Court punts Worrells pair who agreed to 11th hour VA

The recent judgment of Victorian Judicial Registrar Ian Irving in EAD Concepts Pty Ltd (admin apptd) [2021] VSC 227 (28 April 2021) makes for instructive reading in respect of the court’s views on winding up versus voluntary administration (VA), and there’s entertaining detail around IP rivalry prompting iNO to wonder which Melbourne-based IPs haven’t had a drink out Melbourne developer Steller’s mushrooming collapse.

In essence EAD Concepts (EAD) director Simon Maurice Pitard, 38 of Cheltenham, Victoria appears to have sought to appoint voluntary administrators (VA) to the company after its major lender, which is itself in liquidation, applied to have EAD wound up over a $3.823 million debt.

“What is required by s 440A(2) is satisfaction that it is in the interest of the company’s creditors for the company to continue under administration, rather than be wound-up, as distinct from satisfaction that it may be so. That reinforces the view that a substantial degree of persuasion that administration rather than liquidation is in the interests of the company’s creditors is required to invoke the section.” Judicial Registrar Ian Irving.

The insolvency practitioners Pitard chose for the job were Worrells partners Con Kokkinos and Matthew Kucianski, and they agreed to be appointed as VAs after creditor SPF Funds Management Pty Ltd filed an originating process for the winding up on March 29, 2021, but before the first court date.

When the winding up proceeding came before the Court on April 7 it was adjourned by consent until 28 April 2021.

When that adjournment expired Kokkinos and Kucianski then applied to the courts for a further adjournment of one week, which would have brought the parties to the winding up application back a day after the second meeting of creditors, scheduled for today.

Predictably, a proposed deed of company arrangement was said to be in the offing and the VAs wanted the court to indulge them so as to be able to put a resolution in respect of the DoCA to EAD’s creditors.

But on April 28 Irving refused the VAs application for the adjournment and brought the parties to the winding up application back the following day, at which time Kokkinos and Kucianski applied without notice to stay the winding up. Again, Irving refused them, the company was wound up and RSM’s David Mutton appointed.

“What is required by s 440A(2) is satisfaction that it is in the interest of the company’s creditors for the company to continue under administration, rather than be wound-up, as distinct from satisfaction that it may be so,” Irving said.

“That reinforces the view that a substantial degree of persuasion that administration rather than liquidation is in the interests of the company’s creditors is required to invoke the section.

“The Administrator bears the onus to show by ‘persuasive evidence’ that the Court ought to be satisfied that it is in the interests of the Company’s creditors that the administration continue rather than the Company be wound up.

“More than ‘mere speculative possibility’ of a higher return to creditors in the administration rather than a winding up is required. ‘Comfortable satisfaction’ of such a result is not required.”

Mutton’s referees were Pitcher Partners Andrew Yeo and Gess Rambaldi in their capacities as the liquidators of SPF Funds Management, whose travails relate directly to the $300 million collapse of the Stellar property group in 2019.

Yeo and Rambaldi of course came on board SPF in mid-2020 after replacing SV Partners’ Tim Brace, Michael Carrafa and Peter Gountzos who were appointed as VAs in late 2019.

We asked Yeo why he and Rambaldi wanted Worrells out but no response was forthcoming by iNO’s deadline. Support INO’s continued chronicling of the insolvency sector.

Further reading:

Jirsch Partner Quits Steller VA After Vote Controversy

McGrathNicol Trio’s “Relevant Non-Disclosure”