Official Trustee in Bankruptcy v Buffier

[2006] NSWSC 870

CITATION:	Official Trustee in Bankruptcy v Buffier [2006] NSWSC 870
HEARING DATE(S):	15 May 2006
JUDGMENT DATE :	29 August 2006
JURISDICTION:	Equity
JUDGMENT OF:	Austin J
DECISION:	See under heading "Conclusions"
CATCHWORDS:	CORPORATIONS - winding up by the court - application for authority to make distribution of surplus asset in specie - court's power to give directions to liquidator - deficiencies in application - costs of applicant and liquidator
LEGISLATION CITED:	Corporations Act 2001 (Cth), ss 477, 479, 485, 488, 556
CASES CITED:	Re GB Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674 Re South African Supply & Cold Storage Co; Wild's Case [1904] 2 Ch 268 Stafford Coal & Iron Co Ltd v Brugan [1963] 3 All ER 277 Warne v GDK Financial Solutions Pty Ltd [2006] NSWSC 464
PARTIES:	The Official Trustee in Bankruptcy (P) Andrew Brian Benjamin Buffier (D1) James Court & Associates Pty Ltd (in liq) (D2/R) Brian Joseph Bouffiere (D3/A)
FILE NUMBER(S):	SC 3519/05
COUNSEL:	JK Chippinall (A/D3) B Skinner (R/D2)
SOLICITORS:	David Landa Stewart (A/D3) Sally Nash & Co (R/D2)

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

AUSTIN J

TUESDAY 29 AUGUST 2006

3519/05 OFFICIAL TRUSTEE IN BANKRUPTCY V ANDREW BUFFIER & CO

JUDGMENT

HIS HONOUR:

The application

1 Before me is an interlocutory process filed 11 April 2006 by the third defendant, Brian Joseph Bouffiere, said to be made under ss 447(1)(d) and 485(2) of the Corporations Act. There is no s 447(1)(d) in the Corporations Act, but the court is obliged by s 485(2) to adjust the rights of contributories among themselves and distribute any surplus among the persons entitled to it. That obligation would in normal circumstances be discharged on the application of a liquidator rather than a person claiming to be a contributory, such as Mr Bouffiere. There is therefore a question, to which I shall return, as to whether Mr Bouffiere has standing to make the application.

2 Questions also arise, on the evidence, as to the identity and description of Mr Bouffiere. It appears that Mr Bouffiere has, on occasion, spelt his surname "Buffier". The first defendant, his son, goes by the name "Buffier". What is less clear is whether "Brian Joseph Bouffiere", the third defendant, is the same person as " Brian Leslie Joseph Bouffiere [or Buffier]", referred to in some of the evidence. I shall return to this point.

3 The application is for the following substantive declaration and orders:

1. A declaration that the only creditor of the second defendant ("the Company") is Mr Bouffiere;

2. An order that the liquidator of the Company transfer the interest of the Company in property at 53 Kuranda Crescent, Kotara ("the Kotara Property") to Mr Bouffiere in consideration of an undertaking by Mr Bouffiere not to claim any further dividends or make any other claim in the winding up of the Company;

3. An order that the liquidator of the Company be not required to settle a list of contributories pursuant to s 478 of the Corporations Act;

4. An order that the costs of the application be costs in the winding up.

4 At the hearing of this application I was handed draft Short Minutes of Orders, which seek relief not identical with the interlocutory process. The draft Short Minutes of Orders provide for a declaration and orders as follows:

1. The Court declares that pursuant to a proof of debt filed on 9 December 2005 and admitted to rank for dividend on 16 January 2006, the only remaining creditor of [the Company] is the deferred creditor being Michael John Zwar as trustee of the Buffier Family Trust in the sum of $896,626.26.

2. The Court notes the undertaking of Michael John Zwar as trustee of the Buffier Family Trust and Mr Bouffiere that a dividend of $391,788 has been paid to them by the liquidator of [the Company] and they will and both of them will make no further claim for dividends in the winding up of [the Company].

3. The Court orders that Darren Scott Pascoe as liquidator of [the Company] execute a memorandum of transfer of the interest of [the Company] in [the Kotara Property] in favour of [Mr Bouffiere] in pursuance of the undertakings referred to in paragraph 2 hereof.

4. The Court orders that the said Darren Scott Pascoe is justified in not settling a list of contributories of [the Company] pursuant to the provisions of the Corporations Act.

5. The Court orders that the interlocutory applications filed on 25 November 2005 and 3 February 2006 be dismissed.

6. The Court orders that the costs of the application be an expense in the winding up.

7. The Court orders that this order be settled and entered forthwith.

5 At the hearing of the application, Mr Chippindall of counsel appeared for Mr Bouffiere and Mr Skinner of counsel appeared for Mr Pascoe, the liquidator of the Company. There was no appearance for any other party. The liquidator of the Company gave evidence by affidavit saying that he did not oppose the transfer of the Kotara Property to Mr Bouffiere, should the court so order. He said that if the court did not make such an order, then he would realise that asset in the liquidation.

6 The evidence adduced in support of the application has been unclearly and incompletely set out in the body of the affidavits. It has been necessary for me to read the exhibits carefully so as to uncover material facts. Having done so, I have reached the firm conclusion that the evidence does not support any of the relief sought in the interlocutory process and draft Short Minutes, except for the para 5 of the draft Short Minutes.

