Background
Tahmoor Coal Pty Ltd owned a coal mine south-west of Sydney that had ceased active operation around February 2025. Court-appointed liquidators obtained lender funding to keep the mine in care and maintenance, pay employees needed for that work and the sale process, and conduct a sale campaign. The mine and other assets were sold under an asset sale agreement that completed on 7 October 2026.
The loan arrangements were amended twice as funding needs and the sale timetable developed. The liquidators applied under s 90-15 of the Insolvency Practice Schedule (Corporations) for a direction that they were justified in repaying the lender $30,482,200.29 from sale proceeds as a first-priority payment. That sum comprised approximately $22.36 million in preservation and realisation costs and approximately $8.12 million in loan fees and interest, subject to excluding interest attributable to legal disbursements not covered by the application. Secured and unsecured creditors were notified; none opposed the relief.
The Court’s Holding
Black J held that the expenses funded by the loan—apart from excluded legal disbursements—were properly within the equitable lien recognised in Re Universal Distributing Co Ltd. The evidence showed that the expenditure on payroll, maintenance, compliance, environmental work, utilities, equipment and sale-related costs preserved the mine’s value and enabled its sale. Creditors claiming against the sale proceeds could not take the benefit of that work without bearing its reasonable and proper cost.
The Court also held, as a matter of principle, that the loan’s relevant fees and interest fell within the same lien. The liquidators could not maintain the mine or complete the sale without borrowing the funds, and could not obtain those funds without incurring the financing costs. The Court made the requested s 90-15 direction, protecting the liquidators in making the priority repayment, because the issue involved mixed questions of fact and law and could otherwise be challenged by interested creditors.
Key Takeaways
- A liquidator’s equitable lien can cover reasonable costs incurred exclusively to care for, preserve and realise assets.
- Financing costs can fall within the Universal Distributing lien where the borrowing was necessary to fund the preservation and realisation work.
- A s 90-15 direction may be appropriate where a substantial priority payment could later be challenged, even if notified creditors do not oppose it.
Why It Matters
The decision confirms that the salvage principle can extend beyond direct operating and sale expenses to necessary funding costs. In an asset-intensive liquidation, funding used to preserve a business or asset until sale may therefore be repaid ahead of competing claims to the resulting fund.
It also illustrates the practical value of a judicial direction where liquidators must make a large payment with priority consequences for secured and unsecured creditors.