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Re St Gregory's Armenian School Inc

Re St Gregory's Armenian School Inc

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Case Copied 7 October 2015 77 min read

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Supreme Court

New South Wales

Case Name:	In the matter of St Gregory’s Armenian School Inc
Medium Neutral Citation:	[2015] NSWSC 1465
Hearing Date(s):	4 – 6 March, 7 - 10 and 24 April, 14 July 2015 (last written submissions 21 September 2015)
Decision Date:	7 October 2015
Jurisdiction:	Equity - Corporations List
Before:	Black J
Decision:	Held that appeals against liquidator’s decision as to proofs of debt under s 1321 of the Corporations Act 2001 (Cth) substantially fail and that Cross-Claim brought by liquidator and company also fail. Parties to bring in agreed short minutes of order to give effect to this judgment, and as to costs, within 14 days. If there is no agreement between them, each party should submit draft orders, and submissions not exceeding 10 pages, as to the orders which they contend should be made, indicating whether a further oral hearing is sought.
Catchwords:	CORPORATIONS – winding up – conduct and incidents of winding up – where liquidator rejected all or parts of proofs of debt lodged by Plaintiffs in the winding up – whether to set aside decision of liquidator under Corporations Act 2001 (Cth) s 1321 EQUITY – general principles – unjust enrichment – where liquidator cross-claimed that cross-defendants were unjustly enriched by certain repayments made by the liquidator – whether breach of fiduciary duty – whether breach of no conflict or no profit rule – whether basis for account of profits established – application of rule in Cherry v Boultbee – whether liquidator estopped from pursuing claims by Anshun estoppel.
Legislation Cited:	- Civil Procedure Act 2005 (NSW) s 21 - Corporations Act 2001 (Cth) ss 553C, 554, 554(1), 1321 - Evidence Act 1995 (NSW) ss 135, 136 - Corporations Regulations 2001 (Cth) regs 5.6.39, 5.6.53(3) - Supreme Court (Corporations) Rule 1999 (NSW)
Cases Cited:	- Australasian Annuities Pty Ltd (in liq) (recs and mgrs apptd) v Rowley Super Fund Pty Ltd [2015] VSCA 9 - Baltic Shipping Company v Dillon [1993] HCA 4; (1993) 176 CLR 344 - Black v S Freedman & Co [1910] HCA 58; (1910) 12 CLR 105 - Briginshaw v Briginshaw (1938) 60 CLR 336 - Brodyn Pty Ltd (t/as Time Cost and Quality) v Dasein Constructions Pty Ltd [2004] NSWSC 1230 - Bull v Lee (No 2) [2009] NSWCA 362 - Carr v Finance Corp of Australia Ltd (No 1) [1981] HCA 20; (1981) 147 CLR 246 - Celermajer Holdings Pty Ltd v Kopas [2011] NSWSC 40 - Chan v Zacharia [1984] HCA 36; (1984) 154 CLR 178 - Cherry v Boultbee (1839) 4 My & CR 442; 41 ER 171 - Colbeam Palmer Ltd v Stock Affiliates Pty Ltd (1968) 122 CLR 25 - Commercial Union Assurance Co of Aust Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 - D’Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; (2005) 223 CLR 1 - Dart Industries Inc v Decor Corporation Pty Ltd (1993) 179 CLR 101 - David Securities Pty…

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: [2015] NSWSC 1465
Decision Date: 7 October 2015

CaseChat Overview and Summary

In the case of Re St Gregory's Armenian School Inc, the dispute involves the winding up of the corporation and the rejection of proofs of debt by the liquidator. The plaintiffs sought to set aside the liquidator's decision to reject their proofs of debt under section 1321 of the Corporations Act 2001 (Cth). The court was required to determine whether the liquidator's decision was lawful and if the plaintiffs had grounds to challenge it. Additionally, the liquidator cross-claimed against the plaintiffs, alleging unjust enrichment and breaches of fiduciary duty, no conflict, and no profit rules. The court also considered whether an account of profits was warranted under the rule in Cherry v Boultbee and whether the liquidator was estopped from pursuing these claims due to Anshun estoppel.

The court examined the liquidator's authority to reject proofs of debt and the criteria for setting aside such a decision. It found that the liquidator had the discretion to reject proofs of debt that were not properly substantiated or were otherwise improper. The plaintiffs had to demonstrate that the liquidator acted beyond their authority or made an error of law in rejecting their proofs of debt. Regarding the cross-claims, the court assessed whether the plaintiffs had been unjustly enriched and whether the liquidator had breached any fiduciary duties. The court also considered whether there was a breach of the no conflict or no profit rules and whether the plaintiffs had profited from such breaches. The court further evaluated the application of the rule in Cherry v Boultbee to determine if an account of profits was necessary and whether Anshun estoppel applied to prevent the liquidator from pursuing the cross-claims.

The court concluded that the liquidator's decision to reject the proofs of debt was lawful and that there were no grounds for setting it aside. The plaintiffs failed to show that the liquidator acted beyond their authority or made an error of law. The court also found that the plaintiffs had not been unjustly enriched and that the liquidator had not breached any fiduciary duties, the no conflict rule, or the no profit rule. The court determined that an account of profits was not warranted and that the liquidator was not estopped from pursuing the cross-claims due to Anshun estoppel. The plaintiffs' application to set aside the liquidator's decision and their claims against the liquidator were dismissed.

Orders