When the environment’s the Priority Creditor

SV Partners’ Matt Hudson recently saw first hand how state environment laws impose themselves on external administrations after he was appointed to a business that dealt in hazardous chemicals until it blew up its rented premises.

The details are in contained in Hudson, in the matter of ACB Group Pty Ltd (in liq) [2025] FCA 90 which provides good guidance for practitioners accepting appointments to environmental transgressors.

“Directions are sought on that matter principally because compliance will be costly, and will use funds that would otherwise have been available for distribution to the Company’s creditors.” Federal Court Judge Catherine Button.

Not only that, the judgement illustrates how environmental imperatives have levered themselves into a position to divert funds which might alternatively flow to secured and unsecured creditor pools.

Hudson was appointed as liquidator of ACB Group Pty Ltd on December 20 2024, not long after the company received two statutory notices issued by the Environmental Protection Authority of Victoria. (EPAV).

The notices were issued following an explosion and fire which had consumed the premises ACB had operated from on July 10 last year.

According to Federal Court judge Catherine Button, “the fire brigade had approximately 180 firefighters battling the blaze, which took over 20 hours and about 3 million litres of water to extinguish.

“The fire was so severe that a large concrete wall collapsed over an underground high pressure gas line, and there are concerns that remaining chemical waste, fire waste and the potential compromise to the integrity of the gas line, pose an ongoing risk of further fires and explosions, in addition to ongoing environmental pollution risks.”

Hudson went into the appointment with his eyes open. The EPAV Notices had to be complied with by February 25 and March 4 and that meant engaging experts for advice.

It also meant applying to the court for an order under s 90-15 of the Insolvency Practice Schedule (Corporations) (the IP Schedule) confirming that in his capacity as liquidator of the company, he is and was justified in taking the necessary steps.

In her judgment Justice Button said such orders were necessary “principally because compliance will be costly, and will use funds that would otherwise have been available for distribution to the Company’s creditors”.

ASIC and the EPAV took a neutral position on the application, which was run for Hudson by Mills Oakley’s Alex Meyers.

The judge also acknowledged the risk environmental laws pose to company directors and external administrators given provisions “which allow for the EPAV to, in effect, re-direct notices to natural persons where (inter alia), the Company has not complied with the notice,” she said.

“The Environment Protection Act 2017 (Vic) (EP Act), exposes the Company to penalties for non-compliance with the EPAV Notices and Mr Hudson would also be personally exposed to penalties as an officer of the Company, if the EPAV Notices are not complied with, and may further be exposed to penalties as a person concerned in, or party to, the Company’s contraventions if the Company does not abide by the EPAV Notices.

“Having regard to the impact that expenditure on environmental clean up costs will have on the pool of funds available for distribution to creditors, I am satisfied that this is a proper occasion for Mr Hudson to seek directions under s 90-15 of the IP Schedule.

“I am also satisfied, having regard to the matters set out above, that Mr Hudson is justified and acting reasonably in utilising funds realised in the winding up of the Company in order to comply with the EPAV Notices, including costs relating to the appointment of the environmental consultancy firm, and the costs of contractors undertaking the physical clean up works,” she said.