Federal Court gives community club a path out of liquidation

The Federal Court has allowed the liquidators of Sunshine City Club to appoint themselves as voluntary administrators, staying the winding up while creditors consider a deed of company arrangement that would pay creditors in full and allow the community club to reopen.

In Sunshine City Club (in liquidation), in the matter of Sunshine City Club, Justice Beach approved a truncated voluntary administration process and ordered that the liquidation be terminated if the proposed DOCA is fully effectuated. The orders give creditors the choice between approving the restructuring proposal or allowing the liquidation to resume.

Sunshine City Club has operated as a recreational clubhouse in Melbourne’s western suburbs since 1956. The company, a non-profit public company limited by guarantee, operated a licensed bar and gaming facilities, managed the club premises and supported community and charitable activities. It also owns the land from which the club operated.

The company had incurred trading losses since July 2022 and became cash-flow insolvent, although it appeared to remain balance-sheet solvent. Nathan Deppeler and Matthew Kucianski of Worrells were appointed voluntary administrators on 3 May 2026. They concluded that continued trading was not feasible, ceased operations and terminated employees on 5 May.

No restructuring proposal emerged during the original administration, and creditors resolved to wind up the company on 5 June. The liquidators then began preparing to sell the club’s land, expecting that asset realisations would be sufficient to pay creditors in full and leave a surplus.

That process was paused after adjacent community organisation Deer Park Club Inc submitted a preliminary restructuring proposal on 12 June. Under the proposed DOCA, Deer Park Club would provide enough money to pay all admitted creditor claims and external administration costs, install a new board and restart the club’s operations.

The proposal also contemplates preserving existing membership rights, offering reciprocal membership through Deer Park Club, potentially re-employing former staff and entering a market-rent lease for the property. The club’s gaming entitlements and liquor licence may also be transferred to Deer Park Club as part of the operating structure.

Justice Beach said the Court’s role at this stage was not to assess the commercial merits of the proposal, but to determine whether there was any impropriety preventing creditors from considering it. He found none, noting that the proposal appeared to have member support and offered clear benefits to creditors and the broader community.

The proposed restructuring would provide creditors with full payment sooner than a liquidation sale, preserve the club as an operating community asset and avoid sale costs, potential tax liabilities and the need for court directions concerning the distribution of any surplus. The company was also incurring property holding costs of approximately $12,846 per month.

The Court granted leave under section 436B of the Corporations Act for the liquidators to appoint themselves as administrators. Their prior involvement did not create a disqualifying conflict, and their familiarity with the company would reduce duplication, cost and delay.

Justice Beach also modified the ordinary requirements of Part 5.3A. The administrators will not need to convene another first meeting of creditors, repeat investigations already completed, obtain duplicate reports from directors or reproduce information previously supplied to creditors. They may rely on proofs of debt already lodged and convene the decisive creditors’ meeting as soon as they are ready.

Creditors will be asked to choose between execution of the DOCA and ending the administration. The usual option of resolving that the company be wound up was removed because the company is already in liquidation and the stay will lift if creditors reject the proposal.

The winding up will remain stayed throughout the administration. If the DOCA is approved and fully implemented, the liquidation will terminate once the liquidators notify the Australian Securities and Investments Commission. The Court found that the proposal should leave the company solvent, with creditors paid or released and a functioning new board responsible for ongoing operations.

Read the decision here.

Damien McAloon SC of Vicbar and List G Barristers, Nik Angelakis of Vicbar and Young's List Barristers, and Petersen Westbrook Cameron acted for the liquidators.