FEDERAL COURT OF AUSTRALIA Royal v El Ali (No 2) [2016] FCA 1156 File numbers: NSD 1731 of 2013 NSD 771 of 2014 Judge: DAVIES J Date of judgment: 23 September 2016 Catchwords: BANKRUPTCY – form of orders giving effect to reasons for decision – whether order for leave to proceed against respondent in liquidation should be made – form of consequential orders in respect of declarations made – application by trustee to correct register – whether trustee entitled to be registered holder of shares – whether trustee has standing to apply for winding up by reason of application to correct register and vesting of shares – distribution orders in respect of indemnifying creditor Legislation: Corporations Act 2001 (Cth), ss 175, 461(1)(k), 462(2)(c) 471B, 553C, 1072C Bankruptcy Act 1966 (Cth), ss 58, 82, 109(10) Cases cited: Aged Care Services Pty Ltd v Kanning Services Pty Ltd [2013] NSWCA 393; (2013) 86 NSWLR 174 Francis v Blue Ribbon Enterprises (NSW) Pty Limited [2009] FCA 1364; (2009) 76 ACSR 13 Grandsky Pty Ltd v Horne in his Capacity as Trustee for the Bankrupt Estate of Van Oost [2014] FCA 119 International Hospitality Concepts Pty Ltd v National Marketing Concepts Inc (No 2) (1994) 13 ACSR 368 Scott (Trustee) v Icicek Holdings Pty Limited, in the matter of Icicek Holdings Pty Limited [2015] FCA 1387 Swaby v Lift Capital Partners (in liquidation) [2009] FCA 749; (2009) 72 ACSR 627 Taylor (Trustee), in the matter of Kwok v Goldana Investments Pty Limited (receivers and managers appointed) (No 2) [2015] FCA 947; (2015) 236 FCR 298 Date of hearing: 21 September 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: 21 Counsel for the Applicants: C Birch SC with P Thew Solicitor for the Applicants: Watson Mangioni Lawyers Pty Limited Counsel for the First Respondent: R Carey Solicitor for the First Respondent: D Massey Counsel for the Second and Third Respondents in NSD 1731 of 2013 and the Second Respondent in NSD 771 of 2014: D Barlin Solicitor for the Second and Third Respondents in NSD 1731 of 2013 and the Second Respondent in NSD 771 of 2014: Bartier Perry Solicitor for the Fourth Respondent: C Cassimatis of Maddocks Counsel for the Sixth Respondent in NSD 1731 of 2013 and the Third and Fifth Respondents in NSD 771 of 2014: A Fernon ORDERS NSD 1731 of 2013 BETWEEN: PETER PAUL ROYAL First Applicant JUDITH LOUISE ROYAL Second Applicant MICHAEL GREGORY JONES IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF NATHAN EL ALI Third Applicant AND: NATHAN EL ALI First Respondent (and others named in the Schedule) NSD 771 of 2014 BETWEEN: MICHAEL GREGORY JONES IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF NATHAN EL ALI Applicant AND: NATHAN EL ALI First Respondent (and others named in the Schedule) JUDGE: DAVIES J DATE OF ORDER: 23 september 2016 NSD 1731 of 2013 THE COURT DECLARES THAT: 1. Pursuant to section 121(1) of the Bankruptcy Act 1966 (Cth) and section 37A of the Conveyancing Act 1919 (NSW), each of the following transactions is void: (a) the transfer of the shares held by Nathan El Ali, the first respondent, in Saracen Holdings Pty Ltd (In Liquidation), the fourth respondent ("Saracen"), to Mahmoud El Ali, the second respondent, on 1 November 2011; (b) the transfer of the shares held by Nathan El Ali in Ottoman Investments Pty Ltd, the fifth respondent ("Ottoman"), to Mahmoud El Ali on 22 August 2011; (c) the transfer of the land situated at unit 2 of 4 Hogben Street, Kogarah NSW 2217 described in certificate of title folio identifier Lot 2 in Strata Plan 80767 (the "Kogarah Unit 2 property") from Ottoman to Otsi Stojanovski, the sixth respondent ("Mr Stojanovski"), on 16 December 2010; (d) the transfer of the land situated at 1 Sirius Road, Voyager Point NSW 2172 described in certificate of title folio identifier Lot 72 in Deposited Plan 661069 (the "Voyager Point property") from Saracen to Mahmoud Zreika, the third respondent ("Mr Zreika"), on 8 December 2011; (e) the transfer of the land situated at 2 Woodlands Road, Taren Point NSW 2229 described in certificate of title folio identifier Lot 1 in Deposited Plan 847333 (the "Taren Point property") from Ottoman to Mr Zreika on 21 April 2011; (f) the deed of retirement and appointment of new trustee executed on or about 21 or 28 April 2011 by which Ottoman resigned as trustee of the Ottoman Investment Unit Trust and Mr Zreika was appointed the new trustee; and (g) the deed of retirement and appointment dated 8 December 2011 by which Saracen resigned as trustee of the Voyager Point Unit Trust and Mr Zreika was appointed the new trustee. 