Milan Visnic v Peter Sywak [2012] NSWSC 1284

Supreme Court New South Wales

Medium Neutral Citation: Milan Visnic v Peter Sywak [2012] NSWSC 1284 Hearing dates: 3 September 2012 Decision date: 03 September 2012 Jurisdiction: Equity Division - Corporations List Before: Brereton J Decision: Leave granted to the liquidator to distribute the surplus Catchwords: CORPORATIONS - external administration - special leave to distribute surplus - Corporations Act s 488(2) - where application for leave has not been advertised in accordance with the Rules Legislation Cited: (Cth) Corporations Act 2001, s 488(2) (Cth) Corporations Regulation 2001, cl. 5.6.71 (NSW) Supreme Court (Corporations) Rules 1999, r 7.9(2) Category: Interlocutory applications Parties: Michael Gregory Jones (Liquidator) - Applicant Peter Orest Sywak (First Defendant) - by leave Maxwell William Prentice (Bankruptcy Trustee of Milan Visnic) - by leave Bruce Gleeson (Bankruptcy Trustee of Lou Tasic) - by leave John David Latimer Fabian & Ors (lien claimants) - by leave Quickfund Capital Pty Ltd - by leave Representation: Counsel: Mr Calabretta (Applicant) Mr Dale (Bankruptcy Trustee of Lou Tasic) Mr Nagrath (Solicitor Firms) Mr Johnson (Bankruptcy Trustee of Milan Visnic) Solicitors: ERA Legal (Applicant) Turks Legal (First Defendant) File Number(s): 2003/ 82389

Judgment (ex tempore) 1HIS HONOUR: By interlocutory process filed 31 August 2012 the liquidator of Adelos Pty Ltd and of Castlove Pty Ltd seeks special leave, pursuant to (Cth) Corporations Act 2001, s 488(2), to distribute surplus funds in the liquidation of each of those companies. 2A prior application for special leave to distribute surplus was heard and determined by Barrett J on 21 October 2011, when his Honour granted special leave to distribute part of the surplus to one of the contributories, Mr Sywak, and made directions in respect of the balance of the surplus pending the resolution of other proceedings, which were ultimately conducted in the Federal Court, regarding the entitlement to that other share. That issue has now been resolved by orders, made by consent, by the Federal Court on 22 August 2012, pursuant to which the bankruptcy trustee of Mr Visnic, the other shareholder, has given a direction to the liquidator as to how the proceeds should be distributed. 3Although s 488(2) speaks of "special leave", the authorities explain that all that that means is that a special application for the Court's approval is required. The purpose of requiring the Court's "special leave" is primarily to ensure that there is in fact a surplus to be distributed. 4The two affidavits of the liquidator, one sworn 26 August 2011, and the other more recently on 31 August 2012, do not go as far as perhaps they might in deposing to the calling for and dealing with proofs of debt, but each depose that there are no claims of creditors of the two companies in question of which the liquidator has been notified and admitted to proof which have not yet been paid. It will, of course, be necessary on any ultimate application for release of the liquidator that notification be given also to creditors who have made claims that have not been admitted to proof. At present, it is sufficient comfort that any risk in this respect, including that of the liquidator's estimate of the outstanding taxation liabilities, will be borne by the liquidator personally. 5(NSW) Supreme Court (Corporations) Rules 1999, r 7.9(2), requires that notice of an application of this kind be advertised. The purpose of that requirement is to enable creditors or contributories not otherwise on notice to come in, even belatedly, and oppose a distribution of surplus. The rule exists for a purpose, and it ought not be expected that the Court will routinely dispense with it. To the contrary, the expectation should be that the Court will routinely insist on its compliance. However, in the present case the winding up has been on foot for some five years. The liquidator must in that time have obtained detailed knowledge of the companies' affairs and potential claims on it, and it would be astounding if in that time a creditor with a claim had not come forward and advanced it. In those circumstances, albeit with considerable misgivings, I am prepared to dispense with the requirement to publish an advertisement of the present application. It should not be expected that that approach will be taken in the future. 6The persons entitled to the surplus are the contributories. In accordance with (Cth) Corporations Regulation 2001, cl. 5.6.71, the order should either on its face, or in the annexed Form 551, specify the persons entitled. Again, it is established that the requirement for a schedule in Form 551 may be dispensed with in a relatively simple case. The persons to whom payment is proposed to be directed are not contributories of the company, but are persons who have, by various means, acquired an interest in the Visnic shareholding, which, at least in some cases, though not necessarily all of them, may more properly be characterised as a charge than a proprietary interest. In those circumstances, the appropriate course is to authorise distribution of the surplus to Mr Visnic's trustee, or as that trustee directs (and the trustee has already given the relevant direction).