In two recent Federal Court decisions, Chan v Four C Realty Pty Ltd (in liq), in the matter of Four C Realty Pty Ltd (in liq) [2013] FCA 928 and Chan v Four C Realty Pty Ltd (in liq), in the matter of Four C Realty Pty Ltd (in liq) (No 2) [2013] FCA 959, the Court considered the circumstances in which it will or will not interfere with the commercial judgment of a liquidator.


Four C Realty Pty Ltd (in liq) (Four C), the first respondent, operated as an estate agent.  On 25 July 2013, liquidators were appointed to Four C pursuant to an application made by Ms Chan, a director and shareholder of Four C. 

Shortly after their appointment, the liquidators made a commercial decision to sell the business of Four C by an expression of interest (EOI) campaign.  Key events were as follows:

  • On 8 August 2013, an interested party submitted an EOI in respect of an offer of $350,000.
  • On 9 August 2013, Ms Chan submitted an EOI and made an offer to purchase certain assets of Four C for $510,000. 
  • On 13 August 2013, the liquidators accepted Ms Chan’s offer and informed the unsuccessful party of their decision. 
  • On 14 August 2013, the solicitor for the unsuccessful party wrote to the liquidators’ solicitor and stated that “there [had] been a genuine misunderstanding” in that the unsuccessful party was under the impression that if there were two bidders in the EOI process, the liquidators would then conduct an auction for the sale of the Four C business.  That letter also purported to make a further offer of $600,000 for the Four C business.
  • By 30 August 2013, Ms Chan had paid the liquidators the total purchase price, but the liquidators refused to complete the contract of sale. 

In the first of two applications, Ms Chan obtained orders that on acceptance of her EOI by the liquidators, a binding and enforceable contract existed for the purchase of the business of Four C.  In finding that a contract existed, Gordon J held that taken with the acceptance by the liquidator, the EOI document fell squarely within the first class of contracts identified in the seminal authority of Masters v Cameron, in that the parties intended to be immediately bound to the performance of the terms of their bargain but that they proposed to have the terms restated in a form which would be more precise, but not different in effect.

Having obtained an order that a binding contract existed, it was necessary for the liquidator to obtain Court approval pursuant to section 477(2B) of the Corporations Act.  Section 477(2B) requires a liquidator to obtain approval of the Court’s for the entry into an agreement, the obligations of which will continue for a period longer than three months.

The liquidators’ position was that Court approval should be granted.  However, given the events that had transpired, they also stated that the creditors’ and members’ interests would now be better served by re-opening the sales process to better offers.


In approving the Contract, her Honour held that the Court will not generally interfere in the exercise of a liquidator’s powers unless there is some lack of good faith, some error in law or principle or real and substantial grounds for doubting the prudence of the liquidator’s conduct.

Her Honour noted that the liquidators made the commercial decision to sell the assets of Four C to Ms Chan, as they considered at the time that Ms Chan’s offer would result in a better return to creditors and members of Four C compared with the offer made by the unsuccessful party.

Her Honour held that there was no evidence to prove that re-opening the sale process would achieve a better price and that there was no certainty that the unsuccessful party would make good on their enhanced 14 August Offer.  Her Honour went on to say that it could not be said that there were real or substantial grounds for doubting the prudence of the liquidators’ conduct in entering into the contract.


These decisions confirm that the Court will not go behind a liquidator’s decision in the absence of evidence of bad faith, impropriety or any other good reason to intervene, even where a further offer is made that purports to be in the best interests of creditors and members.