2. The shares in Saracen and Ottoman vest forthwith as to their legal and beneficial ownership in Michael Gregory Jones in his capacity as trustee of the bankrupt estate of Nathan El Ali, pursuant to section 58(1)(a) of the Bankruptcy Act 1966 (Cth). THE COURT ORDERS THAT: 3. Pursuant to section 471B of the Corporations Act 2001 (Cth), leave is granted to the applicants to proceed with these proceedings against Saracen. 4. Pursuant to section 175 of the Corporations Act 2001 (Cth), the register of members of Saracen and Ottoman be corrected to record that the shares presently registered in the name of Mahmoud El Ali be registered in the name of Michael Gregory Jones as trustee of the bankrupt estate of Nathan El Ali. 5. Pursuant to section 467(3)(b) of the Corporations Act 2001 (Cth), advertising of making of the winding up application be dispensed with. 6. Ottoman be wound up pursuant to section 461(1)(k) of the Corporations Act 2001 (Cth). 7. Peter Paul Krejci and Robyn Karam be appointed official liquidators of Ottoman. 8. Mr Zreika account for the value of the Voyager Point property in the sum of $800,000.00 by paying the said sum to the official liquidator of Saracen. 9. The amount of $100,000 paid by Mr Stojanovski into Court, pursuant to the Orders made on 14 September 2015, in respect of the Kogarah Unit 2 property be paid to the official liquidators of Ottoman. 10. Mr Stojanovski forthwith do all things reasonably necessary to cause the mortgagee of the Kogarah Unit 2 property to pay into Court the sum of $62,836.88, being the net proceeds of the sale of the Kogarah Unit 2 property. 11. The amount of $250,000 paid by Mr Zreika into Court, pursuant to the Orders made on 26 May 2016 in substitution of the claim to the Taren Point property, be paid to the official liquidators of Ottoman. 12. Pursuant to section 109(10) of the Bankruptcy Act 1966 (Cth), 100 per cent of the net amount available for distribution to creditors after payment of the amounts required to be paid by section 109(1)(a) of the Bankruptcy Act 1966 (Cth) from the bankrupt estate of Nathan El Ali be paid to the first and second applicants in priority to all other creditors. 13. The sum of $62,836.88, when paid into Court pursuant to Order 10 hereof, thereupon be paid to the official liquidators of Ottoman THE COURT DIRECTS THAT: 14. A copy of these orders be lodged with the Australian Securities and Investments Commission. NSD 771 of 2014 THE COURT DECLARES THAT: 1. Pursuant to section 121(1) of the Bankruptcy Act 1966 (Cth) and section 37A of the Conveyancing Act 1919 (NSW), each of the following transactions is void: (a) the transfer of the shares held by Nathan El Ali, the first respondent, in Isaac & Jacob Pty Ltd, the fifth respondent ("Isaac & Jacob"), to John Nazloomian, the third respondent ("Mr Nazloomian"), on 19 October 2010; (b) the transfer of the land situated at 1A McDonald Lane, Potts Point NSW 2011 described in certificate of title folio identifier Lot 46 in Deposited Plan 2436 ("Potts Point property") from Saracen Holdings Pty Ltd (in liquidation), the fourth respondent ("Saracen"), to Mr Nazloomian on 22 November 2012; (c) the transfer of the shares held by Nathan El Ali, in ACN 092 879 733 Pty Ltd (formerly known as EasyChoice Home Loans Pty Limited ("EasyChoice") to Mahmoud El Ali, the second respondent, on 7 September 2011; 2. The shares in Isaac & Jacob and EasyChoice vest forthwith as to their legal and beneficial ownership in Michael Gregory Jones in his capacity as trustee of the bankrupt estate of Nathan El Ali, pursuant to section 58(1)(a) of the Bankruptcy Act 1966 (Cth). THE COURT ORDERS THAT: 3. Pursuant to section 471B of the Corporations Act 2001 (Cth), leave is granted to the applicant to proceed with these proceedings against Saracen. 