Tirrabella Pty Ltd v Struthers [2007] NSWSC 467

New South Wales Supreme Court

CITATION : Tirrabella Pty Ltd v Struthers [2007] NSWSC 467

HEARING DATE(S) : 26/04/07

JUDGMENT DATE : 11 May 2007

JURISDICTION : Equity Division Corporations List

JUDGMENT OF : Barrett J

DECISION : Appeal against rejection of proof of debt dismissed

CATCHWORDS : CORPORATIONS - winding up - proof of debt - rejection by liquidator - appeal to court - whether existence of debt proved - no matter of principle

LEGISLATION CITED : Corporations Act 2001 (Cth), s.1321

CASES CITED : Tanning Research Laboratories Inc v O'Brien (1990) 169 CLR 332 Westpac Banking Corporation v Totterdell (1997) 25 ACSR 769

PARTIES : Tirrabella Pty Limited - Plaintiff Ian Lawrence Struthers as liquidator of Bolting In Pty Limited - Defendant

FILE NUMBER(S) : SC 3365/05

COUNSEL : Mr M.W. Young - Plaintiff Mr L.R. deV. Tyndall - Defendant

SOLICITORS : Dixon Holmes duPont - Plaintiff Gregory Falk & Associates - Defendant

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

BARRETT J

FRIDAY, 11 MAY 2007

3365/05 TIRRABELLA PTY LIMITED v IAN LAWRENCE STRUTHERS AS LIQUIDATOR OF BOLTING IN PTY LIMITED JUDGMENT 1 This is an appeal under s.1321 of the Corporations Act 2001 (Cth) against a liquidator's rejection of a proof of debt. 2 The court's function under s.1321 is to "confirm, reverse or modify" the liquidator's decision. The section does not distinguish between different types of decisions. It is available as a means of reviewing the exercise of a liquidator's discretion or a decision on a matter of business judgment. In cases of that kind, the court's main concern is to see whether the liquidator acted unreasonably or in bad faith. But in cases such as the present where the decision under challenge is a decision with respect to the admission of a proof of debt, the court takes a different approach. That approach was described by Brennan and Dawson JJ in Tanning Research Laboratories Inc v O'Brien (1990) 169 CLR 332 at pp.340-1: "The proceedings thus instituted, though often referred to as an 'appeal' from the liquidator's decision to reject, are originating proceedings which the court hears de novo: Re Bird's Stores Pty Ltd (1931) 37 Arg LR 94; Re Kentwood Constructions Ltd [1960] 1 WLR 646; [1960] 2 All ER 655; Re Trepca Mines Ltd [1960] 1 WLR 1273; [1960] 3 All ER 304. In such a proceeding, a liquidator who defends his decision to reject a proof of debt is no longer acting in a quasi-judicial capacity; he is cast in the role of an adversary, defending the assets available for distribution against a liability which, according to the view he formed when acting quasi-judicially, is not legally enforceable. The liquidator may defend those assets against the creditor's claim on any ground on which the company might have defended the claim had it been sued by the creditor. If the liquidator relies on those special defences which allow him to go behind a judgment, an account stated, a covenant or an estoppel in order to ascertain the true liability of the company, he is none the less in the role of an adversary. The issue in the proceeding is whether the liability referred to in the proof of debt is a true liability of the company enforceable against it. The issue is contested between the putative creditor on the one hand and the liquidator on the other; the liquidator is a party litigant. And none the less so though the liquidator is required to act fairly in conducting the litigation." 3 The appellant claiming to be aggrieved by the liquidator's decision to refuse to admit the proof of debt has the onus of proving that the debt should properly be admitted to proof; and the appeal is by way of hearing de novo: Westpac Banking Corporation v Totterdell (1997) 25 ACSR 769. 4 The proof of debt with which I am here concerned is dated 25 January 2006 and was lodged by the plaintiff, Tirrabella Pty Ltd ("Tirrabella"), with the liquidator of Bolting In Pty Ltd ("Bolting"). Tirrabella claimed to be a creditor of Bolting in the sum of $812,705.42. That sum was said to be the balance of principal outstanding in respect of a loan. To be more precise, the proof of debt stated the following under the heading "Particulars of the debt are": " Date Consideration (state how the debt arose) Amount Remarks (include details of voucher substantiating payment) $ & ¢ 26.08.1999 to 18.07.2000 Loan Advance $1,607,371.58 plus interest accruing at the Supreme Court rate of 9.00% pa