Grace v Grace (No 5)

The matter before the court involved a dispute between Grace, a creditor of a company, and Grace, a provisional liquidator appointed to manage the company's affairs. The primary issue was whether the provisional liquidator could be compelled to inspect certain books under section 531 of the Corporations Act, and whether the creditor could terminate the liquidator's appointment without a winding up order. Additionally, the provisional liquidator sought judicial advice on whether it would be appropriate to enter into loan transactions and provide security over the company's assets to cover fees and remuneration.

The court addressed the statutory right of creditors to inspect books under section 531 of the Corporations Act, noting that the right is not absolute and can be subject to limitations. However, the court found that the grounds of oppression raised by the provisional liquidator did not provide a basis for refusing the inspection request. Regarding the termination of the liquidator's appointment, the court held that the creditor could not terminate the appointment without a winding up order, as the substantive proceedings had not resulted in such an order, and no order could be made in those proceedings.

In its reasoning, the court emphasised the importance of maintaining the independence and authority of provisional liquidators in managing a company's affairs during external administration. The court also highlighted the need for provisional liquidators to act in the best interests of the company and its creditors, including ensuring that their fees and remuneration are appropriately covered. The court concluded that the provisional liquidator would not be justified in entering into loan transactions and providing security over the company's assets without further consideration and approval, given the potential impact on the company's creditors and the need to avoid conflicts of interest.

The court made orders that the provisional liquidator must allow the inspection of the company's books, and that the creditor's application to terminate the liquidator's appointment was dismissed. The court also declined to provide the provisional liquidator with judicial advice on the proposed loan transactions and security over the company's assets, indicating that such matters required further consideration and appropriate legal advice.