4. Pursuant to section 175 of the Corporations Act 2001 (Cth), the register of members of Isaac & Jacob be corrected to record that the shares presently registered in the name of Mr Nazloomian be registered in the name of Michael Gregory Jones as trustee of the bankrupt estate of Nathan El Ali. 5. Pursuant to section 175 of the Corporations Act 2001 (Cth), the register of members of EasyChoice be corrected to record that the shares presently registered in the name of Mahmoud El Ali be registered in the name of Michael Gregory Jones as trustee of the bankrupt estate of Nathan El Ali. 6. Pursuant to section 467(3)(b) of the Corporations Act 2001 (Cth), advertising of making of the winding up application be dispensed with. 7. Isaac & Jacob be wound up pursuant to section 461(1)(k) of the Corporations Act 2001 (Cth). 8. Peter Paul Krejci and Robyn Karam be appointed official liquidators of Isaac & Jacob. 9. Mr Nazloomian account to the official liquidator of Saracen in regard to the value of the Potts Point property by paying the said liquidator the sum of $10,000.00 10. Pursuant to section 109(10) of the Bankruptcy Act 1966 (Cth), 100 per cent of the net amount available for distribution to creditors after payment of the amounts required to be paid by section 109(1)(a) of the Bankruptcy Act 1966 (Cth) from the bankrupt estate of Nathan El Ali be paid to Peter Paul Royal and Judith Louise Royal in priority to all other creditors. THE COURT DIRECTS THAT: 11. A copy of these orders be lodged with the Australian Securities and Investments Commission. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT DAVIES J: 1 On 5 July 2016, I delivered judgment in both matters and the parties were asked to submit orders giving effect to the reasons for decision: Royal v El Ali [2016] FCA 782; (2016) 14 ABC (NS) 108. 2 Peter Royal and Judith Royal ("the Royals") and Michael Jones ("the Trustee"), the Trustee of the bankrupt estate of Nathan El Ali (collectively "the applicants") have submitted the following orders and declarations ("the proposed orders"): NSD 1731 of 2013 1. ORDERS THAT pursuant to section 471B of the Corporations Act 2001 (Cth), leave is granted to the applicants to proceed with these proceedings against Saracen Holdings Pty Ltd (In Liquidation), the fourth respondent. 2. DECLARES THAT pursuant to section 121(1) of the Bankruptcy Act 1966 (Cth) and section 37A of the Conveyancing Act 1919 (NSW), each of the following transactions is void: (a) the transfer of the shares held by Nathan El Ali, the first respondent (Mr El Ali), in Saracen Holdings Pty Ltd (In Liquidation), the fourth respondent (Saracen), to Mahmoud El Ali, the second respondent (Mahmoud), on 1 November 2011 (see [227] of the decision delivered on 5 July 2016 in Royal v El Ali [2016] FCA 782 (the Decision)); (b) the transfer of the shares held by Mr El Ali in Ottoman Investments Pty Ltd, the fifth respondent (Ottoman), to Mahmoud on 22 August 2011 (see [227] of the Decision); (c) the transfer of the land situated at unit 2 of 4 Hogben Street, Kogarah NSW 2217 described in certificate of title folio identifier Lot 2 in Strata Plan 80767 (the Kogarah Unit 2 property) from Ottoman to Otsi Stojanovski, the sixth respondent (Mr Stojanovski), on 16 December 2010 (see [219] of the Decision); (d) the transfer of the land situated at 1 Sirius Road, Voyager Point NSW 2172 described in certificate of title folio identifier Lot 72 in Deposited Plan 661069 (the Voyager Point property) from Saracen to Mahmoud Zreika, the third respondent (Mr Zreika), on 8 December 2011 (see [228] of the Decision); (e) the transfer of the land situated at 2 Woodlands Road, Taren Point NSW 2229 described in certificate of title folio identifier Lot 1 in Deposited Plan 847333 (the Taren Point property) from Ottoman to Mr Zreika on 21 April 2011 (see [226] of the Decision); (f) the deed of retirement and appointment of new trustee executed on or about 21 or 28 April 2011 by which Ottoman resigned as trustee of the Ottoman Investment Unit Trust and Mr Zreika was appointed the new trustee (see [233] of the Decision; and (g) the deed of retirement and appointment dated 8 December 2011 by which Saracen resigned as trustee of the Voyager Point Unit Trust and Mr Zreika was appointed the new trustee (see [233] of the Decision). 