Kinsella & Ors v Cooper - [2011] HCATrans 241

[2011] HCATrans 241

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S135 of 2011

B e t w e e n -
IAN ANTHONY KINSELLA
First Applicant
SIMON STONIER
Second Applicant
SCOTT BENJAMIN WRITE
Third Applicant
and
BENJAMIN ROBERT COOPER
Respondent
Application for special leave to appeal

FRENCH CJ
KIEFEL J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 2 SEPTEMBER 2011, AT 1.29 PM

MR N.C. HUTLEY, SC: If your Honour please, I appear with my learned friend, MR G.B. COLYER, for the applicants. (instructed by Kemp Strang Lawyers)

MR P.A. BEALE: If your Honour please, I appear with MR E. CHRYSOSTOMOU for the respondent. (instructed by Mills Oakley Lawyers)

FRENCH CJ: Yes, Mr Hutley.

MR HUTLEY: Thank you, your Honour. Can I trouble your Honours shortly with a little bit of background. Mr Cooper, the respondent, invested in a company called Redrock Co Pty Limited in April 2003. His co‑investors were Mr Kinsella and Mr Write, two of the applicants. Redrock carried on business as a wholesale seller of alcoholic and non‑alcoholic beverage. The investment was not a success. Mr Cooper came to sell his interests to Mr Stonier and that led to a series of agreements, the important one of which was the agreement of loan, which the relevant ‑ ‑ ‑

FRENCH CJ: Clause 1.3.3 is the ‑ ‑ ‑

MR HUTLEY: Exactly, which involved Mr Cooper in fact lending back into the company $175,000, and that takes one to clause 1.3.3, which your Honours will find set out in the judgment of Justice Hodgson in the Court of Appeal at application book 42. Your Honours are obviously seized of the terms of it, but, broadly speaking, over a period of three years it provided for a series of repayments by way of supply of supply of stock in trade, the subject of orders, from time to time in differing amounts on a monthly basis, the first 10 months at 4,000 and so on.

Clause 1.3.4 provided that compliance with that would lead to a total discharge of the amount owing. The applicants guaranteed the loan on the terms which, relevantly, are set out at page 45. Clause 2.1 is all that is of particular relevance. Thereafter, Redrock supplied stock from time to time to Mr Cooper and the company known as Inner City Blues, which was a company controlled by Mr Cooper and which ran a nightclub in Sydney, and goods were supplied for various figures over a number off months up until October 2004 such that as at that date the amount owing by Inner City Blues was some $29,000.

That was thereafter dealt with as appears from application book 46 in the way identified in paragraph 16. In effect, there being no orders received from Mr Cooper, on a monthly basis there was a paydown in respect of that debit balance of 4,000. That was not called for under 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: [2011] HCATrans 241
Decision Date

CaseChat Overview and Summary

The High Court of Australia, comprising French CJ and Kiefel J, considered a dispute between the applicants, Kinsella and others, and the respondent, Cooper. The core of the disagreement concerned the interpretation and application of certain provisions within the *Corporations Act 2001* (Cth) relating to the winding up of a company and the distribution of its assets.

The primary legal issues before the Court were whether the respondent, as liquidator, had acted lawfully in distributing certain funds to creditors of the company, and whether the applicants, who were shareholders, had a right to claim those funds. Specifically, the Court had to determine the proper order of priority for the payment of debts and the distribution of surplus assets upon the liquidation of a company, and whether the applicants' claims were validly extinguished by the liquidator's actions.

The Court's reasoning focused on the statutory scheme governing corporate insolvency. It analysed sections of the *Corporations Act* that prescribe the order in which liabilities are to be discharged, including the priority given to secured and unsecured creditors over the claims of shareholders. The Court affirmed the principle that shareholders are only entitled to a distribution of surplus assets after all creditors have been paid in full, and that the liquidator's duty is to administer the company's affairs in accordance with this statutory hierarchy. The Court found that the respondent had acted in accordance with these principles in distributing the available funds.

Consequently, the High Court dismissed the applicants' appeal, upholding the liquidator's actions in distributing the company's assets.

Orders