Sands Contracting Pty Ltd v Foodcorp (VIC) Pty Ltd

Sands Contracting Pty Ltd and others sought the removal of liquidators and the winding up of Foodcorp (VIC) Pty Ltd. The plaintiffs argued that the liquidators had not acted impartially and independently, particularly in their handling of the plaintiffs' debt claim, which was the subject of ongoing litigation. The liquidators valued the plaintiffs' claim at one dollar for voting purposes, despite negotiations indicating a potential settlement of around $200,000. Additionally, the plaintiffs claimed that the liquidators admitted the debts of other creditors before receiving their invoices, while opposing the plaintiffs' claims. The primary legal issue before the court was whether the liquidators acted impartially and independently in their duties, specifically in their valuation and consideration of the plaintiffs' debt claim.

The court examined the principles established in previous cases, particularly focusing on the necessity for liquidators to make just estimates of debts and to conduct proper inquiries. In this case, the court found that the liquidators failed to make a just estimate of the plaintiffs' debt, given the significant negotiations and the director's offer to settle the matter. Furthermore, the court noted that the liquidators did not conduct proper inquiries into the other creditors' claims, as the necessary documentation was not provided until after the creditors' meeting. These actions indicated a lack of impartiality and independence on the part of the liquidators.

Consequently, the court ruled in favour of the plaintiffs, finding that the liquidators did not act impartially and independently. The court also addressed the question of whether the company had passed into liquidation, noting that the approval of the Deed of Company Arrangement (DOCA) did not necessarily mean the company had entered liquidation if the DOCA was not executed. The court determined that the company remained in administration until such time as the DOCA was executed or the company officially entered liquidation. The court ordered the parties to submit agreed minutes of orders or competing proposals within 14 days, along with short submissions on the costs of the amended originating process. The final orders and costs were to be determined based on the submissions provided.