3. DECLARES THAT the shares in Saracen and Ottoman vest forthwith as to their legal and beneficial ownership in Michael Gregory Jones in his capacity as trustee of the bankrupt estate of Nathan El Ali, a bankrupt pursuant to section 58(1)(a) of the Bankruptcy Act 1966 (Cth). 4. ORDERS THAT, pursuant to section 175 of the Corporations Act 2001 (Cth), the register of members of Saracen and Ottoman be corrected to record that the shares presently registered in the name of Mahmoud be registered in the name of Michael Gregory Jones as trustee of the bankrupt estate of Nathan El Ali, a bankrupt. 5. ORDERS THAT pursuant to section 467(3)(b) of the Corporations Act 2001 (Cth), advertising of making of the winding up application be dispensed with. 6. ORDERS THAT Ottoman be wound up pursuant to section 467(1)(a) and (k) of the Corporations Act 2001 (Cth). 7. ORDERS THAT Peter Paul Krejci and Robyn Karam be appointed official liquidators of Ottoman. 8. DIRECTS THAT a copy of these orders be lodged with the Australian Securities and Investments Commission. 9. ORDERS THAT Mr Zreika accounts for the value of the Voyager Point property in the sum of $800,000.00 by paying the said sum to the official liquidator of Saracen. 10. ORDERS THAT the amount of $100,000 paid by Mr Stojanovski into Court, pursuant to the Orders made on 14 September 2015, in respect of the Kogarah Unit 2 property be paid to the official liquidators of Ottoman. 11. ORDERS THAT Mr Stojanovski forthwith do all things reasonably necessary to cause the mortgagee of the Kogarah Unit 2 property to pay into Court the sum of $62,836.88, being the net proceeds of the sale of the Kogarah Unit 2 property. 12. ORDERS THAT the amount of $250,000 paid by Mr Zreika into Court, pursuant to the Orders made on 26 May 2016 in substitution of the claim to the Taren Point property, be paid to the official liquidators of Ottoman. 13. NOTES THAT the applicants have given notice to the respondents, pursuant to order 4 of the Orders dated 26 May 2016, of their application for payment out of Court of the sum referred to in order 13. 14. ORDERS THAT pursuant to section 109(10) of the Bankruptcy Act 1966 (Cth), 100 per cent of the net amount available for distribution to creditors after payment of the amounts required to be paid by section 109(1)(a) of the Bankruptcy Act 1966 (Cth) from the bankrupt estate of Nathan El Ali be paid to the first and second applicants in priority to all other creditors. 15. ORDERS THAT, pursuant to Rule 13.01 of the Federal Court (Bankruptcy) Rules 2016, section 43(3)(d) of the Federal Court of Australia Act 1976 (Cth), Rule 40.02(b) of the Federal Court Rules 2011 and Practice Note CM4, the respondents be severally and jointly liable to pay the applicants' costs of these proceedings fixed in the amount of $590,223.59. NSD 771 of 2014 1. ORDERS THAT pursuant to section 471B of the Corporations Act 2001 (Cth), leave is granted to the applicant to proceed with these proceedings against Saracen Holdings Pty Ltd (In Liquidation), the fourth respondent. 2. DECLARES THAT pursuant to section 121(1) of the Bankruptcy Act 1966 (Cth) and section 37A of the Conveyancing Act 1919 (NSW), each of the following transactions is void: (a) the transfer of the shares held by Nathan El Ali, the first respondent (Mr El Ali), in Isaac & Jacob Pty Ltd, the fifth respondent (Isaac & Jacob), to John Nazloomian, the third respondent (Mr Nazloomian), on 19 October 2010 (see [227] of the decision delivered on 5 July 2016 in Royal v El Ali [2016] FCA 782 (the Decision)); (b) the transfer of the land situated at 1A McDonald Lane, Potts Point NSW 2011 described in certificate of title folio identifier Lot 46 in Deposited Plan 2436 (Potts Point property) from Saracen Holdings Pty Ltd, the fourth respondent (Saracen), to Mr Nazloomian on 22 November 2012 (see [231] of the Decision); (c) the transfer of the shares held by Nathan El Ali, the first respondent (Mr El Ali), in ACN 092 879 733 Pty Ltd (formerly known as EasyChoice Home Loans Pty Limited (EasyChoice) to Mahmoud El Ali, the second respondent (Mahmoud), on 7 September 2011 (see [227] of the Decision); 3. DECLARES THAT the shares in Isaac & Jacob and EasyChoice vest forthwith as to their legal and beneficial ownership in Michael Gregory Jones in his capacity as trustee of the bankrupt estate of Nathan El Ali, a bankrupt pursuant to section 58(1)(a) of the Bankruptcy Act 1966 (Cth). 