HIS HONOUR: The company Spacespan Australia Pty Limited was wound up by order of the Court on 23 March 2013 on the just and equitable ground, and Paul William Gidley - the present applicant - was appointed liquidator. He has identified the creditors, realised the assets and paid the liabilities of the company, and there remains a substantial surplus for distribution among the shareholders, of whom there are two - the first defendant Barry John Mullens, as to two of four issued shares, and his former wife Carol Michelle Mullens, as to the other two issued shares.
Prior to the appointment of the liquidator, there were proceedings between Mr and Mrs Mullens in the Family Court of Australia at Newcastle. On 1 March 2011, by consent, that Court made orders for the adjustment and settlement of the interests of Mr and Mrs Mullens in their property pursuant to (CTH) Family Law Act 1975, s 79. For present purposes, those orders relevantly provided that the husband and wife sign an agency agreement to appoint an agent to sell the business conducted by Spacepan Australia Pty Limited, and that upon the sale of the business or the expiration of the agency agreement - whichever was the earlier - they forthwith appoint the liquidator to carry out a voluntary liquidation of the company, and (by order 1.3(1)) that:
Upon the sale of the business and/or the liquidation of the company, they, within 14 days of a request to do so, do all acts and things and sign all documents necessary to cause the proceeds of sale and/or distribution of dividends to be applied in the following priority:
(a) in payment of agent's commission and/or auction expenses on sale;
(b) in payment of the legal costs and disbursements on sale;
(c) in payment of any adjustments on settlement;
(d) as to 20 percent of the balance remaining to the CGT account;
(e) as to 41.5 percent of the balance remaining to the wife and
(f) as to the balance to the husband.
Visnic v Sywak [2016] NSWSC 1956 | Case summary | Zoe
The "CGT account" was an account to be opened; and which has since been opened, by the husband and the wife in their joint names with Westpac, with both of them as signatories, to meet their CGT liabilities arising from the disposal of assets in their joint names.
Prima facie, there being two equal shareholders and no apparent reason to adjust interests between them in that capacity, the surplus should be paid equally between them. However, a question arises as to the impact of order 1.3(1).
There are a number of ways in which effect might be given to the Family Court order, consistently with the liquidator's obligations.
The first is the Court's power under (CTH) Corporations Act 2001, s 485(2), by which the Court is empowered to adjust the rights of the contributories among themselves and to distribute any surplus among the persons entitled to it. Prima facie, in the absence of provision to the contrary in the corporate constitution, surplus assets must be distributed rateably in proportion to the nominal amounts of the shares held by the members at the commencement of the winding up [see Re Klaus Maertin Pty Limited (2009) 618, 232 FLR 239 at [38] (Austin J); Visnic v Sywak [2011] NSWSC 1246, 86 ACSR 569 at 574‑575 (Barrett J)]. However, it is at least arguable that in exercising its jurisdiction under Corporations Act, s 485 - which by s 488(1) is delegated to the liquidator - the Court may have regard to equitable interests [see Visnic v Sywak at [35] and [36]). Nonetheless, as the law does not seem to have gone further than to hold that that proposition is arguable, and as the power to adjust rights of contributories amongst themselves, at least generally speaking, is taken to refer to the situation where some of the contributories have contributed or paid in full and others have not, it is preferable not to have to rely on that approach in the present circumstances.
The second possible approach is that where, as here, all the contributories have agreed amongst themselves as to how the surplus proceeds are to be distributed, there is no reason why the liquidator and court should not give effect to that agreement, so that by unanimous assent a different entitlement to the distribution is substituted for that which would prevail on the face of the corporate constitution. That creditors may do so is well established, and there does not seem any reason in principle why shareholders likewise should not be able to agree amongst themselves on a distribution other than in accordance with their legal entitlements under the corporate constitution.
The third basis is that, on any view, a contributory may, before or after receiving a distribution direct the liquidator to pay it to another person. Provision to that effect is made by (CTH) Corporations Regulation 2001, reg 5.6.72 and Form 553. That means that if such a direction is given to the liquidator, the liquidator must pay as directed, rather than to the person prima facie entitled.
The consent order of the Family Court embodies an agreement between all the contributories in the company, as well as being an order of a superior Court that binds each of them to act in a particular way. Until recently, the liquidation proceeded on the footing that there would be a distribution in accordance with orders 1.3(1), and it appears only relatively lately that the liquidator has entertained some doubt about whether that course can safely be adopted. It may be that a formal request of the kind contemplated by order 1.3(1) has not been made, but it is clear enough that, pursuant to the order of the Family Court and by the agreement between them, each is bound to join in such a direction. The practical effect is that there has been an equitable assignment of the wife's share of the proceeds to the extent that her 50% legal interest exceeds the 41.5% to which she is entitled under the orders.
On that basis, although strictly speaking, the legal position is that Mr Mullens and Mrs Mullens are each prima facie entitled to 50%, having regard to the underlying agreement between the parties and the orders of the Family Court, the liquidator should be directed to pay the proceeds in accordance with order 1.3(1).
As virtually none of the procedural requirements for a grant of special leave under Corporations Act, 488(2), have been attended to, it will suffice for present purposes if I give advice that the liquidator would be justified in proceeding on that basis. It seems to me that the appropriate course would be for the liquidator to obtain from the wife, pursuant to order 1.3(1), a direction in Form 553, and that would give him the requisite authority and protection in respect of a distribution in the manner I have indicated.
For the purposes of compliance with rule 7.9(2), and pending the amendment of the rules to make provision in respect of how such a notice should be published, it will suffice if notice in Form 15 is published in a daily newspaper circulating in the State in which the company last had its principal place of business. It may be appropriate to dispense with the requirement that a schedule in Form 551 be attached to the order if sufficient detail of the payment can otherwise be included in the ultimate order, but no attention appears to have been given to this matter at this stage.
Accordingly, the Court orders that:
1. The liquidator would be justified in distributing the surplus proceeds in the liquidation in accordance with order 1.3(1) made in the proceedings between Barry Mullens and Carol Mullens in the Family Court of Australia at Newcastle on 1 March 2011.
2. For the purposes of Corporations Rules r 7.9(2), the notice of the application for special leave to distribute surplus be published in a daily newspaper circulating generally in the State or Territory where the company had its last known place of business.
3. The proceedings be adjourned to 20 June 2016 at 9.45am in the Corporations Judge Motions List.
[3]
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Decision last updated: 01 September 2017