Court grants permission to investigate business despite limited expected returns – Insolvency/Bankruptcy


To print this article, all you need to do is be registered or log in to

This week’s TGIF considers Krejci in Union Standard International Group Pty Limited (in liq) (no. 7) [2022] FCA 890, in which the Federal Court allowed liquidators to conduct extensive and costly public reviews despite limited expected return from creditors, in part to try to uncover the truth behind $585 million that cannot be accounted for in the transactions of the company.

Key points to remember

  • The court may allow the liquidators to incur substantial additional costs to investigate the affairs of the company in appropriate circumstances.

  • The creditors’ consent, or at least the lack of objection to further investigation incurring costs, is an important factor in the exercise of the court’s discretion.

  • Where liquidators are able to convince the court that there are significant gaps in the information provided or that there is evidence of irregularities, the court may be more easily persuaded to allow the liquidator to incur additional costs for investigate possible claims available to the company.

What happened?

Union Standard International Group Pty Limited (cash)
(USIG) held an Australian financial services license and operated a financial services business which included advising on and facilitating the trading of derivatives and foreign exchange contracts. USIG went into liquidation, and during their investigations into the company, the liquidators uncovered two key issues:

  • USIG’s financial records were unreliable in that they recorded its debts to certain categories of clients only partially or not at all; and

  • $585 million is missing in the company’s business.

The app

In this application, the liquidators applied to the Court pursuant to Rule 90-15(1) of Schedule 2 – Insolvency Practice (Companies) Rules 2016 (IPS) to
Companies Act 2001 (Cth), to confirm that they are justified in paying their remuneration in connection with the public examinations offered from USIG funds.

The court’s power in IPS 90-15(1) is broad: “The court may make such orders as it thinks fit in relation to the external administration of a company”. The section contains a non-exhaustive list of options available to the court, including making an order relating to the costs of an action taken by a liquidator or the remuneration paid to the liquidator.

The liquidators’ request was not opposed.

Result and reasoning

In the circumstances, His Honor determined that it was appropriate for the Court to issue orders that would allow the liquidators to conduct the public examinations and recover their costs from the assets of the USIG.

This decision was based on several factors, including that:

  • the current return to creditors has been described as de minimis;

  • there was a substantial amount of formal evidence of debt;

  • the liquidators have made numerous applications to the Court and are still of the view that their investigations are being hampered by the actions of related companies and persons;

  • initial investigations have revealed serious questions about the operation of the business and its relationships with related parties and third parties;

  • creditors have been informed of the proposed reviews and none objected; and

  • the inspection committee, made up of various categories of creditor representatives, expressed its support for the proposed reviews and their rapid conduct.

Although the examinations proposed by the liquidators are extensive and expected to cost over $1 million (plus GST), the Court was satisfied that they were necessary to allow the liquidators to do additional research and obtain documents that may lead to pending claims and recoveries. This was determined to be in the best interests of creditors, particularly in light of the complexity of the company’s transactions, the obstructionism the liquidators faced during their investigation, and the open question of $585 million unexplained that has not been accounted for in the actions of the company.


This decision is another example of the scope of a court’s powers to manage the conduct of external administrations. The key factors in the exercise of this power are the interests of the creditors as a whole, the absence of objection on the part of the creditors to the proposed course of action and the considered approach taken by the liquidators to assess the benefit to incur substantial additional costs in the interest of improving the yield for creditors.

Parties acting in the role of external administrators or liquidators should be reassured that the power of the court is available to facilitate more creative or less obvious steps provided the risk profile is appropriate and the interest of creditors be in the foreground.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

Lawyers Weekly Law Firm of the Year 2021

Gender Equality Employer of Choice (WGEA)

POPULAR ARTICLES ON: Insolvency/Bankruptcy/Restructuring from Australia


About Author

Comments are closed.