This time last year, we published an artice in respect of a decision of the Supreme Court of Western Australia to adjourn a winding up application to enable a Deed of a Company Arrangement (DOCA) proposal to be put to creditors, even though the administrators were appointed a year after the winding up application began.
In that article we noted that it was a matter for the Court’s discretion whether or not to make such orders.
Earlier this month, in In Polar Agencies Pty Ltd (ACN 130 636 869)  VSC 43, Matthews JR in the Supreme Court of Victoria considered a separate case in which an application for adjournment was made, with the opposite result.
On 16 November 2018, Lovelltex Pty Ltd (Lovelltex) filed an application to wind up Polar Agencies Pty Ltd (Polar) based on non-compliance with a statutory demand.
On 19 December 2018, the winding up hearing was adjourned to 6 February 2019.
On the day prior to the adjourned hearing, the directors of Lovelltex appointed voluntary administrators to Lovelltex.
On the morning of the hearing, the administrators filed:
the administrators argued for an adjournment for 6 weeks, by which time it was said that the administrators would have prepared their report to creditors under section 439A of the Corporations Act.
Lovelltex opposed the application citing (among other things) the decision in Gorst Rural Supplies Pty Ltd v Glenroy (Lake Bolac) Pty Ltd  VSC 60 which held that to adjourn a winding up application, a ‘real prospect’ as opposed to a ‘mere speculative possibility’, but not necessarily a ‘comfortable satisfaction’ of a higher return to creditors was required.
It was held that:
Accordingly, the application for an adjournment was refused and the Judicial Registrar further ordered that Polar be wound up in insolvency and appointed a liquidator for that purpose.
The Court was critical of the plaintiff’s lack of explanation about the timing of the administrators’ appointment as well as the lack of persuasive evidence in support of the application to adjourn the winding up. To that end, the Court held (citing Gorst) that while the interests of creditors are paramount, the appointment of the administrators the day prior to the winding up hearing was tantamount to an abuse of the processes of Part 5.3A of the Corporations Act.
As previously advised, practitioners should be mindful of the timing of any appointment in circumstances where a winding up application has been filed or is expected to be filed imminently.
It is important when determining whether to file an application to adjourn a winding up to consider whether or not sufficient persuasive evidence can be put before the Court demonstrating that the adjournment could result in a better return to creditors as opposed to a winding up.
Provided such evidence can be demonstrated, administrators should not be afraid of acquitting themselves of the adjournment process.