If you can’t convince a court that continuing an administration is preferable to a winding up, how can you expect creditors to make an informed decision about the DoCA you want them to consider?
“It will immediately be apparent that a creditor provided with that information could not undertake any meaningful assessment of the likelihood of recoveries in a liquidation, that compares with the asserted recoveries with the Amended DOCA.” Justice Ashley Black.
That’s the thinking of NSW Supreme Court judge Ashley Black who has refused an application brought by three Mackay Goodwin worthies to adjourn the hearing of a winding up application that if not delayed would prevent their holding a second meeting of creditors of Usman Dental Pty Ltd.
As it turned out In the matter of Usman Dental Pty Ltd (admins apptd) [2025] NSWSC 591 the judge relied on the well established principle that those making an application for an adjournment of the hearing of a winding up application have to satisfy the court that it is in the best interests of creditors to continue the administration, rather than it may be.
That failure stemmed directly from what the judge deemed an insufficiency of information provided by administrators Mathieu Tribut, Domenic Calabretta and Richard Lawrence, who despite seeking to be appointed liquidators if their adjournment bid failed, remain as administrators of two related entities.
“In these circumstances, the uncertainties in the information to be put before creditors and now put before the Court are such that it is not possible to undertake any rational comparison of the benefit to Usman Dental of remaining in voluntary administration, with a view to entering into the Amended DOCA, and liquidation, because the Voluntary Administrators have not provided sufficient information as to the outcome in either position to allow their reasoning to be assessed,” the judge said.
“It will immediately be apparent that a creditor provided with that information could not undertake any meaningful assessment of the likelihood of recoveries in a liquidation, that compares with the asserted recoveries with the Amended DOCA”, the judge continued.
“Where that is the case, creditors would have difficulty voting on the relevant resolution, in any informed way, and, more importantly for present purposes, it is not possible for the Court to be satisfied that it is in the interests of Usman Dental’s creditors for it to continue in voluntary administration rather than be wound up, preserving the opportunities of any insolvent trading claim and any of the other claims to which the Voluntary Administrators refer.
“In an application of this kind, the Voluntary Administrators bear the onus of establishing not merely the possibility of a better result in a voluntary administration, but the fact that it is in the interests of the company’s creditors for Usman Dental to continue under administration, on the balance of probabilities, and the evidence before me is incapable of establishing that matter,” he said.
Luckily for the Mackay Goodwin trio the creditor on the winding up application – which succeeded in having its nominees Cate Conneely and Rahul Goyal of Cor Cordis appointed as liquidators – didn’t press for an order that Tribut, Calabretta and Lawrence pay its costs of opposing the adjournment bid.
The administrators were very lucky, on the recent authorities. It is a burden on the part of the administors to place sufficient information before the Court to enable it to be satisfied that it is in the interests of creditors, who they are reporting to, that there be an adjournment so as to enable those creditors to determine any proposal for a DOCA, rather than an immediate winding up.