7 The application was made in a proceeding of some length and complexity, in which Campbell J heard a contested application for an order for the winding up of the Company, and delivered a substantial reserved judgment (The Official Trustee in Bankruptcy v Buffier [2005] NSWSC 839, 25 August 2005). His Honour decided that a winding up order should be made on the just and equitable ground. The judgment indicates that the affairs of the Company were conducted in a very unsatisfactory manner, partly because of the intervention of Mr Bouffiere in the management of the Company, notwithstanding that he was an undischarged bankrupt and was prevented from managing a corporation by an order made by the Australian Securities and Investments Commission.

The proceeding

8 By the initial summons in this proceeding, filed in June 2005, the Official Trustee in Bankruptcy sought to establish that Mr Bouffiere's title to two items of property had vested in him as trustee in bankruptcy, and he sought orders for the recovery of the property. The two items of property were a unit at 85/15 Herbert St, St Leonards ("the St Leonards Property") and the beneficial ownership of the whole of the issued capital (being 100 shares) in the Company. The summons also sought an order that the Company be wound up under s 461 of the Corporations Act, and that Mr Pascoe be appointed liquidator. Initially the defendants were the first defendant (Mr Bouffiere's son) and the Company. Mr Bouffiere became a party as third defendant pursuant to orders made by the Registrar in Equity on 12 December 2005.

9 When the matter came before White J as duty judge on 23 June 2005, his Honour made an order extending a caveat until further order and adjourned the proceeding. On 29 June 2005 his Honour made a declaration, by consent, that the 100 issued ordinary shares in the Company were vested in the plaintiff pursuant to s 58(1)(a) of the Bankruptcy Act 1966 (Cth), and he directed the Company to register the plaintiff as shareholder. His Honour's orders noted that the plaintiff would only be seeking to proceed for orders for the winding up of the Company and the appointment of a liquidator. The winding up application was dealt with by Campbell J, by his reasons for judgment delivered on 25 August 2005.

10 By an interlocutory process, said to have been made under s 479 of the Corporations Act and filed on 25 November 2005, Mr Bouffiere sought orders that the liquidator of the Company pay him an initial distribution of $300,000 and that the liquidator be authorised to divide all or part of the surplus assets of the Company amongst the members in specie. According to the affidavit of Michael John Zwar (Mr Bouffiere's solicitor) made on 10 April 2006, that application has been adjourned from time to time but has not been heard. It is one of the two applications which Mr Bouffiere now asks the court to dismiss.

11 In his affidavit of 10 April 2006, Mr Zwar said he prepared, but did not file, an amended interlocutory process seeking an order for the transfer of the 100 issued shares in the Company from the liquidator to Mr Bouffiere. The transmission of those shares was attended to by orders of the Registrar on 12 December, as noted below. The draft interlocutory application also sought an order authorising the liquidator to distribute to Mr Bouffiere all the Company's cash after deduction of proper expenses and debts owing to creditors, and to transfer the Kotara Property. The last part of the application now comes before the court as part of the interlocutory application of 11 April 2006.

12 As mentioned above, the short minutes of orders handed to me by counsel at the hearing of the present application invited me to dismiss the application of 25 November 2005, and also an application said to have been filed on 3 February 2006. According to the court's records, there was no application filed on that day. It may be that the short minutes were intended to refer to the draft application described by Mr Zwar in his affidavit. But it would be nonsensical to ask the court to make an order dismissing that application, since it was not filed, according to his evidence.

13 Mr Zwar exhibited to his affidavit of 10 April 2006 some correspondence between his firm and the solicitors for the liquidator concerning a draft interlocutory process. It is clear from the correspondence that the draft under discussion was not the draft exhibited to Mr Zwar's affidavit (at MJZ 2). In the circumstances, I do not know what to make of some parts of the correspondence. However, I can and do make the following inferences:

· the correspondence confirms my overall impression of the evidence, which is that this application, and the proceeding as a whole, is being conducted in a very loose and imprecise manner having the effect of obfuscating the true facts;

· the question whether the Company has any actual or potential tax liability is unresolved - by letter dated 3 February 2006 the solicitors for the liquidator expressed concern about the tax implications of any transfer of the Kotara Property to Mr Bouffiere, and while Mr Zwar's firm replied on 8 February 2006 asserting that there is no tax liability, it appears from item 10 of the liquidator's solicitor's letter of 22 March 2006 that the solicitors for the liquidator were still concerned about the matter at that time.

Bankruptcy of third defendant

14 The third defendant was made bankrupt by sequestration order in January 2000. The plaintiff was appointed his trustee in bankruptcy. The bankrupt's statement of affairs was filed in January 2001 and in January 2004 the plaintiff caused the bankruptcy to be extended for a further period of three years, in consequence of alleged non-compliance by the third defendant with the plaintiff's requirements.

