New South Wales Supreme Court CITATION : CGU Workers Compensation (NSW) Ltd v Ascom Service Automation Australia) Pty Ltd [2005] NSWSC 747 HEARING DATE(S) : 25/07/05 JUDGMENT DATE : 25 July 2005 Equity Division JURISDICTION : Corporations List JUDGMENT OF : Barrett J DECISION : Orders under ss.480(d) and 1322(4) CATCHWORDS : CORPORATIONS - winding up by the court - application by liquidator for orders discharging liquidator and directing deregistration of company - surplus assets transferred by liquidator to sole shareholder without court's leave - whether excusing order should be made LEGISLATION CITED : Corporations Act 2001 (Cth), ss.480(d), 488(2), 1322(4)(a), 1322(4)(c), 1322(6)(a)(i), (ii), (iii), 1322(6)(b), 1322(6)(c) CGU Workers Compensation (NSW) Limited - Plaintiff Ascom Service Automation (Australia) Pty Limited - Defendant PARTIES : David Gregory Young as Liquidator of Ascom Service Automation (Australia) Pty Limited - Applicant FILE NUMBER(S) : SC 4534/03 COUNSEL : Ms J. Bennett, Solicitor - Applicant SOLICITORS : McLachlan Chilton - Applicant LOWER COURT JURISDICTION : IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST BARRETT J MONDAY 25 JULY 2005 453/03 - CGU WORKERS COMPENSATION (NSW) LIMITED v ASCOM SERVICE AUTOMATION (AUSTRALIA) PTY LIMITED; APPLICATION OF DAVID GREGORY YOUNG JUDGMENT 1 The applicant, Mr Young, is the liquidator of Ascom Service Automation (Australia) Pty Ltd, having been appointed by order made on 7 October 2003 at the same time as a winding up order was made. Mr Young seeks an order under s.480(d) of the Corporations Act 2001 (Cth) that he be released and that ASIC deregister the company. That application is made in circumstances where the evidence shows that all assets have been realised, all three creditors have been paid 100 cents in the dollar in respect of their debts and the surplus has been paid to the sole contributory. 2 The only matter requiring the attention of the court is the fact that the liquidator neglected to seek leave under s.488(2) before paying the surplus to the sole contributory. Section 488(2) is as follows: "Despite anything in rules or regulations made for the purposes of subsection (1), a liquidator may distribute a surplus only with the Court's special leave." 3 In a court-ordered winding up, it is the court itself that has the responsibility of adjusting the rights of the contributories among themselves and distributing any surplus among the persons entitled to it: see s.485(2). Section 488(1) contemplates that rules or regulations may allow that function to be performed by the liquidator. Regulations 5.6.58 to 5.6.62 allow the liquidator to settle the list of contributories but, apart from s.488(2) itself (and its statement that the liquidator "may distribute surplus" only with the leave of the court) there is no express grant of power to a liquidator to distribute surplus. It seems to me, however, that s.488(2), by regulating distribution by the liquidator, recognises that the liquidator has the power (albeit a controlled power) to distribute. This is, of course, a by-product of the fact that the surplus is in the hands of the liquidator and that it is the liquidator who, in a physical sense, is capable of disposing of it. 4 It is clear that the statutory provisions with respect to distribution of surplus have the twofold aim of ensuring that there is in reality a surplus (in that the claims of creditors have been recognised and met in full) and of seeing that the correct relativities among the contributories have been observed, having regard to the possibility of differing rights. In the present case, neither of those matters poses any difficulty. The evidence shows clearly that there were only three creditors, all of whose claims were admitted and paid in full, and that there was only one contributory, being the sole shareholder. The case would accordingly have been one in which settling of a list of contributories was dispensed with on the basis stated by Buckley J in Re Paragon Holdings Ltd [1961] 1 Ch 346 at p.353: "If there were a very simple case of a very small number of shareholders where it was possible to establish that the position was perfectly clear without going through the formalities prescribed by the rules relating to the settlement of the list of contributories, that would be the sort of case in which the court could properly dispense with the settlement of the list under section 257(1) ..." 5 For the same reasons, the court would readily have made an order granting leave under s.488(2) to transfer the surplus to the sole contributory in this case. 6 In the circumstances of this case, the court will make the order under s.480(d) despite the irregularity concerning payment over of the surplus to the sole shareholder. 7 The liquidator seeks orders under ss.1322(4)(a) and 1322(4)(c) in respect of that irregularity. I will make such orders and, in doing so, record my conclusions that the failure to obtain leave under s.488(2) was, in the circumstances, an essentially procedural matter (s.1322(6)(a)(i)), that the liquidator acted honestly (ss.1322(6)(a)(ii) and 1322(6)(b)) and that it is just and equitable that the order under s.1322(4)(a) be made (s.1322(6)(a)(iii)); also that no substantial injustice has been or is likely to be caused by the non-compliance, that being a matter to which the court must direct its attention under s.1322(6)(c). 8 I make orders (1) to (4) in the interlocutory process filed on 23 June 2005. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. 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