RE BANALASTA FARMING PTY LTD (ADMINISTRATORS APPOINTED) [2026] WASC 270
[2026] WASC 270
Page 1
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION : RE BANALASTA FARMING PTY LTD
(ADMINISTRATORS APPOINTED) [2026] WASC
270
CORAM : LUNDBERG J
HEARD : 30 JUNE 2026
DELIVERED : 2 JULY 2026
FILE NO/S : COR 58 of 2026
BETWEEN : CHANG JIA HENG TAI (HONG KONG)
INVESTMENT LIMITED
Plaintiff
AND
BANALASTA FARMING PTY LTD
(ADMINISTRATORS APPOINTED)
Defendant
Catchwords:
Corporations - Urgent applications by plaintiff creditor to appoint provisional
liquidator or special purpose administrator to the defendant cattle farming
business - Administrators recently appointed by sole director of defendant while
plaintiff's winding up application pending - Winding up application based on
failure to comply with a statutory demand - DOCA proposal advanced by
director and related parties to be voted upon at looming second meeting of
creditors - Relationship between winding up and administration processes -
Turns on own facts
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Legislation:
Corporations Act 2001 (Cth), s 435A, 440A, s 440D, s 447A, s 459A, s 459P,
s 477
Result:
Orders made for appointment of special purpose administrators.
Category: B
Representation:
Counsel:
Plaintiff : J P Cook
Defendant : J S Slack-Smith
Solicitors:
Plaintiff : Mendelawitz Morton Commercial Lawyers
Defendant : Dentons Australia
Case(s) referred to in decision(s):
Advance Housing Pty Ltd (in liq) v Newcastle Classic Developments (1994) 14
ACSR 230
Australian Securities and Investments Commission v Diploma Group Ltd [2017]
FCA 549
Australian Securities and Investments Commission v Keystone Asset
Management Ltd (recs and mgrs apptd) (admins apptd) (No 2) [2024]
FCA 1040 [17]
Deputy Commissioner of Taxation, in the matter of ACN 154 520 199 Pty Ltd
(in liq) v ACN 154 520 199 (in liq) [2017] FCA 444
Grace v Grace [2007] NSWSC 6
Hughes v Receivers and Managers of Westgem Investments Pty Ltd (No 3)
[2012] WASC 360
Hughes v Westgem Investments Pty Ltd (recs and mgrs apptd) (No 3) [2012]
WASC 360
In the Matter of Pages Equipment Pty Ltd [2020] NSWSC 959
In the matter of Vietnam Industrial Investments Pty Ltd [2022] NSWSC 1411
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[2026] WASC 270
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Jahani, in the matter of Northern Energy Corporation Ltd (Administrators
Appointed) (No 2) [2019] FCA 382
Lubavitch Mazal Pty Ltd v Yeshiva Properties No 1 Pty Ltd [2003] NSWSC
535; (2003) 47 ACSR 197
M2 Assets Pty Ltd v GT Capital Partners [2022] WASC 331
Re First Debenture Ltd [2015] NSWSC 1808
Re Grandview Ausbuilder Pty Ltd (admins apptd) [2019] NSWSC 1243
Re Offshore & Ocean Engineering Pty Ltd [2012] NSWSC 1296
Re Recycling Pty Ltd [2015] NSWSC; (2015) 107 ACSR 406
Sev.en Gamma a.s. v IG Power (Callide) Pty Ltd [2024] FCA 30; [2024] 172
ACSR 136
State of Victoria v CTM Training Solutions Pty Ltd (In Liq) & Ors [2017] VSC
47
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Table of Contents
Introduction ................................................................................................................................ 5
The plaintiff's interlocutory applications .................................................................................... 7
Appointment of provisional liquidators.................................................................................. 7
Special purpose administrators ............................................................................................. 10
Affidavit material and submissions ...................................................................................... 12
Factual background................................................................................................................... 13
The defendant's cattle farming business ............................................................................... 13
Loan of funds by the plaintiff ............................................................................................... 14
The appointment of administrators ....................................................................................... 15
Present assessments of the financial position of the defendant ............................................ 17
Investigations of voidable transactions and insolvent trading .............................................. 18
The DOCA Proposal ............................................................................................................. 22
Second meeting of the creditors ........................................................................................... 24
The positions of the parties ....................................................................................................... 24
The plaintiff's position .......................................................................................................... 24
The position of the present administrators ........................................................................... 26
Relevant principles ................................................................................................................... 27
Disposition ................................................................................................................................ 30
Conclusion and orders .............................................................................................................. 35
ATTACHMENT A Orders made on 30 June 2026 .................................................................. 37
ATTACHMENT B Orders made on 2 July 2026 ..................................................................... 38
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LUNDBERG J:
Introduction
1 The court has before it urgent applications which have been
brought by the plaintiff creditor for the appointment to the defendant
company of a provisional liquidator under s 472(2) of the Corporations
Act 2001 (Cth) (CA), alternatively a special purpose administrator by
exercising the plenary power in s 447A of the CA.
2 The defendant company operates a cattle farming business in New
South Wales, to the north of Tamworth, trading as the Kia Ora Cattle
Company. The financial position of the company is, and has been for
some time, precarious and dependent on support from related entities.
The plaintiff is an unsecured creditor of the defendant, having advanced
substantial loan funds to the company some years ago, which it says
were misapplied by the defendant and its sole director, Mr Huan Zhang.
The transfer of these funds by the defendant to a related party, in a
manner inconsistent with the express terms of the relevant loan
agreement, together with the defendant's failure to repay the funds, due
for repayment some years ago, are matters of serious and genuine
concern to the plaintiff and its director, Mr Chung Fuk Chuk.
3 The present applications have been filed against the backdrop of
pending winding up proceedings initiated by the plaintiff under pt 5.4
of the CA. A statutory demand had been served by the plaintiff, and
not answered. The applications have also been filed in the wake of the
recent appointment of administrators to the defendant by Mr Zhang,
under the regime in pt 5.3A of the CA, with a looming second creditors'
meeting having been scheduled to precede the hearing of the winding
up application. The plaintiff says this was intended to thwart its
winding up strategy.
4 This latter development, and the prospect of a proposal being put
by the administrators at the creditors' meeting (which the administrators
had recommended), was the immediate catalyst for the present
applications, stinging the plaintiff into further action and prompting the
request to the court late last week for the listing of an urgent hearing.
5 At its core, the plaintiff proposes that insolvency practitioners
other than the present administrators should investigate and report on
any offences by and claims against the sole director of the defendant,
the claims against related parties of the defendant, and the
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recoverability of amounts from the director's personal assets and from
the related parties.
6 The present administrators, Ms Jialan Xu and Mr Philip Campbell-
Wilson of Grant Thornton, have opposed the relief sought. Through
counsel, the administrators urged the court to adjourn the applications
(and the winding up application itself) so as to permit the
administrators more time to consider the factual issues raised by the
plaintiff, which they say have now been more fully developed in the
written submissions filed by the plaintiff on 29 June 2026, and to
otherwise continue to discharge their statutory duties.
7 In answering this, the plaintiff contends that the administrators
have failed to exercise the appropriate degree of independent rigour in
order to properly understand and assess the strength, quantum and
recoverability of claims which might be advanced by the defendant
company against Mr Zhang and other related parties, including
insolvent trading claims, preference payments, and breach of duty
claims.