15 According to the affidavit of Mr Zwar made on 27 February 2006, Mr Bouffiere's bankruptcy was annulled on 21 September 2005, pursuant to s 73(A) of the Bankruptcy Act. There is no such section, and s 73A deals with another matter, namely the trustee's power to require surety for the cost of a meeting of creditors. In his affidavit of 10 April 2006, Mr Zwar said that the bankruptcy was annulled under s 74(5) of the Bankruptcy Act and he referred to a certificate of annulment which, however, has not been put into evidence. Mr Zwar's assertion suggests that there may have been a compromise or arrangement between the bankrupt and his creditors, approved by the creditors by special resolution on about 21 September 2005, having the effect that the bankruptcy was annulled by force of s 74(5) of the Bankruptcy Act on that day. But his evidence is so unsatisfactory, in the various ways identified throughout this judgment, that I cannot make a finding of fact that the bankruptcy has been annulled. Instead, I shall merely assume that this is the case for the purposes of considering the other issues I have been asked to address.

Ownership and control of the Company

16 A company extract annexed (upside down!) to the affidavit of Mr Pascoe made on 12 May 2006 asserts that Mr Bouffiere is the beneficial holder of all of the 100 issued shares in the Company. According to the same extract, the director and secretary of the Company, appointed on 1 December 2003, is Alastair Service.

17 These matters have been the subject of findings by Campbell J. I shall consider, first, the identity of the director or directors, and secondly, the identity of the shareholder.

Control of the Company

18 His Honour held that Mr Bouffiere was a director of the Company until 28 January 1999. He said that on 27 January 1999 ASIC made an order against Mr Bouffiere under s 600 of the Corporations Law, prohibiting him for a period of 5 years from being concerned in the management of a corporation without the leave of the court. He found that from March or April 2001 until October 2002, Mr Bouffiere purported to act as a director of the Company while bankrupt and disqualified by an ASIC order. Subsequent appointments of directors initiated by him were accordingly invalid, and so the person purporting to act as sole director in 2005, Mr Service, did not validly hold that office and there was, in effect, a power vacuum justifying the making of an order for the winding up of the Company.

19 Campbell J noted that according to an ASIC search tendered in evidence before him, Mr Bouffiere may have been appointed a director again on 11 April 2001, but it is not clear whether the leave of the court was obtained as required by ASIC's order, and in any case Mr Bouffiere was an undischarged bankrupt at that time. Although there appears to be no notation in ASIC's records to show resignation or removal, it appears that at some stage Mr Bouffiere ceased to be a director, for by 2005 only Mr Service was purporting to act as the sole director and secretary of the Company.

Ownership of the Company's shares

20 According to the evidence of Mr Zwar (affidavit of 27 February 2006), Mr Bouffiere acquired all of the ordinary issued shares of the Company for a consideration of approximately $300 in July 2001. However, there was evidence before Campbell J, referred to in his judgment at [18], that the purchase of shares occurred on 14 March 2001. Whether it was in March or July 2001, Mr Bouffiere's purchase of the shares occurred while he was an undischarged bankrupt. Campbell J inferred that at the time of acquisition, the plaintiff must have already been the beneficial owner of the shares. This was because White J's declaration, made on 29 June 2005 by consent, that the shares were vested in the plaintiff, was made under the section of the Bankruptcy Act (s 58(1)(a)) that deals with the vesting in the trustee in bankruptcy of property of the bankrupt at the time when he became a bankrupt (at [18]). The circumstances of Mr Bouffiere's apparent acquisition of the beneficial ownership of the shares are not revealed either by Campbell J's judgment or the evidence before me on the application.

21 On 12 December 2005 the Registrar in Equity made an order under s 468(1) of the Corporations Act that the transmission of the 100 shares in the Company from the plaintiff to Mr Bouffiere was not void, and it authorised the liquidator to register the transmission. Section 468(1) states, inter alia, that a transfer of the shares of a company in liquidation, made after the commencement of the winding up, is void, but it authorises the court to make an order to the contrary. Therefore Mr Bouffiere is now registered as the sole shareholder in the Company. Whether he is entitled to the shares depends upon whether he validly acquired them and whether his bankruptcy has been validly annulled. If he is entitled to the shares, Mr Bouffiere is the sole contributory of the company.

The property of the Company

22 It appears from Mr Pascoe's Report to Creditors dated 22 December 2005 that the Company's two principal assets are the Kotara Property and the proceeds of sale of the St Leonards Property.

Kotara Property

23 The Company is, and was at all relevant times, the registered proprietor of the Kotara Property, which has been occupied at all relevant times by Mr Bouffiere. In his judgment (at [47]), Campbell J noted that Mr Bouffiere, though a bankrupt, had purported to represent the Company in commercial dealings, and he continued:

"Further, the Kotara property has come to be significantly encumbered, and there is no satisfactory account of what has become of the money which has been borrowed on the security of it. As well, the evidence about just what the assets of the [Company] are is imprecise and unsatisfactory."

24 His Honour's observation seems to raise a question about whether the Company or its liquidator might have a cause of action for recovery of money borrowed on the security of the Company's property.

