Shaoxing Newtex Imp & Exp Co Ltd, in the matter of Mosaic Brands Limited (in... [2025] FCA 1479 | Case summary

[2014] FCAFC 85Shaoxing Newtex Imp & Exp Co Ltd, in the matter of Mosaic Brands Limited (in... [2025] FCA 1479 | Case summary | Zoe

[45]

Mr Vaughan Strawbridge and three other members of FTI Consulting (the Liquidators) are the liquidators of Mosaic Brands Limited (Mosaic Brands) and 12 other companies in the Mosaic Brands group of companies (Mosaic Group), including Noni B Holdings Pty Limited (Noni B Holdings). The Mosaic Group formerly operated a substantial retail group with brands such as Noni B, Katies, Rockmans, Rivers, Millers, and others.
Until late 2020, Mr Strawbridge was a partner at Deloitte. Deloitte had several engagements for Mosaic Brands in 2020 concerning (inter alia) the impact of COVID-19. Mr Strawbridge himself did work for the Mosaic Group and attended certain board meetings of Mosaic Brands. The plaintiff says that, as a result, Mr Strawbridge lacks independence and might be perceived as not likely to pursue with appropriate rigour claims potentially available to the Mosaic Group. It seeks to replace the Liquidators with alternative liquidators.
There is a deed of cross guarantee (DXG) binding on ten of the companies in the Mosaic Group, including Mosaic Brands and Noni B Holdings (DXG Entities). The remaining three companies are not parties to the DXG (non-DXG Entities). Pursuant to the DXG, in the event of the winding up of the DXG Entities, the debts of each DXG Entity become debts owed by each other DXG Entity, and thus the creditors of each DXG Entity become creditors of each other DXG Entity.
A resolution to appoint Mr Andrew McCabe, Ms Jessie Wang and Mr Joseph Hayes of Wexted Advisors (the Alternative Liquidators), to prevent Mr Strawbridge and the other administrators from becoming liquidators, was put to creditors of the Mosaic Group at a reconvened second meeting of creditors. For the DXG Entities, a substantial majority of creditors by value supported the resolution. However, the Chairperson of the Meeting (Mr Strawbridge) determined that the resolution in respect of the DXG Entities did not attract the support of a majority of creditors by number, such that the resolution failed to pass. In that regard, he counted many votes of employees who were employees of Noni B Holdings (only). These employees would only be creditors of other DXG Entities by virtue of the operation of the DXG. The plaintiff says that counting these employees in the vote on the resolution to appoint the Alternative Liquidators for any entity other than Noni B Holdings involved error.
The plaintiff now seeks relief from the Court that:

[49]

The Liquidators were previously the administrators of the Mosaic Group (the Administrators). By the date of the second meeting of creditors, no deed of company arrangement had been proposed and the Administrators contended that each of the companies in the Mosaic Group was insolvent. The Administrators therefore recommended that each of the companies in the Mosaic Group enter into liquidation.
The Administrators had sought proofs of debt from creditors of each of the Mosaic Group companies, other than the employee creditors. Proxy forms had also been completed.
In relation to employee creditors, the process was different. All employees of the Mosaic Group were employed by Noni B Holdings. The Administrators had obtained information as to employee entitlements. Employees had commenced to receive payments under the Commonwealth Government's Fair Entitlements Guarantee scheme (FEG), because the relevant Minister had made a declaration giving the employees early access to the FEG (which normally cannot be accessed until the company is in liquidation). The outstanding entitlements were therefore reducing from time to time, and the Administrators received updated information. The employees were not required to submit proofs of debt. Rather, the Administrators treated their entitlements as claims in full against Noni B Holdings. As noted below, the Administrators purported to prepare a "global" proof of debt form on behalf of all the employees.
Like other creditors, some employees completed proxy forms.
The second meeting of creditors commenced on 20 June 2025 (the 20 June 2025 Meeting). It was a combined meeting of the Mosaic Group companies, including both the DXG Entities and the non-DXG Entities. The 20 June 2025 Meeting was, however, adjourned, because shortly prior to the meeting it became clear that certain creditors wished to propound a resolution seeking that the Alternative Liquidators be appointed as the liquidators of the Mosaic Group companies, and the Administrators considered that more notice was required before that resolution could be put to the meeting. The 20 June 2025 Meeting was adjourned and reconvened on 1 July 2025 (the 1 July 2025 Meeting).
At the 1 July 2025 Meeting, Mr Strawbridge, as Chairperson of the meeting, dealt first with the resolution that each of the Mosaic Group companies be wound up (i.e. 13 resolutions to that effect) (Winding Up Resolution). The Winding Up Resolution was passed in respect of each of the 13 entities in the Mosaic Group. The effect of that resolution, pursuant to s 499(2A) of the Corporations Act 2001 (Cth) (the Corporations Act), was that the Administrators would be appointed as the liquidators at the conclusion of the meeting, unless a further resolution was passed to appoint the Alternative Liquidators.
Upon the passing of the Winding Up Resolution, the meeting then proceeded to deal with the remaining resolutions, including the resolution that the Alternative Liquidators be appointed. At that point, Mr Strawbridge advised the meeting that as each of the DXG Entities had guaranteed the debts of the other DXG Entities pursuant to the DXG, the further resolutions would be put to the DXG Entities on a collective basis, and would be put to each of the non-DXG Entities separately.
For the DXG Entities, Mr Strawbridge determined that the results of the vote for the appointment of the Alternative Liquidators (as recorded in the minutes of the meeting) were that:

