TGIF 20 June 2025 – Staying a winding up to allow for a restructure

This week’s TGIF considers a recent decision of the Supreme Court of Western Australia (Re Dundas Mining Pty Ltd (In Liq); Ex Parte John Allan Bumbak As Joint And Several Liquidator Of Dundas Mining Pty Ltd (In Liq) (ACN 608 839 050) [2025] WASC 157) to stay the winding up of a company to allow a deed of company arrangement (DOCA) to proceed.

Key takeaways

• A stay of the winding up to allow creditors to vote on a DOCA may be appropriate to facilitate a restructuring transaction and the end of the external administration.
  
  
• The liquidators may be granted leave to be appointed as the administrators with the leave of a court where the liquidators are the appropriate person. That is, there is no conflict of interest, threat to independence or “anything else offensive to commercial morality”.
  
  
• A court may make a range of other orders to facilitate the transition from a liquidation to a voluntary administration.

Background

On 30 November 2021, the liquidators were appointed as voluntary administrators of Dundas Mining Pty Ltd (in liquidation) (Dundas) and various other related companies. Dundas was subsequently placed into liquidation.

The liquidators had been pursuing investigations and public examinations of various individuals and related entities of Dundas to consider the prospects of voidable transactions and a return to creditors. Then, following without prejudice discussions, one of the former officers proposed a DOCA and transferred funds into a solicitors’ trust account as security for the DOCA proposal.

Decision

In the application for leave for the liquidators to be appointed voluntary administrators, Justice Hill adopted the relevant matters summarised by Halley J in Mansfield (liquidator), in the matter of NR Complex Pty Ltd (in liquidation) (receivers and managers appointed) [2023] FCA 614. That is, the liquidators must be appropriate persons to be appointed. In considering this, the Court will have regard to whether there are any conflicts of interest, threats to independence or “anything else offensive to commercial morality”.

In this case, it was held that it was appropriate for the liquidators to be appointed as voluntary administrators because they were familiar with the affairs of Dundas, their appointment would avoid a duplication of costs, and they were the ones negotiating with the DOCA proponent.

There was a question raised about the liquidators’ independence which arose because the liquidators were also the liquidators of a number of Dundas’ creditors and so would be submitting proofs of debt and voting on the DOCA proposal, and be representing those creditors as well adjudicating those proofs, and receiving further fees from the DOCA as the voluntary administrators/deed administrators of Dundas. Justice Hill was satisfied the liquidators would exercise professional judgment as experienced practitioners in this regard.

In respect of the application that the winding up of Dundas be stayed, Justice Hill accepted the principle in Re Hughes (in his capacity as liquidator of each of Vah Newco No 2 Pty Ltd) (in liq) [2020] FCA 1121 [32], that a stay “may be appropriate where it is designed to facilitate the proposed restructuring transaction and finalise the external administration, rather than restore the company to ordinary trading operations”.

It was held that it was appropriate to stay the winding up to facilitate the proposed restructuring, to finalise the external administration of Dundas, and to avoid the incurring of duplicate and unnecessary costs. Importantly, neither ASIC nor any creditors of Dundas had objected or applied to be heard.

Justice Hill left open the question of whether the proposed DOCA should be entered into and the winding up terminated. Terminating the winding up would mean claims would not be pursued. This was left for the creditors to vote on and for the Court to decide (on a later application) whether the winding up should be terminated.

Her Honour made a number of other orders to facilitate the transition. Those orders were the voluntary administration procedure be truncated to the second meeting of creditors, and the voluntary administrators not being required to receive a ROCAP from the directors or conduct additional investigations.

Comment

A stay of a winding up can occur to facilitate a restructuring proposal via a DOCA. The liquidators can be appointed voluntary administrators if they are appropriate persons to be appointed, with the potential for conflicts of interest and threats to independence being prime considerations for a court. Thought should also be given to what ancillary court orders are needed to facilitate the transition, minimise duplication and avoid unnecessary costs.