25 There was some evidence before Campbell J of a mortgage by the Company over the Kotara Property in favour of Permanent Custodians Ltd to secure up to $450,000, which apparently refinanced a mortgage to St George Bank on which about $362,000 had been owing. It appears from Campbell J's judgment (at [62]) that part of the proceeds of refinancing was paid to Mr Bouffiere while he was an undischarged bankrupt. The basis upon which Mr Bouffiere received part of the proceeds of refinancing, if he did so, does not appear from Campbell J's judgment or the evidence before me. Mr Pascoe annexed to his affidavit a title search showing that there is now a mortgage over the Kotara Property to Permanent Custodians Ltd. In a letter dated 20 March 2006 to the liquidator's solicitors, Mr Zwar asserted that there was an equity in the Kotara Property of "perhaps $120,000", although he also said (presumably incorrectly) that the land was subject to a mortgage to "Perpetual Trustees".

26 In the same letter Mr Zwar asserted that "Perpetual Trustees" would agree to the assignment of the property to Mr Bouffiere. There is no other evidence before me of the mortgagee's consent.

27 It was submitted to Campbell J that the Kotara Property was held by the Company as trustee for a trust called "the MRB Trust". Campbell J rejected that submission (at [70]), pointing out that the plaintiff, after making extensive inquiries, had been unable to find any documentation relating to that trust. He noted that Mr Bouffiere had denied any knowledge of the existence of the trust.

St Leonards Property

28 The registered proprietor of the St Leonards Property was the first defendant, Mr Bouffiere's son. It appears from Campbell J's judgment that he granted a mortgage of that property to RAMS Mortgage Corporation Ltd, and also that he gave security over it to the Company.

29 There was evidence before Campbell J that the first defendant executed a mortgage on 8 October 2001 over the St Leonards Property in favour of the Company to secure the sum of $16,000. The discharge of that mortgage was executed, ostensibly by Mr Bouffiere, on 28 November 2001 (although it appears from Campbell J's judgment (at [46]) that there is an allegation that Mr Bouffiere's signature is a forgery).

30 In February 2003 the Company commenced a proceeding in this court against RAMS Mortgage Corporation Ltd and the first defendant, claiming a declaration that it was an equitable mortgagee of the St Leonards Property and seeking orders for the discharge of a mortgage held by RAMS. As Campbell J remarked (at [53]), it appears that Mr Zwar, who was acting for the Company in that proceeding, did so on instructions given to him by Mr Bouffiere while Mr Bouffiere was an undischarged bankrupt. The RAMS mortgage was later discharged.

31 The Company became a registered mortgagee of the St Leonards Property in 2003. According to Campbell J's judgment, the principal sum secured was $630,000. The mortgagee was undated but it was stamped and registered in mid-2003. The source of the funds is not revealed by the evidence.

32 Campbell J (at [56]) referred to some evidence indicating that the Company purported to exercise its security against the St Leonards Property later in 2003, but it was not able to sell the property at an acceptable price. By the time of the winding up hearing in 2005, there were further negotiations for sale and a draft contract had been submitted.

33 According to Mr Zwar's affidavit of 27 February 2006, the Company sold the property as mortgagee in possession for $630,000 in September 2005, and the net proceeds of sale were paid into the liquidator's trust account. But Mr Pascoe's Report to Creditors dated 22 December 2005 gives the purchase price as $642,000. Mr Pascoe has annexed a settlement sheet to his affidavit, which shows that the purchase price was $642,000 including a deposit of $64,200. The settlement sheet indicates that payment was made to the company of $518,272.90, and payment was made to the trust account of Mr Zwar's firm of $50,000. The destination of the deposit is not indicated.

The Buffier Family Trust

34 There was some evidence before Campbell J that, at one stage, a trust called the Buffier Family Trust had existed. His Honour concluded that the evidence did not establish that the Company was the trustee of that trust or that the Company held its interests in the St Leonards Property and the Kotara Property in trust.

35 There is further evidence before me now about the Buffier Family Trust. In his affidavit of 27 February 2006, Mr Zwar said that prior to 25 August 2005, when the winding up order was made, the Company purported to be the trustee of that trust. He said the trust had been registered at the Land Titles Office in Canberra in 1985. He exhibited to his affidavit a document he claimed to be a true copy of the "Original Deed" of the Buffier Family Trust.

36 The exhibited document is very curious in some respects. The first 19 pages consist of a standard text of an instrument called a Deed of Settlement. The instrument contemplates, in the typical fashion, that the variable parts appear in a Schedule. Following those 19 pages there is a page numbered 24 (that is, not numbered sequentially after the previous 19 pages), which contains an attestation clause and signatures, in a different typescript. The signatures are by Barbara Joan O'Brien and Copperhead Pty Ltd, the latter under seal. The next page in the exhibit, which bears no number at all (except the number affixed during preparation of the exhibit) is headed "Schedule" and is in a different typescript again.

37 The Schedule identifies the trust as the Buffier Family Trust, the settlor as Barbara Joan O'Brien and the trustee as Copperhead Pty Ltd. The Principal is named as Brian Leslie Joseph Buffier and the residuary beneficiaries are said to be the children of the Principal. As previously mentioned, the evidence does not directly indicate whether "Brian Leslie Joseph Buffier" and "Brian Joseph Bouffiere" are the same person.

38 The exhibit includes a statutory declaration by an officer of the Land Titles Office, Canberra, but it does not assist in overcoming the uncertainties of the documentation. I would not be prepared to conclude, on the basis of the evidence before me now, that the 19 page boilerplate instrument, the attestation page and the Schedule were contemporaneous parts of a single document at the time of execution.