8 At the conclusion of the hearing on the afternoon of Tuesday,
30 June 2026, I reserved my decision on the applications to the
afternoon of Thursday, 2 July 2026. To facilitate that occurring, in the
exercise of the court's inherent discretion, I adjourned the winding up
application, which had been listed for hearing on the morning of 2 July
2026. The court also noted the undertaking which had been proffered
to the court by the administrators through counsel that they would not
put to a vote a resolution under s 439C of the CA until Friday, 3 July
2026.
9 For the following reasons, I consider it is appropriate for the court
to appoint special purpose administrators to the defendant, to undertake
investigations concerning the affairs of the defendant as described in
the minute of proposed orders drafted by the plaintiff. I will make
orders accordingly.
10 It is appropriate to emphasise that the court has not concluded
there is any conflict of interest between the present administrators and
the defendant, or its sole director. Nor do these reasons include any
finding of wrongdoing or breach of duty by those administrators. No
such assertion was affirmatively put, although the plaintiff creditor
certainly criticises the efforts of the present administrators.
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11 The approach the court has taken is driven by the evident need, in
the interests of all creditors of the defendant, for a fulsome examination
to be undertaken of the claims identified by the plaintiff, prior to any
consideration of the future of the defendant company by those creditors,
leaving the present administrators to continue their management of the
defendant's business.
The plaintiff's interlocutory applications
12 I will first outline the scope of the application filed by the plaintiff
before setting out the salient background facts and context to these
matters.
13 On Friday, 26 June 2026, the plaintiff filed an interlocutory
process by which it sought urgent orders for the appointment of a
provisional liquidator to the defendant under s 472(2) of the CA,
alternatively for the appointment of a special purpose administrator by
exercising the power in s 447A of the CA.
14 The interlocutory process was listed for hearing on 30 June 2026
on the request of the plaintiff, so as to precede the second creditors'
meeting which had been scheduled for 1 July 2026.
Appointment of provisional liquidators
15 The plaintiff, in the first instance, seeks an order that Mr Mathieu
Tribut and Mr Mitchell Warren Ball, of Mackay Goodwin, be
appointed as joint and several provisional liquidators of the defendant.
Allied to that, the plaintiff seeks an order that the administration of the
defendant be terminated forthwith, pursuant to s 447A of the CA and
s 90-15 of the Insolvency Practice Schedule to the CA (IPS).
16 Section 472 of the CA provides as follows:
472 Court to appoint registered liquidator
(1) On an order being made for the winding up of a company, the
Court may appoint a registered liquidator to be liquidator of the
company.
(2) The Court may appoint a registered liquidator provisionally at
any time after the filing of a winding up application and before
the making of a winding up order or, if there is an appeal against
a winding up order, before a decision in the appeal is made.
(3) A liquidator appointed provisionally has or may exercise such
functions and powers:
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(a) as are conferred on him or her by this Act or by rules of
the Court that appointed him or her; or
(b) as the Court specifies in the order appointing him or
her.
(4) A liquidator of a company appointed provisionally also has:
(a) power to carry on the company's business; and
(b) the powers that a liquidator of the company would have
under paragraph 477(1)(d), subsection 477(2) (except
paragraph 477(2)(m)) and subsection 477(3) if the
company were being wound up in insolvency or by the
Court.
(5) Subsections 477(2A) and (2B) apply in relation to a company's
provisional liquidator, with such modifications (if any) as the
circumstances require, as if he or she were a liquidator
appointed for the purposes of a winding up in insolvency or by
the Court.
(6) If more than one liquidator is appointed by the Court, the Court
must declare whether anything that is required or authorised by
this Act to be done by the liquidator is to be done by all or any
one or more of the persons appointed.
17 The terms of s 440A of the CA are particularly relevant to the
determination of the present applications. Section 440A provides:
440A Winding up company
(1) A company under administration cannot be wound up
voluntarily, except as provided by section 446A or 446AA.
(2) The Court is to adjourn the hearing of an application for an
order to wind up a company if the company is under
administration and the Court is satisfied that it is in the interests
of the company's creditors for the company to continue under
administration rather than be wound up.
(3) The Court is not to appoint a provisional liquidator of a
company if the company is under administration and the Court
is satisfied that it is in the interests of the company's creditors
for the company to continue under administration rather than
have a provisional liquidator appointed.
18 The orders proposed by the plaintiff contemplate that the
provisional liquidators be empowered to carry out a range of specified
functions. The specified functions are as follows:
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1. The Provisional Liquidators shall, within 28 days of this Order,
provide to the Court and to the parties, a report as to the
provisional liquidation of the Defendant (“Report”), including:
(i) the identification of the assets and liabilities of the
Defendant;
(ii) an opinion as to the solvency and date of insolvency of
the Defendant;
(iii) an opinion as to the value of the assets of the
Defendant;
(iv) an opinion as to the likely return to creditors and
shareholders, if the Defendant is wound up;
(v) an opinion as to whether the Defendant has proper
financial records;
(vi) any other information necessary to enable the financial
position of the Defendant to be assessed;
(vii) any suspected contraventions of the Act by the
Defendant;
(viii) any suspected contraventions of the Act by the director
of the Defendant;
(ix) offences by and claims against the director of the
Defendant;
(x) claims against related parties of the Defendant;
(xi) claims against any other parties;
(xii) recoverability from the director's personal assets; and
(xiii) recoverability from related parties of the Defendant.
2. Investigate and report upon the appropriateness of making an
application for, and conducting, examinations under ss 596A
and 596B of the Act and orders for production pursuant to
s 579(9), for the purposes of the investigations referred to
herein.
3. Consider the claims available to the Defendant in relation to the
matters arising from the investigations and examinations
referred to in this Annexure, and from examination of the books
and records of the Defendant, including obtaining and
considering legal advice in respect of any such claims.
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4. Undertake such further or other matters in relation to the affairs
of the Defendant as the Court considers appropriate and so
orders.
19 Further, the plaintiff proposes that the provisional liquidators be
entitled to exercise, for the purposes of facilitating the functions
specified in the proposed orders, all the powers conferred on a
liquidator by s 477 and div 2 of pt 5.4B of the CA. An order is also
sought by which the defendant would be obliged to cooperate and
provide all reasonable assistance required of it by the provisional
liquidators, including making available to the provisional liquidators all
books and records of the defendant.
Special purpose administrators
20 In the alternative, the plaintiff seeks an order pursuant to s 477A
and s 451A(2) of the CA that Mr Tribut and Mr Goodwin be appointed
as additional joint and several administrators of the defendant. The
plaintiff proposes to provide the initial funding for this appointment.
21 The plaintiff proposes that the special purpose administrators
investigate and report on any offences by and claims against the
director of the defendant, claims against related parties of the
defendant, recoverability from the director's personal assets, and
recoverability from related parties of the defendant.
22 An order is sought that, pursuant to s 447A of the CA, the special
purpose administrators be empowered to carry out the following
functions:
1. Conduct investigations into, and within 28 days of this Order,
provide to the Court and to the parties, a report as to the
following matters (“Report”):
(i) the identification of the assets and liabilities of the
Defendant
(ii) an opinion as to the solvency and date of insolvency of
the Defendant
(iii) an opinion as to the value of the assets of the Defendant
(iv) an opinion as to the likely return to creditors and
shareholders, if the Defendant is wound up
(v) an opinion as to whether the Defendant has proper
financial records
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(vi) any other information necessary to enable the financial
position of the Defendant to be assessed
(vii) any suspected contraventions of the Act by the
Defendant
(viii) any suspected contraventions of the Act by the director
of the Defendant
(ix) offences by and claims against the director of the
Defendant
(x) claims against related parties of the Defendant
(xi) claims against any other parties
(xii) recoverability from the director's personal assets
(xiii) recoverability from related parties of the Defendant.
2. Investigate and report upon the appropriateness of making an
application for, and conducting, examinations under ss 596A
and 596B of the Act and orders for production pursuant to
s 579(9), for the purposes of the investigations referred to
herein.
3. Give consideration to the claims available to the Defendant (or
its administrator) in relation to the matters arising from the
investigations and examinations referred to in this Annexure,
and from examination of the books and records of the
Defendant, including obtaining and considering legal advice in
respect of any such claims.
4. Take possession of such books and records of the Defendant as
the Special Purpose Administrators deem necessary for the
purpose of the investigations and examinations referred to
herein, subject to the proviso that the Special Purpose
Administrators will provide the Primary Administrators all
reasonable access to those books and records and the Primary
Administrators are permitted to make such copies of them as
they see fit.
5. Undertake such further or other matters in relation to the
administration and affairs of the Defendant as the Court
considers appropriate and so orders. This includes, for the
avoidance of doubt, making an application to extend the
administration of the Defendant.
6. Make an application pursuant to ss 442A and/or 447A of the
Act, and/or s 90-15 of Sch 2 to the Act, that they be justified in
executing, on their own behalf as Special Purpose
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Administrators and on behalf of the Defendant, a funding and
indemnity deed.
23 Further, the plaintiff seeks orders to the effect that the special
purpose administrators be entitled to exercise, solely for the purposes of
carrying out the above functions, all the powers conferred on an
administrator by s 437A and div 8 of pt 5.3A of the CA.
24 As to the continuing role of the present administrators, the plaintiff
seeks an order, pursuant to s 447A of the CA, that the administrators
refrain from exercising any of the powers of the special purpose
administrators, except with the prior written consent of the special
purpose administrators or by leave of the court.
25 The plaintiff seeks an order that the present administrators must
use their reasonable endeavours to assist the special purpose
administrators to exercise the powers given to them by the proposed
orders, including by providing documents or information previously
prepared or obtained by them in investigating or pursing any claim in
relation to the matters set out in the plaintiff's orders. The present
administrators would also be precluded from holding a vote at the
second meeting of creditors to resolve that the defendant execute a deed
of company arrangement, until after the special purpose administrators
have reported to them.
26 Importantly, the plaintiff says, it seeks an order that, pursuant to s
447A of the CA, the indemnity provisions in s 443D to s 443F of the
legislation would not apply in the appointment of the special purpose
administrators such that they would not be entitled to be indemnified
out of the defendant's property, nor would they have a lien over the
defendant's property.
Affidavit material and submissions
27 The court has been presented with detailed affidavit material from
the plaintiff and from the administrators, which I will describe in due
course.
28 For its part, the plaintiff relies on the affidavit sworn by its
solicitor on 26 June 2026 (the Cook Affidavit). In that affidavit,
Mr Cook largely produces documentary material evidencing the
plaintiff's loan agreement, communications between the law firms and
the administrators, and a copy of the detailed reports prepared by the
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administrators which is dated 23 June 2026.1 I will refer to that report
as the Administrators' Report. Both counsel drew heavily on that
report at the hearing of the applications.
29 For the administrators, a comprehensive affidavit was sworn by
one of the administrators, Ms Xu. I refer to her affidavit sworn on 30
June 2026 (the Xu Affidavit). Within that affidavit, Ms Xu has
explained, in some detail, the steps the administrators have taken to
assess and manage the business of the defendant and to undertake the
administration process in accordance with their obligations.2
30 The court also received detailed written submissions from both the
plaintiff and from the administrators, filed on 29 and 30 June 2026
respectively, which both counsel amplified at the hearing on 30 June
2026.
Factual background
31 The following factual matters are drawn from the Cook Affidavit
and the Xu Affidavit, and particularly from the Administrators' Report.
There are factual matters which remain contentious and it is not
intended in these reasons to resolve those matters, not is it necessary for
the purposes of resolving the present disputes.
The defendant's cattle farming business
32 The defendant company operates a cattle farming business in New
South Wales, on around 6,100 hectares in Bendemeer, which is an area
to the north of Tamworth. It trades as the Kia Ora Cattle Company.
The land on which it operates is known as the Kia Ora Aggregation,
comprising the historical farming properties of Birralee, Burlington,
and part of Banalasta. The farmland itself is owned by a related
company (BK Farms Holding Pty Ltd) and leased to the defendant.
33 Mr Huan Zhang is the sole director of the defendant company and
holds 50% of the shares in the entity, the other shareholder being JBN
Agricultural Group Pty Ltd. The defendant's business operates through
a complex corporate structure involving several trusts and related
companies, with Mr Zhang at the centre of the enterprise.
1 Cook Affidavit, Attachment JPC 12.
2 Xu Affidavit.
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34 At the time of the appointment of administrators, the defendant
employed a total of eight full time employees and one casual employee.
These persons include Mr Zhang and two of his relatives.
Loan of funds by the plaintiff
35 In November 2019, the defendant borrowed $3.0 million from the
plaintiff, which was advanced by way of three equal tranches of
$1.0 million each. A written loan agreement is in existence, prepared in
Mandarin, but a translated copy has been produced to the court.3
36 These funds were advanced for the express purpose of purchasing
cattle. On the presently available material, the defendant appears not to
have discharged that purpose. Instead, within three days of receipt, it
transferred the funds to a related company, Australia QC Holding Pty
Ltd. That related company presently owes the defendant company
some $2.3 million, which the plaintiff says is the 'direct product of the
use' of the funds loaned by the plaintiff.4
37 This transfer of funds in a manner inconsistent with the loan
agreement, coupled with the defendant's failure to repay the loaned
funds, which were due for repayment some years ago, are matters of
concern to the plaintiff.
38 Indeed, the plaintiff has been pursuing the loaned funds through
several avenues. First, in early February 2026, the plaintiff initiated
recovery proceedings against the defendant in this court.5 With
interest, the plaintiff calculates its total claim against the defendant to
be around $4.139 million.
39 Second, in late February, the plaintiff served a statutory demand
on the defendant pursuant to s 459E of CA. That was served on around
24 February 2026. The statutory demand is dated 12 February 2026. It
was accompanied by an affidavit sworn by Mr Chung Fuk Chuk dated
12 February 2026. The statutory demand expired on 17 March 2026. It
went unanswered.
40 Third, in May 2026, the plaintiff filed a winding up application
under div 4 pt 5.4 of CA on the basis that the defendant failed to answer
the statutory demand which had been served.6 The proceeding was
3 Loan agreement dated 15 November 2019; Cook Affidavit, Attachment JPC 1.
4 PS [3].
5 Supreme Court CIV 1148 of 2026.
6 COR 58 of 2026.
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filed on 19 May 2026. The plaintiff's winding up application had been
listed for hearing for the morning of 2 July 2026 before the Acting
Master.
41 For its part, the defendant brought proceedings in the Federal
Court of Australia to set aside the statutory demand which had been
served, asserting a genuine dispute. It appears the plaintiff contested
the application, and the defendant ultimately consented to the dismissal
of the application and agreed to pay the plaintiff's costs.7 There is a
suggestion in the materials, which appears to have substance, that the
application to set aside the demand was filed out of time.
42 There are two features of the plaintiff's claim against the defendant
which struck me on first review. I have mentioned both of them below
but, as explained, they can be put to one side for now.
