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On 3 May 2019, the Federal Court of Australia dismissed an application brought by the administrators of an oil and gas exploration company, Paltar Petroleum Limited (Paltar) to adjourn proceedings for the winding-up of the company in insolvency. The decision illustrates that the belated appointment of administrators appointed by directors in response to pending winding-up proceedings is unlikely to keep at bay the approaching fire of liquidation; indeed, it may accelerate it.
JWS acted for the plaintiff, California-based T-S Capital Partners, LLC (T-S Capital), a creditor and contributory of Paltar. On 12 October 2018, T-S Capital commenced proceedings for an order winding up Paltar in insolvency.
The administrators sought to adjourn the winding-up proceedings on two bases:
In considering the interaction of these provisions, the Court concluded that even if a more lengthy adjournment were not in the best interests of creditors, the Court nonetheless retained a residual discretion under s 467 of the Act to enable further investigation by Paltar’s administrators to better assess those interests. The administrators conceded that if they were unsuccessful in seeking an adjournment, it was inevitable that Paltar would be wound up.
The administrators’ application under s 440A(2) comprised three limbs:
In finding that the Court was not satisfied that an adjournment was in the interests of Paltar’s creditors, the Court re-affirmed that s 440A requires at least “some persuasive evidence” that there are assets which, if realised under an administration, would produce a larger or at least an accelerated dividend for creditors than in a liquidation scenario. Significantly, the directors’ appointment of administrators just two weeks before the final hearing and submitting a DOCA proposal after that point, the hearing having been listed almost six months prior, attracted “some scepticism with regard to the value to creditors in the administration continuing”.
The Court held that the DOCA proposal was laden with uncertainty, that the DOCA proponents had already had a very long time to resolve Paltar’s liquidity difficulties, and that the consideration of an absence of prejudice to T-S Capital was not a relevant consideration under s 440A(2). In comparing the competing scenarios of administration and winding-up, the Court held that the position was “essentially neutral”, lacking the persuasive evidence required to mandate an adjournment. With respect to the residual discretion under s 467(1)(b), the Court was unpersuaded that much was likely to change in the near future and again cited the ample time already afforded to the DOCA proponents.
The following key points emerge from the Paltar decision:
 T-S Capital Partners LLC v Paltar Petroleum Limited (administrators appointed), in the matter of Paltar Petroleum Limited (No 1)  FCA 635.
  FCA 635 at , -.
  FCA 635 at  and , citing Creevey v Deputy Commissioner of Taxation (1996) 19 ACSR 456 at 457 per McPherson JA (Davies and Pincus JJA agreeing).
  FCA 635 at .
  FCA 635 at .
  FCA 635 at -.
  FCA 635 at .
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