Solicitors:
ERA Legal (Applicants)
File Number(s): 2013/145558
[2]
Judgment - ex tempore
By Interlocutory Process filed on 12 May 2015, Mr Simon Cathro and Mr Phillip Campbell-Wilson as liquidators of Dave Lahood Pty Limited (in liquidation) ("Company") apply, relevantly, under s 488(2) of the Corporations Act 2001 (Cth) for, inter alia, special leave to distribute the balance of surplus funds held by them as liquidators of the Company, after the costs of this application, to the Company's sole contributory.
The application originally sought leave to distribute the surplus to the then trustee in bankruptcy of Mr David Lahood, but the orders now sought provide for a contribution to Mr Lahood. I have been informed and I proceed on the basis that that results from the discharge of Mr Lahood from bankruptcy after payment of all his creditors. That matter makes no difference to the principles that are in issue in this application.
Mr Anderson, who appeared for Mr Cathro and Mr Campbell-Wilson in the application, properly recognised that the preferable way to proceed was to deal with the application for special leave to distribute the balance of the surplus at this point, such that the liquidators could proceed to take that course in accordance with any order made by the Court. It would not be appropriate to proceed to an application for their release until evidence can be lead before the Court that that distribution has been completed. The matter will, accordingly, be relisted before me, at some time in the near future, for the application for release to be determined. Sensibly, a large part of the evidence that is necessary for that application for release has been read in this application, so that all that will be necessary on the next occasion is likely to be an updating affidavit to confirm that the distribution has in fact occurred.
The application is supported by an affidavit of Mr Cathro dated 12 May 2015 which deals with the history of the appointment of Mr Campbell-Wilson and Mr Cathro, initially as provisional liquidators and subsequently as liquidators of the Company and of the steps which had been taken by them to realise the Company's assets and distribute the proceeds of the realisation, in the first instance, to the Company's creditors, and to Mr Lahood's trustee in bankruptcy to the extent that Mr Lahood was entitled to some of those proceeds.
Mr Cathro points out that, on 2 April 2015, he and Mr Campbell-Wilson sought and were then granted, special leave under s 488(2) of the Corporations Act to make an interim distribution of surplus funds in the name of the company to the then trustee of Mr Lahood's bankrupt estate, and also obtained an order under reg 5.6.71 of the Corporations Regulations 2001 (Cth) that that order need not have annexed to it a schedule in accordance with Form 551. That order reserved the Applicants' ability to apply for special leave for a further and final distribution. I note that, in granting the order for an interim distribution, Brereton J would have had to be satisfied of the requirements for distribution of the surplus under s 488(2) of the Corporations Act, although it is desirable that I also satisfy myself as to those matters for the purposes of this application. Mr Cathro's evidence is that he caused a cheque then to be drawn and distributed in accordance with those orders.
Mr Cathro also deals with matters that are primarily relevant to the application for the release, although they include the steps which have been taken to provide for payment of creditors. Mr Cathro's evidence is that he has caused all creditors, both secured and unsecured of the Company, to be paid the full amount of their claims, along with interest, and has since made the interim distribution of surplus funds following the grant of leave to which I referred above. Mr Cathro's evidence is also that he has retained sufficient surplus funds in the liquidation to meet payment of his remuneration and expenses in connection with this application, and he expects the balance will remain for distribution following payment of those expenses and remuneration.
Mr Cathro updates his earlier affidavit by a further affidavit dated 19 June 2015, which indicates that he expects that a balance of approximately $50,000 will be paid as the final distribution, pursuant to the leave now sought, to the Company's sole contributory, Mr Lahood. He also refers to the fact that a share transfer form has now been executed, as contemplated by Brereton J's earlier orders, transferring the single ordinary class share in the Company to Mr Lahood.
There is evidence of service of the Interlocutory Process in this application on the Australian Securities and Investments Commission. There is also evidence in Mr Cathro's second affidavit of confirmation by the Australian Securities and Investments Commission that it neither consents to nor opposes the application, which it considers to be a matter for the Court. There is evidence that the application has also been served on creditors of the Company who, not surprisingly, where the evidence is that they have been paid, have not sought to appear in respect of the application.
Mr Anderson has prepared helpful written submissions which refer to the relevant issues in an application for leave to distribute a surplus. Mr Anderson refers to the often-cited observation of Barrett J in Re FAI Car Owners Mutual Insurance Company Pty Ltd [2009] NSWSC 1350 that the purpose of s 488(2) of the Corporations Act is to promote the exercise of care by a liquidator to ensure that all steps necessary to verify that a surplus in truth exists had been properly taken and that members' entitlements have been ascertained. The section requires that "special leave" be sought, and that in turn requires that a special application be made to the Court, as has occurred in this matter, rather than it being dealt with as part of other administrative procedures: see, for example, Re HIH Services Pty Limited (in liq) [2012] NSWSC 1188.
I am satisfied, having regard to Mr Cathro's evidence, that the relevant creditors' claims have been discharged, after having been identified after appropriate enquiry, and that there remains a surplus in the liquidation and that there is only one contributory to which a surplus should be paid, namely, Mr Lahood, following his discharge from bankruptcy. I am therefore satisfied under s 488(2) of the Corporations Act that the liquidators should be granted special leave to distribute the surplus assets of the Company which they seek.
The liquidators also seek an order dispensing from the requirement to file a Form 551 as would otherwise be required by reg 5.6.71 of the Corporations Regulations. Mr Anderson refers to the view expressed by Barrett J in Brealey v Shields [2009] NSWSC 1148 that there is no reason to require that form in a simple case, where there is only one or two contributories holding shares in a company. The purpose of the schedule contemplated by Form 511 and reg 5.6.71(2) is, in effect, to ensure that contributories are properly identified and the amounts payable to them are properly identified. I take the view, as was taken in Brealey v Shields above; Re FAI Car Owners Mutual Insurance Company Pty Ltd above and Re HIH Services Pty Limited above at [12] that no useful purpose would be served by preparing such a schedule, where it is apparent that there is only one contributory to whom the entire surplus should be paid. For that reason, I will also make the orders sought by the liquidators dispensing with the requirement to prepare and annex such a schedule under reg 5.6.71 of the Corporations Regulations.
The liquidators seek an order that the costs of and incidental to the application be paid from the Company's assets. The application is, plainly, one that was properly brought as an incident of the liquidation, and I am satisfied that that order should be made. The remaining matter is to relist the matter so that the application for release of the liquidators can be determined, after the distribution of the surplus has been completed.
I list the matter at 3.30pm on Wednesday 22 July 2015. I will renumber the orders that were previously in paragraphs 2, 3 and 4 of the orders as orders 1, 2 and 3 and I will add an additional order listing the liquidator's application for release before Black J for hearing at 3.30pm on Wednesday 22 July 2015. I make orders in accordance with paragraphs 1-4 as amended in that manner initialled by me and placed in the file.
[3]
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Decision last updated: 03 September 2015