In this Australian case, a major creditor of the company in question alleged that it was involved in phoenix activity and offered to fund a public examination of the director provided that the creditor's solicitors would act for the liquidators in that examination.  The liquidators refused the offer and, in response, the creditor applied to have the liquidators removed.

The New South Wales Supreme Court declined the creditor's application on the basis that the liquidators had reasonably formed the view that they should not instruct the creditor's solicitors to examine the director (on the basis that those solicitors were exposed to a conflict).  In making that decision, Black J considered that the relevant matters included "not only whether that course would be for the benefit of the liquidation, and the body of persons interested in it, but also the need for confidence in the integrity, objectivity and impartially of the winding up."  While Black J agreed that loss of confidence by creditors may constitute a ground for removal, this would not be a sufficient basis for removal where that loss of confidence was due to an unreasonable requirement of the creditor.

The Court declined to decide whether a liquidator may refuse to conduct an examination on the grounds that it is unfunded.  Black J went on to comment that he would have also dismissed the application on the basis that there were more appropriate methods by which to challenge the liquidators' decision to decline to examine the director.

See the judgment here.