Federal Court of Australia

Hudson (Liquidator), in the matter of RNOK Pty Ltd (in liquidation) [2026] FCA 1406

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to section 477(2A) of the Corporations Act 2001 (Cth) (the Act), the Court approves the First Plaintiff nunc pro tunc to cause the Second Plaintiff to enter into the Deed of Settlement dated 7 July 2026, between the First and Second Plaintiff, Five Star Projects Pty Ltd ACN 169 520 192 as trustee for Kartz West End Trust, and Kosrodos Pty Ltd ACN 672 469 939 as trustee for LJCSIT Family Trust and as trustee for MRZSE Family Trust, for the sum of $450,000.00 (Deed of Settlement).

2.    Pursuant to sections 60-10(1)(c) and (3) of the Insolvency Practice Schedule being Schedule 2 to the Act (IPS), the First Plaintiff be entitled to receive remuneration for work performed in the liquidation of the Second Plaintiff:

(a)    for the period from 17 September 2025 to 31 August 2026, in the sum of $92,187.70 (inclusive of the GST); and

(b)    for the period from 1 September 2026 to the finalisation of the liquidation of the Second Plaintiff, fixed in the amount of $22,000.00 (inclusive of the GST).

3.    The Plaintiffs’ costs of the originating application filed 7 August 2026, and interlocutory application filed 2 September 2026 be costs in the liquidation of the Second Plaintiff and paid out of the assets of the Second Plaintiff.

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

REASONS FOR JUDGMENT

(REVISED FROM TRANSCRIPT)

LONGBOTTOM J:

Introduction

1    The first plaintiff is the liquidator of RNOK Pty Ltd. He seeks an order approving his entry into a deed of settlement on behalf of RNOK fixing the price of its participating interest in a joint venture for the development of a property at West End in Brisbane. The liquidator also seeks an order determining his remuneration for the work that he has undertaken and will undertake to bring the liquidation to an end.

2    The liquidator seeks the approval of the Court, rather than a resolution of creditors, because RNOK has only two creditors (Westpac Banking Corporation and DSH Group Holdings Pty Ltd (in liquidation)). The liquidator is also the liquidator of DSH Group. Given that, the liquidator considers that there would be a conflict if he were to authorise DSH Group to use its vote as a creditor to approve entry into the deed of settlement, and it would be unfair to the creditors of DSH Group if only Westpac voted. An additional consideration for the liquidator is the fact that Westpac has not put in a proof of debt, and its entitlement in that context to have a vote would be in doubt.

3    The joint venture was established by project deed made on or around 31 January 2024. Its parties included Five Star Projects Pty Ltd and Kosrodos Pty Ltd. Each of RNOK, Five Star and Kosrodos had a one-third participating interest in the project deed. The other parties to the project deed included, but were not limited to, the builder for the property development and its sole director.

4    Under the terms of the project deed where, as here, a participant experiences an “insolvency event” which is not remedied within 45 days, the participant will be deemed to have provided notification that they will irrevocably transfer their participating interest for 70 per cent of its current market value. The participant may dispute the price offered for their participating interest in which case it will be referred to an independent expert to determine its market value. The independent expert determination is final and binding once notified and, unless otherwise agreed, the continuing participants in the joint venture must pay the selling participant the price determined by the independent expert for their interest.

5    RNOK entered voluntary liquidation on 17 September 2025, triggering the process under the project deed for the transfer of its participating interest in the joint venture to Five Star and Kosrodos. RNOK disputed the price offered for its participating interest ($178,658) and an independent expert was appointed under the project deed in early 2026. The independent expert determined that the market value of RNOK’s participating interest in the joint venture was $573,227, which determination was notified to the parties in or about April 2026 (expert determination).

6    On 29 May 2026, Five Star and Kosrodos’ solicitors wrote to the liquidator of RNOK foreshadowing an application to the Supreme Court of Queensland to set aside the expert determination on the grounds of manifest error and denial of procedural fairness, if the parties could not resolve the dispute on a commercial basis.

7    There followed, on 7 July 2026, the execution of the deed of settlement by which it was agreed that Five Star and Kosrodos would pay $450,000 in respect of RNOK’s participating interest. The parties to the deed of settlement do not include the other parties to the project deed. That is understandable because those other parties do not hold a participating interest in the joint venture and are, therefore, unaffected by the dispute as to the price to be paid. The settlement date under the deed of settlement is 5 October 2026, which settlement is subject to approval by the Court.

Approval of the deed of settlement

8    The Court has power under s 477(2A) of the Corporations Act 2001 (Cth) to approve a compromise by the liquidator of a debt to the company. Such approval is necessary where, as here, the debt exceeds $100,000, and the liquidator has not obtained the approval of a committee of inspection or by way of a resolution of the creditors: cf, reg 5.4.02 of the Corporations Regulations 2001 (Cth).

9    The principles relevant to s 477(2A) of the Act are well established. Essentially, the purpose of the requirement for approval under that section is to ensure that the interests and wishes of those affected by a compromise, chiefly the creditors, are a major consideration in making such a compromise: see Re One.Tel Limited [2014] NSWSC 457; (2014) 99 ACSR 247 at [28] (Brereton J).

