Palmer and Collis and Terraplanet Limited (in liquidation), in the matter of Terraplanet Limited (in liquidation) (No 2)

The case involves Terraplanet Limited, which was in liquidation, and its liquidators, Palmer and Collis. The dispute centred around the winding up of the company and the proposed Deed of Company Arrangement (DOCA). The Federal Court was tasked with deciding whether the winding up should be terminated and the DOCA approved. The key legal issues were whether the company was solvent, if the DOCA adequately protected the interests of creditors, and if terminating the winding up would result in a better outcome for creditors compared to proceeding with the winding up.

The Court considered ASIC’s Regulatory Guide 82, which provides guidance to administrators regarding proposals involving creditors’ trusts. The liquidators had followed the guide by evaluating the proposal, disclosing material information, and expressing an opinion on its adequacy. The Court also referred to Rupert Co v Chameleon Mining, which highlighted the factors the Court considers when deciding to terminate a winding up. These factors include the interests of creditors, the liquidator, contributories, and the public. In this case, existing creditors and shareholders had voted in favour of the DOCA and recapitalisation. The Court concluded that the DOCA and the Terraplanet Creditors’ Trust met the statutory objective of maximising the chances of the company continuing in existence or providing a better return for creditors.

Given the absence of existing debts and the recapitalisation of Terraplanet, the Court inferred that the company was solvent and likely to pay future debts. The Court determined that terminating the winding up and approving the DOCA would result in a greater return to creditors than if the winding up proceeded to finalisation. Consequently, the Court terminated the winding up of Terraplanet Limited on 18 April 2008.

The orders made by the Court included terminating the winding up of Terraplanet Limited and ensuring that the order was entered forthwith on 18 April 2008.