[60]

In relation to the admission of claims, the plaintiff's contention is not that the Administrators could not have admitted the employees claims and could not have admitted them in relation to companies other than Noni B Holdings. Rather, its contention is that the Administrators did not do so before they ceased to be administrators. The plaintiff contends that the Administrators did not admit the claims of employees as claims against each of the DXG Entities other than Noni B Holdings prior to the passage of the Winding Up Resolution at the 1 July 2025 Meeting, and could not do so afterwards. Although the Administrators appeared to proceed on the basis that the effect of the DXG would be that debts of Noni B Holdings would become debts of the other DXG Entities once the Winding Up Resolution was passed, the plaintiff contends that no step was taken by the Administrators prior to the Winding Up Resolution to admit employee claims against the other DXG Entities in accordance with sub-paragraph 3(a).
Once the Winding Up Resolution was passed, the Chairperson (rather than the Administrators) could act on claims or proofs of debt lodged prior to the meeting in accordance with sub-paragraph 3(b). However, the plaintiff contends that no employee claims or proofs of debt were ever lodged.
The defendants rely on the decision of J Aron Corporation and The Goldman Sachs Group Inc v Newmont Yandal Operations Pty Ltd (2006) 57 ACSR 149; [2006] NSWCA 46 (J Aron), which affirmed the decision at first instance in J Aron Corporation v Newmont Yandal [2005] NSWSC 238. That case involved circumstances with many similarities to the present case, but also with some important differences.
The defendant in that case (NYOL) was part of a group of 14 companies (NYOL Group) that had executed deeds of cross guarantee. The companies lodged consolidated financial statements. They were placed simultaneously into voluntary administration. The administrators decided to treat the NYOL Group as a single commercial and economic entity. A deed of company arrangement was proposed (strictly, 14 deeds). The meetings of creditors for all NYOL Group companies were held concurrently, and only one resolution (as opposed to 14 separate resolutions) approving the resolution to enter into the deed of company arrangement was put to creditors, relying on votes tallied from persons who were creditors for certain companies only because of the effect of the cross guarantee. That resolution passed.
On appeal, Bryson JA, with whom Spigelman CJ and Ipp JA agreed, observed as follows (at [11]):

[98]

In relation to admission by the Administrators, the plaintiff rely upon a document kept by the Administrators headed "01 1 July reconvened meeting > 01.15 Mosaic Brands - Proof of Debt Adjudication Reconvened Meeting.pdf". A sub-heading reads "Mosaic Brands Group - Adjudication on PODs for Reconvened Second Meeting of Creditors 1 July 2025". That document contains a list of creditors. It tabulates information including the creditor's ID, the creditor's name, a statement of the status of the review (e.g. "Review Complete"), the "Entity POD submitted in", the category of creditor (e.g. "Employees"), a "POD amount", and a statement of whether the proof of debt value matches the supporting documents and/or the books and records of the company. In the case of creditors which had claims against more than one group company, the document records the claim against each company (e.g. the Australian Taxation Office had a different claim against each of ten companies). In the case of each employee, the document records the "Entity POD submitted in" as Noni B Holdings.
The plaintiff says that this document reflects the way in which the Administrators were treating the claims of creditors: namely, recording the claims against particular entities, rather than treating claims against DXG Entities as claims against all.
However, this document is not conclusive as to how the Administrators were treating claims. As a natural first step, the Administrators would need to work out the claims against each entity. If there were claims against more than one entity, these would each need to be counted when applying the terms of the DXG. A further step needed to be taken, which was to sum the claims across the DXG Entities (as explained earlier, with the example of $10,000 + $20,000 = $30,000). This particular document did not do this. But that was nevertheless done for the purposes of the voting process. It cannot sensibly be said that, in circumstances where claims against particular entities had to be identified, including for the purposes of applying the DXG, a document identifying those claims precludes the further step of recognising the claims that flow from the operation of the DXG. The Administrators did not say, in relation to this document, "these are the only claims we will admit and only in respect of these entities."

[100]

In these circumstances, it is not necessary to consider the defendants' alternative arguments on the plaintiff's first contention. However, for completeness, I will say something brief about them.
First, the defendants also rely upon r 75-85(3)(b) of the IPR, and say that proofs of debt had been lodged by the Administrators on behalf of the Noni B Holdings employees (i.e. without any step by the employees, but purportedly on their behalf).
This issue arose at the very conclusion of the hearing, and in a somewhat unsatisfactory way. The defendants submitted that the late reference to the lodging of proofs of debt on behalf of employees was because they had not hitherto understood how the plaintiff was putting its case. However, the plaintiff's argument, to which these documents were said to respond, had been made in the written submissions filed more than two weeks prior to the hearing. The argument could perhaps have been put more simply, but it was not hidden. Further, the position of the plaintiff throughout has been that no proofs of debt had been submitted in respect of employee claims. That was said in terms in the plaintiff's written submissions filed prior to the hearing. Nothing was said by the defendants to the contrary in their submissions or at any point in the hearing prior to its conclusion. In the meantime, Mr Strawbridge had come and gone as a witness.
In the course of the plaintiff's oral submissions in reply, the defendants sought the opportunity to tender fresh evidence constituting "proofs of debt" which were prepared by the Administrators on behalf of the employees. That took the form of a document which contained the aggregate position of Noni B Holdings employees. I admitted this late evidence, because the plaintiff ultimately did not object to it. However, the defendants went further and sought to tender additional documents by email to Chambers after the hearing had concluded, having foreshadowed at the hearing that they might seek to do that. Those documents comprise an email chain between Mr Strawbridge and FTI staff between 16 and 19 June 2025, and a Word document titled "F536 - Formal Proof of Debt or Claim on behalf of Employees.docx", being the document embedded in a link in the email chain. In the circumstances, I will not admit these further documents sent to Chambers after the hearing.
There were also short supplementary submissions dealing with the defendants' new contention, but no further hearing.
It may be recalled that r 75-85(3) of the IPR is in the following terms:

[105]

In considering that submission, it is relevant to note that the two mechanisms recognised by IPR r 75-85(3) are distinct and involve different roles. The power given to Administrators to admit a claim is distinct from the question of whether they are authorised to take a step that, by r 75-85(3)(b), is to be taken by creditors. There is a question as to whether the requirement in r 75-85(3)(b) should be construed such that it is satisfied by an unauthorised action of someone other than a creditor.
Secondly, the defendants rely on reg 5.6.45 of the Corporations Regulations 2001 (Cth) (Corporations Regulations). Regulation 5.6.45 creates a regime for the lodgment of a "global" proof of debt specifically for employee creditors, and provides that if the employees of a company "make demands" for wages or salaries or for retrenchment payments, then "one proof of debt or claim may be prepared and submitted on behalf of those employees" which must have annexed to it a schedule setting out the names of the employees and the amounts due to each of them, and "has the same effect as if separate proofs had been prepared and submitted by each of the employees named in the schedule."
The defendants submit that, in the present circumstances, reg 5.6.45 of the Corporations Regulations permits the Liquidators to submit a proof of debt on behalf of the employees without their authority, and that such a proof of debt is taken to be lodged by the employees for the purposes of r 75-85(3)(b) of the IPR. The defendants submit that the purpose of reg 5.6.45 would be undermined if, nonetheless, each employee was required to submit an express authorisation in writing.
By contrast, the plaintiff emphasises the words "make demands" in reg 5.6.45, and says there is no evidence of any demands being made in the present case. Further, the plaintiff relies on the general provision in reg 5.6.40 of the Corporations Regulations, which provides that a proof of debt can only be submitted "by the creditor personally or a person authorised by the creditor."
Resolution of this question would require consideration, inter alia, of the meaning of "make demands", the interrelationship between reg 5.6.40 and reg 5.6.45, and the meaning of "he or she has lodged" in r 75-85(3)(b) of the IPR. It would require consideration of whether reg 5.6.45 is a deeming provision that avoids the need for any authority to be given by employees before taking any steps on their behalf.
Because of the manner in which this issue arose, in the dying moments of the hearing, the Court did not receive any proper submissions on any of these questions. The Court was not taken to any authorities, or to the legislative history of the relevant provisions. There was no opportunity to have any dialogue with counsel. I would prefer to reserve the consideration of these questions to a case in which they have been fully argued. The present case is therefore not one in which it is appropriate to decide the first of the defendants' fallback arguments, having regard to their success on the first ground.
The second fallback argument from the defendants was an argument that, even if there had been no admission of claims by the Administrators, the effect of r 75-100(1) of the IPR is that it was for Mr Strawbridge (as the person presiding at the meeting) to determine any question that arose as to the entitlement of a person to vote at the meeting. Further, the defendants submitted that, pursuant to r 75-100(4), any such decision had to be appealed within 10 business days. It was submitted that even if the plaintiff's contentions had been accepted, this does not result in the resolution to appoint the Alternative Liquidators having been passed.
This submission does not quite capture the effect of r 75-100 of the IPR. Rule 75-100(4) refers to a decision "by the person presiding to admit or reject a proof of debt or claim for the purposes of voting." However, in the present case, the relevant question was whether the Administrators had admitted a claim on a contingent basis. Any decision by the Administrators to admit the employee claims on a contingent basis was not a decision of a type referred to in in r 75-100(4) (because it was not a decision by the person presiding to admit or reject a proof of debt or claim). Nor was it a decision by Mr Strawbridge, in his capacity as the person presiding at the meeting, on any question that arose at the meeting as to the entitlement of the employees to vote. I therefore do not consider that r 75-100 has any application in the present circumstances. The balance of s 75-100 of the IPR indicates that the rule as a whole is concerned with decisions to admit or reject a proof of debt or claim, or related decisions.
The defendants also submitted that any technical non-compliance could be cured by r 75-270 of the IPR. Rule 75-270 provides that a meeting, or anything done at a meeting, is not invalid "because a requirement of this Division has not been strictly complied with, if the requirement has been substantially complied with." It is not apparent that r 75-270 has any role to play in the present circumstances. The plaintiff's contention is not one about "strict compliance", but is a more fundamental point about entitlement to vote. If the plaintiff was otherwise right, then the voting process would simply have miscarried, and there would have been no substantial compliance.

