In the matter of I and P Holdings Pty Ltd (in liquidation)

[2017] NSWSC 675

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of I & P Holdings Pty Ltd (in liquidation) [2017] NSWSC 675
Hearing dates:	13 April 2017
Decision date:	13 April 2017
Jurisdiction:	Equity - Corporations List
Before:	Black J
Decision:	The Court grants special leave to the liquidator to distribute the surplus in the winding up of the company to the contributories of the company, and makes ancillary orders.
Catchwords:	CORPORATIONS – Winding up – Application for special leave under Corporations Act 2001 (Cth) s 488(2) to distribute surplus – where liquidator seeks to retain some funds for further costs
Legislation Cited:	- Corporations Act 2001 (Cth), ss 461(1)(k), 480, 488(2) - Corporations Regulations 2001 (Cth), reg 5.6.71(1) - Supreme Court (Corporations) Rules 1999 (NSW)
Cases Cited:	- CGU Workers Compensation (NSW) Ltd v Ascom Service Automation (Australia) Pty Ltd [2005] NSWSC 747 - Hayes, Re Henry Walker Eltin Group Ltd (in liq) (No 4) [2015] FCA 656 - Re Allseal Floor Preparations Pty Ltd (in liq) [2015] NSWSC 1990 - Re DS Millard & Son Pty Ltd (1997) 24 ACSR 71 - Re HIH Services Pty Ltd (in liq) [2012] NSWSC 1188
Category:	Procedural and other rulings
Parties:	Katherine Elizabeth Barnet in her capacity as court-appointed liquidator of I & P Holdings Pty Ltd (in liq) (Applicant) Ignatios El Tobbagi (First Respondent) Peter Wahbe (Second Respondent)
Representation:	Counsel: J Hutton (Applicant)   Solicitors: Clayton Utz (Applicant)
File Number(s):	2015/145572

Judgment- ex tempore

1. Ms Katherine Barnet, in her capacity as court-appointed liquidator of I & P Holdings Pty Ltd (in liq) (“Company”) seeks an order under s 488(2) of the Corporations Act 2001 (Cth) that special leave be granted to her to distribute the surplus in the winding-up of the Company to its two contributories, in the proportion of half to each of them. In order to bring that application, she seeks a formal order that these proceedings be reopened, with the laudable objective, presumably, of avoiding the cost of an additional filing fee, and an order that she be joined as the Third Defendant to the proceedings. There seems to me to be no difficulty with those orders, which provide a convenient and cost-effective way of dealing with an application of this kind.

2. So far as the application under s 488(2) of the Corporations Act is concerned, the relevant principles are well established and were summarised by Mr Hutton, who appears for Ms Barnet in the application, by reference to authority. Because those principles are so well established, I need deal with them only briefly, to provide background to the disposition of the application. Section 488(2) of the Corporations Act relevantly provides that a liquidator may distribute a surplus only with the Court's special leave. That provision is intended to ensure that there is in reality a surplus, in that creditors' claims have been recognised and met in full and also to ensure that the correct relativities amongst contributories have been observed: CGU Workers Compensation (NSW) Ltd v Ascom Service Automation (Australia) Pty Ltd [2005] NSWSC 747 at [4]; Re Allseal Floor Preparations Pty Ltd (in liq) [2015] NSWSC 1990 at [4]. The phrase “special leave” requires that a special application be made to the Court, as has occurred in this case: Re DS Millard & Son Pty Ltd (1997) 24 ACSR 71 at 72; Re HIH Services Pty Ltd (in liq) [2012] NSWSC 1188 at [10].

3. The application for special leave to distribute a surplus is in this case supported by Ms Barnet's affidavit dated 28 March 2017. Ms Barnet refers to the circumstances in which she was appointed as liquidator of the Company in a winding-up on the just and equitable ground under s 461(1)(k) of the Corporations Act. She refers to the nature of the Company's business, which it appears was to hold three industrial units, which have since been realised as part of the Company's liquidation. She refers to the fact that Mr El Tobbagi and Mr Wahbe were the two principals in a business, with which the Company was associated, and each had a 50% shareholding in the Company. A dispute arose between them, and that appears to have given rise to the application for the winding-up of the Company.