43 The first is the lapse of time since the funds were advanced and
the potential that the applicable limitation period had expired. Counsel
for the plaintiff points to, at least, certain acknowledgements of debt in
this regard as an antidote to any such concern.
44 The second feature is whether the plaintiff has a viable claim for
contractual interest. I can put this issue to one side for now given the
statutory claim for interest available to the plaintiff, which would be
sizeable given the lapse of time since the loan was due and payable.
The appointment of administrators
45 Subsequent to the filing of the present proceedings by the plaintiff,
the sole director of the defendant appointed administrators to the
company, under the provisions of pt 5.3A of the CA. He did that on
8 June 2026. As earlier noted, the appointed administrators are
Ms Jialan Xu and Mr Philip Campbell-Wilson of Grant Thornton.
46 Section 435A of the CA identifies the objects of pt 5.3A in the
following terms:
435A Object of Part
The object of this Part, and Schedule 2 to the extent that it relates to this
Part, is to provide for the business, property and affairs of an insolvent
company to be administered in a way that:
7 I refer to the consent orders made by the Federal Court of Australia on 29 April 2026.
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(a) maximises the chances of the company, or as much as possible
of its business, continuing in existence; or
(b) if it is not possible for the company or its business to continue in
existence -- results in a better return for the company's creditors
and members than would result from an immediate winding up
of the company.
47 The administration process has moved swiftly following the
appointment of the present administrators. The plaintiff observes that
the 'haste and timing' of the administration process is 'difficult to
understand',8 while the defendant explains, in a matter-of-fact way, that
administration under pt 5.3A is typically a 'rapid process'.9
48 Counsel for the administrators has submitted that:10
…the Administrators have identified substantial risks in dealing with
the Company's only substantial asset being a living herd of cattle,
including in respect of statutory animal welfare obligations and
operational risks as to weather, feed availability and veterinary
contingencies, with these issues exacerbated in circumstances where
500 head of cattle are in late-stage pregnancy.
…
The Administrators have progressed the administration in a swift and
practical manner due to the serious potential animal welfare concerns…
49 The plaintiff disputes the existence of any animal welfare concern,
explaining that:11
The 500 heavily pregnant cattle are soon to perform their most
significant value-adding function, by doubling the number of the
remaining herd with their progeny. That is the obviously profitable
phase of the process of running a herd.
50 The administrators have explained on affidavit, in some detail, the
steps they have taken to assess and manage the business of the
defendant and to undertake the administration process in accordance
with their obligations.12
51 Following the assessment of the company's ability to continue
trading, the administrators ultimately determined that trading should
8 PS [68].
9 DS [5].
10 DS [15.2] and [24].
11 PS [43].
12 Affidavit of Jialan Xu sworn 30 June 2026.
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continue on a controlled basis to preserve the value of livestock assets
and facilitate an orderly realisation strategy. The administrators have
indicated they will continue to manage the trading activities prudently
to maximise available returns to creditors during the administration.
52 It is also evident that certain related parties of the defendant have
provided the administrators with indemnities in respect of the
administration. Specifically, an upfront cash indemnity of $400,000
has been provided, together with a further indemnity of up to $600,000
(together with certain costs). The source of the indemnity has been BK
Farms Holding Pty Ltd, BK Farms Holding Unit Trust, Australia QC
Holding Pty Ltd, and Australia QC Holding Family Trust — all of
which are connected to Mr Zhang.
53 The first meeting of creditors of the defendant was held on 17 June
2026, but it appears nothing of consequence occurred at the meeting. I
note the administrators were not replaced and no Committee of
Inspection was appointed.
Present assessments of the financial position of the defendant
54 The Administrators' Report presents a bleak picture of the
financial position of the defendant and its business, although the court
recognises that the administrators have not undertaken an audit of the
company's affairs and their work has been undertaken in a swift
manner.
55 Stated shortly, the financial position of the company is presently
precarious and dependent on support from related entities. That has
been the position for some time.
56 The present administrators opined that the defendant's descent into
voluntary administration arose from a combination of factors. The
defendant experienced a 'sustained deterioration in its cashflow position
and a history of unprofitable trading over an extended period, which
eroded its capital base'.13 Further, the operations of the company 'had
been heavily reliant on financial support from related parties, and the
withdrawal or curtailment of that support removed a key source of
working capital'.14
57 Further to this, the administrators observed that the company's
business 'appears to have been substantially reliant on ongoing funding
13 Administrators' Report p 16.
14 Administrators' Report p 16.
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from related parties, particularly during its formative years, with limited
evidence of sufficient external cash inflows to support its working
capital requirements independently of such support'.15
58 The administrators describe the existence of a pattern of 'circular
funding' between related parties.16
59 The administrators noted there were several secured creditors with
interests over the property of the defendant. One of those secured
creditors holds a $4.0 million agricultural commodities finance facility
which was put in place some six months prior to the appointment of the
administrators. At the time of their appointment, the secured creditor
had advised that the quantum of debt outstanding under the facility was
around $2.5 million. The secured creditor's security comprises specific
security interests in respect of the company's livestock and a blanket
security interest over the remainder of the company's assets.17
60 The administrators investigations of the financial statements and
performance of the defendant revealed that the company incurred
cumulative net losses of around $8.3 million between the 2023 financial
year and the present. The trading losses had reduced in the 2025
financial year and in the present financial year, but the administrators
suggested that the 'improved performance is likely overstated due to
non-payment of lease obligations, reducing reported expenses and
overstating the Company's overall financial performance'.18
61 In a similar vein, the administrators indicated in their report that
the balance sheet of the company 'reflects a deteriorating financial
position, characterised by increasing liabilities, reliance on related party
funding, and a declining net asset position'.19
62 In its submissions, the plaintiff refers to the 'unwavering losses' of
the defendant as totalling around $11.0 million since 2020, through to
the appointment of the administrators on 8 June 2026.20
Investigations of voidable transactions and insolvent trading
63 The Administrators' Report includes a summary of their
investigations in relation to potential offences, voidable transactions
15 Administrators' Report p 17.
16 Administrators' Report p 17.
17 Administrators' Report p 20.
18 Administrators' Report p 23.
19 Administrators' Report p 24.
20 PS [16].
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and insolvent trading in relation to the defendant.21 The report also
addresses the sole director's personal financial position.22 The plaintiff
makes some criticism of the approach which has been adopted in this
regard.
64 The preliminary investigations of the administrators have revealed
that the sole director may have breached s 180, s 181, and s 182 of the
CA, and may also have permitted the company to engage in insolvent
trading in contravention of s 588G of the CA, in connection with the
use of loan funds received from the plaintiff.23 The administrators
point to the funds advanced by the plaintiff which were promptly then
transferred to a related company. The administrators note that, should
the defendant be placed into liquidation, further investigations would be
undertaken in relation to these matters.
65 There are also potential and viable unfair preference claims which
have been identified by the administrators. These claims concern third
parties and related parties. The recoverability of the claims is limited,
according to present investigations.24
66 As to the present assessment of the insolvency of the defendant,
the administrators concluded:25
… it is our opinion that the Company was insolvent upon failing to
comply with the statutory demand, which expired on 17 March 2026.
From that time, the Company appears to have had limited ability to
obtain further funding to meet its liabilities as and when they became
due and payable.
Conclusion on the Cash Flow Test of Insolvency
• On the basis of our review of the Company's ability to pay its
debts as and when they fall due, it appears the Company has
been predominantly supported by funding from related entities.