[142]

At the 7 November 2024 Meeting, Mr Anderson of ERA Legal, who appeared to be acting as proxy for a number of creditors, raised the independence concerns ERA Legal had received. In response, Mr Strawbridge, as Chairperson of the meeting, "referred to the Administrators' DIRRI sent to all creditors on 29 October 2024 which sets out the Administrators [sic] relevant relationships" and the basis for the Administrators' independence. When asked whether Hamilton Locke was one of the Mosaic Group's safe harbour advisers, Mr Strawbridge stated that the Administrators understood that the safe harbour adviser to the directors and the Mosaic Group was Deloitte. While resolutions to replace the Administrators of Mosaic Brands and one other company in the Mosaic Group were put to the creditors at the 7 November 2024 Meeting, these resolutions did not pass.
In the 13 June 2025 Report, the Administrators stated that they had formed the preliminary view that the Mosaic Group "was likely insolvent from at least 31 December 2020 and remained insolvent up until the date of [the Administrators'] appointment, being 28 October 2024" (emphasis added). Following initial investigations, the Administrators identified possible breaches by (one or more of) the directors including breaches of directors' duties, and formed the preliminary view that "[t]here is a strong prima facie claim for insolvent trading against the directors" for at least some, if not all, of the investigation period between 1 July 2019 and 28 October 2024, which "will require further investigation by a liquidator." The report indicated that the directors of the Mosaic Group had advised that they would seek to rely on safe harbour protections in respect of insolvent trading under the Corporations Act. The Administrators indicated that "it was not clear whether the Safe Harbour eligibility criteria were met at all times and further investigation is required."
Prior to and following the 20 June 2025 Meeting, ERA Legal sent a number of letters and emails to King & Wood Mallesons (KWM) (the Mosaic Group's current lawyers) reiterating, inter alia, "the obvious, irreconcilable and incurable independence issues" attending Mr Strawbridge's appointment as an administrator in circumstances where Deloitte had been providing advice to the Mosaic Group and/or directors either directly or indirectly in relation to safe harbour and Mr Strawbridge was a "review partner" from at least June 2020. In response, KWM sent correspondence claiming that the allegations made against Mr Strawbridge were "incorrect, misleading and deceptive, and potentially defamatory."
During the hearing, Mr Strawbridge confirmed that he gave instructions for the various correspondence from KWM to be sent. However, the defendants submitted that ERA Legal's assertions did contain certain misleading statements, namely (a) the unqualified conclusion that the appointment of Mr Strawbridge was tainted with "obvious, irreconcilable and incurable independence issues", and (b) the false assertion that "Mr Strawbridge was directly involved in the provision of [the safe harbour] advice."
ERA Legal also made a request for documents and information including, inter alia:

[147]

Mr O'Neill asked the Chairperson whether the Mosaic Brands board [at the First Board Meeting] briefed the Chairperson on plans underway to manage cashflow in the short term and a plan to restructure the business in the longer term.

The Chairperson advised that given the passage of time, he did not remember the specifics of the discussion at that meeting, however, he recalled they were general in nature and confined to the Mosaic Brands' present position at that time. The Chairperson confirmed that no engagement with Mosaic arose from that meeting, nor was any remuneration received and confirmed that it is not unusual for insolvency practitioners to attend board meetings with companies to hold preliminary and general discussions.

Mr O'Neill asked whether between 28 March 2020 and 11 July 2020 Deloitte received its first engagement and was paid for that work.

The Chairperson advised that was correct and that engagement was via Hamilton Locke to review JobKeeper payments received by Mosaic Brands during COVID.

Mr O'Neill asked was Deloitte's advice provided to Mosaic.

The Chairperson advised it was not. Deloitte's advice was provided to Hamilton Locke who had engaged Deloitte.

Mr. O'Neill stated that on 30 March 2020, the Chairperson was recorded as attending a second meeting with Mosaic's board of directors and asked if the Chairperson recalled that ANZ had been asked to approve an increase [to] the working capital facility by $20 million in order to allow employees and some suppliers to be paid, and to limit longer term supply chains and to discuss other financial issues.

The Chairperson advised he was not able to comment as he does not have access to his former records from when he worked at Deloitte, and that he did not have a copy of those minutes (from the records in his possession) in front of him at the meeting. The Chairperson re-iterated there was no engagement in place for this attendance, no advice provided, no remuneration was received, and it is not unusual for an insolvency practitioner to attend such meetings.

Mr. O'Neill stated that on 3 April 2020, the Chairperson attended the third Mosaic board of directors meeting. At that meeting there were updates on the bank and cash flow. In April 2020 there was a report issued by Deloitte to Mosaic Brands, rather than Hamilton Locke, do you agree?

The Chairperson advised that as he did not have that report in front of him he could not comment.

Mr. O'Neill asked whether the Chairperson recalled such a report.

The Chairperson advised not off hand, no.

[158]

