Australia: To adjourn or not adjourn (winding up proceedings), a review of section 440A(2)

In proceedings before the Federal Court of Australia and the state Supreme Courts where an application is made pursuant to sections 459P and 459Q of the Corporations Act (Cth) ("Act") for orders winding up a company, the appointment of an Administrator often results in the Administrator seeking an adjournment of winding up proceedings.

The purpose of such an adjournment is to enable the Administrator time to further investigate a company's financial circumstances before the company is wound up in insolvency.

The Court is compelled to consider the test under section 440A(2) of the Act in determining whether to allow the administration to continue, and can also use its discretionary powers to adjourn winding up proceedings pursuant to section 467(1) of the Act.

The Court will only grant an adjournment of winding up proceedings pursuant to section 440A(2) if it is satisfied that 'it is in the interests of the company's creditors for the company to continue under administration rather than be wound up'.

If the application is refused, the Court will determine the winding up application.

Application of Section 440A(2)

When a statutory presumption of insolvency has been established pursuant to section 459C(2)(a) following a defendant company's failure to comply with a statutory demand, the Courts are hesitant to allow delays to the determination of winding up proceedings.

An Administrator seeking the adjournment will often seek an adjournment to allow further assessments of the company's finances to be undertaken and a Deed of Company Arrangement ("DOCA") to be presented to creditors. An Administrator will likely submit that a DOCA would be of greater benefit to the creditors than the company entering liquidation.

Evidentiary Basis

Evidence to support these matters is required. The Court when considering whether it is "in the interests of creditors" will only consider the evidence adduced on the application; the Court does not consider what evidence might emerge in a subsequent report to creditors that is not currently before the Court, per Brereton J in Reed Constructions Australia Pty Ltd [2012] NSWSC 1045.

McPherson JA, in Creevey v Deputy Commissioner of Taxation (1996) 19 ACSR 456, held that to persuade a Court that section 440A(2) has been satisfied,

'one would expect that there would have to be some persuasive evidence'.

Recent cases proffer that the degree of persuasion must be substantial. In Offshore & Ocean Engineering Pty Ltd [2012] NSWSC 1296, Brereton J held it must be,

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' (our emphasis added).

Persuasive evidence will be in the form of detailed affidavits and evidence based on financial forecasts.

Gardiner JA in Gorst Rural Supplies Pty Ltd v Glenroy (Lake Bolac) Pty Ltd [2012] VSC 60, found that the evidence contained in the affidavit of the Administrator, based primarily on information provided to him by the defendant, was 'optimistic speculation' as opposed to positive proof.

A similar test had been accepted as "sound" by Nicholas J in DCT v LDT Corp Pty Limited (Administrator Appointed) [2011] FCA 420, following Santow J in Waste Recycling and Processing Services of NSW v Local Government Recycling Co-operative Ltd [1999] NSWSC 507 where his Honour had said:

"To grant such an adjournment there must be a sufficient possibility, as distinct from mere optimistic speculation, that such a deferment for the envisaged time is in the interests of creditors".

This can be contrasted with evidence adduced before Brereton J in Media Options Group Pty Ltd [2-13] NSWSC 1746 where an adjournment was granted due to the strength of the evidence which included a,

'real, tangible and detailed proposal for a Deed of Company Arrangement ... which more than arguably offers the potential for a better result for creditors than a liquidation.'


When an Administrator is appointed after winding up proceedings have been commenced, Courts will be wary of the intentions of the defendant. Brereton J stated in Offshore & Ocean Engineering Pty Ltd [2012] NSWSC 1296 that,

'the court approaches with a degree of scepticism whether the appointment is not an attempt as a last resort to avoid the consequences of liquidation'.

In some instances, the Court may find that a last-minute appointment of an Administrator constitutes an abuse of process. This is demonstrated by the findings of Gardiner JA in Gorst Rural Supplies Pty Ltd v Glenroy (Lake Bolac) Pty Ltd [2012] VSC 60 where,

'the appointment of the Administrator the day before the hearing amounts to an abuse of the process of Part 5.3A of the Act.'


In considering whether to adjourn winding up proceedings pursuant to section 440A(2), the Court will carefully examine:

  • when the Administrator was appointed;
  • whether formal investigations of a company's finances have occurred in an expedient manner;
  • the amount of evidence the Administrator has produced;
  • the possibility of additional funds from third parties; and
  • any previous adjournments granted for investigations by the Administrator.

Brereton J in Reed Constructions Australia Pty Ltd [2012] NSWSC 1045 highlights that the Court will also consider liquidation as a vessel for recovery,

'liquidation will have an advantage for creditors triggering the availability of the provisions that enable recovery of the proceedings of uncommercial transactions, and remedies for insolvent trading, and in this matter the court found 'apparent scope for insolvent trading claims.'


The case law establishes the following:

  • the Court will not allow defendants to use a last-minute appointment of an Administrator as a final effort to avoid winding up proceedings;
  • any foreseeable benefits to creditors must be evidence based;
  • the Court will not allow winding up proceedings to linger simply because there is scope for further examination by an Administrator;
  • an argument that creditors should be able to vote on a DOCA at a second creditor's meeting is not a relevant consideration under section 440A;
  • the Court takes a sceptical view when an Administrator is appointed just prior to a hearing date of winding up proceedings;
  • and the view of the creditors, particularly the major creditor is a relevant consideration, as is the opinion of the Administrator, but ultimately it is a matter for the Court to determine (see DCT v LDT Corp Pty Limited (Administrator appointed) supra).

If an initial adjournment of the winding up proceedings is granted and further adjournments are sought by an Administrator, then, as discussed in DCT v Bradley Keeling Management Pty Ltd [2003] NSWSC 47,

'as time goes on, and the occasion that there has been for collecting of evidence increases, so the amount of material which might need to be put before the court before it is persuaded, will increase'.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions