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ARTICLE · 18 NOVEMBER 2014

Creditor’s pumped up priority brings down DOCA

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This decision cautions against DOCAs that prefer certain creditors, unless there is a clear benefit to all creditors.

AustraliaInsolvency/Bankruptcy/Re-Structuring
David Abernethy
David Abernethy
Jason Salman
Jason Salman
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Connections Total Fitness for the Family Pty Limited (Connections) operated a gym on premises owned by Selkirk Pastoral Co Pty Limited (Selkirk). The gym business ultimately failed and ceased trading when administrators were appointed on 4 October 2013. Connections' assets were limited to some cash at bank and a $1.1m claim against Selkirk.

A Deed of Company Arrangement (DOCA) was proposed under which the administrators' existing solicitors (Meehans) would be paid ahead of employee entitlements on the basis that Meehans would continue to pursue the $1.1 claim against Selkirk. Unsurprisingly, Selkirk voted against the DOCA, but the DOCA resolution passed with the support of a number of related party proxies.

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