39 According to Mr Zwar, as a consequence of "doubt" as to the validity of the appointment of the Company as trustee of the Buffier Family Trust, a Deed of the Appointment was made on 19 December 2005, appointing Mr Zwar as trustee and replacing the first defendant with the third defendant as residuary beneficiary of the trust. He exhibited to his affidavit a copy of that deed.

40 The Deed of the Appointment is between Andrew Buffier (the first defendant), Mr Bouffiere and Mr Zwar. The recitals identify what, I infer, Mr Zwar had in mind when he referred to a doubt about the validity of the appointment of the Company as trustee. The recitals appear to assume that the Schedule page was a page of the trust instrument establishing the Buffier Family Trust. Recital B asserts that Brian Joseph Bouffiere was the first Principal of the trust - that is, the recitals treat him as the person described in the trust instrument as "Brian Leslie Joseph Buffier". The recitals trace the history of purported appointments of trustees after the initial trust instrument (including a purported appointment of the Company), noting the absence of documentation and recording that as a consequence of legal advice there was uncertainty as to whether the Company was ever validly appointed as trustee.

41 In the operative part of the deed, Mr Andrew Buffier acknowledges that Mr Brian Bouffiere is the sole Principal, and Mr Bouffiere as Principal appoints Mr Zwar as trustee. Then Mr Zwar as trustee purports to vary the Schedule so that the residuary beneficiary is Brian Joseph Bouffiere rather than "the children of the Principal".

42 Mr Zwar said in his affidavit evidence that the trust vested on 23 December 2005. He said that after the vesting date, a proof of debt for $896,626.26 was lodged in the winding up of the Company, both by himself as trustee of the Buffier Family Trust and the third defendant as residuary beneficiary of the trust. He did not explain the basis for the claim, or the relationship between the two proofs of debt. He did not give evidence as to the property of the trust; specifically, he did not claim that either the Kotara Property or the mortgage interest in the St Leonards Property was held by the Company on the trusts of the Buffier Family Trust. As I have mentioned, Campbell J found that the evidence before him did not warrant the conclusion that the Company's property was held in trust.

Winding up of the Company

43 In July 2005 the plaintiff, then the sole contributory of the Company as confirmed by White J's declaration, made an application for the winding up of the Company on the just and equitable ground, said to be made as part of the realisation of assets of the bankrupt estate of Mr Bouffiere. According to Campbell J's judgment, the winding up application was opposed by counsel instructed by Mr Zwar, who was purporting to act for the Company while receiving instructions from Mr Service. Campbell J made a winding up order on 25 August 2005 and appointed Mr Pascoe as liquidator.

44 Mr Pascoe's Report to Creditors is dated 22 December 2005. He calculated that the Company had a surplus of assets over liabilities of $697,703. The principal assets were the Kotara Property, which he valued at $550,000, and the net proceeds of sale of the St Leonards Property of $630,000. There were small amounts of debtors, cash at bank, work in progress and plant and equipment. The liabilities were a loan by Permanent Custodian in the sum of $450,000 and unsecured creditors of $51,926. However, the Report listed total claims of creditors at $1,916,826.25. This figure included the secured loan of $450,000 made by Permanent Custodian, a claim for $3,600 by "Mr Brian Buffier (Priority Creditor)", a claim for $66,191.40 by Mr Zwar's firm, and a claim for $1,396,206 by Mr Zwar as trustee of the Buffier Family Trust. The Report said that Mr Pascoe would seek approval for remuneration of $36,839.95 for the period to 21 December 2005, and future remuneration not to exceed $25,000. The Report enclosed proof of debt forms and gave notice of a meeting of creditors to be held on 10 January 2006.

45 Mr Pascoe said he received "proven" proofs of debt from Brian Leslie Joseph Buffier for $3,600 for unpaid wages, ASIC for $212 for an annual review fee, Mr Zwar's firm for $8,000 for the provision of legal services, and the Office of State revenue for $616.85. Additionally, Mr Zwar lodged a proof of debt as trustee of the Buffier Family Trust for $896,626.26, which Mr Pascoe treated as "proven".

46 Mr Zwar's proof of debt as trustee, which is annexed to Mr Pascoe's affidavit, is said to be for "loan advanced to James Court 18/7/01 and 7/8/01" in the sum of $896,626.26. No documentary evidence of the loan is attached to the proof of debt, or is otherwise in evidence. Mr Pascoe said in his affidavit that the trust property in the Buffier Family Trust has vested and that Brian Bouffiere is the sole residuary beneficiary as well as being the sole shareholder in the Company. He annexed a copy of the Deed of Appointment dated 19 December 2005 to his affidavit (considered above), but he did not explain what significance he attached to that document. He appears to have accepted Mr Zwar's claim that the trust made a loan of $896,626.26 to the Company, but he did not directly say so and he did not produce any evidence of the loan.