4. ORDERS THAT, pursuant to section 175 of the Corporations Act 2001 (Cth), the register of members of Isaac & Jacob be corrected to record that the shares presently registered in the name of Mr Nazloomian be registered in the name of Michael Gregory Jones as trustee of the bankrupt estate of Nathan El Ali, a bankrupt. 5. ORDERS THAT, pursuant to section 175 of the Corporations Act 2001 (Cth), the register of members of EasyChoice be corrected to record that the shares presently registered in the name of Mr El Ali be registered in the name of Michael Gregory Jones as trustee of the bankrupt estate of Nathan El Ali, a bankrupt. 6. ORDERS THAT pursuant to section 467(3)(b) of the Corporations Act 2001 (Cth), advertising of making of the winding up application be dispensed with. 7. ORDERS THAT Isaac & Jacob be wound up pursuant to section 467(1)(a) and (k) of the Corporations Act 2001 (Cth). 8. ORDERS THAT Peter Paul Krejci and Robyn Karam be appointed official liquidators of Isaac & Jacob. 9. DIRECTS THAT a copy of these orders be lodged with the Australian Securities and Investments Commission. 10. ORDERS THAT Mr Nazloomian account to the official liquidator of Saracen in regard to the value of the Potts Point property by paying the said liquidator the sum of $30,000.00 11. ORDERS THAT pursuant to section 109(10) of the Bankruptcy Act 1966 (Cth), 100 per cent of the net amount available for distribution to creditors after payment of the amounts required to be paid by section 109(1)(a) of the Bankruptcy Act 1966 (Cth) from the bankrupt estate of Nathan El Ali be paid to Peter Paul Royal and Judith Louise Royal in priority to all other creditors. 15. ORDERS THAT, pursuant to Rule 13.01 of the Federal Court (Bankruptcy) Rules 2016, section 43(3)(d) of the Federal Court of Australia Act 1976 (Cth), Rule 40.02(b) of the Federal Court Rules 2011 and Practice Note CM4, the respondents be severally and jointly liable to pay the applicant's costs of these proceedings fixed in the amount of $282,888.23. 3 Save with respect to the costs orders, which the respondents do oppose, the orders which the applicants seek are otherwise largely not opposed. As the question of the costs orders that should be made has been put over for separate hearing at a later date, the Court has heard argument on the following remaining orders which are in issue: (a) Order 1 of the proposed orders in each proceeding which the liquidator for Saracen Holdings Pty Limited ("Saracen") has opposed; (b) Order 12 of the proposed orders of NSD 1731/2013: the liquidator of Saracen has sought in substitution for that order that the amount of $250,000 be paid to Saracen, in lieu of Ottoman Investments Pty Limited ("Ottoman"); (c) Order 10 of the proposed orders of NSD 771/2014: John Nazloomian ("Mr Nazloomian") has sought in substitution for that order that he pay the amount of $10,000 to the liquidator of Saracen, in lieu of the amount of $30,000 provided for in the proposed order. 4 Written submissions had also been filed on behalf of Ottoman opposing the making of a winding up order against it. Those submissions were, however, withdrawn upon the solicitor for Ottoman ceasing to act and there was no appearance for Ottoman at the hearing on 21 September 2016. LEAVE TO PROCEED: Proposed order 1 of NSD 1731/2013 and proposed order 1 of NSD 771/2014 5 On 3 November 2015, Saracen was ordered to be wound up on the application of the Deputy Commissioner of Taxation and, accordingly, the applicants require the leave of the Court pursuant to s 471B of the Corporations Act 2001 (Cth) ("the Corporations Act") to proceed against Saracen. The liquidator of Saracen has opposed the grant of leave if the Court is to determine that a costs order should be made against Saracen, on the basis that a costs order would make the applicants unsecured creditors of the company for the amount of the costs and the company and its existing creditor (the ATO) would be worse off, but does not oppose the grant of leave if the Court is to determine that a costs order should be not made against Saracen. 