In a report dated 9 June 2026, Brookhollow’s accountant identifies a potential capital loss if certain action is taken before 30 June 2026. In a report to creditors on 10 June 2026, one of Brookhollow’s liquidators, Mr Scott, foreshadows an urgent application to the Court “seeking appropriate relief that we would be justified in admitting the Proof of Debt received from Paintball”. Mr Scott later states that the payment to Paintball is subject to obtaining approval from the Court. It is not evident whether this is a statement of intention. It does not appear to be a statement of law.

5    Counsel for the plaintiffs accepted in oral submissions that the plaintiffs were not prevented from admitting and paying the proof of debt before 30 June 2026, in the absence of the direction sought. Rather, the direction sought was intended to shield the plaintiffs from any criticism to which they may be subject due to one of the liquidator’s “potential conflict”.

6    That may be a prudent course of action, but it does not underscore the urgency of the application.

7    Any sense of urgency due to a potential tax benefit resonates as a commercial or business driver. In an outline of submissions dated 23 June 2026, counsel for the plaintiffs drew my attention to the relevant legal principles undergirding the application of s 90-15 of the IPS, and in particular s 90-15(3)(a). While the Court may give directions that provide guidance on matters of law and the reasonableness of a contemplated exercise of discretion, it will not typically do so where a matter relates to the making and implementation of a business or commercial decision: Re MF Global Australia Ltd (In liq) [2012] NSWSC 994 at [7]. While the decision to admit the proof of debt may not qualify as a commercial decision, the decision to do so before 30 June 2026, for the purposes of realising a capital loss, has that character.

8    Furthermore, while the Court will not typically provide guidance in the form of an advisory opinion where there is no attack on the propriety or reasonableness of the decision (Re MF Global at [7]), it may do so where there is the prospect of such an attack: Re 7 Steel Distribution Pty Limited (in liquidation) (receivers and managers appointed) [2013] NSWSC 669 at [20]. Counsel for the plaintiff did not put this prospect higher than that of a potentiality. In the affidavit of one of the liquidators, William Anthony Honner, dated 24 June 2026, Mr Honner explains that “this application is brought in the event any issues are raised due to any potential conflict of interest”. There are two tiers of potentiality in that prospect: that of a conflict, and that of any issue being raised in relation to it.

9    This is not a criticism of the underlying application. I am simply not satisfied that the matter should be dealt with as a matter of urgency outside of the usual course of proceedings. Counsel for the plaintiffs submitted that the position sought to be taken by the liquidators in respect of the proof of debt is uncontroversial. That undergirds the propriety of seeking the relevant direction given the “potential conflict” that would affect the liquidators’ decision whether to allow the proof of debt. Accordingly, the matter should be referred to the National Operations Registrar for allocation to a docket judge.

Associate:

Dated:    25 June 2026