Nonetheless, the quantum of aged payables began to
significantly increase around March 2026, which is indicative of
difficulties in obtaining support from alternative sources of
funding.
• Subject to overall capacity of the related parties to provide
funding, to the Company, the Company may not have had
21 Administrators' Report pp 35 - 52
22 Administrators' Report p 53.
23 Administrators' Report p 36.
24 Administrators' Report p 49.
25 Administrators' Report p 44.
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sufficient funding available to meet the repayment of the
Petitioning Creditor's debt from 10 February 2020.
• We have requested information from the related parties to
determine the financial capacity and willingness of these entities
to support the Company's historical and ongoing obligations and
have not received a response at this time.
67 Building on the foregoing, the administrators concluded that:26
Following a preliminary review of the indicators of insolvency in both
the balance sheet and cash flow tests, we are of the opinion that the
Company became insolvent on or around 17 March 2026 as a
consequence of the failure to comply with the statutory demand served
by the Petitioning Creditor. Subject to the willingness and capacity of
the related parties to provide support and funding to the Company, the
Company may have been insolvent from as early as 11 February 2020.
Should the Company be placed into liquidation, further investigations
will be undertaken in this regard.
68 The plaintiff criticises the efforts of the administrators to properly
assess the financial position of the sole director of the defendant. The
administrators have expressed opinions in this regard, but it is apparent
the sole director has been less than forthcoming in answering their
queries.
69 The administrators note the following matters in their report:27
Our preliminary investigations indicate that if the Company was wound
up, a liquidator may have potential claims against the Director for
insolvent trading up [to] a maximum amount of c. $1.3m and potential
unreasonable director related transactions of c. $370k.
The quantum of these claims is subject to change as further
investigations are carried out.
The commerciality of pursuing any potential claims against the Director
is subject to their financial capacity to meet a judgment made against
them.
Following our appointment, we requested the Director provide a
statutory declaration outlining their respective personal asset and
liability positions. To date, we have yet to be provided with same.
However, the Director has claimed that he has no significant personal
Australian-based assets.
26 Administrators' Report p 44.
27 Administrators' Report p 53.
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We have carried out real property searches in NSW in the name of the
Director to determine if they hold any freehold assets in their name. The
search identified twenty-one (21) properties registered in the name
'Huan Zhang'. Given that this is a popular name, it is unclear how many
of these properties (if any) are owned by the Director.
A search of the ASIC database in the Director's name has also identified
several other potential shareholdings in entities outside of the group
structure set out in Section 3 of this report (as set out in the table
opposite). Similar to our comments above, it is unclear whether these
shareholding all relate specifically to the Director. We are also unaware
of whether any of these shareholdings have any significant value at this
time.
At this stage, the Administrators have not received any evidence or
statement from the Director regarding any assets held in another
jurisdiction.
…
As such, it is unclear whether the Director has any capacity from
onshore assets to meet any judgment which may be awarded against
them. The Administrators have not, to date, undertaken a detailed
investigation of the Director's asset position, whether onshore or
offshore. Should the Company be placed into liquidation, further
investigation into the Director's financial capacity [sic - would be
undertaken]. The Administrators' present view, however, is that even if
a liquidator were to obtain judgment against the Director in respect of
an insolvent trading or other claim, there is a material risk that the
practical recoverability of that judgment would be limited, particularly
to the extent the Director's asset base is concentrated offshore.
70 In contrast, the plaintiff submits that the entirety of the asset pool
reflected in the overall corporate group structure must be examined.28
71 The plaintiff points to the freehold of the farm upon which the
company operates its herd, which is held by a related company. The
plaintiff submits there is strong evidence in the report that the true
insolvent trading claim is for no less than $11.0 million and that
Mr Zhang has substantial assets in his corporate group, notwithstanding
his refusal to provide information. Further, the plaintiff suggests there
is a 'potential preference payment' to another related company owned
and controlled by Mr Zhang in the amount of $2.46 million, which was
made during 2024.
28 PS [34].
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The DOCA Proposal
72 Within the Administrators' Report, the administrators
recommended that creditors vote in favour of a Deed of Company
Arrangement (DOCA Proposal) proposed by Mr Zhang and certain
related parties.
73 The DOCA Proposal was received on 23 June 2026 from BK
Farms Holding Pty Ltd in its own capacity and as trustee for BK Farms
Holding Unit Trust, and from Australia QC Holding Pty Ltd in its own
capacity and as trustee for Australia QC Holding Family Trust.
74 It is not necessary to detail all of the specifics of the DOCA
Proposal. In summary, drawing from the details included in the
Administrators' Report which has been circulated to creditors, the
DOCA Proposal provides as follows:
(a) First, it provides for a deed fund to be established comprised of
any funds held by the administrators at the time of execution of
the DOCA, any receivables recovered from the defendant's
debtors as at the date of appointment, or any debtors arising
from trading during the administration period, the upfront
indemnity funds of $400,000 held in the Grant Thornton trust
account will be a contribution into the deed fund, and a
contribution of $1.2 million which will arise from the sale
proceeds of the defendant's cattle inventory in early 2027.
(b) Second, to ensure the performance of the DOCA and for the
defendant to commit the sale proceeds of the cattle to the deed
fund, various actions will be undertaken. These actions include
the administrators registering a security interest against all of
the assets of Australia QC, BK Farms will commence a
refinance of the secured creditor debt, effectively paying out the
defendant's liability and BK Farms will have a subrogated claim
against the defendant. Further, BK Farms will enter into a side
deed permitting the defendant to attend to the sale of the
secured cattle and commit the sale proceeds to the deed fund.
Additionally, the proponents will guarantee a floor of
$1.2 million in respect of the contribution to the deed fund from
the sale proceeds of the defendant's cattle (such that if the cattle
proceeds do not achieve a deed fund contribution of $1.2m, the
proponents will make a cash contribution for any shortfall
amount so as to ensure at least $1.2m is contributed to the deed
fund). Once the deed fund is constituted and distributed to
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creditors, the defendant's Australia QC loan receivable will be
assigned to BK Farms as consideration for BK Farms
refinancing the secured creditor and procuring the release of the
subrogated debt and security, and the security interest against
Australia QC will be discharged.
(c) Third, the DOCA will contain a clause that will allow (but not
require) the proponents to make a cash contribution of $1.2m
(equivalent to the minimum amount proposed for the deed fund
contributions from the defendant's cattle). This would have the
effect of expediting the return to creditors under the DOCA.
(d) Fourth, the deed fund will then be distributed in accordance
with the following process and priority:
(i) First, in respect of any outstanding remuneration and
costs properly incurred by the administrators
(ii) Second, in respect of any outstanding remuneration and
costs properly incurred by the deed administrators;
(iii) Third, to pay in full the admissible claims of any priority
employee creditors;
(iv) Fourth, to pay, on a pari passu basis, the ordinary
unsecured creditors of the company in respect of their
admitted claims; and
(v) Lastly, any remaining balance thereafter to the
company.
(e) Fifth, the balance of the assets of the defendant will not be
available for realisation to augment the deed fund and will be
retained by the defendant to facilitate ongoing business
operations.
(f) Sixth, related party creditor claims will be deferred and will not
participate in any distribution in the DOCA. That said, the
related party creditors will remain eligible to participate in the
DOCA for their priority employee entitlements up to the
statutory maximums set out in section 556 of the Act.
75 As noted above, the DOCA Proposal provides that related party
creditor claims would be deferred and they will not participate in any
distribution in the DOCA.