6 Whether leave should be granted is a matter for the Court's discretion, but generally, the central question is whether good reason has been shown to depart from the statutory proof process: Swaby v Lift Capital Partners (in liquidation) [2009] FCA 749; (2009) 72 ACSR 627 at [24]-[33]. In the present case, good reason is shown for the grant of leave. 7 Saracen was only placed into liquidation after the hearing of both proceedings, though before judgment was delivered. The company was represented at the hearing and defended the applicants' claims in both proceedings. The applicants now seek final orders against all respondents resulting from their success in both proceedings, including an entitlement to costs as against the company, which the liquidator has indicated he will dispute. The applicants cannot put in a proof of debt for any costs unless the Court first makes an order awarding costs in their favour against the company, which is reason in itself for the grant of leave: s 82 of the Bankruptcy Act 1966 (Cth) ("the Bankruptcy Act"). Until an order for costs is made, there is no obligation or liability to pay them and no right to recover them. Another compelling reason is that the liquidator is also seeking to make substantive submissions to the Court concerning the final orders to be made, not confined just to costs. If leave were refused, the liquidator would not have standing to be heard on the final orders to be made, which he seeks to be heard on. Accordingly, leave to proceed against Saracen is granted. DECLARATIONS: Proposed orders 2 and 3 of NSD 1731/2013 and proposed orders 2 and 3 of NSD 771/2014 8 None of the respondents have opposed the making of the declarations sought by the applicants and in light of the findings made, it is appropriate that each of the declarations be made. CONSEQUENTIAL ORDERS: Proposed orders 4, 9, 10, 11 and 12 of NSD 1731/2013 and proposed orders 4, 5 and 10 of NSD 771/2014 9 The orders sought in proposed orders 4, 9, 10, 11 and 12 of NSD 1731/2013 and proposed orders 4, 5 and 10 of NSD 771/2014 follow from, and are consequential upon, the making of the declarations. There is limited dispute in respect of two of the consequential orders sought by the applicants. Taren Point Property 10 Upon the declaration being made in order 2(e) of the proposed orders in NSD 1731/2013 that the transfer of the property at 2 Woodlands Road, Taren Point ("the Taren Point property") from Ottoman to Mr Zreika is void, the Taren Point property (or any amount in substitution for it) vests in Ottoman. Mr Zreika in fact sold the Taren Point property in May 2016 and pursuant to consent orders made on 26 May 2016, made a payment into court of $250,000, in substitution of the Trustee's claim to the Taren Point property. The applicants now seek an order that the $250,000 be paid to Ottoman. 11 The liquidator of Saracen, however, contended that the $250,000 paid into Court was directly attributable to the proceeds earned from the sale of Saracen's property at 1 Sirius Road, Voyager Point ("the Voyager Point property") and the payment out of Court should therefore be made to Saracen, not to Ottoman, consistent with the application of the equitable doctrine of subrogation to the present facts: Aged Care Services Pty Ltd v Kanning Services Pty Ltd [2013] NSWCA 393; (2013) 86 NSWLR 174, at [53]. The issue here, however, is the order that should be made consequential upon the making of the declaration, not whether Saracen may have an equitable claim to any part of the $250,000 paid into Court based upon the doctrine of subrogation. Such a claim was not made in the proceeding itself and such a claim, if properly to be made, would be against Ottoman and does not arise for determination on the applicants' claim for final relief. Potts Point property 12 Upon the declaration being made in order 2(b) of the proposed orders in NSD 771/2014 that the transfer