Australia: The liquidator's duty of sale

Focus: Wentworth Metal Group Pty Ltd v Leigh and Owen (as liquidators of Bonython
Metals Group Pty Ltd): In the matter of Bonython Metals Group Pty Ltd (in liq) [2013] FCA 349
Services: Financial Services, Property & Projects
Industry Focus: Financial Services, Property

Receivers and mortgagees are well-versed as to the statutory duty of sale enshrined in section 420A of the Corporations Act 2001 (Cth), but what of the duties owed by a liquidator when undertaking asset sales?

The matter was considered in the recent Federal Court decision of Wentworth Metal Group Pty Ltd v Leigh and Owen (as liquidators of Bonython Metals Group Pty Ltd): In the matter of Bonython Metals Group Pty Ltd (in liq) [2013] FCA 349 (18 April 2013).

Brief facts

An order was made for the appointment of liquidators to Bonython Metals Group Pty Ltd (BMG) on 27 February 2012. As an incidence of the liquidation, the liquidators listed for sale BMG's largest asset – its interest in a mining tenement.

After a sale process that included advertising, extensive negotiations with various bidders, and an assessment of the adherence of the proposed bids with the Joint Venture Agreement's requirements for the sale of the interest, the interest was sold to the Fourth Defendant, Pure Metals Pty Ltd.

The plaintiffs, Wentworth Metals Group Pty Ltd and its directors, sought an interlocutory injunction to prevent the sale of the interest pursuant to section 1321 of the Corporations Act (the Act). The plaintiffs were unsuccessful bidders of the interest and relied on various grounds for their application, including a contention that the liquidators had breached their alleged duty to achieve the "best possible price" for the asset.

The competing bids

The plaintiffs' offer, while slightly higher than the successful bidder's offer, was not as commercially favourable. For example, the successful bidder offered a larger cash component and offered an indemnity in respect of any claims arising out of the Joint Venture Agreement. These terms meant that liquidators had access to an immediate realisation in cash and eliminated any risk that there may be no return to shareholders should a claim arise under the Joint Venture Agreement.

Further, the successful bidder provided releases and indemnities and a secured guarantee from a separate corporate entity. The liquidators also gave weight to the fact that the successful bidder's offer meant a more timely finalisation of the sale, thus minimising loss to all parties.

"Best Possible Price"?

Under section 420A of the Act, controllers or receivers and managers must take all reasonable care to sell property of a company for not less than market value, or if there is no market value, for the best price reasonably obtainable.

The applicants contended that section 420A applied similarly to liquidators. Unsurprisingly, the Court held that section 420A had no application to liquidators as liquidators are not "controllers" of the company. The Court further commented that in exercising the broad array of powers under section 477 of the Act, liquidators have a wide discretion and a certain latitude to use considerable business or commercial judgment in determining whether or not to sell an asset and on what terms. 1

In addition, the Court favoured French J's broad approach in ASIC v Forestview Nominees Pty Ltd (Receivers and Managers Appointed), 2 where his Honour stated that the courts ought only intervene with a sale process and exercise its control if there was some defect arising out of a lack of good faith or an erroneous approach in law or principle. The significance of the decision to the affairs of the company is also a material consideration for the court. This reasoning equally applied to the court's ability to intervene in a decision made by liquidators. In this case, the judge held that liquidators' decisions should be considered within the dimension of their duties to make practical commercial judgments which often involved the application of business acumen.


The sound commercial reasoning adopted by the liquidators in accepting the successful bid and the contemporaneous evidence of the liquidators' decision-making process was regarded by the Court as sufficient evidence to support a finding that the liquidators had acted in accordance with their powers under section 477 of the Act.

The plaintiffs failed to establish a prima facie case that the liquidators' conduct was unreasonable or otherwise defective and their application was ultimately unsuccessful.


1This view is consistent with the Court's general refusal to make directions under section 479(3) of the Corporations Act where a matter relates to the making and implementation of a business or commercial decision.

2[2006] FCA 1530 at [42] to [45].

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.

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