Federal Court of Australia

Sunshine City Club (in liquidation), in the matter of Sunshine City Club [2026] FCA 1045

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 436B(2)(g) of the Corporations Act 2001 (Cth), the first plaintiff (the liquidators) have leave to appoint themselves as administrators of the second plaintiff (the company) under s 436B(1).

2.    Pursuant to s 447A of the Act, upon the liquidators’ appointment as administrators under s 436B(1), Part 5.3A is to operate in relation to the administration of the company (and the administration of a deed of company arrangement made in relation to the company), on the following terms and to prevail to the extent of any inconsistency with the provisions of Part 5.3A:

(a)    there be no requirement that a first meeting of creditors in the administration of the company be convened or held pursuant to s 436E;

(b)    sections 438A(a), 438B(2), 438B(2A), and 438D do not apply to the administration of the company;

(c)    the liquidators (as administrators) may convene and hold the meeting required under s 439A at any time during the convening period, provided that notice of such meeting is provided in accordance with r 75-225 of the Insolvency Practice Rules (Corporations) 2016 (Cth) (IPR);

(d)    the report required under r 75-225(3)(a) of the IPR need not include information:

(i)    provided previously by the liquidators in a report in the course of the external administration of the company; and

(ii)    that is not required to be included by r 75-225(3)(b)(v) of the IPR;

(e)    in and for the purposes of the administration, the liquidators may accept as proofs of debt in the administration of the company any proofs of debt submitted by creditors at any time during the course of the external administration of the company, without adjustment for interest in respect of the claims the subject of such proofs of debt; and

(f)    section 439C(c) does not apply to the administration of the company.

3.    Pursuant to s 482 of the Act, with effect from the appointment of the liquidators as administrators of the company, the winding up of the company be stayed until the end of the voluntary administration of the company pursuant to s 435C.

4.    Pursuant to s 482 of the Act, the winding up of the company be terminated upon the giving of written notice by the liquidators to ASIC of the full effectuation of a deed of company arrangement.

5.    The liquidators have liberty to apply in relation to questions or issues arising in the administration of the company or the administration of a deed of company arrangement entered into by the company.

6.    The liquidators’ costs of and associated with this application be costs in the liquidation and/or administration of the company.

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

REASONS FOR JUDGMENT

BEACH J:

1    The Sunshine City Club has operated as a recreational clubhouse servicing locals in the western suburbs of Melbourne since 1956. The second plaintiff (the company), a non-profit unlisted public company limited by guarantee, operated the Club until its external administration; it also owns the land from which the Club has operated. The company’s liquidators, who have brought the present application under ss 436B(2), 447A and 482 of the Corporations Act 2001 (Cth), were initially appointed as its voluntary administrators on 3 May 2026.

2    The liquidators, as the company’s then administrators, previously determined that it was not feasible to continue trading the Club. Further, despite the company having relatively modest known creditors by claim value, the liquidators did not in the course of the company’s voluntary administration receive any proposal for the restructuring of the company. Accordingly, the company passed into liquidation on 5 June 2026, and the liquidators commenced the process of selling the said land.

3    But the liquidators have now paused progress towards realisation of the land after receiving a preliminary proposal for a deed of company arrangement in respect of the company. The proposal would see the payment of all debts of the company and all costs of the external administration, and the Club re-commencing operations under the management of a new board which would be comprised of directors of the proponent of such a proposal, being an adjacent community club, Deer Park Club Inc (DPC).

4    The liquidators consider that it is in the interests of all stakeholders in the liquidation of the company that the creditors have an opportunity to consider and vote upon such a DOCA proposal. The present application before me is concerned with the procedural steps that are either necessary or convenient to enable that to occur.

5    The liquidators seek orders that grant leave to the liquidators to appoint themselves as voluntary administrators of the company, to dispense with requirements of the Act concerning convening a first meeting of creditors and other matters, and to stay the winding up during the period of voluntary administration and to terminate it upon the effectuation of a DOCA if executed.

6    The liquidators have given notice of this application to the creditors of the company, ASIC and the members of the Club, who are not “members” of the company as such.

7    By way of further background I should note the following.

8    The company is governed by a constitution which provides that one of its objects is to maintain a non-political and recreational clubhouse. The operations of the Club included operating a licensed bar and gaming facilities, managing a club premises, and supporting community and charitable activities.