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76 In terms of the estimated return to creditors in the competing
scenarios, the administrators prepared an estimated income statement,
which is extracted below.29 This statement formed part of the
Administrators' Report.
77 As is evident from the above statement, the administrators have
estimated that, in a liquidation scenario, recoveries are uncertain,
dependent on successful litigation outcomes on voidable transaction
and insolvent trading claims, and the realisation of related party
receivables. In contrast, in a DOCA scenario, unsecured creditors are
estimated to receive approximately 25 to 35 cents in the dollar, with
distribution within around twelve months.
Second meeting of the creditors
78 A second meeting of the creditors of the defendant was to be held
on Wednesday, 1 July 2026, as part of the administration process. At
that meeting, the creditors were due to vote on the DOCA Proposal.
79 More specifically, the creditors of the defendant (including the
plaintiff) would have voted on whether the DOCA Proposal should be
approved, whether the company should be wound up, or whether the
company should be returned to the control of its director.
The positions of the parties
The plaintiff's position
80 For its part, the plaintiff emphasises that the administrators have
failed to exercise the appropriate degree of muscle and independent
rigour in order to properly understand and assess the strength, quantum
and recoverability of claims which might be advanced by the defendant
company against Mr Zhang and other related parties, including
29 Administrators' Report p 59.
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insolvent trading claims, preference payments, and breach of duty
claims.
81 Assertions of a lack of independence on the part of the
administrators permeate the submissions filed by the plaintiff. The
plaintiff says it is 'so sceptical' of the approach adopted by the present
administrators, that it is 'inevitable' that it would challenge any
resolution in favour of the DOCA Proposal.30
82 The court is not in a position to comment on the assertions made
by the plaintiff in this regard, but it should be observed that the
administrators have properly identified, within the Voluntary
Administrators' Report, a number of claims which might be advanced
against the related parties.
83 The plaintiff accepts that the legislative framework does not
contemplate contemporaneous administration and the appointment of a
provisional liquidator: s 440A(3) of the CA. However, it submits that
s 440A(3) does implicitly contemplate the appointment of a provisional
liquidator if the court is satisfied that it is not in the interests of the
company's creditors for the company to continue under administration.
84 According to the plaintiff, the proper question is whether the
interests of the company's creditors will be better served, in the relevant
circumstances, by a provisional liquidator being appointed than by the
continuance of the voluntary administration.
85 The plaintiff says the appointment of a provisional liquidator
would be apt in the current circumstances. The plaintiff places reliance
on the following observations of Black J in In the Matter of Pages
Equipment Pty Ltd,31 in deciding to appoint provisional liquidators to
companies already in administration:
… it seems to me that there are strong grounds for an independent
investigation of the relevant transactions, which a provisional liquidator
could undertake in the period pending a winding up application. The
period of time available to a provisional liquidator, and the nature of his
or her role, is such that he or she would have a greater focus on
investigation, than a voluntary administrator would likely have within
the relatively confined timetable available for a voluntary
administration
30 PS [45].
31 In the Matter of Pages Equipment Pty Ltd [2020] NSWSC 959 [18].
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86 In the alternative, it is submitted that a special purpose
administrator would be appropriate, under s 447A of the CA.32 The
plaintiffs submit that Mr Zhang is the 'alter ego, controller and ultimate
owner of all of assets and entities within the Corporate Group Structure,
from which the Administrators are being paid'.33 Further, it is
submitted that he is:34
…simultaneously funding the Administrators and Mr Zhang is the
obvious target of a significant and strong insolvent trading claim, where
it appears that the Administrators have failed to express the strength and
magnitude of that claim and they have simply taken Mr Zhang's word
for facts where the objective indicia of those facts contradict that word,
especially as to Mr Zhang's financial capacity.
87 Certainly, it may be accepted that the appointment of the
administrators by the sole director of the defendant in this matter came
at a late stage, after the winding up application had been filed by the
plaintiff (and well after the statutory demand had been served by the
plaintiff). The lateness of such an appointment is a relevant factor to
consider in weighing whether to adjourn winding up proceedings and
whether to allow the administration to continue.35
The position of the present administrators
88 At the hearing on 30 June 2026, the administrators adopted
something of a conciliatory attitude, although the plaintiff suggests that
this outbreak of goodwill is rather overdue and comes quite late in the
day.
89 The administrators proposed that the second creditors' meeting be
adjourned such that no resolutions under s 439C of the CA to determine
the future of the defendant be put to creditors, until on or around
21 July 2026. In the intervening period, the administrators indicated
they intended to re-visit the matters raised by the plaintiff and continue
to fulfil their duties. In conjunction with this, the administrators
proposed that the plaintiff's winding up application against the
defendant be adjourned.
90 In essence, the administrators emphasised the swift process which
had been undertaken on their part over recent weeks, since their
32 Relying on Hughes v Westgem Investments Pty Ltd (recs and mgrs apptd) (No 3) [2012] WASC 360 [4]
to [6] and Sev.en Gamma a.s. v IG Power (Callide) Pty Ltd [2024] FCA 30; [2024] 172 ACSR 136.
33 PS [62].
34 PS [63].
35 Re Offshore & Ocean Engineering Pty Ltd [2012] NSWSC 1296; In the matter of Vietnam Industrial
Investments Pty Ltd [2022] NSWSC 1411 [15] (Black J).
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appointment, consistent with their statutory duties and the need for
expedition. To the extent further work is needed by them to explore the
claims which the plaintiff wishes to be further investigated, they are
prepared to do that, given further time.
91 As to the viability of an insolvent trading claim, the administrators
observed that, even if the quantum of the claim were increased, pursuit
of the claim would give rise to several difficulties.36
92 These difficulties include the costs required to pursue an insolvent
trading claim, that the defendant received support from its related
entities, which can be taken into account in assessing the defendant's
insolvency, the potential defences available under s 588H of the CA,
and the uncertainty of recoverability against the director.
93 The administrators submit that 'there is a significant difference
between a claim that, if pursued at great expense, may result in
recovery, and cash' and criticise the plaintiff's statement that the
'potential return' from a claim may be great, while ignoring the risks
that pursuing that claim would only cost the creditors.37
94 Accordingly, the administrators submit that: 38
…even if the estimated quantum of the insolvent trading claim is
increased, there would be many reasons why that amount might not be
recovered. Consequently, there would nevertheless be a practical
prospect that the administration would result in a better return to
creditors than a winding up.
Relevant principles
95 The principles set out below are, on my assessment, relatively
orthodox. In summarising these principles, I have drawn on the
submissions helpfully prepared by the administrators.39
96 I have earlier set out the terms of s 440A of the CA. The central
question posed by the present applications, having regard to the express
language of s 440A, is whether the court is satisfied that it is in the
interests of the creditors of the defendant for the company to continue
under administration rather than be wound up.
36 DS [29].
37 DS [30].
38 DS [31].
39 DS [8] – [21].
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97 This statutory provision, particularly s 440A(2), requires a
consideration of the competing policy considerations that
administration may prove more beneficial to creditors if permitted to
run its course and that winding up applications be determined quickly.40
98 The court is required to consider whether there is persuasive
evidence of any real practical prospect, as opposed to mere speculation,
that creditors would receive a better outcome in an administration,
including the prospects of salvage-ability through allowing the
administration to proceed.41 The possibility that a deed of company
arrangement might emerge that would give creditors a quicker and
better dividend than a winding up is one factor which may support
continuing the administration.42
99 As noted by counsel for the administrators in his submissions,
other factors that may support an adjournment of a pending winding-up
application, in the face of a continuing administration, include:43
(a) that the administration process enables the creditors to exercise
commercial judgment as to where their best interest lie;
(b) that contributions to a deed fund that are to be made by related
parties which would not be available if the company enters
liquidation; and
(c) the administrator's support for an adjournment.
