Background
Brookhollow Investments Pty Ltd and Paintball Developments Pty Ltd were co-guarantors under a Deed of Indemnity and Guarantee for obligations owed by Quasar Constructions Pty Limited to Assetinsure. When Quasar entered voluntary administration in September 2024, Assetinsure served a statutory demand on Brookhollow for the debt of $1,836,702.59. Brookhollow subsequently entered liquidation in November 2025, with Andrew Scott and William Honner appointed as joint liquidators.
In June 2025, Paintball became a co-guarantor by executing a Transaction and Standstill Deed. Between 1–2 June 2026, Paintball paid the full liability ($2,104,925.70) to Assetinsure. Paintball then lodged a proof of debt in Brookhollow’s liquidation for $1,836,702.59 (Brookhollow’s share of the liability), expressly accepting that any payment would be capped at 50% of what Paintball had paid, representing the just proportion of liability between the co-sureties.
A conflict arose because Mr Scott held dual roles: deed administrator of Paintball (which submitted the proof) and joint liquidator of Brookhollow (which must adjudicate it). The liquidators sought a direction under s 90-15 of the Insolvency Practice Schedule (Corporations) authorizing admission of the proof despite this conflict, arguing that a capital loss claim against the now-insolvent Quasar could generate a tax benefit of approximately $744,957 if executed before 30 June 2026.
The Court’s Holding
Justice Younan granted the direction under s 90-15, finding it was properly sought due to Mr Scott’s conflict of interest in both submitting and adjudicating the debt. The court noted that a liquidator acts in a quasi-judicial capacity when determining proofs of debt, and it would be inappropriate for one person to both lodge and decide upon the same claim. Judicial directions under s 90-15 are properly sought where an issue of propriety or reasonableness arises, and an applicant seeking to be excused from fiduciary duties faces “an onerous and exacting task.”
The court found the liquidators’ proposal to cap payment at 50% of the debt was reasonable and comprehensive, grounded in established principles: the rule in Re Parker (allowing a co-surety who has paid the whole debt to prove against a co-surety’s estate for only the just proportion), the rule against double proof, and s 3(3) of the Law Reform (Miscellaneous Provisions) Act 1965 (NSW), which provides that a co-surety cannot recover more than the proportion for which it is justly liable. No creditors had objected; indeed, creditors unanimously approved a resolution to compromise the liability owed by Quasar.
The court ordered the proof admitted on the proposed terms—limiting payment to 50% of principal—and granted ASIC liberty to apply within seven days to vary or discharge the orders, addressing concerns about short notice to the regulator.
Key Takeaways
- Section 90-15 directions protect liquidators from liability when exercising quasi-judicial functions in conflict situations, provided the proposal has a reasonable basis supported by comprehensive analysis.
- A liquidator’s dual roles—submitting and adjudicating a proof of debt—create an impermissible conflict requiring court sanction, even when no creditor objects.
- Co-sureties are entitled to limit contribution to their just proportionate share of a liability paid by a co-surety, applying principles from Re Parker and the rule against double proof.
- Tax considerations and timing can factor into the reasonableness of a liquidator’s proposal, particularly when linked to distributions to creditors.
Why It Matters
This decision clarifies when courts will grant protective directions to liquidators navigating conflicts of interest in insolvency administration. It signals that s 90-15 remains a valuable tool for protecting liquidators performing quasi-judicial functions—provided their analysis is thorough, their proposal is grounded in established law, and creditors are engaged. The case reinforces that propriety and transparency matter as much as substantive correctness when liquidators face competing roles.
For practitioners, the judgment offers guidance on the interplay between co-surety contribution principles and insolvency law: a co-surety who pays a shared liability can recover from a co-surety’s estate, but only to the extent of that co-surety’s just share. It also illustrates that tax-driven timing considerations are permissible reasons for seeking expedition, so long as the underlying insolvency decisions remain sound. The court’s requirement that ASIC receive timely notice and retain the right to challenge the orders underscores ongoing regulatory oversight of liquidator discretion.