47 Exhibited to the affidavit of Mr Zwar made on 10 April 2006 is a proof of debt directed to the liquidators of the Company, dated 9 December 2005 and on its face signed by Mr Bouffiere, apparently for himself and purportedly as agent for Mr Zwar. The document contains very little information about the claim that it makes. It asserts that the Company is indebted to "Michael John Zwar as trustee of the Buffier Family Trust and Brian Joseph Bouffiere as residuary beneficiary of the Buffier Family Trust upon the vesting of the Buffier Family Trust on 23 December 2005 jointly" for $1,396,206. The "particulars" of the claim give the date as 20 February 1981 and the consideration as "Buffier Family Trust", and under the heading "remarks" there is simply a horizontal line. There is no evidence before me that makes clear the relationship between this proof of debt and Mr Zwar's proof of debt for a smaller amount.

48 A meeting of creditors was held on 10 January 2006, attended by Mr Pascoe and a colleague from his firm, and Mr Zwar, appearing as a representative of his firm and as the trustee of the Buffier Family Trust. The firm's claim, admitted for voting purposes, was $66,191.40, and the trust's claim admitted for voting purposes was $990,000. Mr Pascoe did not explain the calculation of these amounts in his affidavit. The amount claimed by Mr Zwar's firm is the same figure as appears in the Report to Creditors, but the figure of $990,000 for the trust is neither the amount claimed in Mr Bouffiere's proof of debt nor the amount claimed in Mr Zwar's proof of debt.

49 A motion for approval of the liquidator's fees to date was put and carried. There was discussion about future fees, and also about whether and in specie distribution of the Kotara Property could be made to Mr Bouffiere. A resolution for approval of future fees up to a stated amount was carried. Mr Zwar signed a handwritten note on behalf of the Buffier Family Trust consenting to the debt owing to the trust being deferred in favour of the unsecured creditors identified in the Report to Creditors. Apparently that note was produced after Mr Pascoe said at the meeting that such a deferral would be a prerequisite to an in specie distribution.

50 Mr Pascoe said he "advertised for dividends" but he did not annex any advertisement to his affidavit. However, he did annex some Notices of Declarations of Dividends. Mr Bouffiere as employee, ASIC, and Mr Zwar's firm (in respect of a claim of $8,000) received notices of declaration of dividends at the rate of 100 cents in the dollar. There is no indication of payment to the Office of State Revenue (recorded as a creditor in the Report to Creditors), or the balance of the claim by Mr Zwar's firm (which according to the Report to Creditors was for $66,191.40).

51 By a Notice of Declaration of Dividend dated 16 January 2006, Mr Pascoe advised Mr Zwar as trustee of the Buffier Family Trust of a "first dividend for deferred unsecured creditors" at the rate of 43.7 cents in the dollar. The notice enclosed a cheque in favour of Mr Zwar as trustee of the Buffier Family Trust for $391,788, calculated on a debt admitted to rank for dividend in the sum of $896,626.26. There is no Notice of Declaration of Dividend in respect of the proof of debt signed by Mr Bouffiere for $1,396,206 (except to the extent that the Notice of Declaration of a dividend of $391,788 might, in some unexplained fashion, be a response to that proof of debt as well as Mr Zwar's proof of debt for a lower amount).

52 Mr Pascoe has annexed to his affidavit a Receipts and Payments Listing which shows the distributions to Mr Zwar as trustee ($391,788), Mr Zwar's firm ($8,000), ASIC ($212) and Brian Leslie Joseph Buffier of $2,466 (the amount of $3,600 claimed less PAYG). It does not show any payment to the Office of State Revenue.

53 In his affidavit of 10 April 2006 Mr Zwar said he had been informed that Mr Bouffiere does not seek to make any further claims in the liquidation of the Company provided that the Company's interest in the Kotara Property is transferred to him. Just what claims he may otherwise have had, and in what capacity, are matters that remain mysterious. Mr Bouffiere has not directly given evidence of these matters. At the hearing Mr Chippindall of counsel offered to the court a similar undertaking by Mr Bouffiere and also by Mr Zwar, as trustee of the Buffier Family Trust.

Financial position of the Company

54 In his affidavit made on 10 April 2006, Mr Zwar referred to his earlier affidavit, which he said was made on 23 November 2005. No such affidavit was read on the application. I have searched through the large file in this proceeding. There is no affidavit by Mr Zwar dated 23 November 2005, but there is an affidavit by him dated 25 November 2005. That affidavit refers extensively to an exhibit called "[Ex1]", but the exhibit was not tendered on the application and there is no copy of it in the file.

55 In his affidavit of 10 April 2006 Mr Zwar said the only creditors of the Company were those disclosed in the Reports as to Affairs exhibited to his affidavit of 23 November. For the reason just explained, the Reports as to Affairs are not in evidence. He said that:

· he has been informed by the liquidator that the Australian Taxation Office has not lodged any proof of debt;

· the third defendant told him that all outstanding taxation returns in respect of the Company have been lodged;

· there are no costs owing to the plaintiff because the plaintiff's costs were settled in the course of the annulment of the bankruptcy.

56 He claimed that the only asset of the Company remaining to be dealt with is the Kotara Property. He asserted that Mr Bouffiere as residuary beneficiary of the Buffier Family Trust is the only creditor of the Company.