The adoption of the Ebner "double might" test for the removal of a liquidator or administrator has been affirmed in Franklin at [59]; Accord Pacific Holdings Pty Ltd v Gleeson as liquidator of Accord Pacific Land Pty Ltd (in liq) [2011] NSWSC 1021 (Accord) at [35] - [36] (Ward J); Pinklillies Pty Ltd (Trustee), in the matter of Northwest Motel Group Pty Ltd (in liq) v Huxtable [2011] FCA 1543 at [21] (Logan J); Habrok (Dalgaranga) Pty Ltd v Gascoyne Resources Ltd (2020) 149 ACSR 1; [2020] FCA 1395 (Habrok) at [442] (Beach J).
In their submissions, the plaintiff referred to the higher "would" test for apprehended bias, in stating that the question is whether "the hypothetical fair minded observer would perceive a lack of independence or impartiality on the part of the liquidator in the discharge of his or her functions" (emphasis added). This is consistent with the language of Advance Housing at 234 (Santow J) and Re Biposo Pty Ltd (1995) 17 ACSR 730 (Biposo) at 735 (Young J), both of which preceded Ebner. I observe that there are a small number of instances where the "would" test has been applied by courts post-Ebner: see Domino Hire v Pioneer Park [2003] NSWSC 496 at [64] - [65] (Austin J) and St Gregory's at [102].
In Franklin (at [73] - [81]), the Full Court held that the application of the "would" test for the removal of a liquidator involves error. I adopt the "double might" test.
In relation to the standard of reasonable apprehension that must be met, there must be a "real and not merely a theoretical possibility of conflict": Queensland Mining Corporation Ltd v Butmall Pty Ltd, in the matter of Butmall Pty Ltd (in liq) [2016] FCA 16 at [9] (Jagot J); Franklin at [77]; Advance Housing at 232; Club Superstores at 735; Bovis Lend Lease Pty Ltd v Wily (2003) 45 ACSR 612; [2003] NSWSC 467 at [124] (Austin J). "The question is one of possibility (real and not remote), not probability": Ebner at [7].
The precise application of these tests may be influenced by the context in which they fall to be applied. The following observations were made in Isbester v Knox City Council (2015) 255 CLR 135; [2015] HCA 20 (Isbester) at [23] (Kiefel, Bell, Keane and Nettle JJ) in the context of statutory decision-making (citations omitted):

[162]

In Habrok at [442], Beach J observed that the context and nature of the office holder are all important in applying the Ebner test. In Franklin, at [60] - [61], the following observations were made:
1. The "double might" test stated in Ebner has been regarded as relatively undemanding and, on occasion, has been described as "Spartan". Nevertheless, the degree of independence and impartiality to be expected of a decision-maker may differ from one statutory context to another. As Spigelman CJ observed in McGovern v Ku-ring-gai Council [2008] NSWCA 209; (2008) 72 NSWLR 504 at [11], "the judicial paradigm is not universally applicable". Similarly, this Court observed in Cabcharge Australia Ltd v Australian Competition and Consumer Commission [2010] FCAFC 111 at [27] that, "although the test for apprehended bias is ordinarily the same wherever it arises, the precise language used in applying the test has frequently varied depending on the context in which it falls to be applied". This means, in the present case, that particular regard must be had to the position of liquidators in a voluntary winding up.
2. Liquidators are officers of the court and are, accordingly, expected to conduct themselves with independence, impartiality and integrity. However, questions of bias in relation to liquidators arise in a context which differs in material respects from that of the judiciary or administrative decision-makers. Liquidators are themselves engaged in business in a competitive environment. They have to attract work. This makes it almost inevitable that they will develop contacts and relationships with those who are actual or prospective sources of referrals. Further, the success or otherwise of liquidators will depend in part on their maintaining good professional reputations.
It is in this context that the observations in some of the authorities as to the particular position of liquidators fall to be considered. A fair-minded observer is to be taken to know and understand the conventional roles and conduct of liquidators. That conventional role and conduct is different from that of a judicial officer.
It is well accepted that prior involvement or association by the liquidator in the company is not, by itself, cause to remove a liquidator: Advance Housing at 234; In the matter of FW Projects Pty Limited (in liquidation) [2019] NSWSC 892 (FW Projects) at [100] (Black J); Re Monarch Gold Mining Co Ltd; Ex Parte Hughes [2008] WASC 201 at [16] (Master Sanderson). For example, in Commonwealth of Australia v Irving (1996) 65 FCR 291 at 296, Branson J observed that:

[164]

Similarly, it was accepted by Thomas J in Club Superstores (at 736) that it was common practice in Queensland for potential liquidators to attend pre-appointment conferences with the company's directors or a creditor which would not contravene the duties of independence and impartiality.
However, in Club Superstores (at 736), Thomas J held that "the line was clearly crossed" by the liquidator when, prior to his appointment, the liquidator (inter alia) provided specific advice to one of the directors regarding the consequences of liquidation. Thomas J observed that while it was unrealistic to assume that the liquidator would be joined as a third party to any insolvent trading claim against the director, it was not inconceivable that the liquidator could be called as a potential witness if such a claim was advanced.
In National Safety Council (at 34), the Court held that the liquidator could not be seen as independent because he was a partner of an accounting firm who had been advising the company and might potentially be the subject of a claim for negligence in not identifying earlier that the company was insolvent.
There are "no hard and fast rules" as observed by Beach J in Habrok (at [450]). Ultimately, "[w]hat the court has to do is to make up its mind by looking at the overall picture" and the liquidator's conduct as a whole to determine whether a fair-minded lay observer might reasonably apprehend that the liquidators might not bring an impartial mind to the winding up of the company: Biposo at 736.
A liquidator may retain their appointment if it can be established that their prior involvement in the company is not likely to impede or inhibit him or her from acting impartially in the interests of all creditors, or give rise to a reasonable apprehension that he or she might be so inhibited or impeded: FW Projects at [100].
When assessing the independence of a liquidator "one looks to the conduct both before and after the liquidation commenced": Biposo at 732.
The following further matters, which are by no means exhaustive, have also been cited in the authorities as relevant considerations when determining whether to replace a liquidator:

[193]

