Adjudication overturned and liquidator ousted

Related parties have used a court challenge to a liquidator’s adjudication of their proofs of debt to get the liquidator replaced. Whether the ousted liquidator can now rely on his statutory indemnity to avoid a personal costs order remains unresolved.

“It is not in the interests of the creditors to require the liquidator to reconsider the question of the admission of the plaintiffs’ proofs of debt in light of the Court’s findings or for there to be a further meeting of creditors to reconsider the Replacement Resolution.” Justice Brigitte Markovic.

Federal court judge Brigitte Markovic delivered judgment on the adjudication challenge yesterday, ordering that Pilot Partners’ Cameron Woodcroft be replaced as liquidator of Sunshine contracting Group Pty Ltd (SCG).

The proceedings in the matter of Zong v Woodcroft (liquidator), in the matter of Sunshine Contracting Group Pty Ltd (in liquidation) [2025] FCA 1521 were commenced by Sunshine’s director Tony Zhong and his related parties, who’d sought to have Woodcraft replaced at the first meeting of SCG held on July 16.

Woodcroft determined that he had insufficient evidence to admit the proofs of debt of Zhong and his relateds for the combined $5.47 million claimed, instead ascribing to them values of $1.00 each for voting purposes.

When the replacement resolution was put to the meeting it was opposed only by the Deputy Commissioner of Taxation (DCT), Queensland’s Chief Commissioner of State Revenue (CSR) and by a creditor who’d granted Woodcroft a special proxy.

25 creditors voted in favour of replacing Woodcroft with Mackay Goodwin’s Domenic Calabretta and Edwin Narayan.

With Zhong and the relateds being represented at the meeting by Stefano Calabretta it’s not difficult to identify Domenic and Edwin’s referral source.

While a minority in number opposed the resolution, the votes of the DCT and CSR eclipsed by a fair margin the value of those in favour and Woodcroft predictably declined to use his casting vote, setting up the adjudication appeal in court.

In determining that the related party claims were true debts owed by SCG the judge had information before her that was not available to Woodcroft at the July 16 meeting. But that didn’t stop her from also finding that Woodcraft had erred in his adjudication of two of the three of the proofs of debt in issue.

This the judge said was because Woodcraft did have sufficient information ahead of the first meeting to conclude that the proofs of debt were for liquidated amounts as specified in the respective loan agreements with Sunshine and their respective claims were precisely stated and were not contingent.

“They were supported by the extracts from the Sunshine Account and were identified in the Second Balance Sheet which was provided with an explanation about their omission from the First Balance Sheet,” the judge said.

“The liquidator erred in proceeding in the way he did in relation to Mr Zong’s and DIHE’s proofs of debt.”

Justice Markovic also declined to countenance Woodcroft’s suggestion that he should not be replaced because he now had the benefit of sufficient information supporting the related party claims and because the courts should let creditors decide.

“I am not persuaded that in the circumstances I should send this matter back to the creditors to consider,” she said.

“The effect of my findings is that the Replacement Resolution would have passed at the 16 July Meeting.

“I am not persuaded that in the circumstances I should send this matter back to the creditors to consider,” she said.

“The effect of my findings is that the Replacement Resolution would have passed at the 16 July Meeting.

“It is not in the interests of the creditors to require the liquidator to reconsider the question of the admission of the plaintiffs’ proofs of debt in light of the Court’s findings or for there to be a further meeting of creditors to reconsider the Replacement Resolution.

“The findings are clear as is what follows from them. To put the estate to the further cost of an additional meeting seems to me to be of little or no utility.

“Further, as this is not an application for removal of a liquidator, but an appeal from the Decision, the question of onus of proof for removal of a liquidator does not arise.”

This story is published for the benefit of iNO Priority holders and must not be shared, copied, reproduced or otherwise distributed without the written permission of the publisher.