Liquidator’s mistaken premise halts creditors' meeting

A liquidator’s rejection of a proof of debt based on a mistaken understanding of a creditor’s litigation position was sufficient to secure urgent injunctive relief, with the Supreme Court of Victoria restraining a creditors’ meeting listed for the following day.

Gaage Developments Pty Ltd entered liquidation in August 2024. Before the liquidation, Jen & Jacq, described in the judgment as a first-time property developer, had commenced County Court proceedings alleging misleading or deceptive conduct, breach of contract and negligence arising from development management services connected with a Caroline Springs subdivision.

Jen & Jacq later lodged a formal proof of debt claiming about $464,772 for fees paid to Gaage, alleging those amounts lacked proper contractual basis or were paid for consideration that failed. It also advanced contingent claims for wasted costs and lost profits.

The liquidator rejected the proof of debt on the basis that the County Court dispute first needed to be determined. Separately, the liquidator had entered into a deed purporting to assign the company’s rights in a counterclaim against Jen & Jacq to third parties.

Jen & Jacq appealed the rejection its claim, and sought an urgent interlocutory application seeking to restrain the liquidator from convening or proceeding with a creditors’ meeting scheduled for the following day until the hearing and determination of the appeal proceeding. The purpose of the meeting was to seek retrospective approval of the assignment deed under s 477(2B) of the Corporations Act. Jen & Jacq opposed the assignment, and its immediate concern was to have the opportunity to secure the right to vote at that meeting. On a final basis, Jen & Jacq sought the admission of its proof for all purposes.

At the injunction hearing, the liquidator admitted that he had assumed Jen & Jacq had leave to continue proceedings against the company and intended to pursue its claim in the County Court rather than prove in the winding up. That assumption was incorrect. Justice Nichols found that, had the liquidator understood the true position, it was certainly possible he may have admitted the proof, including at a nominal value for voting purposes.

The Court found there was a serious question to be tried. Although the creditor’s evidentiary case was described as quite marginal, there was a real prospect that the rejection decision could be overturned on the de novo appeal applicable to proof of debt determinations.

The Court also found there was a risk of prejudice if the meeting proceeded, because Jen & Jacq would lose the immediate opportunity to vote on whether the assignment deed should be approved, which was one of the practical objectives of the appeal.

No material prejudice was identified on the other side. The liquidator did not point to any harm to creditors or to the administration if the meeting were delayed, and the proof of debt appeal had already been listed for hearing on 19 June 2026.

The Court therefore restrained the liquidator from convening or proceeding with the meeting pending determination of the appeal.

Read the decision here.

J Levine of Counsel, Winstan Lawyers acted for Jen & Jacq.