(IN LIQUIDATION). Company-Compulary liquidation-Priority of debenture debt to costs, charges and
expenses of liquidation and to liquidator's remuneration-Costs of providing liquidator's security, whether allowable-Companies Ordinance 1931 (F.C.T.) (No. 25 of 1931)-Companies Act 1899 (N.S.W.) (No. 40 of 1899).
The assets of a company in compulsory liquidation were insufficient to satisfy the liability secured by its debentures which charged its whole under- taking and its uncalled capital.
Held, that the debenture debt took priority over the general costs, charges and expenses of the liquidation, but the expenses incurred by the liquidator in the actual realization of the assets subject to the security should be thrown upon the proceeds.
Part of the time and services of the official liquidator in respect of which his remuneration was fixed having been expended in getting in both uncalled capital and other moneys out of which the debenture-holder was so entitled to priority of payment:
Held, that so much of the liquidator's remuneration as represented these services together with the expenses properly incurred in the care, preservation and realization of the property should be paid out of the assets in priority to the debenture debt, but that the rest of the expenses of the liquidation and of the remuneration should rank for payment after the debenture debt.
The Companies Ordinance 1931 of the Federal Capital Territory adopts with modifications the company legislation of New South Wales in force at its commencement, and sec. 19 (4) of the Ordinance provides that the practice and procedure so far as it is not regulated by rules of the High Court shall be ** as nearly as may be according to the practice and procedure of the Supreme Court of the State of New South Wales under the rules made in pursuance of the Companies Act 1899 of that State."
Held, that this enactment referred to rules existing at the time and did not refer to rules which might be made from time to time after the commencement of the Ordinance. R. 15 (4) of the Companies Act Rules 1932 of New South
HIGH COURT Wales by which the allowance out of the assets of the liquidator's costs of obtaining security from a guarantee company is expressly prohibited is, therefore, not in force in the Federal Capital Territory.
Held, nevertheless, that as the official liquidator was remunerated and undertook the office as part of his professional work, the expense of finding (IN LIQUIDA-
the security which is a condition of his appointment must be borne by him. TION).
Principles on which an official liquidator's remuneration is fixed considered.
REFERENCE to the High Court by the District Registrar at Canberra.
This was a reference to the High Court by the District Registrar at Canberra in the winding up of the Universal Distributing Co. Ltd. (In Liquidation). The facts sufficiently appear in the judgment hereunder.
Codd, for the official liquidator. Davies, for the debenture-holder.
Cur. adv. vult.
DIXON J.…
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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Re Universal Distributing Co Ltd (In liq) [1933] HCA 2
Case
[1933] HCA 2
Decision Date
CaseChat Overview and Summary
This case concerned the priority of claims in the compulsory liquidation of Universal Distributing Co Ltd. The company's assets were insufficient to cover the debt secured by its debentures, which charged its entire undertaking and uncalled capital. The dispute arose between the debenture-holder and the official liquidator regarding the payment of liquidation costs and the liquidator's remuneration.
The court was required to determine the priority of the debenture debt against the general costs, charges, and expenses of the liquidation, as well as the liquidator's remuneration. Specifically, the court had to consider whether expenses incurred by the liquidator in realizing the secured assets, and a portion of his remuneration attributable to such realization, should be paid out of the proceeds in priority to the debenture debt. The court also addressed the applicability of certain New South Wales company rules to the Federal Capital Territory and the allowability of the liquidator's expenses in obtaining security.
Dixon J. held that the debenture debt generally took priority over the costs of the liquidation. However, he applied the principle that expenses reasonably incurred in the care, preservation, and realization of assets subject to a security should be borne by the proceeds of those assets. Therefore, so much of the liquidator's remuneration and expenses as were directly attributable to the recovery and realization of the assets encumbered by the debenture were to be paid out of those proceeds in priority to the debenture debt. The court also determined that the expense of the liquidator obtaining security, while not expressly prohibited in the Federal Capital Territory, should be borne by the liquidator personally as a condition of his professional engagement.
The court fixed the liquidator's remuneration at two hundred and fifty guineas, plus travelling expenses, and declared that thirty guineas of this sum, along with specific disbursements for solicitor's and witnesses' expenses, were entitled to priority over the debenture-holder's claim. The premium paid for the liquidator's bond was disallowed. The matter was remitted to the District Registrar to pass the accounts consistently with the order, with further directions regarding the priority of certain claims and without prejudice to other potential claims.