4. Ms Barnet refers to the steps which have been taken to realise the properties owned by the Company and to pay out its secured debt and unsecured debts, including debts owed to companies associated with Mr El Tobbagi and Mr Wahbe and debts owing to the Australian Taxation Office. Ms Barnet notes that, following the completion of that process, and discharge of liabilities owed to the Company's creditors in full, including discharge of all of the Company's tax liabilities, the Company continues to have a substantial surplus which, in the ordinary course, should be distributed amongst its contributories.

5. Ms Barnet indicates that she has undertaken a formal process of seeking proofs of debt, and attended to the three debts that were claimed in that process, involving a small debt to the Australian Taxation Office and two more substantial debts to companies associated with the shareholders. Notice of intention to declare a dividend has been advertised on the Australian Securities and Investments Commission’s insolvency notice website and given to creditors. Ms Barnet also sets out the work which has been undertaken in the course of the liquidation, and the remuneration which has been paid to her and her firm, together with a small amount that has been payable by way of out-of-pocket expenses. No issue arises as to remuneration in this application because that remuneration has been approved at a meeting of the Company's creditors which, as I noted above, include entities associated with the Company's shareholders.

6. There is evidence as to the Company's register of members, which establishes the identity of its contributories, and Ms Barnet refers to her intention to distribute the surplus to those contributories in accordance with their interests, subject to retaining a relatively small amount of funds to be applied to further costs and disbursements, specifically legal expenses in respect of this application and an anticipated application to release Ms Barnet as liquidator under s 480 of the Corporations Act and deregister the Company. Each of the Company’s two contributories consents to the distribution of the surplus to them in the manner that is proposed.

7. There is evidence of service of the Interlocutory Process and accompanying documents on the Company’s contributories and creditors, again including the Australian Taxation Office, and of publication of notice of the hearing in an appropriate newspaper. The matter was called and no third parties sought to appear in respect of the application.

8. I am satisfied that the steps that have been taken are such that it has been shown that creditors have been discharged, contributories have been properly identified and the amount owing to them has properly been calculated, and it is appropriate that an amount be held back for payment of the liquidator's reasonable costs and expenses, by way of external disbursements, in respect of the completion of steps in the liquidation and of this application. The consent of contributories is a relevant factor in making such an order. It will often be reasonable to authorise a distribution of a surplus, in circumstances that some amount is retained for further costs, in order to avoid the need for a further application, once those additional costs have been incurred: see, for example, Hayes, Re Henry Walker Eltin Group Ltd (in liq) (No 4) [2015] FCA 656 at [16].

9. Ms Barnet seeks an order that is commonly made in an application of this kind to dispense with the requirements under reg 5.6.71(1) of the Corporations Regulations 2001 (Cth) for an order distributing the surplus to have annexed to it a schedule in accordance with Form 551. The relevant information is contained in Ms Barnet's affidavit, the identities of the contributories are clear and they consent to the distributions to them, and there would be no useful purpose in annexing such a schedule to the orders. Such an order should be made.

10. Ms Barnet has recognised, consistent with the authorities, that although an order for her release and deregistration of the Company may well ultimately be appropriate, it should not be sought until the final steps involved in distributing the surplus are completed. For that reason, I will make an order relisting the matter in the near future, once the steps involved in completing the distribution have occurred. It is likely that any application on that occasion will require no more than a brief updating affidavit, to confirm that the proposed steps have been taken, since Ms Barnet has otherwise addressed the requirements of the Supreme Court (Corporations) Rules 1999 (NSW) in her affidavit evidence in this application, and the relevant legal issues have already been addressed in submissions for this application.

11. For these reasons, I make orders in accordance with paragraphs 1–7 of the Short Minutes of Order initialled by me and placed in the file. I make a further order 8, that these orders be entered forthwith.

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