FEDERAL COURT OF AUSTRALIA Taylor (Trustee), in the matter of Kwok v Goldana Investments Pty Limited (receivers and managers appointed) (No 3) [2016] FCA 515 File number: NSD 316 of 2014 Judge: WIGNEY J Date of judgment: 9 May 2016 Catchwords: BANKRUPTCY AND INSOLVENCY – application by liquidator for special leave to distribute a surplus pursuant to s 488(2) of the Corporations Act 2001 (Cth) – leave to dispense with requirements of regulation 5.6.71(1) of the Corporations Regulations Legislation: Corporations Act 2001 (Cth), ss 473, 488(2) Corporations Regulations 2001 (Cth), reg 5.6.71(1) Cases cited: Brealey v Shields [2009] NSWSC 1148 In the matter of Wise Guys International Proprietary Limited [2015] NSWSC 1245 Taylor (Trustee), in the matter of Kwok v Goldana Investments Pty Limited (receivers and managers appointed) [2015] FCA 517 Taylor (Trustee), in the matter of Kwok v Goldana Investments Pty Limited (receivers and managers appointed) (No 2) [2015] FCA 947 Date of hearing: 9 May 2016 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Category: Catchwords Number of paragraphs: 11 Counsel for the Liquidator: Ms K Britton of Gadens Lawyers Table of Corrections 5 October 2016 The appearances have been corrected ORDERS NSD 316 of 2014 IN THE MATTER OF THE BANKRUPT ESTATE OF MICHAEL WILSON KWOK BETWEEN: BARRY ANTHONY TAYLOR AS TRUSTEE OF THE BANKRUPT ESTATE OF MICHAEL WILSON KWOK Applicant AND: GOLDANA INVESTMENTS PTY LIMITED (RECEIVERS AND MANAGERS APPOINTED) ACN 073 235 275 First Respondent TRACY HELEN JAMES Second Respondent JUDGE: WIGNEY J DATE OF ORDER: 9 MAY 2016 THE COURT ORDERS THAT: 1. Pursuant to section 488(2) of the Corporations Act 2001 (Cth), the liquidator of Goldana Investments Pty Limited ACN: 073 235 275 (in liquidation) (Goldana) be granted special leave to distribute the balance of the surplus funds in the liquidation of Goldana to the shareholder of Goldana, being Barry Anthony Taylor, in his capacity as trustee of the bankrupt estate of Michael Wilson Kwok. 2. The Court dispense with the requirements of regulation 5.6.71(1) of the Corporations Regulations 2001 (Cth). 3. The liquidator's costs and expenses of the application be paid from the proceeds held by the liquidator prior to the payment referred to in paragraph 1 above being made. 4. The balance of the application be adjourned to 20 June 2016 at 9.30am. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT (Delivered ex tempore, revised from transcript) WIGNEY J: 1 Goldana Investments Pty Limited was wound up by order of the court made on 27 August 2015. Mr Richard Stone, is the liquidator of Goldana. In this application, Mr Stone seeks special leave pursuant to s 488(2) of the Corporations Act 2001 (Cth) to distribute the balance of the surplus funds in the liquidation of Goldana to the sole shareholder. 2 The shares in Goldana are currently held by Mr Barry Taylor, in his capacity as trustee of the bankrupt estate of Michael Wilson Kwok. The facts that resulted in Mr Kwok becoming a shareholder in Goldana, and those shares then vesting in Mr Taylor, as Mr Kwok's trustee in bankruptcy, can be found in two judgments of this Court, Taylor (Trustee), in the matter of Kwok v Goldana Investments Pty Limited (receivers and managers appointed) [2015] FCA 517; Taylor (Trustee), in the matter of Kwok v Goldana Investments Pty Limited (receivers and managers appointed) (No 2) [2015] FCA 947. 3 The essential basis of Mr Stone's application is that the sole creditor of Goldana in the winding up has been paid in full. Creditors of Goldana were invited to lodge proofs of debt by 14 January 2016. The only creditor who lodged a proof of debt was the New South Wales State Debt Recovery Office. The SDRO's proof of debt was for $1050. On 30 March 2016, Mr Stone declared a first and final dividend of 100 cents in the dollar for unsecured creditors of Goldana. As a result, on 4 April 2016, the SDRO was paid $1050. 4 The application is straightforward. Goldana's debts have been fully paid and there is only one shareholder to whom the surplus is to be distributed. The only matter that is ultimately worthy of some consideration concerns Mr Stone's remuneration as liquidator. 