9    The company incurred trading losses from 1 July 2022 which rendered the company cash flow insolvent, and the liquidators were appointed as administrators on 3 May 2026. But whilst cash flow insolvent, the company appears to be balance sheet solvent. The known creditors of the company are predominantly trade creditors. In addition to the said land, the assets of the company comprise cash, plant and equipment, registered gaming entitlements, and interests in gaming machines located on the land.

10    The liquidators consider that given the potential value of the assets and the liabilities presently known to them, they consider it likely that if they were to progress the liquidation by realising assets, they would generate a sufficient fund from which to pay creditors in full with a surplus.

11    The liquidators determined that they were not able to trade on, and so they ceased trading and terminated the employees on 5 May 2026. Further, the liquidators whilst acting as administrators did not receive a proposal for a DOCA. Given the absence of a DOCA proposal, the liquidators recommended to creditors that the company be wound up. The second meeting of creditors proceeded on 5 June 2026, at which the creditors of the company resolved that the company be wound up.

12    On 12 June 2026, a proposal was put by the DPC. The DPC appears to have a similar history to the Club dating back to 1957, and operates a social club with similarities to the Club, in Deer Park, Victoria.

13    The liquidators have prepared a DOCA proposal incorporating terms of the DPC’s proposal, but in a more orthodox form. The key terms of the DOCA proposal are as follows: (a) the board of the DPC will be appointed as directors of the company by the execution date, and from execution, control of the company will revert to these new directors; (b) the DPC and the new directors will re-commence and continue operating the Club, in accordance with the provisions of the company’s constitution; (c) the members of the Club will retain their existing membership rights and be offered membership to the Club operated by the DPC; (d) the DPC may enter into a lease agreement at market rent with the company for the property and make offers of employment to the former employees of the company; (e) the DPC will pay a sum that is sufficient to pay the claims of all admitted creditors of the company and the costs of the external administration; and (f) the deed administrators will distribute the deed fund in satisfaction of all creditors’ claims, and to the extent not discharged by payment, the company will be released from creditor claims.

14    The liquidators consider that it is in the best interests of creditors of the company and members of the Club that the creditors have an opportunity to consider and vote upon the DOCA proposal. I am not in a position to second-guess and do not second-guess the view that they have formed. Let me deal with the first step that needs to occur concerning the liquidators being appointed as administrators.

Section 436B(2) — appointment as administrators

15    Section 436B(2) provides as follows:

(2)     A liquidator or provisional liquidator of a company must not appoint any of the following persons under subsection (1):

(a)    himself or herself;

(b)    if he or she is a partner of a partnership—a partner or employee of the partnership;

(c)    if he or she is an employee—his or her employer;

(d)    if he or she is an employer—his or her employee;

(e)    if he or she is a director, secretary, employee or senior manager of a corporation—a director, secretary, employee or senior manager of the corporation;

unless:

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

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

16    The principles applicable to the liquidators’ application under s 436B(2)(g) were discussed in Emerald No 2 (SA) Pty Ltd v Matthews [2025] FCA 695 by Neskovcin J at [30] who applied the principles that were collated by O’Bryan J in Brooks, in the matter of 351 Property Management & Maintenance Pty Ltd (in liq) [2023] FCA 1426 at [18] and [19], which were in turn sourced to Halley J’s synthesis in Mansfield (liquidator), in the matter of NR Complex Pty. Ltd (in liquidation) [2023] FCA 614 at [18] to [22]. I adopt their discussion.

17    I should note that I am not here to consider the commerciality of the DOCA proposal but only its propriety. If there is no issue concerning the latter, and there is not, then the creditors should be given the choice to vote on it. The order sought under s 436B(2) in the circumstances of the present case is a desirable first step.

18    The liquidators’ present view is that the DOCA proposal appears to have the support of the Club’s members, and that an opportunity to vote upon it would serve the best interests of creditors of the company and those members. There is no issue of propriety that prevents the DOCA proposal being put to the creditors by the liquidators by means of the liquidators resuming office as administrators, and the benefits arising from the DOCA proposal, if effectuated, for creditors and the broader community appear manifest.

19    First, the DOCA proposal provides for payment of all debts and costs in the external administration in full, and in a manner that is likely to result in a much timelier payment than the realisation and payment of property in a liquidation. An amount calculated as an estimate of the deed fund is to be paid on execution of the DOCA. The liquidators do not have concerns as to DPC’s financial capacity to satisfy its obligations under the DOCA proposal.

