Act First, Sue Later: Preserving Assets Before Proceedings

Sam Merrylees

Senior AssociateAitken PartnersView Profile

Liquidators are often faced with the challenge of protecting assets before recovery proceedings can be commenced.

In Baskerville, in the matter of HX Food Group (Aus) Pty Ltd (in liq) [2026] FCA 817, the Federal Court of Australia confirmed that liquidators do not always need to wait until substantive proceedings are filed before seeking urgent asset protection. The decision provides important guidance for insolvency practitioners dealing with suspected phoenix activity, offshore transfers and other risks to recoverable assets.

What Happened in HX Food Group?

The liquidator obtained an ex parte interim injunction restraining a related company from dealing with funds held in its bank accounts. The liquidator alleged that the funds were beneficially owned by the company in liquidation and were at risk of being dissipated, including potentially overseas.

Importantly, no substantive proceeding had yet been commenced, and the application was brought in existing proceedings concerning the issuing of summonses to certain people for public examination and the production of documents. The Court accepted that rule 7.01 of the Federal Court Rules 2011 (Cth) allowed interim relief to be granted where the liquidator undertook to commence substantive proceedings within 14 days.

When Will the Federal Court Grant an Asset Preservation Order?

The Court was satisfied that:

• there was a prima facie case that the funds belonged to the company in liquidation; and

• there was a real risk of dissipation if orders were not made.

The finding of dissipation risk was informed by evidence gathered during the liquidator's investigations, including:

• evasive answers provided by a director during public examinations; and

• significant non-compliance with document production obligations.

What Does This Mean for Liquidators and Insolvency Practitioners?

Investigations can support preservation orders

Public examinations and document recovery efforts are not merely information-gathering exercises. Evidence obtained through those processes may provide the foundation for urgent injunctive relief where there is a risk that assets will disappear.

Practitioners need not wait for a fully pleaded claim

Where a liquidator has identified company assets at risk and can establish a prima facie entitlement, the Court may be prepared to preserve those assets while substantive recovery proceedings are being finalised.

Obstruction can strengthen the case for relief

A director's failure to cooperate, evasive examination evidence, or non-compliance with production orders may become important evidence supporting a finding that assets are at risk of dissipation.

Conclusion

The HX Good Group decision highlights the Court’s willingness to act quickly to protect potential recoveries. For liquidators confronting suspected asset diversion, illegal phoenixing activity or offshore transfers, the decision serves as a timely reminder that urgent preservation orders may be available even before substantive proceedings are commenced. The key is assembling sufficient evidence to demonstrate both a prima facie claim and a genuine risk that assets may be lost.

Need advice on asset recovery or preservation orders?

If you are a liquidator, creditor, or insolvency practitioner dealing with suspected asset dissipation, phoenix activity, or related-party transactions, our insolvency team can assist with urgent recovery strategies, preservation orders, and related court applications. Get in touch with us to discuss your circumstances and the options available.