of the property at 1A McDonald Lane, Potts Point ("the Potts Point property") from Saracen to Mr Nazloomian is void, the Potts Point property (or any amount in substitution for it) vests in Saracen. As Mr Nazloomian sold the Potts Point property in May 2015, the applicants seek an order that the amount of $30,000 be paid by Mr Nazloomian to the liquidator of Saracen, being the amount for which Saracen transferred the property to Mr Nazloomian in 2012. It was contended for Mr Nazloomian that he should be required to pay only the amount of $10,000, being the amount for which he sold the Potts Point property in May 2015 in line with a valuation that the purchaser obtained for the property in April 2015. It was submitted that if an order of $30,000 was made, the applicants would receive a windfall and Mr Nazloomian would be required to pay more than he received for the property. The applicants contended that the sale price was not reliable evidence of actual value at the time because the sale price was not arrived at by an on-market sale and the valuation on which the sale price was based lacked a reasoned basis for valuing the property at $10,000. Although not particularly informative as to the basis upon which valuer arrived at $10,000, the evidence, such as it is, does, however, support a value of $10,000 in 2015. In the valuation report the valuer noted that property is a long and narrow allotment which is undevelopable and that there were no comparable sales in the area as the property is an easement without the usage rights. It is stated that "a nominal figure of $10,000 has been adopted which after considering relevant easement valuations in the area and speaking with agents is appropriate". Thus, the valuer's adoption of $10,000 as the market worth of the property does not appear to be totally arbitrary or without some objective measure. Moreover, I do not think that it can be said that it is completely improbable that in May 2015, the property was worth less than the $30,000 value ascribed to the property when Saracen transferred the property to Mr Nazloomian in 2012. The figure of $10,000 should accordingly be substituted lieu of $30,000 in proposed order 10 of NSD 771/2014. 13 It was also submitted for Mr Nazloomian that an order that the value of the Potts Point property be paid to the liquidator of Saracen would invoke s 553C of the Corporations Act permitting mutual claims to be set off. As it was said that it is not disputed that Saracen is indebted to Mr Nazloomian for around $440,000 in respect of funds advanced to it, a mutual debt would arise which should be set off. Mr Nazloomian's contention is that the set-off has already occurred. Although asserted, the contention that the moneys were applied towards reduction of Saracen's debts was, however, not accepted by the Court. Furthermore, there is no warrant for making any adjustment for any set-off between Saracen and Mr Nazloomian because of a claimed set off pursuant to s 553C of the Corporations Act. That is a matter between the liquidator of Saracen and Mr Nazloomian. WINDING UP ORDERS: Proposed orders 5, 6, and 7 of NSD 1731/2013 and proposed orders 6, 7 and 8 of NSD 771/2014 14 Winding up orders are sought against Ottoman and Isaac & Jacob pursuant to ss 461(1)(a) and (k) of the Corporations Act. 15 The application is made by the Trustee and the Trustee is given standing to make the application by reason of the operation of the vesting provisions in ss 58 and 116 of the Bankruptcy Act, the effect of s 1072C of the Corporations Act, and the making of an order pursuant to section 175(1) of the Corporations Act correcting the share register: Francis v Blue Ribbon Enterprises (NSW) Pty Limited [2009] FCA 1364; (2009) 76 ACSR 13. 