In the matter of John L Norris Holdings Pty Limited (in Liquidation)

[2013] NSWSC 2005

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of John L Norris Holdings Pty Limited (in Liquidation) [2013] NSWSC 2005

Hearing dates:

17 December 2013

Decision date:

17 December 2013

Jurisdiction:

Equity Division - Corporations List

Before:

Brereton J

Decision:

Pursuant to Corporations Act, s 488(2), the liquidator have special leave to make an interim distribution of the surplus assets of John L Norris Holdings Pty Ltd (in liq) in accordance with the schedule in Form 551 annexed to this order.

Costs of this application be costs in the liquidation.

Catchwords:

CORPORATIONS - External administration - winding up - application for special leave pursuant to (Cth) Corporations Act 2001 s 488(2) to make interim distribution of surplus assets.

Legislation Cited:

(Cth) Corporations Act 2001 s 485, s 488
(Cth) Corporations Regulations 2001 reg 5.6.69
(NSW) Supreme Court (Corporations) Rules 1999 r 7.10

Cases Cited:

D S Millard & Son Pty Ltd (1997) 24 ACSR 71
In the Matter of Trussted Frames and Trusses Pty Ltd [2012] NSWSC 787
Re Klaus Maertin Pty Ltd (in liq) [2009] NSWSC 618; [2009] 232 FLR 239
Visnic v Sywak [2012] NSWSC 1284

Category:

Principal judgment

Parties:

Ian James Purchas (applicant)
John L Norris Holdings Pty Ltd (defendant)

Representation:

Counsel:
J Johnson (applicant)
Solicitors:
Megan McCormick & Andrew Williams Lawyers Pty Limited (applicant)

File Number(s):

2013/356202

Judgment - EX TEMPORE

1. HIS HONOUR: By originating process filed on 26 November 2013, the liquidator of John L Norris Holdings Pty Ltd seeks special leave pursuant to (Cth) Corporations Act 2001, s 488(2), to make an interim distribution of the surplus assets of the companies to the contributories in accordance with a document in Form 551, a copy of which will be annexed to the order to be made in these proceedings.

1. Corporations Act, s 485(2), provides that the court must adjust the rights of the contributories amongst themselves and distribute any surplus among the persons entitled to it. Section 488(1) provides that the rules or regulations may enable or require a liquidator to exercise all or any of the powers and duties conferred and imposed on the court in respect of, inter alia, "(c) the adjusting of the rights of the contributories among themselves and the distribution of any surplus among the persons entitled to it". However, subsection (2) provides that despite anything in the rules or regulations made for those purposes, a liquidator may distribute surplus only with the court's special leave.

1. (NSW) Supreme Court (Corporations) Rules 1999, r 7.10, delegates the powers reserved to the court under part 5.4B of the Corporations Act to the liquidator, but subject to the Act, the regulations, the rules and any order of the court. Accordingly, the power to distribute surplus has been delegated to the liquidator, however section 488(2) means that the liquidator nonetheless requires the court's special leave to distribute surplus. The cases establish that the words "special leave" are essentially of historical origin, and do not denote that any particular standard is required so far as establishing grounds for leave is concerned, but only that it be shown that it is appropriate in all the circumstances for the distribution to be made [Re Klaus Maertin Pty Ltd (in liq) [2009] NSWSC 618; [2009] 232 FLR 239 (Austin J), citing re D S Millard & Son Pty Ltd (1997) 24 ACSR 71 (Young J); see also In the Matter of Trussted Frames and Trusses Pty Ltd [2012] NSWSC 787, [4]]. The purpose of requiring the court's special leave is largely concerned with ensuring that there is, in fact, a surplus to be distributed, and that proper steps have been taken to ensure that those who might have a claim on it have been notified.

1. Rule 7.9 specifies that the affidavit in support of an application for special leave to distribute surplus must state how the liquidator intends to distribute surplus, including the name and address of each person to whom the liquidator intends to distribute any part of the surplus, and that at least fourteen days before the date fixed for hearing, the liquidator must publish in accordance with r 2.11 a notice of the application in accordance with Form 15. The purpose of the requirement to advertise notice of the application is to give all creditors or contributories an opportunity to have their claims considered before the distribution of any surplus [Visnic v Sywak [2012] NSWSC 1284, [5]].