57 I do not accept Mr Zwar's evidence that Mr Bouffiere is the only creditor of the Company. In the first place, the evidence does not disclose the basis upon which Mr Bouffiere, if he is the sole beneficiary of a trust, comes to have a claim as creditor of the Company. In the second place, the very skimpy evidence that I have described does not enable me conclude that Mr Bouffiere has become the sole beneficiary of the Buffier Family Trust. In the third place, the evidence does not support Mr Zwar's assertion that there are no other creditors. The evidence shows that there was, at the time of the Report to Creditors, a creditor, namely the Office of State Revenue, which is not shown by the evidence to have been paid. It may be that Mr Zwar's evidence amounts to a waiver by his firm of their claim for fees in excess of the sum of $8,000 that appears to have been paid to them, but that issue is also not clear on the evidence. Further, as I have said, the evidence raises a question as to whether the Australian Taxation Office may have a claim of some sort against the Company in the event that the Kotara Property is sold or distributed in specie to Mr Bouffiere. In the fourth place, the only evidence that the liquidator has advertised for claims by creditors is Mr Pascoe's bare assertion in his affidavit, without any indication of where the advertisements were placed or what they said.

Conclusions

58 Paragraph 1 of the interlocutory process filed on 11 April 2006 seeks a declaration that the only creditor of the Company is Mr Bouffiere. For the reasons I have given under the heading "Financial position of the Company", the evidence does not permit me to make such a declaration. Further, I am not in a position to conclude, for reasons I have given, that Mr Bouffiere, the applicant, is entitled to the shares in the Company, and therefore he has the standing (if any) that may be afforded to a contributory. Additionally, it is not plain to me that a contributory would have the standing to obtain a declaration of the kind sought in para 1 even if there was evidence to support the declaration. I shall therefore not make the declaration sought in para 1.

59 Nor shall I make the declaration sought in para 1 of the draft Short Minutes of Orders. Just as the evidence does not allow me to say that the only creditor of the Company is Mr Bouffiere, equally I am not in a position on the evidence to say that the only remaining creditor is Mr Zwar as trustee of the Buffier Family Trust. If (contrary to the position obtaining on the evidence) I could say so, in some general sense, I would not be able to reach the conclusion that the amount owing is $896,626.26, a figure not substantiated by the evidence. Further, I am not satisfied that there has been any adequate advertising for claims. There is also the problem of standing that I have mentioned.

60 Paragraph 2 of the draft Short Minutes of Orders invites the court to note an undertaking by Mr Zwar and Mr Bouffiere. Such an undertaking has been given by counsel and could be noted, provided there was some point in doing so. In view of my conclusion on the other matters addressed in the draft Short Minutes, there is no point in noting an undertaking. Nor is it clear, on the evidence, that Mr Zwar as trustee of the Buffier Family Trust, or Mr Bouffiere, would have any further valid claim on the Company if the undertaking were not given.

61 Paragraph 2 of the interlocutory process and para 3 of the draft Short Minutes invite the court to order Mr Pascoe as liquidator to transfer the Company's interest in the Kotara Property to Mr Bouffiere, in consideration of the undertakings to which I have referred. The evidence and submissions suggest that such an order is sought on each of three grounds.

62 First, it seems to be contended that the Company holds the Kotara Property on the trusts of the Buffier Family Trust, which vested on 23 December 2005 in the sole beneficiary, Mr Bouffiere. On this analysis, the liquidator should cause the Company as trustee to distribute the trust property to the sole beneficiary, who is sui juris and absolutely entitled and has called for it. Assuming, without deciding, that the Deed of Appointment of 19 December 2005 was effective to appoint Mr Zwar as trustee and cause Mr Bouffiere to be the sole beneficiary of the Buffier Family Trust on the vesting date, the fatal defect of this submission is that the evidence, set out above, does not show that the Kotara Property is held by the Company on the trusts of the Buffier Family Trust or any other trust.

63 Second, it seems to be submitted that the Kotara Property should be transferred to Mr Bouffiere as an in specie distribution in the winding up of the Company. Generally speaking, the duty of a liquidator in a court-ordered winding up is to realise the assets of the company and pay its debts and costs, and if there is a surplus, obtain the court's special leave under ss 485 and 488(2) to distribute the surplus among the persons entitled to it. Prima facie, this process involves converting the assets into money, but it appears that if the company's constitution authorises distribution in specie, or if everyone who is entitled to participate in the distribution agrees to distribution in specie, the court may authorise the liquidator to make a distribution of assets in specie without conversion into money, provided that all debts and expenses are paid: see AH Slater, Law and Taxation of Company Distributions in Australia (CCH, 1980), para [1536], citing Re South African Supply & Cold Storage Co; Wild's Case [1904] 2 Ch 268; cf Stafford Coal & Iron Co Ltd v Brugan [1963] 3 All ER 277.

64 There is no evidence of the contents of the Company's constitution in this case. But if it were established that Mr Bouffiere was the sole contributory and consented to distribution of the Kotara Property in specie, and there were no creditors except creditors who validly waived their remaining claims against the Company, the court may be prepared to make an appropriate order.

65 However, these preconditions have not been satisfied on the evidence before me. For the reasons I have explained, it has not been shown that there are no remaining creditors apart from Mr Bouffiere and the trust. In my view, there would need to be quite specific evidence with respect to any claim by the Australian Taxation Office, including any claim to capital gains tax that might arise out of the disposal of the Kotara Property.

