Sozou (liquidator) v Touchline Pty Ltd, in the matter of Touchline Pty Ltd

Sozou (liquidator) v Touchline Pty Ltd, in the matter of Touchline Pty Ltd [2025] FCA 1516 is a Federal Court decision about time extensions in insolvency litigation. The liquidators of three companies in liquidation asked the court to extend the period for bringing possible voidable transaction claims under s 588FF(1) of the Corporations Act.

The court granted the application. Time was extended to 29 April 2028 for Touchline and Highpoint, and generally for Grow Surge as well. For one identified category of possible Grow Surge claim against Commercial TC Pty Ltd, the court granted a shorter extension to 1 March 2027. The decision is about preserving the liquidators' ability to investigate and potentially sue later. It is not a final ruling that any transaction was voidable.

The companies at the centre of the case were Touchline Pty Ltd, Highpoint Pty Ltd and Grow Surge Pty Ltd. The ATO had commenced winding up applications against each company on 29 August 2022. That date became important because it was the relation-back day for each company, which in turn set the ordinary deadline for any s 588FF application at 29 August 2025.

The current liquidators were appointed much later. They replaced the former liquidators on 29 April 2025 for Touchline and Grow Surge, and on 10 July 2025 for Highpoint. That meant they inherited the administrations only a few months, or in Highpoint's case only about seven weeks, before the ordinary deadline expired.

The evidence described a difficult investigative environment. The former liquidators had reported insufficient books and records, limited cooperation from former directors and others involved in the companies, and funding constraints. Despite those problems, they had already identified concerns about possible voidable transactions and uncommercial transactions. Their reports also suggested the companies were insolvent shortly after incorporation and remained insolvent until the administrators were appointed.

After taking over, the new liquidators said they moved quickly. They gathered and reviewed books and records, carried out forensic transaction analysis, engaged legal advisers, prepared for public examinations and worked on identifying possible claims and recovery avenues. They identified potential claims against several entities, including Empryl Pty Ltd, Videriva Pty Ltd, Auswide Operations Pty Ltd and Commercial TC Pty Ltd.

A major part of the factual story involved labour hire arrangements. The liquidators said some of the companies' business appeared to involve supplying labour hire services to only one customer under agreements that did not appear to include any mark-up or profit. They also said customers may have paid less than what should have been paid under those agreements, leaving a significant shortfall between amounts received and the companies' employment costs.

For Highpoint, the liquidators identified a potential claim against Auswide in connection with a labour hire agreement dated 1 July 2020 and said there may have been an underpayment of $2,197,088. For Grow Surge, the liquidators identified a potential claim against Commercial TC linked to invoicing under a labour hire arrangement said to be on the same terms as the Auswide arrangement. They also identified possible claims by each company against Empryl and Videriva for payments made for no apparent consideration where they had not yet found records explaining the payments.

The Grow Surge and Commercial TC issue was the most developed part of the opposition. The liquidators said Commercial TC had contracts with third parties to provide construction site traffic management services. They said Commercial TC and Comm TC Pty Ltd had entered into a labour hire agreement, and that Comm TC and Grow Surge had also entered into a labour hire agreement. On the liquidators' preliminary view, Comm TC may have acted as an intermediary between Grow Surge and Commercial TC, with Grow Surge appearing to supply workers directly to Commercial TC, invoicing Comm TC, and Comm TC then invoicing Commercial TC for the same amounts.

The liquidators also pointed to bank statements suggesting payments from Commercial TC to Comm TC were made in large rounded sums rather than amounts that could be reconciled to particular invoices. They said that, based on the limited records available, there may have been a shortfall between amounts contractually due and amounts actually paid of potentially as much as $4 million, although they acknowledged the figure could change because of complexities about which company had actually supplied the workers.

Commercial TC opposed the extension. Its sole director, Arthur Mitsoulis, said Commercial TC was a trading traffic control company and that any extension would create commercial uncertainty over the coming years, affect day-to-day operations and prejudice the business in dealing with a possible claim. He said Commercial TC employed about 120 employees, did not maintain a substantial cash reserve, and that a possible $4 million debt would pose a serious threat to its viability.

Commercial TC also disputed the liquidators' picture of the invoicing. Mr Mitsoulis said Commercial TC paid invoices issued by Comm TC under the labour hire agreement, subject to one disputed invoice dated 11 September 2022 which he suggested might not be genuine. He also said Commercial TC had never received an invoice from Grow Surge. He explained that Commercial TC had strong commercial reasons to ensure labour hire invoices were paid, including client requirements to prove wages and entitlements had been met, CFMEU audit obligations under an enterprise agreement, and reputational risk if records showed outstanding entitlements.

That was the commercial dispute before the court. The court was not deciding who was right on the underlying accounting or contractual issues. It was deciding whether the liquidators should have more time to investigate those issues properly and, if justified, bring proceedings later.

The legal issue was whether the court should exercise its discretion under s 588FF(3)(b) of the Corporations Act to extend the time for making applications under s 588FF(1). Section 588FF(3) sets the ordinary period by reference to the relation-back day, but also allows the court to order a longer period if the liquidator applies within time.

The extract records the accepted principles. The court had to balance commercial certainty for parties who had dealt with the companies against the interests of creditors and the policy of recovering transactions that may be unfair to the general body of creditors. The court also had to consider delay, the explanation for delay, the merits of the proposed proceedings where relevant, and prejudice arising from an extension.

In practical terms, the court had to ask questions such as these: how much time had the liquidators really had to investigate, including the former liquidators; whether they had acted diligently; whether the obstacles they described genuinely explained the delay; whether there was a real basis for further investigation rather than mere speculation; and whether the prejudice claimed by Commercial TC was strong enough to outweigh the case for preserving potential recoveries for creditors.

The extract also makes clear that an extension application of this kind does not require the court to finally determine the underlying voidable transaction claims. Here, the liquidators said they still needed to conduct public examinations, make further inquiries and assess the merits before proceedings could be commenced. So the court's task was procedural and discretionary, not a final adjudication on liability.

The court allowed the application. It extended time for Touchline and Highpoint to 29 April 2028. It also extended time for Grow Surge generally to 29 April 2028, but for one identified category of possible Grow Surge claim against Commercial TC, being the transactions identified in paragraphs 61 to 64 of Katherine Sozou's affidavit sworn 28 August 2025, it granted a shorter extension to 1 March 2027.

The court also ordered that the costs of the proceeding be costs in the winding up of the plaintiff companies. In addition, the court directed under s 90-15 of the Insolvency Practice Schedule that the first plaintiffs were entitled to use funds in a specified bank account belonging to Touchline for the purpose of paying the costs associated with the proceeding.

On the reasoning available, the court accepted that the application had been filed within time. It also accepted the liquidators' explanation for delay. The extract records that the former liquidators had faced obstacles including insufficient books and records, limited cooperation from former officers and funding difficulties. It also records that the replacement liquidators had undertaken substantial work in a short period after appointment and had sought to overcome those obstacles.

The court was not persuaded by Commercial TC's submission that the delay should not be excused because the same problems had existed from the beginning. The extract shows the judge accepted that those problems were real, that they had constrained the former liquidators, and that some of them still affected the current liquidators. The available reasons also indicate the court accepted there was no suggestion that the liquidators or former liquidators had been dilatory.

Commercial TC's prejudice arguments were serious. It said an extension would create uncertainty and that a large claim could threaten the viability of a business employing about 120 people. Even so, the court granted the extension, while tailoring the order for one category of Grow Surge claim against Commercial TC by giving a shorter period than the broader extension sought for other claims. That tailored order suggests the court took Commercial TC's concerns into account, but not to the point of refusing relief altogether.

The first point for business owners is that this case does not decide the merits of any voidable transaction claim. No one was found liable in this application. The court only decided that the liquidators should have more time to investigate and, if appropriate, sue. That distinction matters. An extension order preserves risk. It does not prove wrongdoing.