16 As the Trustee is entitled to be registered as the holder of Mr El Ali's shares by reason of s 58 of the Bankruptcy Act, and the applicants seek an order that the register of members of Ottoman, Saracen, EasyChoice and Isaac & Jacob be corrected pursuant to s 175 of the Corporations Act to record that the shares presently registered in the names of Mahmoud El Ali and Mr Nazloomian be registered in the name of the Trustee, I am satisfied that orders under s 175 should be made: see also Taylor (Trustee), in the matter of Kwok v Goldana Investments Pty Limited (receivers and managers appointed) (No 2) [2015] FCA 947; (2015) 236 FCR 298; Scott (Trustee) v Icicek Holdings Pty Limited, in the matter of Icicek Holdings Pty Limited [2015] FCA 1387. The making of the orders under s 175 gives the trustee standing as a "contributory" to apply for the winding up of Ottoman and Isaac & Jacob pursuant to s 461(1)(k) of the Corporations Act: s 462(2)(c) of the Corporations Act; definition of "contributory" s 9 of the Corporations Act. 17 I am also satisfied that it is appropriate for both companies to be wound up under s 461(1)(k) on the just and equitable ground. It is well settled that a company may be wound up on the just and equitable ground where there has been serious fraud or misconduct in regard to the affairs of the company: International Hospitality Concepts Pty Ltd v National Marketing Concepts Inc (No 2) (1994) 13 ACSR 368. In the present case, that has been clearly established and it is in the public interest that Ottoman and Isaac & Jacob both be wound up. It is also appropriate to make the associated orders sought dispensing with the requirement to advertise the making of the winding up applications pursuant to s 467(3)(b) of the Corporations Act. I note that Peter Paul Krejci and Robyn Karam have consented to act as liquidators and they should be appointed. 18 It is unnecessary to deal with the application under s 461(1)(a). DISTRIBUTION ORDERS: Proposed order 14 of NSD 1731/2013 and proposed order 11 of NSD 771/2014 19 The applicants seek orders under s 109(10) of the Bankruptcy Act in respect of the amounts payable to the liquidators of each of Saracen and Ottoman (on the assumption that a winding up order is made against Ottoman). Section 109(10) provides: Where in any bankruptcy: (a) property has been recovered, realized or preserved under an indemnity for costs of litigation given by a creditor or creditors; or (b) expenses in relation to which a creditor has, or creditors have, indemnified a trustee have been recovered; the Court may, upon the application of the trustee or a creditor, make such orders as it thinks just and equitable with respect to the distribution of that property and the amount of those expenses so recovered with a view to giving the indemnifying creditor or creditors, as the case may be, an advantage over others in consideration of the risk assumed by creditor or creditors. 20 The orders sought are not opposed and should be made. The Royals have acted in the public interest because they prevented number of frauds on creditors being effected: Grandsky Pty Ltd v Horne in his Capacity as Trustee for the Bankrupt Estate of Van Oost [2014] FCA 119 at [41]. They have taken on the risk of the litigation and indemnified the registered Trustee in both proceedings and ought to receive the full benefit of the net proceeds of the properties recovered. conclusion 21 Putting aside the costs orders sought which will be the subject of argument at a later hearing, orders will otherwise be made in the terms sought by the applicants in both proceedings, with the substitution of the figure of $10,000 in lieu of $30,000 in proposed order 10 of NSD 771/2014. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Davies. Associate: Dated: 23 September 2016 SCHEDULE OF PARTIES NSD 1731 of 2013 Applicants First Applicant: PETER PAUL ROYAL Second Applicant: JUDITH LOUISE ROYAL Third Applicant: MICHAEL GREGORY JONES IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF NATHAN EL ALI Respondents First Respondent: NATHAN EL ALI Second Respondent: MAHMOUD EL ALI Third Respondent: MAHMOUD ZREIKA Fourth Respondent: SARACEN HOLDINGS PTY LIMITED Fifth Respondent: OTTOMAN INVESTMENTS PTY LIMITED Sixth Respondent: OTSI STOJANOVSKI NSD 771 of 2014 Applicant Applicant: MICHAEL GREGORY JONES IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF NATHAN EL ALI Respondents First Respondent: NATHAN EL ALI Second Respondent: MAHMOUD EL ALI Third Respondent: JOHN RENE NAZLOOMIAN Fourth Respondent: SARACEN HOLDINGS PTY LIMITED Fifth Respondent: ISAAC & JACOB PTY LIMITED