Creditors scuttle proposed compromise of proceedings by the liquidator

This week’s TGIF considers a recent decision of the Victorian Court of Appeal where a company’s creditors successfully opposed an application by the company’s liquidators to compromise proceedings commenced on the company’s behalf. 

Lonnex Pty Ltd (Lonnex) and Millennium Management Pty Ltd (Millennium) were related companies which had sold medical practices to a company known as Lonnex & Millennium Management Holdings Pty Ltd (LMMH) for $22 million. The full amount of the purchase price was funded by way of loan granted to LMMH by Lonnex and Millennium. That same day, the loans were forgiven by Lonnex and Millennium by entry into a deed of forgiveness and release.  The effect of this was that Lonnex and Millenniums assets were acquired by LMMH, while other liabilities (mostly owed to the major creditors) were left with Lonnex and Millennium.