1. In this case, the evidence establishes that, having substantially completed the administration and settled a list of contributories and having given notice of intention to declare a dividend and having published that notice on 3 April 2013 on the ASIC website in accordance with (Cth) Corporations Regulations 2001 reg 5.6.69, there are in the liquidation assets of, approximately, $3,536,000 comprising an investment portfolio managed funds of $3,403,000, an investment portfolio of cash of $447,960, an investment portfolio of equities of $1,803,271, an investment portfolio fixed interest account of $420,212, the liquidator's current account of $60,474 and the liquidator's interest bearing account of $801,000. The liquidator proposes to retain $480,598 to cover estimated liabilities, including legal fees $60,000, liquidator's fees $142,000, tax $55,483 and other (including third party portfolio management fees and contingencies) $230,115.

1. The shareholding is held as follows: Patricia Louise Norris, John Mark Norris and Louise Ann O'Rourke jointly hold 4,001 cumulative preference shares; Patricia Louise Norris holds 3,001 ordinary shares; John Mark Norris holds 20 ordinary shares and Louise Ann O'Rourke holds 20 ordinary shares.

1. The effect of the company's Constitution, as amended, and in particular article 109, is that the cumulative preference shares are entitled only to repayment of the paid-up capital upon a winding up, albeit in preference and priority to the ordinary shares: see cl 2 in the special resolution. The ordinary shares are entitled to the surplus pro rata. In accordance with those entitlements, the liquidator proposes to make an interim distribution of the equities and of cash to the value of $770,000 as follows: first, to Patricia Louise Norris, John Mark Norris and Louise Ann O'Rourke jointly as trustees for Patricia Louise Norris in respect of the cumulative preference shares, $8,002; secondly, to Patricia Louise Norris in respect of her ordinary shares, a total of $2,978,861 (comprising $751,975 in cash, $3,403 in the portfolio managed funds, $1,803,271 in the portfolio equities and $420,212 in the portfolio fixed interest); thirdly, to John Mark Norris in respect of his ordinary shares, cash of $5,011.50; and, fourthly, to Louise Ann O'Rourke in respect of her ordinary shares, cash in the sum of $5,011.50. Those proposed distributions reflect the respective entitlements of the shareholders under the Articles of Association as amended.

1. Article 109(b) provides that if the company is wound up, the liquidators may with the sanction of an ordinary resolution divide among the contributories "in specie or kind" any part of the assets of the company. On 10 December 2013, at meeting of the members of the company, the shareholders unanimously sanctioned a proposed distribution, including a distribution in specie, as set out above.

1. Notice of the present application under r 7.9(2) was published in the Sydney Morning Herald on 12 December 2013, which was not at least fourteen days before the date fixed for the hearing of the application. In circumstances where notice of intention to declare a dividend has previously been given, and a list of contributories duly settled, it seems improbable that a creditor not already known to the liquidator would now emerge in response to such advertisement. None has yet emerged since the notice was published, giving notice of the proposed notice of the hearing today. In any event, the amount reserved from the interim distribution on account of contingencies provides some comfort that were a creditor to emerge, there would be funds from which provision could be made. In those circumstances, I am prepared to dispense with further compliance with r 7.9(2).

1. In compliance with r 7.9(1), the supporting affidavit states how the liquidator intends to distribute the surplus. The notices exhibited to the affidavit contain the name and address of each person to whom the liquidator intends to distribute surplus.

1. The court orders that:

(1)   Pursuant to Corporations Act, s 488(2), the liquidator have special leave to make an interim distribution of the surplus assets of John L Norris Holdings Pty Ltd (in liq) in accordance with the schedule in Form 551 annexed to this order.

(2)   Costs of this application be costs in the liquidation.

(3)   The liquidator have liberty to apply on seven days' notice for special leave for any further distribution.

(4)   The court directs that a minute of this order be lodged with my associate together with the annexure, for entry.

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Decision last updated: 30 June 2014