Home > News > Can special purpose liquidators be appointed to investigate the conduct of administrators or liquidators?

Can special purpose liquidators be appointed to investigate the conduct of administrators or liquidators?

Spread the love

By Alicia Hill, Principal and Matthew Deetlefs, Law Clerk

During insolvency proceedings, administrators and liquidators are often required to make urgent commercial decisions. These decisions are unlikely to please every stakeholder, however, administrators and liquidators are not able to be subjected to investigation through appointment of special purpose liquidators (SPL) tasked with doing so. The unhappy stakeholders in Lewis v Battery Mineral Resources Ltd (in liq) [2021] FCA 963 found this out when they requested such an appointment from the Court as summarised in this article.


Battery Mineral Resources Ltd (BMR) was a mining company with notable exploration activities in Canada, where BMR had a Canadian subsidiary of the same name.

On 11 November 2019, administrators were appointed to BMR by its board. The administrators sought an urgent sale of the Canadian subsidiary to preserve the value of the shares in the subsidiary.

On 21 November 2019, the first meeting of BMR’s shareholders was held and a seven-person Committee of Inspection was appointed that included Mr Lewis, a former director of BMR.

A confidential report by the administrators was presented to the Committee of Inspection recommending that one of three bids received be accepted. This bid was made by one of the secured creditors (Weston) whose bid, unlike the bid favoured by Mr Lewis, would clearly result in the payment of creditors beyond Weston. The Committee of Inspection did not object and a contract was settled for sale to Weston within three weeks.

Mr Lewis objected to the sale and complained during correspondence with the administrators for a number of months.

In April 2021, more than a year after the sale, Mr Lewis applied to the court seeking the appointment of an SPL under section 90-15 of Schedule 2 of the Corporations Act 2001 to scrutinise the administrators decision to accept the bid.


The Court held that it did not possess the power under section 90-15 to appoint an SPL to investigate the conduct of an administrator or liquidator.

The investigation of the conduct of administrators and liquidators was noted to be a supervisory function of the Court and therefore could not be provided to a liquidator.

Even if the Court was empowered to appoint an SPL in these circumstances, the Court said it would have refused to exercise its discretion to do so. It must be demonstrated that the appointment of an SPL will have sufficient utility to the winding up and the creditors. The Court found this had not been demonstrated as Mr Lewis failed to show that the appointment would likely lead to further recoveries by creditors, in fact, appointment would delay distribution to creditors and reduce the dividend available. Mr Lewis’ unexplained delay in seeking the appointment was also fatal to the application.


The purpose of an SPL is not to investigate the conduct of the administrators or liquidators. An application to appoint an SPL will be accepted for example where:

  • A liquidator is prevented from investigating or pursuing causes of action which will benefit the creditors because the liquidator has a conflict of interest or has insufficient funds to do so;
  • It is just and useful that a different liquidator investigates a matter (not including the administrator or liquidator’s conduct) that may allow further recovery by creditors; or
  • A creditor is prepared to fund investigations and recovery actions but only on the condition that another liquidator is appointed.

The Court will also consider the following matters upon an application to appoint an SPL:

  • Whether a ‘special purpose’ has been identified with sufficient specificity;
  • Whether the appointment would ensure that ‘confidence in the integrity, objectivity and impartiality of the administration is maintained’;
  • Whether the special purpose is ‘substantial and serious’; and
  • The public interest.

Ultimately, as highlighted by this case, courts are reluctant to interfere with the decisions of an external administrator who has acted in good faith. This is welcome news to administrators who are often required to make urgent commercial decisions.

If you have any queries about any of the matters raised by this case, then please contact Alicia Hill on (03) 8540 0292 or alicia.hill@mst.com.au