Re Equititrust Limited (in liq)

In this matter McMurdo J considered a number of hitherto unresolved issues concerning whether or not a “proof of debt” lodged for the purposes of the second meeting of creditors in an Administration could be regarded as a “proof of debt” for the purposes of the subsequent liquidation of the company?  In the circumstances of the case the creditor which lodged the initial proof of debt asserted that it had no effect after the meeting of creditors in administration and that it was entitled to lodge a different proof of debt in the liquidation.   His Honour held that a proof lodged for the purposes of an Administration would not normally be effective as a proof of debt in a subsequent liquidation.  In reaching his conclusion his Honour made the following determinations:

•The Corporations Act does not make provision for the lodgment of formal proofs of debt within an Administration and nor does it empower the Administrator to require one.  The regulations only permit a liquidator to require a formal proof debt.

•The regulations concerning the content of a formal proof of debt confirm that its use is in the context of liquidations.

•However, as there is authority to the contrary it can be accepted that the reference in reg 5.6.23 to a formal proof of debt can apply to a meeting under s 439A.

•Nevertheless, a document which is a formal proof of debt which is lodged at a meeting of creditors of a company under administration does not automatically become a proof of debt in the subsequent liquidation of the company:

-There is no provision in the Act or in the regulations to the effect that a proof lodged when the company is in administration will become a proof in liquidation.

-The date at which the creditor’s indebtedness is to be ascertained differs depending on whether the proof of debt is for an administration or for a liquidation.

-For the purposes of a liquidation a formal proof of debt must be delivered or sent to the liquidator and that is not satisfied by mere reliance on a proof lodged for the purposes of administration meetings.  The position may be different where the creditor has asked the liquidator to treat the original as a proof in the liquidation and the liquidator has agreed.

-A proof of debt which has been lodged in the course of an administration and has been rejected is of no on-going effect.