No adjournment of winding-up application to consider alternative proposal

In the recent case of Look Property Group Pty Ltd v Gateway Developments (Vic) Pty Ltd [2011] VSC 237, the Victorian Supreme Court refused to adjourn a creditor's winding-up application at the request of an administrator. The administrator sought the adjournment to enable creditors to consider a proposed deed of company arrangement (DOCA) but the court considered the terms of the proposal to be so derisory that the DOCA had no prospect of being approved at a meeting of creditors.

The administrators claimed that the DOCA, under which creditors would obtain a return of approximately four cents in the dollar, represented a better outcome for creditors than would occur in a liquidation. Two of the largest creditors submitted to the court that, if the proposal were put to a meeting of creditors, they would use their combined vote to defeat the resolution.

Accordingly, the court found that there was no basis for finding that the adjournment of the winding-up application would result in an acceptable proposal emerging. The court was particularly reluctant to use its discretion to adjourn the application because the proposal did not seek to return the insolvent company to a financially-viable position as a trading entity.