The Liquidators have expressed the view that the Mosaic Group was insolvent from 31 December 2020 "and potentially earlier," and have an investigation period of 1 July 2019 to 28 October 2024. Mr Strawbridge departed on 23 November 2020. The Liquidators have identified a "material transaction" which has the potential to be classified as a "related entity uncommercial transaction" involving the acquisition of the Ezibuy business by the Mosaic Group in 2019. They have expressed a preliminary view that there is a strong prima facie claim for insolvent trading against the directors for "at least some, if not all, of the Investigation Period."
These matters raise the possibility, if not the likelihood, that there may be an insolvent trading claim against the directors in respect of the period from 31 December 2020, and potentially earlier. It is not unlikely that directors sued in that way may point to the retention by the Mosaic Group (either directly or indirectly via Hamilton Locke) of skilled advisers upon whom they relied. Deloitte was retained, inter alia, to consider likely future cashflows and the financial position of the Mosaic Group, to consider the reliability of the financial model used by the Mosaic Group, and to recommend actions and initiatives to maintain or improve the financial position. Directors are not unlikely to say that they relied on this work to inform them as to whether the Mosaic Group would have sufficient cash and whether the Mosaic Group's analysis and forecasting was reliable. Further, they may allege reliance upon work performed by Deloitte to identify strategies or initiatives to maintain or improve the financial position of the Mosaic Group.
The Liquidators have identified the potential size of the claim for insolvent trading as up to $196 million, with an estimate of recoverable amounts in the order of $38 - $77 million before costs and funding. Common experience suggests that a claim of that magnitude is likely to generate cross-claims where available, and the available material raises the possibility of a cross-claim against Deloitte, including potentially in respect of the period while Mr Strawbridge was a partner. It is not necessary to conclude that a cross-claim against Deloitte affecting or involving Mr Strawbridge is more likely than not.
In addition to Mr Strawbridge's potential liability as a partner of Deloitte during a relevant period, Mr Strawbridge was a partner responsible for the First Engagement and a review partner on the Second Engagement and attended three Board meetings during the course of 2020 at which issues concerning the management of cashflow were discussed. At the very least, it is on the cards that Mr Strawbridge may need to give evidence about what occurred during this period.
One area of uncertainty is that the evidence does not disclose what specific advice was provided by Deloitte to the Mosaic Group and/or its directors prior to Mr Strawbridge's departure. Relevant advice was not in evidence. However, given that the Second Engagement commenced by 19 May 2020, it is likely that at least some relevant advice was provided prior to 23 November 2020. That conclusion is fortified by the fact that Deloitte invoiced Mosaic Brands for $170,500 on 14 August 2020 in respect of work on the Second Engagement.
Taking these matters together, and subject to consideration of the defendants' various "answers" to the application, a scenario in which Mr Strawbridge is involved in a claim for insolvent trading is not merely hypothetical and remote, but is a credible possibility. In the circumstances, there is at least a possibility (real and not remote) that Mr Strawbridge might not bring an impartial mind to bear to the conduct of claims against directors. There is a real and not merely a theoretical possibility of conflict. Put shortly, Deloitte was retained to provide advice on cashflow, cashflow forecasts and company systems likely to be the very subject of a claim for insolvent trading. A fair-minded lay observer might reasonably apprehend that Mr Strawbridge might not bring an impartial and unprejudiced mind to the conduct of any claim for insolvent trading because of the credible scenario that the bringing of such a claim might give rise to a claim against Mr Strawbridge himself as a partner of Deloitte, or otherwise involve him in the claim. An observer might also apprehend that this might impact not only the decision as to whether to bring an insolvent trading claim, but also how such a claim might be conducted - e.g. the vigour with which it is pursued, or the readiness to compromise the claim. A fair-minded lay observer might reasonably apprehend that even if Mr Strawbridge strived to act with complete integrity and diligence, it might be difficult to put the relevant consideration entirely out of his mind, that being the very vice of a conflict.
In relation to the conduct of the Liquidators relied upon by the plaintiff, for the reasons given earlier this does not add much to the analysis. I accept that Mr Strawbridge was dismissive of the concerns raised by the lawyers for the plaintiff. That is no doubt because those complaints were directed at Mr Strawbridge's provision of safe harbour advice, and Mr Strawbridge's response was focussed on his own limited involvement in the provision of advice to the Mosaic Group.
I also accept that, in the course of responding to the criticism, Mr Strawbridge said things that were inaccurate. For example, incorrect information was provided to creditors in the 24 June 2025 Circular and at the 1 July 2025 Meeting that he attended the Mosaic Board meetings in "no formal capacity" and not pursuant to any formal engagement. In the course of cross-examination, Mr Strawbridge accepted that those statements were inaccurate. There is no evidence to suggest that this inaccuracy was deliberate. Rather, Mr Strawbridge's evidence was that he had not reviewed the letters of engagement at the time that he made the statements. I do not think this adds anything useful to the analysis of whether Mr Strawbridge might be perceived to have a conflict or lack independence.
Turning then to the points raised by the defendants, in relation to the first point (that a claim for negligent safe harbour advice could not be made against Deloitte directly), this is not the apprehended basis of the conflict, and so this point can be put to one side. The scenario that is not unlikely is, instead, a claim against a director that leads to a cross-claim by that director against Deloitte (or against Hamilton Locke that in turn received advice from Deloitte).
In relation to the second point raised by the defendants (that outstanding debts were incurred after 2020), this is a relevant factor. However, advice received as to forecast cashflow, likely solvency, the adequacy of financial recording systems, or strategies for future trading and cashflow maintenance, is likely to remain current and applicable for a reasonable period of time after 31 December 2020 until rendered obsolete by some relevant change of circumstances. Strategic advice, in particular, may remain relevant for an extended period. Even advice as to the then-current cashflow position is likely to remain relevant for at least some time. Further, having regard to the terms of the four engagements summarised above, it is likely that any advice from Deloitte was an ongoing exercise which developed and matured over time, such that there may be no neat chronological division between episodes of advice and Mr Strawbridge may well be involved in respect of the early period: i.e. there may be allegations that later work built upon flawed earlier work.
In relation to the third point, s 588GAAA of the Corporations Act provides that the proscription against insolvent trading in s 588G(2) does not apply to a person and a debt incurred by a company if the debt is incurred in the ordinary course of the company's business and during the 6 month period starting on the day the section commences or any longer period that is prescribed by the Corporations Regulations.
The original six month period ran from 25 March 2020 to 30 September 2020. It was extended by reg 5.7B.01 of the Corporations Regulations to 31 December 2020. The defendants say that the period ran until 31 March 2021. No basis for that assertion has been identified, and the Court was not directed to any relevant further extension. The defendants may be confusing this protection with other provisions the operation of which ran until 31 March 2021. I note for completeness that this was the date also identified by the Administrators in the 13 June 2025 Report.
This third point is relevant. It means that the directors are only potentially liable under the insolvent trading provisions for debts incurred prior to 25 March 2020 or after 31 December 2020. However, the consideration is otherwise the same as for the second point, and would remain broadly the same even if the relevant date had been 31 March 2021. It is not an answer to the concern raised by the plaintiff. Further, there may be other types of liability for directors (i.e. other than for insolvent trading), such as breaches of director's duties.
In relation to the fourth point (that the conduct of the Liquidators since the commencement of the administration, including in identifying insolvent trading claims, demonstrates that there is no relevant bias), this is a relevant factor and I take it into account, including in relation to remedy. However, the conduct of a person in a position of conflict is rarely a complete answer to the issue raised by the conflict. It may often be the case that persons in a position of potential conflict strive to demonstrate the diligent performance of their role. As observed earlier, the guiding principle is that a liquidator must be independent and must be seen to be independent. Conflicts can influence behaviour in unpredictable or even unobservable ways. For example, a settlement offer by a director may seem just that little bit more attractive if it also means there will be no claim against Deloitte, and at the very least the offer may become difficult to assess objectively in those circumstances.
I emphasise that nothing I have said in these reasons should be taken to suggest that Mr Strawbridge has been acting with anything other than integrity, or to suggest that Mr Strawbridge suffers from any actual bias. The Court is instead concerned with whether a fair-minded observer might consider that Mr Strawbridge might not be able to bring an impartial and unprejudiced mind to the task at hand.
The present case is not one in which Mr Strawbridge has simply done some previous work for the Mosaic Group. Rather, the apprehended mechanism by which a fair-minded lay observer might reasonably apprehend that the liquidator might not bring an impartial and unprejudiced mind to the resolution of questions they may be called upon to decide is one where Mr Strawbridge is potentially impacted by the risk of personal liability, and in any event by the risk that he may be embroiled in litigation other than as a liquidator (for example, by becoming a witness).
In relation to the fifth point, the funding of the Liquidators is a relevant consideration that points against replacement. I discuss this in the next section.