100 As to the appointment of a provisional liquidator, the terms of
s 440A(3) are relevant, which require a focus on the interests of the
company's creditors.44
101 A provisional liquidator is usually appointed to preserve the status
quo pending the determination of the winding up application.45
Pursuant to s 472(2), a provisional liquidator may be appointed after the
filing of a winding up application and before the making of a winding
up order.
40 Re Offshore & Ocean Engineering Pty Ltd [16].
41 Lubavitch Mazal Pty Ltd v Yeshiva Properties No 1 Pty Ltd [2003] NSWSC 535; (2003) 47 ACSR 197
[78].
42 Lubavitch Mazal Pty Ltd v Yeshiva Properties No 1 Pty Ltd [74].
43 Re Grandview Ausbuilder Pty Ltd (admins apptd) [2019] NSWSC 1243 [8].
44 In a similar manner to s 440A(2) of the CA.
45 Lubavitch Mazal Pty Ltd v Yeshiva Properties No 1 Pty Ltd [105].
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102 I accept that the appointment of a provisional liquidator is a drastic
intrusion into the affairs of the company and should not be
contemplated if other measures would be adequate to preserve the
status quo.46 Such an order is exceptional.47
103 Counsel for the administrators submitted, and I accept, that where,
for instance, administrators have been appointed, there may be
insufficient need for the appointment of a provisional liquidator.48
104 Further, generally, an undertaking as to damages is required for
the appointment of a provisional liquidator.49
105 As to the removal of incumbent administrators, such an order
should not be made unless it is demonstrated that it would be better for
the conduct of the administration.50 This requires that attention be
given to the stage of the administration and the remaining functions of
the administrator.
106 The onus is on the party seeking removal, which will not be easy
to discharge if the administrator has become well acquainted with the
business and affairs of the company.51
107 Further, as to questions of independence and conflicts of interest,
the court accords to the fair-minded observer knowledge of the reality
of how administrators are selected and appointed. Allegations of bias
and conflict may reflect the tensions that are often present in an
administration.52
108 Finally, as to the appointment of special purpose administrators,
there was no dispute on this application that the court had power to
make such an appointment. In general terms, and without being
exhaustive, the court may appoint special purpose administrators in
circumstances similar to those which courts have found sufficient to
justify the appointment of special purpose liquidators.53
46 Grace v Grace [2007] NSWSC 6 [28].
47 Australian Securities and Investments Commission v Diploma Group Ltd [2017] FCA 549 [22].
48 Australian Securities and Investments Commission v Keystone Asset Management Ltd (recs and mgrs.
apptd) (admins apptd) (No 2) [2024] FCA 1040 [17].
49 M2 Assets Pty Ltd v GT Capital Partners [2022] WASC 331 [219].
50 Re Recycling Pty Ltd [2015] NSWSC; (2015) 107 ACSR 406 [94].
51 Advance Housing Pty Ltd (in liq) v Newcastle Classic Developments (1994) 14 ACSR 230, 233.
52 Hughes v Receivers and Managers of Westgem Investments Pty Ltd (No 3) [2012] WASC 360 [18].
53 Jahani, in the matter of Northern Energy Corporation Ltd (Administrators Appointed) (No 2) [2019]
FCA 382 [29].
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109 Circumstances which may justify their appointment include the
following:54
(a) where there are matters that require investigation with a view to
possible recovery for the benefit of creditors;
(b) where the current administrators have insufficient funds and
insufficient prospects of obtaining funds to pursue an
investigation;
(c) where a creditor is prepared to fund an investigation and
recovery action, but only on condition that another
administrator is appointed; and
(d) where such appointment would be beneficial in the
administration (or subsequent winding up) to the creditors as a
whole.
110 These matters are relevant considerations, not exclusive factors,
and the weight to be attributed to them will vary as the occasion
requires.55
Disposition
111 Having heard from counsel for the plaintiff and for the defendant
at the hearing on 30 June 2026, I consider the interests of the creditors
of the defendant company as a whole would best be served by the
appointment of special purpose administrators in the manner proposed
by the plaintiff.
112 The drastic step of appointing a provisional liquidator should not
be entertained, in all the circumstances. To do so would end the
administration: s 435C(3)(g) CA.56 It is premature to do that. I reach
that conclusion particularly given the stage at which the administration
has reached, the work which has been undertaken to date by the present
administrators, and the prospect that further investigation of the matters
identified by the plaintiff may yield additional information which
should be put to the creditors to permit them to decide the future of the
company.
54 Deputy Commissioner of Taxation, in the matter of ACN 154 520 199 Pty Ltd (in liq) v ACN 154 520
199 (in liq) [2017] FCA 444 [64]- [85].
55 Sev.en Gamma a.s. v IG Power (Callide) Pty Ltd [128[.
56 Re First Debenture Ltd [2015] NSWSC 1808 [6].
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113 The decision to appoint special purpose administrators in effect is
a conclusion that it is not presently appropriate to allow the
administration to continue forward in its present form. Rather, the
administration should continue on the basis that the presently appointed
administrators remain focused on the management of the business of
the defendant company and, in doing so, work to preserve value for the
creditors.
114 However, the task of undertaking the investigation and analysis of
the claims against the sole director and any related companies (as well
as third parties) should be reserved to other persons, who will hold
appointment as special purpose administrators, who will report to the
court, and be funded by the plaintiff. In this regard, the court is not
making any findings adverse to the present administrators.
115 The considerations evident on the materials before the court which
justify this course are as follows.
116 First, the materials presently demonstrate that there are claims
against the sole director of the defendant, and potentially also against
related companies of the defendant, which are worthy of serious further
investigation. The present administrators have identified some of these
claims in their report. The plaintiff takes a more expansive view of the
breadth and quantum of the claims, as well as their recoverability, but
putting to one side the differences between the parties in this respect, I
consider it is appropriate for further investigative work to be
undertaken in relation to the claims.
117 The claims which have been identified would focus on the
potential breaches of duties of the sole director, particularly concerning
the transfer of the funds loaned to the defendant by the plaintiff in
2019. There is also an insolvent trading claim in prospect, and unfair
preference claims.
118 Second, as to whether the present administrators should be left
with the responsibility to undertake this investigative work and report
to creditors once that has been done, I recognise that those
administrators have indicated to the court, through counsel, their
preparedness to undertake further investigations of these matters. The
court does not doubt the sincerity of that indication.
119 However, there is a compelling reason in the present
circumstances why the task should be reserved to others. That reason is
centred on the reality that the potential claims are focused on the
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conduct of the sole director who was responsible for the appointment of
the present administrators and, more importantly, a person who is the
driving force behind the DOCA Proposal which is to be considered by
the creditors (although it should be recognised that related party
creditors are excluded from participation in the deed fund).
120 Importantly, the present administrators have recorded their
recommendation that creditors vote on that proposal.
121 These matters strongly incline me to the view that wholly
independent persons should be charged with the responsibility of
investigating the claims which have been outlined. The observations
made by Sifris J in State of Victoria v CTM Training Solutions Pty
Ltd (In Liq) & Ors57 are apposite in this regard in the context of
administrators:
I should also stress that it is of the first importance that liquidators are
totally independent and are seen to be so. It is important that
confidence in the integrity, objectivity and impartiality of an
administration be maintained.
