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ARTICLE · 14 JULY 2015

Court sets aside bankruptcy composition passed and accepted by creditors

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This case confirms the guiding principles for the court's discretion to set aside a composition passed by the creditors.

AustraliaInsolvency/Bankruptcy/Re-Structuring
David Abernethy
David Abernethy
Jason Salman
Jason Salman
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A bank loaned over $8,000,000 to Areaworks Pty Ltd for a property development in Victoria. Adrian Liddell (Liddell) provided a guarantee of the debt. Subsequent to default under the facility, the bank sold the secured property and commenced debt recovery proceedings against Liddell for the shortfall of over $700,000 owing to it.

A sequestration order was subsequently made against Liddell upon the presentation by Liddell of a debtor's petition, with admitted debts in his bankruptcy totalling $3,303,078.

On 14 August 2014 a meeting of creditors was convened to consider a composition proposed by Liddell whereby $50,000 would be paid to creditors by his family, delivering an expected return to creditors of about 1 cent in the dollar (Composition). The seven creditors in attendance voted unanimously to accept the Composition.

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