10    In determining whether to approve a compromise, the Court is to pay due regard to the commercial judgment of the liquidator. That is not to say that the Court will “rubber stamp” whatever is put forward. Rather, it is a recognition that “the court is necessarily confined in attempting to second guess the liquidator”: see Re Spedley Securities Ltd (in liq) (1992) 9 ACSR 83 at p 85 (Giles J).

11    If the liquidator expresses the opinion that it is an appropriate commercial compromise, and there does not appear to be any lack of good faith, error in law or principle, or real or substantial ground for doubting the reasonableness of the liquidator’s view, the Court will generally give its approval: see Re One.Tel at [29], relevantly citing Re Mineral Securities Australia Ltd (in liq) [1973] 2 NSWLR 207 (Street CJ in Eq).

12    I am satisfied, for the reasons that follow, that the Court has the power, and it is appropriate, to make an order under s 477(2A) of the Act approving nunc pro tunc the liquidator entering into the deed of settlement.

13    The power of the Court under s 477(2A) of the Act is conditioned on the existence of a “debt” to the company: see Elderslie Finance Corporation Limited v Newpage Pty Ltd (No 6) [2007] FCA 1030; (2007) 160 FCR 423 at [28] (Lindgren J). In that statutory context, “debt” means “a sum of money that is either immediately payable, or that, by reason of an existing obligation, will become payable in the future”: Elderslie at [24] and the authorities there cited. The Court will only dismiss an application that has been made under s 477(2A) of the Act on the basis that there is no “debt” in “the clearest of cases”: see Re HIH Insurance Ltd [2004] NSWSC 5 at [12] (Barrett J).

14    The cumulative effect of the clauses of the project deed summarised above is that RNOK is required to transfer its participating interest in the joint venture to Five Star and Kosrodos for the price determined by the independent expert as notified by the expert determination. That expert determination is, as counsel for the liquidator emphasises, deemed under the project deed to be “final and binding”. By reason of those obligations under the project deed, that price is, if not immediately payable, an amount that will become payable in the future. It is, therefore, properly characterised as a “debt” to RNOK within the meaning of s 477(2A) of the Act.

15    The liquidator has provided evidence in support of the relief sought in which he expresses the opinion that the deed of settlement is a prudent compromise that is in the best interests of the creditors of the company. As appears from his affidavit, that opinion is based on the percentage of the price determined by the independent expert that the creditors will receive under the deed of settlement (78 per cent) as compared to the costs that will likely be incurred in defending the foreshadowed application in the Supreme Court of Queensland to set aside the expert determination ($100,000).

16    The liquidator’s evidence, which is informed by the solicitor with conduct of the proceeding, is that even were RNOK to be successful in resisting those proceedings in the Supreme Court of Queensland, the difference between the price that would ultimately be recoverable after legal costs and that under the deed of settlement is $23,227.

17    The liquidator also emphasises that the amount under the deed of settlement is well above the price originally offered by Five Star and Kosrodos under the terms of the project deed for RNOK’s participating interest ($178,658). That is to say, it appears from the liquidator’s evidence that there is a risk that RNOK would ultimately recover substantially less than what has been offered by Five Star and Kosrodos under the terms of the deed of settlement were he to proceed with the litigation.

18    I do not discern any lack of good faith, error in law or principle, or real and substantial ground for doubting the reasonableness of the liquidator’s view. In making that assessment, I have also had regard to evidence of communications between the liquidator and Westpac who, as I have already noted, is one of the two creditors of RNOK. In an email dated 7 September 2026, following the receipt of the material relevant to this originating application, Westpac advised that it had “no issues” with the orders sought with respect to the deed of settlement, but would be taking steps to restructure its facilities on the basis that the deed would be approved. Given the emphasis placed in s 477(2A) of the Act on the interests and wishes of the creditors of the company, Westpac’s position is to be afforded some weight.

19    It follows that I am satisfied that orders should be made granting retrospective approval to the liquidator to enter into the deed of settlement on RNOK’s behalf. That approval does not constitute an endorsement of the deed of settlement. Rather, consistent with the authorities and the principles that I have outlined above, it reflects my view that it is appropriate in the circumstances described for the liquidator to exercise his own commercial judgment in the matter.

Approval of liquidator’s remuneration

20    The liquidator has also filed an interlocutory application dated 2 September 2026, seeking an order determining his remuneration under s 60-10(1)(c) of the Insolvency Practice Schedule (Corporations), being Sch 2 to the Act (IPS). The Court has the power to make such an order in the absence of the determination by members, creditors or a committee of inspection. Such a determination is not limited to previous work undertaken by the liquidator; a determination may fix remuneration for work to be performed in the future: see, eg, Deputy Commissioner of Taxation v ACN 154 520 199 Pty Ltd (in Liq), in the matter of ACN 154 520 199 Pty Ltd (in Liq) (No 6) [2025] FCA 813 (Cheeseman J).

21    The principles to be applied in approving remuneration under s 60-10 of the IPS are well settled: see Phoenix Institute of Australia Pty Ltd (in liq), in the matter of Phoenix Institute of Australia Pty Ltd (in liq) [2021] FCA 1203 at [26]-[31] (Cheeseman J). The burden lies with the liquidator to establish that the remuneration claimed is fair and reasonable: Phoenix Institute at [27]. It is not necessary for the Court to undertake an item-by-item assessment of the work performed, but the Court may have regard to the rates of charge, the time taken by employees and the liquidator in undertaking the administration and the total remuneration claimed: Owen, in the matter of Rivercity Motorway Pty Limited (Administrators Appointed) (Receivers and Managers Appointed) v Madden (No 2) [2012] FCA 312 at [22]-[23] (Logan J). The Court must also have regard to the relevant factors identified in s 60-12 of the IPS: Phoenix Institute at [29], citing Sanderson as Liquidator of Sakr Nominees Pty Ltd (in liq) v Sakr [2017] NSWCA 38; (2017) 93 NSWLR 459 at [53] (Bathurst CJ).

22    The liquidator has provided an affidavit as to the basis of the amount of remuneration sought. This comprises a total of $114,187.70, reflecting $92,187.70 in work performed until 31 August 2026 and $22,000 in work to be performed from 1 September 2026 through to and until the end of the liquidation. The evidence provided in support of the relief sought comprises a description of the nature of the work that has been, and will be, performed by the liquidator and the employees of his firm and the complications that have arisen in performing that work for RNOK. It also includes timesheets detailing the work that has been performed on behalf of the company, with accompanying information as to the rates at which various staff perform that work.

23    The complications in undertaking the liquidation have arisen from the dispute the subject of the deed of settlement. As the evidence reveals, that has required, amongst other matters, steps to be taken by the liquidator and employees on his behalf to negotiate a settlement with Five Star and Kosrodos and the application to the Court for approval of the deed of settlement. As at the date of the affidavit provided by the liquidator (which was affirmed on 2 September 2026) the work still to be performed included that associated with today’s hearing and, if approval is granted, putting into effect the ramifications of the deed of settlement being approved. It also included other steps in the liquidation such as engaging an external accountant to prepare outstanding lodgements with the Australian Taxation Office, seeking clearance from the Deputy Commissioner of Taxation to declare a dividend to unsecured creditors and preparing a report to creditors adjudicating their claims and giving notice of and declaring a first and final dividend.

24    On 6 August 2026, the liquidator caused a notice to be issued regarding his remuneration. In an affidavit affirmed 17 September 2026, the solicitor for the liquidator gave evidence, on information and belief, that the liquidator has not received any notice of objection from either Westpac or DSH Group.

25    Having regard to that evidence and bearing in mind the considerations in s 60-12 of the IPS, I am satisfied that orders should be made approving the remuneration sought by the liquidator. In particular, I am satisfied that:

(a)    The evidence provided by the liquidator comprehensively sets out what has been done, who has performed that work and the rates at which it has been charged so as to provide a satisfactory basis for the Court to conclude that the amount claimed for the work performed to date is fair and reasonable remuneration. I note, in that regard, that the timesheets reflect that work has not exclusively been undertaken by the liquidator (who has the highest hourly rate), but includes work that has been delegated to and performed by other employees as appropriate with lower hourly charge-out fees;

(b)    The work undertaken by the liquidator as detailed in the evidence is appropriate to the task with which he was charged. Insofar as it concerns the deed of settlement, I am satisfied that the issues arising under the project deed and leading to the compromise of the price of RNOK’s participating interest in the joint venture are such as to have complicated the liquidation. The work performed by the liquidator both with respect to that issue, and the liquidation more generally, is in my assessment proportionate to the scope of his engagement;

(c)    Insofar as it concerns the claim for “future remuneration”, I am satisfied that the amount claimed is reasonable having regard to the fact that it involves the remnant steps with the deed of settlement, as well as those other actions necessary to bring the liquidation to an end, as summarised above. Those steps as associated with the completion of the deed of settlement are further particularised in the affidavit of the liquidator and include the execution of various release documents drafted by Westpac, property transfer documents and a further deed of settlement and release between Kosrodos and RNOK; and

(d)    If the liquidator was to wait until the liquidation had been completed before seeking approval of remuneration for the remainder of the work he is required to undertake, it would be necessary to file a further remuneration application with the Court. This would inevitably result in further costs in the liquidation. The liquidator has sensibly concluded that such further costs are unnecessary and would not be in the interests of creditors.

26    For all of these reasons, I am satisfied that the remuneration claimed by the liquidator is fair and reasonable.

Costs

27    Finally, I will make an order making explicit that the liquidator’s costs of both the originating application filed 10 August 2026 and the interlocutory application filed 2 September 2026 are costs in the liquidation of RNOK, which costs are to be paid out of the company’s assets: cf, Act, s 556(1)(a).

Associate:

Dated:    25 September 2026