[194]

The defendants submit that the removal and replacement of the Liquidators would cause significant prejudice to the creditors, who will not only lose the benefit of the investigations performed to date and the substantial funding available to the Liquidators, but will have the detriment of the considerable time that a replacement liquidator would need to spend familiarising themselves with the Mosaic Group's books and records and the complex business affairs of the Mosaic Group. I accept this submission. Mr Strawbridge and the other Liquidators have been considering and investigating the affairs of the Mosaic Group for over a year, since 28 October 2024. Their removal will necessarily result in delay and duplication of work, and the identified funding available to the replacement liquidators was considerably less.
Mr Strawbridge has provided the following evidence:
1. In my opinion, due to the size and complexity of the Mosaic Companies and their operations, as well as the advanced stage of the external administration, there is significant potential for wasted costs and delay in the conclusion of the winding up if alternative officeholders are appointed as liquidators of the Mosaic Companies.
2. We have become well acquainted with the complex business and affairs of the Mosaic Companies and have gained extensive information, evidence and knowledge which would enable us to expeditiously pursue the Potential Claims once funding is secured and approved.
3. We have performed significant preparatory work that is required to assess the Potential Claims, and our replacement would delay pursuit of those claims as the that [sic] work would need to be reviewed and replicated to place alternate liquidators in the same position that we are presently in. That duplication of investigatory work would be to the detriment of creditors as significant costs would be incurred with a commensurate delay to commencing public examinations and any litigation that follows.
4. An appointment of alternate liquidators would require us to handover the significant Books and Records which we have already spent time and costs in reviewing, securing and backing up.