122 Third, I consider it is highly relevant that the administrators have
had limited time to make any assessment of the potential claims against
the sole director and others (as well as the recoverability of the claims).
They were appointed on 8 June and reported to creditors less than three
weeks later, on 23 June. The types of claims in question would benefit
from further analysis, as would the extent of the recoverability from the
potential targets of the claims.
123 Fourth, and allied to the preceding points, I regard it as significant
that the sole director and the related parties have presently resisted
demands from the present administrators to provide further
documentation in several respects. The administrators have noted the
resistance from these parties in their report. I refer to the following
matters recorded in the Administrators' Report:
We have requested information from the related parties to determine the
financial capacity and willingness of these entities to support the
Company's historical and ongoing obligations and have not received a
response at this time. [at p 44].
Following our appointment, we requested the Director provide a
statutory declaration outlining their respective personal asset and
liability positions. To date, we have yet to be provided with same.
57 State of Victoria v CTM Training Solutions Pty Ltd (In Liq) & Ors [2017] VSC 47 [43] (Sifris J).
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However, the Director has claimed that he has no significant personal
Australian-based assets. [at p 53]
At this stage, the Administrators have not received any evidence or
statement from the Director regarding any assets held in another
jurisdiction. [at p 53]
We have requested further financial information from the Deed
Proponents regarding their capacity to make any top up payment that
may be required to ensure that $1.2m is contributed to the deed fund as
set out on the previous page. At the time of writing this report, we are
yet to receive this information. [at p 56]
124 It appears the sole director and the related parties may be adopting
something of a recalcitrant attitude at this stage, in the face of requests
from the administrators. That attitude may change. The court's
expectation is that it would change, and there would be less resistance
to the steps being taken by the administrators. However, the fact of the
resistance to date provides support for a decision to appoint wholly
independent parties to undertake the investigative work going forward.
125 Fifth, I consider it would be in the interests of the creditors that the
present administrators be permitted to focus on the process of managing
the defendant's cattle business, rather than on the potential claims
which have been identified against the sole director and related parties.
The administrators have pointed to the difficulties in managing the
business and the need to ensure animal welfare is maintained. The
administrators point to operational risks with the business, including
weather, feed availability and veterinary contingencies which must be
managed, in order to ensure the herd's optimal realisation window is not
missed or compressed.
126 The appointment of separate professionals to examine and
investigate the identified claims, and manage the communications with
the director and related parties and their advisers regarding the claims,
will mitigate the risks identified by the administrators concerning the
ongoing management of the business.
127 In forming this view, I do not minimise the animal welfare issues
that have been identified. There is a factual dispute between the parties
in this regard, which involves matters concerning cattle husbandry.
The court is not capable of resolving this dispute on the present
materials. That will need to wait for another day. At present, I
consider the short-term risks identified can be managed by the present
administrators on an ongoing basis.
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128 Sixth, I recognise that the costs of the administration to date are
substantial, and are growing. Extending the period of administration
through the appointment of special purpose administrators will mean
these costs continue to grow. These accumulating costs will have a
priority over the claims of the company's creditors. Against this, it is
relevant that the plaintiff creditor is proposing to fund the special
purpose administrators, in the amount of $200,000.58 That funding
source mitigates the administrators' concerns as to the level of the
accumulating costs to a significant degree, in my view.
129 Seventh, I also recognise the concerns expressed by the present
administrators as to the impact of delays on the company, the
interruption of the voluntary administration process, the potential loss
of the DOCA Proposal, and the potential delays to the refinance of the
secured creditor's debt. These are matters properly identified by the
administrators as being relevant to the applications advanced by the
plaintiff. These matters must be seen in context, though. An important
part of the context is that the administration process, while it has
proceeded quite rapidly to the point of a DOCA Proposal being
advanced, was initiated by the sole director late in the day and after a
considerable period of time, it would seem, during which the defendant
company was operating in financially straitened circumstances. This is
a relevant and weighty consideration here given the preceding efforts
undertaken by the plaintiff creditor to pursue its debt against the
company, which were either ignored or resisted.
130 It is open to infer that the sole director has belatedly pursued the
voluntary administration in order to forestall the plaintiff's genuine
attempts to pursue its debts. That does not operate, in and of itself, to
somehow invalidate the administration process under pt 5.3A. But it is
a relevant factor when considering the plaintiff's present application to
appoint special purpose administrators.
131 In these circumstances, while the appointment of the special
purpose administrators will lengthen the administration process and
provide some disruption, those are difficulties the company and its
creditors will need to absorb in order to permit a more fulsome
examination of the important potential claims which the plaintiff has
identified. The further examination of those claims may also provide a
firmer foundation than presently exists to quantify the claims and assess
their recoverability, which I consider is in the interests of all creditors,
58 PS [40].
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particularly when one appreciates the precarious financial position of
the business at present.
132 Eighth, returning to the DOCA Proposal and its potential fragility
if the administration process runs further, I have taken into account the
concern expressed by the administrators in this regard. The risk must
be seen in the context that the administrators themselves have
acknowledged that the DOCA Proposal is dependent upon finance
approval, which is subject to an 'indicative letter of offer for the
refinancing' which has not yet been issued.59
133 That is, the Administrators' Report acknowledges that the
administrators have not yet received full financial information from the
DOCA proponents to confirm their capacity to make any top-up
payment required to ensure $1.2m is contributed to the deed fund.
134 The DOCA Proposal is thus conditional and its funding remains
partly unconfirmed. These matters must be given weight, in my view,
when viewing the financial outcomes identified by the administrators in
the various scenarios, which have led the administrators to recommend
the DOCA Proposal as a superior outcome for creditors.
135 Ninth, as matters stand, I do not assess the appointment of special
purpose administrators as introducing significant risks for the present
employees of the business.
136 Tenth, the position proposed by the plaintiff is that the special
purpose administrators would be funded by the plaintiff and, further,
the orders drafted by the plaintiff preclude the special purpose
administrators from being indemnified from the defendant's property or
asserting a lien over the defendant's property. That is, s 443D to s 443F
of the CA will not apply to their appointment.
Conclusion and orders
137 For the foregoing reasons, I consider it appropriate to make the
appointment sought by the plaintiff of special purpose administrators,
to the defendant company, and to allow the administration process
under pt 5.3A of the CA to continue, in the interests of the creditors.
The present administrators will not be removed, but will continue in
office, subject to and conditioned by the regime proposed by the
plaintiff.
59 Cook Affidavit, p 220.
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138 I have set a further date for a hearing, being 3 August 2026, by
which time the special purpose administrators will, on the current
timetable, have prepared their report.
139 A question was raised at the hearing as to whether an undertaking
as to damages was required to be proffered by the plaintiff as a
condition of the appointment. While that would be required as a pre-
condition to the appointment of a provisional liquidator, it was not
suggested that such an undertaking was essential in the context of
special purpose administrators. I would not have required it, in any
event, in the circumstances of the present case.
140 The orders set out in Attachment A to these reasons were made
by the court on 30 June 2026, and the orders set out in Attachment B
to these reasons were made on 2 July 2026.
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ATTACHMENT A
Orders made on 30 June 2026
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ATTACHMENT B
Orders made on 2 July 2026
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LUNDBERG J
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I certify that the preceding paragraph(s) comprise the reasons for decision of
the Supreme Court of Western Australia.
LM
Associate to the Honourable Justice Lundberg
2 JULY 2026
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