The second point is about limitation periods. Many businesses assume that once the ordinary three-year period from the relation-back day is close to expiring, the risk is effectively over. This case shows that assumption can be unsafe. If a liquidator applies within time and can explain why investigations could not be completed earlier, the court may extend the period significantly.

The third point is about the kinds of commercial features that can attract scrutiny. The extract refers to labour hire agreements with no apparent mark-up, possible under-invoicing, large rounded payments, uncertainty about which entity actually supplied workers, and payments for no apparent consideration. None of those matters was finally proved here. But they were enough to support further investigation and an extension of time.

For businesses using labour hire, subcontracting chains or related entities, the practical lesson is to make sure the paper trail tells a coherent commercial story. The contract should identify the correct parties, the pricing formula, what costs are included, and how invoices are to be issued and paid. The invoices should match the contract. The bank records should match the invoices. If an intermediary entity is used, there should be a clear commercial explanation for that structure.

The fourth point is about opposing an extension. Commercial TC argued that the extension would create uncertainty and threaten the viability of its business. Those are important concerns, but the court still granted relief. On the available reasons, that means general commercial inconvenience or anxiety about a future claim may not be enough by itself. A business resisting an extension should be ready to show concrete prejudice linked to the delay, while also putting forward its factual response to the liquidator's allegations.

The fifth point is procedural. If a liquidator contacts your business, issues a demand, or serves an extension application, do not treat it as a mere holding step. It may be the start of a longer investigation period. Early document collection matters. So does consistency in your explanation of how the arrangement worked in practice.

If your business operates in labour hire, traffic control, construction support services or any model involving multiple entities, this case is a prompt to review your records before a dispute arises. The extract shows how quickly an arrangement can become difficult to defend when the records are incomplete or when the practical operation of the deal does not line up neatly with the written documents.

Start with entity identification. Check that the company named in the contract is the same company issuing invoices, receiving payment and supplying the workers or services. If one entity contracts, another invoices, and a third performs the work, make sure the structure is documented and commercially justified.

Then review pricing. The court extract refers to agreements said to involve no mark-up or profit. That does not automatically make a transaction voidable, but it can raise questions about commerciality. If your pricing model is unusual, keep records showing why it was commercially sensible at the time.

Next, review invoicing and payment patterns. Rounded lump-sum payments, unexplained adjustments and gaps between contractual entitlements and actual payments can all become red flags in an insolvency investigation. Finance teams should be able to explain how each payment was calculated and what invoice or entitlement it related to.

Finally, think about retention and retrieval. An extension application often succeeds because the liquidator says more time is needed to reconstruct events from incomplete records. Businesses that can quickly produce contracts, invoices, payroll support, correspondence and reconciliations are in a much stronger position than businesses relying on memory or informal understandings.

The judgment was delivered by Markovic J in the Federal Court of Australia on 4 December 2025. The hearing took place on 20 November 2025. The relation-back day for each company was 29 August 2022 because that was when the ATO commenced winding up applications. The ordinary deadline for s 588FF applications was therefore 29 August 2025.

The current liquidators were appointed to Touchline and Grow Surge on 29 April 2025 and to Highpoint on 10 July 2025. The court then extended time to 29 April 2028 for Touchline and Highpoint, and generally for Grow Surge, while setting a shorter deadline of 1 March 2027 for one identified category of possible Grow Surge claim against Commercial TC.

This means the case is best understood as a procedural insolvency decision about preserving potential claims. Any substantive claim under s 588FF(1), if later filed, would still need to be pleaded, defended and proved in the ordinary way.

This page summarises the Federal Court decision in Sozou (liquidator) v Touchline Pty Ltd, in the matter of Touchline Pty Ltd [2025] FCA 1516. The available judgment text includes the orders, the statutory framework, the factual background and part of the court's reasoning.

Because the available reasons are truncated, some parts of the court's analysis may not be fully visible here, especially the detailed treatment of prejudice and the final balancing exercise. The summary should therefore be read as a careful public explainer of the extension application, not as a complete annotation of every aspect of the judgment.

General information only. This page is not legal advice. If your business is dealing with a liquidator, a threatened voidable transaction claim or a complex labour hire structure, get tailored Australian legal advice.