20    Second, the DOCA proposal will enable the Club to continue trading and serving the local community. The members of the Club will maintain their membership and receive reciprocal rights from the club operated by the DPC. The ex-employees of the company will, if appropriate, receive offers of employment from DPC. Further, the liquidators have said that if the proposal is effectuated, then the Club will be able to deliver ongoing social and community benefits to members and the general public and preserve an established community asset as opposed to a likely development site if the said land is sold.

21    Third, the DOCA proposal if effectuated will promote the objectives in s 435A as it would maximise the chances of the Club and its business continuing in existence, whereas a liquidation would involve the sale of the land.

22    Fourth, the transactions contemplated by the DOCA proposal will avoid costs that arise in connection with a sale campaign or the sale of the land. The company will not incur liability for any applicable taxes that are payable on the sale of the land and, associated with that, the expenses of the liquidators in seeking advice and attending to the company’s taxation affairs on sale. Further, the constitution provides that any surplus assets are payable to members of the company in proportion of their shares, but the company does not have shareholders, and the liquidators will likely be required to apply for judicial directions concerning how they are to deal with the surplus property. Further, the liquidators continue to incur holding costs of $12,845.66 per month in relation to the land, which costs will diminish any surplus in the liquidation.

23    Fifth, there is no material prejudice to creditors of the company. The orders that the liquidators seek merely provide an opportunity for creditors to vote on the DOCA proposal. The creditors may, if so inclined, vote against the DOCA proposal and they will retain their rights to apply for the termination of any DOCA under, inter-alia, s 445D. Whilst some additional costs are likely to have been incurred by the liquidators in exploring the DOCA proposal, it is unlikely to endanger the prospect of creditors being paid in full, and they are costs properly incurred in light of the potential benefits that the DOCA proposal, if approved, is expected to deliver.

24    Sixth, there is no real conflict of interest such as to preclude the liquidators from taking an appointment as administrators of the company. They have formerly been the company’s administrators, and so are familiar with its affairs. It is clearly efficient and minimises unnecessary duplication of work to have the liquidators appointed as its administrators.

25    I have no difficulty in making the s 436B(2) order that is sought.

The truncated administration orders

26    The liquidators also seek orders that would modify or truncate the requirements that would ordinarily apply in a voluntary administration; see for example Emerald No 2 at [42]. Recourse is sought for this purpose to what I have described in other contexts as the magic pudding provision of s 447A. The relief that the liquidators seek is in summary to modify the operation of Part 5.3A as it applies to the company utilising s 447A, with the following modifications being specifically sought.

27    First, dispensation is sought as to the requirement to hold a first meeting under s 436E which is not necessary because creditors have already had the opportunity to familiarise themselves with the company’s affairs.

28    Second, dispensation is sought as to the requirement that the administrators under s 438A(a) investigate the company’s business, property, affairs, and financial circumstances, which they have already attended to. Indeed, they recently published a report as former administrators under r 75-225 of the Insolvency Practice Rules (Corporations) 2016 (Cth).

29    Third, dispensation is sought as to the requirements that the directors of the company give, and the administrators lodge under ss 438B(2) and (2A), reports on the company’s business, property, affairs and financial circumstances. The liquidators as former administrators have already received these reports from the present directors.

30    Fourth, dispensation is sought as to the requirement that the administrators report on misconduct under s 438D, which obligation was in-place at the time the liquidators made their r 75-225 report.

31    Fifth, an order is sought permitting the second meeting of creditors under s 439A to be convened at any time during the administration, to avoid the need for the liquidators to wait out the convening period if they are otherwise ready to convene the meeting.

32    Sixth, an order is sought modifying the required content of a further r 75-225 report so that it does not need to contain matters previously reported on by the liquidators. In the circumstances, this would be duplicative and of no material benefit to creditors.

33    Seventh, an order is sought permitting the administrators to accept proofs of debt that have previously been lodged, to again avoid the need for duplication in work for no material benefit to creditors.

34    Eighth, an order is sought disapplying s 439C(c), so that the only options that the creditors may vote upon are to have the company execute a DOCA or to bring the voluntary administration to an end, where, if creditors vote for the latter, the stay on the winding up presently contemplated by this application will be lifted.

35    I have no difficulty making any of these orders as they are a necessary corollary of what is proposed and fairly standard truncated administration orders.