66 Unless it is clearly established that all claims of creditors have been met or appropriately compromised, and that only Mr Bouffiere has any claim to the Kotara Property, questions may arise for investigation by the liquidator about the destination of borrowings by the Company secured over the Company's interests in property, and the destination of the proceeds of sale of St Leonards Property including the deposit.

67 Third, it is submitted that the transfer should be sanctioned under s 477(1)(b) or (c). Those provisions confer powers on the liquidator, not on the court. But under s 477(6) the exercise by the liquidator of these powers is subject to the control of the court.

68 Section 477(1)(b) empowers a liquidator, subject to s 556, to pay any class of creditors in full. I had occasion to consider this provision recently in Warne v GDK Financial Solutions Pty Ltd [2006] NSWSC 464; see also Ford's Principles of Corporations Law (LexisNexis, looseleaf) at [27.501] and cases there cited. It seems to me that s 477(1)(b) does not fit the present circumstances, because on Mr Bouffiere's contention, this is not a case of paying a class of creditors in full while not paying others.

69 Section 477(1)(c) empowers a liquidator to make any compromise or arrangement with creditors or persons claiming to be creditors. Arguably there are elements of a compromise or arrangement in the present case, because Mr Bouffiere and Mr Zwar are undertaking not to pursue their claims against the Company in consideration of the liquidator transferring the Kotara Property to Mr Bouffiere. The substantial difficulty with the court making an order to sanction such an arrangement is that the evidence does not establish that the interests of other creditors or potential creditors (including the Australian Taxation Office) have been properly identified and addressed, and it does not provide sufficient information about the nature of the claims of Mr Bouffiere and the Trust against the Company to enable the court to conclude that it is reasonable to compromise those claims by transferring the sole remaining substantial asset of the Company to Mr Bouffiere.

70 I shall therefore not make an order providing for a transfer of the Kotara Property to Mr Bouffiere.

71 Paragraph 3 of the interlocutory process and para 4 of the draft Short Minutes propose an order exonerating the liquidator from settling a list of contributories. Section 478(1A) requires the liquidator of a company that is being wound up by the court to settle a list of contributories if it appears to the liquidator likely that:

(a) either:
(i) there are persons liable as members or past members to contribute to the company's property on the winding up; or
(ii) there will be a surplus available for distribution; and
(b) it will be necessary:
(i) to make calls on contributories; or
(ii) to adjust the rights of the contributories amongst themselves.

72 This provision requires that the liquidator must take certain steps if he forms a certain opinion. The section does not give the court a power to exonerate the liquidator. I take it that the application is an application for the court to give directions under s 479(3) that the liquidator would be justified in not settling a list of contributories in the present case.

73 I see no proper basis for giving such a direction. There is nothing in the evidence to indicate that any member or past member may have a liability to contribute to the Company's property on winding up, or to pay a call. There is some evidence to indicate that there may be a surplus available for distribution on winding up (although, as I have pointed out, the evidence as to the financial position of the company is incomplete), but nothing to indicate any need to adjust the rights of contributories amongst themselves, because the application is made on the basis that there is only one contributory. Directions under s 479(3) may be given in circumstances of doubt, so as to provide a measure of protection to the liquidator (see Re GB Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674), but the present case is not one where, if the facts were properly proved, there would be doubt of the kind warranting the court's intervention by direction.

74 Paragraph 5 of the draft Short Minutes invite the court to order that the interlocutory applications filed on 25 November 2005 and 3 February 2006 be dismissed. The application filed on 25 November 2005 seems to be out of date and the appropriate course is to dismiss it. As I have said, the evidence and the court's file do not reveal any application filed on 3 February 2006.

75 Paragraph 4 of the interlocutory process and para 6 of the draft Short Minutes seek an order that the costs of the application be an expense in the winding up. In the absence of any order, it seems to me that the liquidator's costs of appearing on the present application, other than any deferred expenses, are recoverable out of the assets of the Company as expenses properly incurred by a relevant authority in realising or getting in property of the company, and accordingly have the priority allocated by s 556(1)(a). Any deferred expenses of the liquidator would fall within s 556(1)(de). I see no reason to interfere with those priorities, and I shall make an order confirming that outcome in the interests of clarity. But there is no case for making an order that would have the effect that Mr Bouffiere's costs of his application should become expenses recoverable out of the assets of the company at all, let alone with any statutory priority. Not only is the application unsuccessful, but it was poorly prepared in the many ways that I have noted in these reasons for judgment.

76 I shall therefore make orders as follows:

(1) the interlocutory process filed by Brian Joseph Bouffiere on 25 November 2005 is dismissed;

(2) subject to order (1), the interlocutory process filed by the third defendant on 11 April 2006 is dismissed;

(3) the costs of the liquidator (but not the costs of the applicant) with respect to the interlocutory processes referred to in orders (1) and (2), other than deferred expenses as defined in s 556(2), are the liquidator's expenses properly incurred in realising or getting in property of the second defendant, for the purposes of s 556(1)(a) of the Corporations Act 2001 (Cth), and the liquidator's deferred expenses in respect of the applications are his deferred expenses for the purposes of s 556(1)(de).

77 In the absence of any further, competent application, Mr Pascoe will have no alternative but to complete the administration of the winding up of the Company according to law, with due expedition.

**********