Australia: Special Purpose Liquidators (SPLs) - How you can oppose their appointment

In brief - Appointment of SPLs not a foregone conclusion

While special purpose liquidators might be viewed by some as a means to advance claims on behalf of creditors and at the same time expand business, incumbent liquidators are right to look at them as a potential threat to their position.

It is important to know that there may be ways of opposing the appointment of SPLs.

Role of a special purpose liquidator

An SPL inevitably picks over the file of the liquidator and whilst the SPL is usually appointed for particular tasks, they often stray outside of their area. What's more, because of how the case law has developed, they are almost always funded in what they do.

Most of us will be aware of Justice Barrett's decision in Lo v Nielsen & Moller (Autoglass) NSW Pty Limited [2008] NSW SC 407.

This case is used as authority for the proposition that all a party has to do to get an SPL appointed is to show that he or she has a legitimate concern, is prepared to indemnify and the liquidator has some impediment which prevents him or her from pursuing a potential claim, out of either conflict or embarrassment.

In Lo, the SPL was proposed in order to look into a number of things, including the conduct of the incumbent liquidator. Ultimately the liquidator was replaced by the SPL.

SPLs are now being advanced to inquire into the conduct of liquidators themselves.

Company in liquidation following fraud by director

Recently I found myself chasing a preference from the ATO.

It related to a company that had gone into liquidation after one of its directors had committed a fraud on the company, its clients and his co-directors by stealing a very large sum out of the clients' trust account. The business of the company was an accountancy practice.

My client was initially appointed as the voluntary administrator and during the course of the voluntary administration, he sold the business to the existing directors in a new corporate entity. The sale took a fair while to complete. Creditors were advised of the sale at the second meeting and agreed to adjourn the meeting to allow the sale to complete.

Secured creditor debt was taken on by the purchasers, monies were paid for the assets, employee entitlements were taken over and some other monies were paid in relation to work in progress, but no allowance was made for goodwill in the sale.

That sale completed in 2007. In 2009 the liquidator decided to pursue a preference claim against the ATO, which itself was a large creditor in the liquidation.

ATO application to appoint special purpose liquidator

In 2011, four years after the sale had gone through, the Australian Taxation Office (ATO) made an application to appoint an SPL to investigate, amongst other things, potential claims including a claim against the liquidator for failing to get any value for the asserted goodwill in the company's business. The ATO engaged heavy duty senior counsel, a very competent junior counsel and used its best people in the application.

My client was not prepared to take the ATO's application lying down and joined issue with the Commissioner. We obtained an expert report indicating that my client had acted in accordance with professional norms, a report from the accountant my client first spoke to about the potential sale, indicating that in his view there was no goodwill, and my client put on a very lengthy affidavit as to what he had done in the matter.

Investigation into the conduct of a liquidator

Despite the ATO's view that its application for an SPL would inevitably succeed, I was of the view that an investigation into the conduct of a liquidator by an SPL went beyond the powers of the SPL. It is the Court that looks at the conduct of an administrator or a liquidator under Sections 235, 237, 241, 447E and 1321.

Justice Barrett's decision in Lo was effectively a consent judgment given in response to an application in which no one had raised the suggestion either of a definitive claim against the liquidator or of the fact that it is the Court, not an SPL, which should investigate the conduct of a liquidator.

There is a very well considered judgment on the point, one that the search engines do not pick up because the Court dealt with a special purpose administrator rather than an SPL. It is the decision in Honest Remark Pty Limited v All State Exploration NI & Ors [2006] NSW SC 735. That is a judgment of Justice Brereton and it involves an application to appoint a special purpose administrator to conduct an investigation into the conduct of a deed administrator.

Court responsible for conduct of administrator or liquidator

Decided before Lo, the Judge observed that he had not encountered a case in which an SPL had been appointed to investigate the conduct of another liquidator with a view to a potential claim against him or her, and that was because it is the Court which holds the supervisory function of investigating the conduct of liquidators. His Honour said, at 62:

"In my opinion, there is no power to appoint a special purpose liquidator for the purpose of investigating the conduct of the original liquidator as such... It is not the duty of a liquidator to investigate allegations against themselves or some of them. Such an investigation is not part of the administration, and it cannot, therefore, be carved out of the administration and given to a special purpose liquidator."

At paragraph 100 he said:

"Given this range of available remedies [the statutory range which allows a liquidator or administrator to be reviewed by the Court] that are attended with safeguards and protections, it would be wholly inappropriate to appoint a special purpose administrator to investigate the administration... The inherent jurisdiction of the Court does not confer powers to appoint a special purpose administrator [such an appointment] will circumvent the conditions and protections that attend the several appropriate remedies for the supervision of administrators and review of their decisions under Sections 236, 237, 241, 447E and 1321. No Court acting reasonably could grant the relief sought."

Can a court appoint an SPL to investigate the conduct of a liquidator?

We therefore appear to have two conflicting authorities, one from Justice Barrett and one from Justice Brereton, on whether or not the Court can appoint an SPL with a view to investigating the conduct of a liquidator.

My view is that that appearance of conflict is illusory. Justice Barrett was not looking at appointing an SPL specifically to investigate the conduct of the liquidator with a view to formulating a claim against the liquidator. Justice Brereton was.

Additionally, Justice Barrett was not provided with a copy of Justice Brereton's decision, did not refer to it and did not refer to the statutory issues which Justice Brereton raised.

Justice Barrett dealt with a consent matter in the busiest corporations list in Australia and whilst he is without doubt one of our most outstanding judicial minds, I think Lo should not be taken as the absolute point of reference for any SPL application.

Application to appoint SPL unsuccessful

I am pleased to say that my client has now settled the preference claim on good terms and the application to appoint the SPL has gone away.

Most lawyers, including the ATO's, are unaware of the Honest Remark decision. Keep it in your back pocket. It is a very important tool in dealing with the current mania for SPLs.

For further information contact our insolvency team.

For more information on insolvency and reconstruction, please see the website of Colin Biggers & Paisley or contact Peter Harkin at

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.