The stay and termination of the winding up

36    The liquidators seek orders pursuant to s 482 that with effect from the appointment of the liquidators as administrators of the company, the winding up of the company be stayed until the end of the voluntary administration of the company pursuant to s 435C. Further, they seek an order terminating the winding up upon the liquidators giving written notice to ASIC of the full effectuation of a DOCA substantively in the terms of the DOCA proposal.

37    Section 482 provides that upon the application of a liquidator the Court may make an order staying the winding up either indefinitely or for a limited time, or terminating the winding up on a day specified in the order.

38    In Deputy Commissioner of Taxation v Infomatix Solutions Pty Ltd [2025] FCA 1094, I said at [22] to [24]:

At this point it is necessary to say something about s 482(1) of the Corporations Act which provides as follows:

Power to stay or terminate winding up

(1)    At any time during the winding up of a company, the Court may, on application, make an order staying the winding up either indefinitely or for a limited time or terminating the winding up on a day specified in the order.

Clearly this is a discretionary power which is guided by consideration of the following non-exhaustive factors (Re Warbler Pty Ltd (1982) 6 ACLR 526 at 533 per Master Lee QC) viz: (a) the granting of a stay is a discretionary matter, and there is a clear onus on the applicant to make out a positive case for a stay; (b) there must be service of notice of the application for a stay on all creditors and contributories, and proof of this; (c) the nature and extent of the creditors must be shown, and whether or not all debts have been discharged; (d) the attitude of creditors, contributories and the liquidator is a relevant consideration; (e) the current trading position and general solvency of the company should be demonstrated; solvency is of significance when a stay of proceedings in the winding-up is sought; (f) if there has been non-compliance by directors with their statutory duties as to the giving of information or furnishing a statement of affairs, a full explanation of the reasons and circumstances should be given; (g) the general background and circumstances which led to the winding-up order should be explained; (h) the nature of the business carried on by the company should be demonstrated, and whether or not the conduct of the company was in any way contrary to commercial morality or the public interest.

Of course, where a company has been wound up on insolvency grounds, the question of solvency will be a primary consideration.

39    As I indicated, such factors are non-exhaustive. Here, a relevant factor concerns the purpose of facilitating a restructuring such that on completion the company will be able to trade on in a viable and solvent fashion, both as to cash flow solvency and balance sheet solvency.

40    In my view the relief sought under s 482 is properly to be regarded as part of a suite of orders required to facilitate consideration by the company’s creditors of the DOCA proposal and, if approved, its implementation by the liquidators as deed administrators.

41    The DOCA proposal, if effectuated, is likely to return the company to a position of solvency. It contemplates that all admitted creditors will be paid, and to the extent the claims of creditors are not discharged by payment, the company will have the benefit of a release. Accordingly, upon effectuation, the company will have a clean slate.

42    The DOCA proposal further contemplates that the company will continue operating the Club in accordance with the constitution. Thus far, the DPC proposed in its proposal that the company will transfer to DPC its gaming entitlements and its liquor licence, and that the Club will (as landlord) enter into a tenancy agreement with DPC (as tenant) for rent at a market rate. In that instance, it can be inferred that the revenues that the company will receive from a tenancy agreement will exceed the holding costs of the said land. If that does not or cannot occur, then the new directors would be obliged to consider how the Club can continue to operate in accordance with the constitution whilst also being subject to the obligations ordinarily imposed upon directors under the Act, including the duty to prevent the company trading whilst insolvent. The new directors appear to have comprised the board of the DPC, which has a history of operating a club with similarities to the Club. Accordingly, the evidence before me does not suggest that there is a material risk that the company will immediately fall back into insolvency upon the effectuation of a DOCA.

43    Finally, the continued stewardship of the company is relevant to the application made under s 482. Some or all the present directors did not wish to continue as directors and accordingly it is anticipated that entry into the DOCA will entail the appointment of the new directors. Such an appointment can be effected by the liquidators exercising powers as administrators under s 442A(b). Where control of the company will revert to the directors upon execution of the DOCA, the liquidators will be required, before executing the DOCA, to satisfy themselves that the some or all of the new directors are willing and able to be appointed as directors of the company and that the company will have a functioning governance structure.

44    I anticipate no difficulty in this respect. Accordingly, the necessary orders sought under s 482 will be made.

Conclusion

45    It is for the foregoing reasons that I made the orders sought earlier today.

Associate:

Dated:    31 July 2026