Scott (Trustee) v Stolyar, in the matter of Stolyar

bACKGROUND 4 The applicant as the bankruptcy trustee of Ms Stolyar's son and his wife brought proceedings in this Court (NSD 861 of 2019) against Ms Stolyar to recover various assets for the bankrupt estates (primary proceedings). 5 After a number of Court hearings and applications, Markovic J upheld substantially all of the applicant's claims in the primary proceedings: Scott (Trustee), in the matter of Stolyar (Bankrupt) v Stolyar [2022] FCA 691 (primary judgment). Her Honour made extensive orders in favour of the applicant including orders for the payment of a sum of some $5,544,782.46 by Ms Stolyar: Orders 26 and 28 made on 6 September 2022. 6 Ms Stolyar has now exhausted her avenues of appeal against the primary judgment. The Full Court dismissed her appeal: Stolyar v Scott (Trustee) [2023] FCAFC 61 (Banks-Smith, Downes and Jackman JJ). The High Court subsequently refused an application by Ms Stolyar for special leave: Stolyar & Anor v Scott in his capacity as the trustee of the bankrupt estates of Ian Stolyar and Beth Ngoc Nguyen [2023] HCASL 129 (Edelman and Steward JJ). 7 On 15 May 2023, a judicial registrar of this Court made a charging order. The charging order was made over Ms Stolyar's shares in CTP (Shares) to secure the payment of her judgment debt to the applicant. The applicant, by this application, now seeks to enforce his charge upon the Shares by the appointment of a receiver empowered to sell the Shares on such terms as the receiver sees fit. The applicant seeks the appointment of David Mansfield of Deloitte as receiver. Mr Mansfield is an accountant, registered liquidator and registered trustee in bankruptcy. He has consented to his proposed appointment. 8 It is important to note that the summary of share price movements in CTP between July 2022 and November 2024 tendered by the applicant demonstrated that the Shares were relatively illiquid and falling in value.

Legal principles 9 As Mr Edney of counsel, who appeared for the applicant, set forth in his written submissions, the principles with respect to the making of a charging order are well established. 10 In summary, a charging order is a means of enforcement available for judgment debts in the Supreme Court of New South Wales pursuant to s 106(1)(c) of the Civil Procedure Act 2005 (NSW). It was, therefore, an order that was able to be made in the primary proceedings pursuant to s 53 of the Federal Court of Australia Act 1976 (Cth). 11 Such an order is available against various kinds of assets including shares in public companies: s 126(1)(a) of the Civil Procedure Act 2005 (NSW). It operates "to charge the [asset] in favour of the judgment creditor to the extent necessary to satisfy the judgment": s 126(2)(a) of the Civil Procedure Act 2005 (NSW). Further, s 126(5) of the Civil Procedure Act 2005 (NSW) provides: A charging order entitles the judgment creditor, in relation to the [asset] charged by the order, to any relief to which the judgment creditor would have been entitled had the charge been made to the judgment creditor's favour by the judgment debtor. 12 The practical effect of these matters is that a judgment creditor has the same rights as any other equitable chargee. These include the right to have, by separate process, the charged property appropriated to satisfy a judgment debt. 13 The ordinary remedy is the ordering of a judicial sale and the Court will grant such remedy without the creditor being required to show any special circumstances: Galbally at [69]-[74]; Mathieson Nominees v Aero Developments & Ors [2016] VSC 131 at [76]-[79] (Vickery J). Such a judicial sale may be achieved by appointing a proper person such as a liquidator to sell the shares: Galbally at [77].

Consideration 14 The critical issue in this case is the fact that the Shares are relatively illiquid. Unless the Shares are sold in an orderly manner, there is a significant risk that the value of the Shares will be significantly diminished. 15 Both the applicant and Ms Stolyar agree that the Shares should be sold and the moneys paid into Court. They disagree as to who should sell the Shares. 16 The applicant presses for the appointment of a receiver on the basis that the sale of the Shares is not a straightforward exercise and there has been a failure by Ms Stolyar in the past to comply with asset preservation orders of the Court. I make no finding today as to whether or not there has, in fact, been any failure by Ms Stolyar to comply with asset preservation orders in the past. That is a serious matter and I would not attempt to address that matter absent a full consideration of all of the circumstances. 17 Ms Stolyar opposed the appointment of a receiver to sell the Shares because the costs of any receivership would reduce the net proceeds of the sale of the Shares. Ms Stolyar submitted initially that she would be able to arrange for CommSec to sell the Shares on her behalf in an orderly manner that would not unduly reduce the prices that could be achieved for the Shares. 18 Mr Edney pointed to annexures to the applicant's 22 December 2023 affidavit which demonstrate or establish that CommSec has effectively stated that it will not take any further instructions from Ms Stolyar with respect to any future sale of the Shares. 19 In response, Ms Stolyar then advised the Court that her lawyers had informed her that they would be prepared to sell the Shares on her behalf for no charge. 20 Unfortunately, it is difficult to place any particular weight on that submission, given that the solicitors otherwise appear to have withdrawn from representing Ms Stolyar and have not been in Court on this occasion or on the last occasion when this matter was before me. It may be that the offer has been made, but it is important that the sale of these Shares be under the control of a responsible person who the Court is confident is going to ensure, to the extent possible, that the sale is conducted in an orderly manner. 21 It was by no means clear whether Ms Stolyar's solicitors would ultimately seek to recover their costs with respect to the sale of the Shares or whether their particular interests, and those of the trustee and those of Ms Stolyar, might align in a way that would maximise the potential sale of those Shares (particularly if the solicitors were not intending to recover their costs for selling the Shares). 22 Suffice it is to say that there is no evidence other than statements from the bar table of any indication that the solicitors would be prepared to sell the Shares and not seek to recover their costs. 23 Ms Stolyar also submitted that potential delay arising from the appointment of a receiver was a further reason not to appoint a receiver. At the end of the day, however, any delay in the time taken to sell the Shares due to the appointment of a receiver is unlikely to be material given that it is going to take some time to sell the Shares in a manner that will minimise the risk of diminishing their value through the sale of a large parcel of shares in an illiquid stock. 24 Given the illiquid nature of the Shares, the evidence that CommSec will not sell the Shares on behalf of Ms Stolyar and the uncertainty surrounding the position of Ms Stolyar's solicitors, I am firmly of the view that the most appropriate course, in all the circumstances, is for a receiver to be appointed to sell the Shares, notwithstanding the additional costs of the receivership.

Disposition 25 In those circumstances, orders substantially in the form sought by the applicant in the short minutes provided on 22 December 2023 are to be made. I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Halley.