Liquidators not required to prove debts prior to commencing compensation proceedings for insolvent trading

In the matter of Mustang Marine Australia Services Pty Ltd [2014] NSWSC 1074, Brereton J of the New South Wales Supreme Court held that there is no principle that before instituting proceedings a liquidator must be satisfied of the material facts that constitute its cause of action, and that absent such satisfaction the proceedings are an abuse of process. As long as proceedings are instituted for bona fide relief claimed and are not doomed then there is no abuse of process.

FACTS

Mustang Marine Australia Services Pty Ltd (Mustang) went into voluntary administration in March 2010. The administrators called for and received "proofs of debt." Thereafter, the administrators sold Mustang's business to a third party. In May 2010 the creditors resolved to accept a Deed of Company Arrangement (DoCA) pursuant to which creditors would receive a divided from a deed fund.