[196]

The defendants say that these matters are a relevant consideration in determining whether it is appropriate to remove a liquidator, and that the disruption caused where a liquidation is well advanced can tell decisively against the removal of a liquidator. I accept that the disruption caused by the removal of a liquidator can be a relevant factor in considering whether an order for removal should be made, in that it may be necessary to establish that the removal is for the general advantage of persons interested in the winding up: Advance Housing at 233. However, it is also important to bear in mind that a liquidator must be independent and must be seen to be independent, which was described as a "guiding principle" in Franklin at [58] (among other authorities). In Franklin, it was concluded that there was "a conflict which is more than theoretical" (at [124]) and that this justified removal of the liquidators, even though "an order [for removal] is likely to be productive of considerable inconvenience and expense in the liquidations" (at [128]), including because the liquidators must have carried out a considerable amount of work and acquired a considerable body of knowledge. Where a perceived conflict may exist, the Court would not lightly refrain from taking steps to deal with that potential conflict on the grounds that this would cause disruption to the liquidation, recognising that this is a question of degree in all of the circumstances.
Having regard to the nature of the conflict issue in the present case, and notwithstanding the practical considerations against removal, I do not consider it to be appropriate for Mr Strawbridge to continue to have the conduct of the potential claims against the directors. I also do not consider it to be appropriate for Mr Strawbridge to have the conduct of potential claims against Hamilton Locke or Deloitte, unless there is some clear disconnection between the claim and the period prior to Mr Strawbridge's retirement from Deloitte - for example, some claim for a preferential payment to Deloitte or Hamilton Locke after Mr Strawbridge had left.
However, where the relevant considerations point in opposite directions, as they do in the present case, it also becomes relevant to consider the alternative form of relief sought by the plaintiff, being that additional special purpose liquidators be appointed for the purpose of investigating and pursuing the claims that give rise to the potential conflict. While the alternative form of relief was identified in the plaintiff's Amended Originating Process dated 1 August 2025, the plaintiff did not address this at the hearing or in their written submissions and it received no attention at the hearing.
The plaintiff proposes that the Alternative Liquidators be appointed as special purpose liquidators (the Special Purpose Liquidators). This would be in addition to the four existing liquidators. The Amended Originating Process identified a number of purposes in respect of which the Special Purpose Liquidators should be appointed:

[200]

The appointment of the Special Purpose Liquidators would have the advantage that the benefit of other work conducted by the Liquidators (including the knowledge of the Liquidators) would not be entirely lost. I consider that this is a good reason for ordering the appointment of special purpose liquidators, rather than simply ordering the replacement of the Liquidators.
In relation to funding, as noted above, the evidence suggests that Liquidators have a capped funding offer of around $9.7 million. The terms of the funding deed are confidential, and it is not clear what would happen in the event of the appointment of the Special Purpose Liquidators. The plaintiff suggests that the Alternative Liquidators have obtained an indicative proposal from Clover Risk capped at $300,000 for conducting preliminary investigations, and a further funding proposal from Clover Risk capped at $150,000 for storing the data of the Mosaic Group. It is not clear whether the funding proposal from Clover Risk would be available to the Alternative Liquidators if they were appointed as the Special Purpose Liquidators.
Without the terms of the funding proposals, the Court lacks sufficient information to determine what funding would be available if special purpose liquidators are appointed. In those circumstances, I cannot give this factor any real weight in choosing between an order for replacement of liquidators and an order for appointment of special purpose liquidators. That is not to say that funding is not taken into account at all: the greater certainty of $9.7 million of funding if the status quo remains is a consideration against any change to the liquidators. However, that factor is insufficient to weigh against the appearance of a possible conflict.
For completeness, I note that, although only Mr Strawbridge is directly affected by the issues discussed above, I do not consider that the removal of Mr Strawbridge alone (amongst the Liquidators from FTI Consulting) is a viable outcome. No party suggested such an approach.
Mr Strawbridge is a Senior Managing Director in the Financial Advisory Group at FTI Consulting. Mr Strawbridge joined FTI Consulting, following his departure as a partner from Deloitte, at some point in 2021. Mr Strawbridge is a chartered accountant and registered liquidator with more than 25 years' experience assisting companies restructure their businesses. It is apparent that Mr Strawbridge is the lead liquidator of the Mosaic Group. He has been the sole signatory on every notice or circular to creditors since the Liquidators' appointment in October 2024, and presided as Chairperson at the 7 November 2024 Meeting, 20 June 2025 Meeting, and 1 July 2025 Meeting. As at 11 May 2025, Mr Strawbridge had performed around 305 hours of work in relation to the administration (compared with around 306 hours performed by Ms Evans, 26.8 hours performed by Ms Warwick and 7 hours performed by Mr McGrath), and had the highest charge out rate of the Administrators. In circumstances where Mr Strawbridge has held such a role, the conduct of the liquidation by others in his team would not avoid the issue.
I have concluded that there should be an appointment of special purpose liquidators to deal with claims against directors, Hamilton Locke and Deloitte, other than claims against Hamilton Locke or Deloitte that can have no connection with the period prior to Mr Strawbridge's retirement from Deloitte. As noted above, I received limited assistance at the hearing as to the form of any orders that would be made in such an eventuality, including because I was not addressed on the plaintiff's alternative prayers for relief. I will therefore order that the parties bring in proposed agreed or competing short minutes to give effect to these reasons for judgment, and that the matter be listed for a further short hearing for the purpose of making final orders consistent with these reasons for judgment, including any order as to costs.

Shaoxing Newtex Imp & Exp Co Ltd, in the matter of Mosaic Brands Limited (in liq) v Strawbridge [2025] FCA 1479

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