5 On 31 March 2016, a meeting of the creditors of Goldana was held. That meeting was attended (by telephone) by a person holding a proxy for the SDRO, being the only creditor of Goldana. The only other attendees were Mr Stone and a colleague from his firm. At the meeting, a resolution was passed approving Mr Stone's remuneration for work done in the winding up for the period up to 31 January 2016. The amount approved was $11,674. A resolution was also passed approving Mr Stone's future remuneration capped at $30,000. Mr Stone's evidence on this application is that as at 31 March 2016, his total remuneration was just short of $26,000. 6 It is a matter of some concern that the amount of Mr Stone's remuneration for this relatively straightforward winding up has not been the subject of any real independent scrutiny. Given that the only creditor of Goldana was owed a very small amount of money, and was obviously always going to be repaid in full, it is doubtful that the creditor bothered scrutinising the amount of Mr Stone's remuneration when the resolutions were passed. The amount of the remuneration sought and approved also seems fairly large for such a straightforward winding up. There was only one creditor, and it would appear that Goldana had not conducted any business for some time. There were no books and records. It may be accepted that it was necessary for Mr Stone to make an application to the Supreme Court of New South Wales for moneys that had been paid into court to be paid to him. That action, however, also appears to have been a very straightforward matter. Details of Mr Stone's remuneration claims were provided in the notice issued in relation to the holding of the creditor's meeting. The particulars provided in the notice concerning the work engaged in by Mr Stone and members of his firm were, however, in very general and somewhat formulaic terms. 7 Nevertheless, the fact remains that Mr Stone's remuneration was validly approved by the creditor(s) pursuant to s 473 of the Corporations Act. Even if the Court has the power to review the approval, or the amount of Mr Stone's remuneration, which, in the absence of any objection or application is perhaps doubtful, in all the circumstances a review would in any event not be unwarranted. It would probably simply increase the costs of the winding up. It is also noted that Mr Taylor, who is the person to whom the surplus is ultimately to be paid, has also consented to the application and raised no issue concerning Mr Stone's remuneration. 8 The final matter to note is an essentially procedural issue. Regulation 5.6.71(1) of the Corporations Regulations 2001 (Cth) provides that an order in a winding up by the court authorising the liquidator to distribute any surplus to a person entitled to it must, unless the court otherwise directs, have a schedule in accordance with form 551. Form 551 is essentially a form which sets out a list of the persons to whom the surplus is to be paid. 9 Mr Stone applies for an order dispensing with the requirements of regulation 5.6.71(1). A direction dispensing with compliance with regulation 5.6.71(1) is plainly appropriate in the circumstances of this case. There is only one person who is entitled to the surplus. No useful purpose would be achieved by requiring Mr Stone to prepare a form 551 which simply contained Mr Taylor's name: see Brearly v Shields [2009] NSWSC 1148; In the matter of Wise Guys International Proprietary Limited [2015] NSW SC 1245 at [8]. 10 In all the circumstances, it is appropriate to grant Mr Stone special leave to distribute the balance of the surplus to Mr Taylor in his capacity as trustee for the bankrupt estate of Mr Kwok. Mr Stone's evidence on this application is that following the payment of his remuneration, a surplus of $357,337.06 existed as at 5 April 2016. It is also appropriate to make an order dispensing with the requirements of regulation 5.5.71(1) of the Corporations Regulations. The costs and expenses of this application should be paid from the amount held by Mr Stone prior to paying the surplus to Mr Taylor in accordance with the orders. 11 I accordingly make orders 1, 2 and 3 of the short minutes of order. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Wigney. Associate: Dated: 9 May 2016