When can liquidators refuse to call a creditors meeting
Recent decisions of the New South Wales Supreme Court and Court of Appeal give helpful guidance on when liquidators can refuse to call a meeting of creditors when asked to do so.
On 18 March 2026, the Court of Appeal handed down judgment in Ample Skill Ltd v Reidy [2026] NSWCA 32, confirming the earlier (Supreme Court decision in Re Balamara Resources Ltd (in liq) [2025] NSWSC 618 and dismissing the application for leave to appeal with costs.
The liquidators, represented by Hall & Wilcox, were successful in both proceedings.
Key takeaways
- Liquidators do not always have to call a creditors’ meeting, even if creditors ask for one.
- They can refuse if the request is not reasonable, including where it may harm creditors or is made for an improper purpose.
- Liquidators meet the ‘good faith’ requirement if they genuinely consider the relevant issues – they do not need to prove their decision was the right one.
- Courts will focus on how the decision was made, not whether it was correct.
- Clear, timely records are critical if the decision is later challenged.
Background
On 17 October 2024, Balamara Resources Limited (In Liquidation) was wound up on ‘just and equitable grounds’ under section 461(1)(k) of the Corporations Act 2001 (Cth). Balamara’s only significant asset is an ongoing international arbitration claim against the Republic of Poland, relating to the failure to grant mining concessions to its subsidiaries.
Soon after their appointment, a group of ten creditors (directing creditors) issued a formal direction to the liquidators to call a meeting of creditors under section 75-15 of the Insolvency Practice Schedule (Corporations) 2016 (Cth) (IPS). The purpose of the meeting was to consider and vote on a resolution for the removal and replacement of the liquidators.
The liquidators declined to call the meeting, taking the view that the request was unreasonable. They then applied to the Supreme Court of New South Wales pursuant to section 90-15 of the IPS for confirmation that their decision was justified.
At first instance, the court agreed with the liquidators and rejected a separate application by the directing creditors to force the meeting to go ahead.
The directing creditors then applied for leave to appeal from that decision. The Court of Appeal refused leave, finding there was no practical benefit in allowing the appeal. The court also determined that even if leave been granted, the appeal would have been unsuccessful.
Legal framework: when can liquidators say no?
Section 75-15 of the IPS sets out when liquidators must call a meeting of creditors, including if directed to do so in writing by at least 25 per cent of the creditors by value (s 75-15(1)(c)).
However, section 75-15(2) provides that the liquidators need not comply with the direction if the request is not reasonable.
Rule 75-250 of the Insolvency Practice Rules (Corporations) 2016 (Cth) (IPR) sets out when a direction is not reasonable, including where the liquidator, acting in good faith, is of the opinion that:
- complying with the direction would substantially prejudice the interests of one or more creditors or a third party, and that prejudice outweighs the benefits of compliance (r 75-250(2)(a)); or
the direction is vexatious (r 75-250(2)(d)).
Original decision: liquidators justified in declining to call a meeting
When considering the liquidators’ application under section 90-15 of the IPS, the court made clear that its role is not to assess whether the liquidators’ decision was correct or preferable, but whether they genuinely, and in good faith, held the opinion that the direction was unreasonable.
Good faith requirement
A central issue in the proceeding was the meaning of the phrase ‘acting in good faith’ under rule 75-250 of the IPR.
The liquidators submitted that they only needed to genuinely consider the relevant matters, including whether complying with the direction would cause substantial prejudice to creditors or whether the direction was vexatious. If they did so, the requirement for the liquidators to act in good faith was satisfied.
The directing creditors argued that, to reach a decision in good faith, the liquidators must also have a reasonable basis for their opinion that the direction was vexatious or that complying with it would cause substantial prejudice to creditors.
The court did not accept that submission and preferred the liquidators’ formulation. It found that two questions need to be answered:
- Did the liquidators in fact hold the view that the direction was vexatious or that complying with it would cause substantial prejudice to creditors?
- If so, did the liquidators form that view at the conclusion of or as a result of a genuine attempt to inform themselves of those matters?
The court at first instance accepted that the liquidators had genuinely attempted to inform themselves of relevant matters in forming their opinion that the direction to call a meeting of Balamara’s creditors was unreasonable.
Substantial prejudice to creditors
The court accepted that the liquidators believed that complying with the directing creditors’ direction may cause substantial prejudice to Balamara’s creditors.
The liquidators formed this opinion on the basis that:
- due to the time of year the direction was issued, a meeting could not be held promptly;
- Balamara’s asset position depends heavily on the outcome of the claim against the Republic of Poland, and any delay could negatively affect to creditors;
- once put on notice of their potential removal, the liquidators were required to minimise their work on the liquidation, meaning the progress of the arbitration claim would be delayed while the creditors’ meeting was convened; and
- if replaced, new liquidators may need several months to review the matter thoroughly in order to progress the claim against Poland, resulting in significant delay and duplication of costs.
Vexatiousness
The court also accepted that the liquidators formed the view that the direction was vexatious.
Specifically, the liquidators considered that the direction may be an attempt by the directing creditors to circumvent or avoid the judgment by which the liquidators were appointed because:
- the direction was issued only a few days after the liquidators were appointed; and
- the liquidators had not received any complaints from creditors regarding their conduct.
The appeal: no practical utility
On appeal, the court refused the directing creditors’ application for leave to appeal with costs (the court’s reasoning is at paragraphs 18 to 21). Leave was refused principally due to a lack of practical utility in allowing the appeal.
The court noted it was being asked to consider whether to, in effect, require the liquidators to call a meeting of creditors now based on circumstances which existed some 15 months ago. It also noted it did not know what has transpired in the liquidation of Balamara since December 2024, and therefore requiring the liquidators to comply with the direction to call a meeting of creditors was not tenable.
Further, the court also found that the directing creditors were not prevented from simply issuing a new direction to the liquidators to call a meeting of creditors. The liquidators would then consider whether that direction was reasonable based on the circumstances at that time. Given that alternative avenue, the court considered an appeal was not appropriate.
In any event, the court determined that, even if leave had been granted, all proposed grounds of appeal would have been dismissed. It confirmed that ‘good faith’ under rule 75‑250 of the IPR does not require an assessment of whether the liquidator’s opinion was objectively reasonable. It is sufficient that the liquidator genuinely and in good faith forms their opinion, having regard to the present circumstances.
Practical guidance for insolvency practitioners
These decisions reinforce that, while section 75-15 of the IPS grants creditors the power to direct that the liquidators call a meeting of creditors, that power is not absolute. Liquidators may refuse to comply where they believe the direction is unreasonable, provided they act in good faith.
In forming an opinion that a direction to call a meeting of creditors is unreasonable, the liquidator must make a genuine attempt to consider and weigh the relevant information.
However, this does not provide an unfettered right for liquidators to refuse to comply. The court will carefully review the liquidator’s notice of decision, contemporaneous records of their decision and any other affidavit material to determine if the relevant opinion was formed in good faith.
The decisions also highlight steps external administrators should take to support their decision:
- Keep contemporaneous file notes of decision-making processes: it’s important that notes are dated and created at the time, not later. Where possible, liquidators should record each step in the reasoning process.
- Demonstrate good faith: this may include seeking legal advice before issuing a notice of decision and showing that factors in favour for and against complying with the direction have been considered.
- Consider the impact of the proposed outcome: where the purpose of the meeting is stated in the written direction, consider what will happen if the proposed resolution passes or fails, and the likely impact on creditors.
If you or your colleagues have any questions or would like to discuss how we can assist you, please get in touch with a member of our insolvency team.
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