Brealey v Shields - [2009] NSWSC 1148

CITATION: Brealey v Shields [2009] NSWSC 1148

HEARING DATE(S): 26/10/09

JUDGMENT DATE :
26 October 2009

JURISDICTION: Equity Division
Corporations List

JUDGMENT OF: Barrett J

EX TEMPORE JUDGMENT DATE: 26 October 2009

DECISION: Distribution ordered

CATCHWORDS: CORPORATIONS - winding up - winding up by the court - surplus after payment of debts and liabilities - liquidator seeks special leave to distribute surplus - requirement that schedule of quantified entitlements be annexed to court's order granting leave - power of court to dispense with that requirement - where only two contributories - no distinction between them - dispensation granted

LEGISLATION CITED: Corporations Act 2001 (Cth), s 488(2)
Corporations Regulations 2001, rule 5.6.71
Supreme Court (Corporations) Rules 1999, rule 7.9

CATEGORY: Principal judgment

CASES CITED: Re D S Millard & Sons Pty Ltd (1997) 27 ACSR 71

PARTIES: David Anthony Brealey - Plaintiff
Edward John Shields - First Defendant
ACN 103 089 416 Pty Ltd - Second Defendant

FILE NUMBER(S): SC 1796/09

COUNSEL: Mr P Bard, Solicitor - Plaintiff

SOLICITORS: Paul Bard Lawyers - Plaintiff

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BARRETT J

MONDAY 26 OCTOBER 2009

1796/09 DAVID ANTHONY BREALEY v EDWARD JOHN SHIELS & ANOR

1 The applicant is the liquidator in the court-ordered winding up of ACN 103 089 416 Pty Ltd, formerly Access Hoists and Scaffolding Pty Ltd.

2 The applicant has given evidence that he has ascertained all debts and liabilities by adjudicating proofs of debt. Those debts and liabilities have been paid in full.

3 Subject only to expenses associated with this application, the applicant has in his hands, as liquidator, a surplus of $143,559.81. He has applied to the court for “special leave” under s 488(2) of the Corporation Act 2001 (Cth) to distribute that surplus.

4 The requirement for “special leave” means no more than that the court’s permission be sought by an application specially made by the liquidator: Re D S Millard & Sons Pty Ltd (1997) 27 ACSR 71.

5 The matter is straightforward. There are two members of the company. Each holds one share. There are, accordingly, two contributories.

6 The applicant’s solicitor, Mr Bard, has referred to rule 7.9 of the Supreme Court (Corporations) Rules 1999 which requires prior publication of an application of this kind, the publication being by means of a notice in Form 15 as prescribed by those rules.

7 The evidence establishes that that requirement has been met.

8 Mr Bard has also directed my attention to regulation 5.6.71 of the Corporations Regulations 2001:

9 The regulation refers to Form 551, a copy of which appears at the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2009] NSWSC 1148
Decision Date: 26 October 2009

CaseChat Overview and Summary

The case of Brealey v Shields involved a winding-up petition by the court in relation to a company. The central issue was the distribution of any surplus funds remaining after the satisfaction of all debts and liabilities. The liquidator sought special leave from the court to distribute the surplus to the shareholders, but the leave was conditional upon a schedule of quantified entitlements being annexed to the court's order. The liquidator sought the court's permission to dispense with this requirement, given the particular circumstances of the case.

The legal issues before the court were whether the requirement to annex a schedule of quantified entitlements to the court's order was mandatory or discretionary and, if discretionary, whether the circumstances of the case justified dispensing with that requirement. The court needed to consider whether the unique situation, with only two contributors without distinction, warranted a departure from the usual procedure.

The court held that the requirement to annex a schedule of quantified entitlements was not mandatory but rather a matter for the court's discretion. Given that there were only two contributors and no distinction between them, the court found that it was appropriate to dispense with the requirement in this instance. This decision was based on the simplicity and clarity of the entitlements, which made the additional formality unnecessary. The court granted the liquidator's application to dispense with the requirement, allowing the surplus to be distributed as requested.

Orders