Key Takeaways

Section 1323 of the Corporations Act (Cth) 2001 (Act) provides a Court with broad powers to prevent a person from dissipating or diminishing property and/or leaving the jurisdiction in particular scenarios which include:

1. where an investigation is being carried out under the Act (or ASIC Act); or
2. where a prosecution has begun against a person for a contravention of the Act; or
3. where a civil proceeding has begun against a person under the Act.

In order to obtain relief, a Court must be satisfied:

• it is necessary or desirable to do so for the purpose of protecting the interest of an aggrieved person; or alternatively:
• if a relevant person is liable, or may become liable, to pay money (by way of a debt, damages or compensation.

The provision has not been readily used by liquidators conducting investigations as part of their statutory obligations under the Act. Previous authorities have found that the provision did not extend to a person conducting an investigation in a private capacity¹.

Whilst the law remains unsettled in some jurisdictions, in a series of recent cases, Courts have shown that there is a basis to make orders under the section on the application of a liquidator, where on balance, it is ‘necessary and desirable’ to do so². Evidence of an ‘appreciable risk’ of dissipation and a ‘reasonably persuasive case’ against the relevant person will be essential for the Court to exercise its discretionary power.

Meaning of ‘investigation’

In Ramsay v Featherston Resources Ltd³, Black J declined to make an order under section 1323 of the Act on the basis that there was no ‘investigation’ being carried out as required.

His Honour found that the power did not extend to ‘a person in a private capacity who is not exercising powers under either the Corporations Act or the ASIC Act and is considering or contemplating whether to commence proceedings.’⁴ His Honour was of the view the term investigation referred to ‘an investigation undertaken in the exercise of a statutory power arising under the relevant Act, such as ASIC's power to conduct an investigation under ASIC Act Part 3 Division 1.’

Recent authorities have challenged this decision and suggest there is a ‘reasonable argument’ to broaden the concept of an investigation for the purpose of the making an order under the section⁵.

In Hogan v McCorkell⁶, Lee J accepted there was weight to the plaintiff’s submissions that:

• the express terms of s1323(1)(a) did not limit the ‘investigation’ to one being carried out by ASIC.
• the section was framed in ‘wide’ terms to protect the aggrieved person in the event that liability to that person was later established, and it would be inconsistent to read down the section.
• the roles performed by ASIC and external administrators are not dissimilar - both require investigative powers.
• the statutory position of a liquidator is different to the position of an ordinary litigant. Similar to ASIC, a liquidator does not act in a private capacity nor is motivated by self-interest.
• there is no requirement for an applicant to demonstrate the usual elements for asset preservation orders (like a prima facie case or risk of dissipation) as statutory purpose of the provision is protecting the aggrieved person (including threats to those interests).

In Re 30 Denham Pty Ltd (In Liquidation)⁷, Stewart J found there was ‘at least a “reasonable” argument’ that an investigation conducted by a private liquidator, namely examinations pursuant to ss596A and 596B, constituted an “investigation” within the meaning of s 1323(1)(a)⁸. In that decision however, he found that it was not necessary to decide the specific question of whether it constituted an investigation, for the purposes of making interim orders under s 1323(3) where the Court need only to be satisfied it was desirable to do so.

Similarly, in Fourteen Consulting Services Pty Ltd (in liq) v A.O.B Holding Pty Ltd⁹, Jackman J found, that it is ‘sufficiently arguable on an interlocutory basis that the examinations now being carried out under ss596A and 596B constitute investigations under the Act’¹⁰.

‘Necessary’ or ‘desirable’

The key question being contemplated, is whether the making of the orders are ‘necessary’ or ‘desirable’ in balancing both public and private rights.

There has been no clear direction as to what it would deem ‘necessary’ or ‘desirable’ relating to such applications brought by liquidators as private litigants. However, in cases brought by ASIC, Courts have held they will consider equitable grounds when determining what is ‘necessary’ or ‘desirable’, looking at the needs and interests of the aggrieved persons and the threats to those needs and interests, rather than the nature of the remedy¹¹.

In ASIC v Adler¹², Santow J observed that ‘evidence of dissipation of assets and at least a reasonably persuasive case are powerful discretionary considerations affecting the court’s willingness to make an order at all.’ His Honour went further to say the ‘absence of appreciable risk of dissipation of assets and of an at least reasonably persuasive case against the individual concerned, should ordinarily lead to the denial of such asset preservation orders as a matter of discretion. Indeed the absence of either one of such factors would ordinarily be fatal.’¹³

In Special Gold Pty Ltd (In Liq) v Dyldam Developments Pty Ltd (Subject to a Deed of Company Arrangement)¹⁴, Stewart J found that if a Court determines the interests of the aggrieved person are, or may, be prejudicially effected, the Court must exercise discretionary judgment to decide what protection should be given. There was also evidence, including difficulties of service of process, before the Court which suggested “active avoidance”. His Honour was satisfied to make limited forms of freezing orders to protect the plaintiff in pursuit of its claims “to ensure that any judgment that it may obtain can be satisfied”¹⁵.

Implications

The line of recent cases, particularly in the Federal Court, there appears to be a shift that ‘investigations’ conducted by liquidators can constitute an ‘investigation’ sufficient to enliven the Court’s discretionary powers under s 1323. The decisions suggest a greater willingness for the Court to grant interim orders, where investigations are being conducted by a liquidator, provided it is satisfied that it is desirable and necessary to do so. However, the law remains very unsettled in some jurisdictions and whilst the Court’s jurisdiction under s 1323 may be enlivened, it remains discretionary. The Court will need to be satisfied there is an “appreciable risk” of dissipation and a “reasonably persuasive case” against the relevant person to grant any orders.

[1] [2013] NSWSC 1923 at [15]
[2] Re 30 Denham Pty Ltd (in liq) [2023] FCA 134; Hogan (liquidator) v McCorkell, in the matter of McCorkell & Associates Pty Ltd (in liq) [2023] FCA 863 (27 July 2023)
[3] [2013] NSWSC 1923
[4] Ramsay v Featherston Resources Ltd [2013] NSWSC 1923 at [15].
[5] Re 30 Denham Pty Ltd (in liq) [2023] FCA 134; Hogan (liquidator) v McCorkell, in the matter of McCorkell & Associates Pty Ltd (in liq) [2023] FCA 863 (27 July 2023)
[6] Hogan (liquidator) v McCorkell, in the matter of McCorkell & Associates Pty Ltd (in liq) [2023] FCA 863 (27 July 2023)
[7] [2023] FCA 134
[8] Re 30 Denham Pty Ltd (In Liquidation) [2023] FCA 134 [29]
[9] [2023] FCA 704
[10] Fourteen Consulting Services Pty Ltd (in liq) v A.O.B Holding Pty Ltd [2023] FCA 704 at [14]
[11] Australian Securities and Investments Commission v Sigalla [2010] NSWSC 1423; Australian Securities and Investments Commission v Krecichwost [2007] NSWSC 948
[12] (2001) 38 ACSR 266, 268-9
[13] (2001) 38 ACSR 266, 269
[14] [2025] FCA 226
[15] [2025] FCA 226 at paragraph 25