Supreme Court New South Wales Medium Neutral Citation: In the matter of CB Constructions (NSW) Pty Ltd [2014] NSWSC 1891 Hearing dates: 8 December 2014 Decision date: 08 December 2014 Jurisdiction: Equity Division - Corporations List Before: Black J Decision: Order made that the liquidator be granted special leave to distribute the surplus assets of the company. Costs of the application be a cost and expense of the liquidation. Catchwords: CORPORATIONS – winding up – application by liquidator for special leave to distribute surplus of assets in the liquidation of company – where contributories do not oppose application – whether surplus of assets exists – whether special leave should be granted to liquidators to distribute surplus assets of company Legislation Cited: - Civil Procedure Act 2005 (NSW) s 14 - Corporations Act 2001 (Cth) ss 488, 488(2) - Supreme Court (Corporations) Rules 1999 (NSW) r 7.9 Cases Cited: - CGU Workers Compensation (NSW) Ltd v Ascom Service Automation (Australia) Pty Ltd [2005] NSWSC 747 - Re DS Millard & Son Pty Ltd (1997) 24 ACSR 71; 15 ACLC 808 Category: Procedural and other rulings Parties: John Baird (Plaintiff) CB Constructions (NSW) Pty Ltd (Defendant) Representation: Counsel: J T Johnson (Plaintiff) Solicitors: Sally Nash & Co (Plaintiff) File Number(s): 2009/288487 Judgment – ex tempore 1. By application dated 18 November 2014, Mr Ashton Brailey, as liquidator of CB Constructions (NSW) Pty Ltd ("Company"), seeks an order for special leave to distribute a surplus to contributories under s 488(2) of the Corporations Act 2001 (Cth). 2. Before turning to the evidence on which Mr Brailey relies, I should refer briefly to the purpose of that section. The requirement that a liquidator obtain leave before distributing a surplus to contributories, under s 488 of the Corporations Act, is intended to ensure that appropriate investigations have been undertaken to identify any creditors of the company and its shareholders before any distribution is made. The provision is therefore intended to ensure that there is, in reality, a surplus, in that creditors' claims have been recognised and met in full, and that the correct relativities among the contributories have been observed: CGU Workers Compensation (NSW) Pty Ltd v Ascom Service Automation (Australia) Pty Ltd [2005] NSWSC 747 at [4]. The reference to "special leave" contemplates that a special application be made to the Court, as has occurred in this matter, rather than that the matter is dealt with as part of some other administrative procedure: Re DS Millard and Son Pty Ltd (1997) 24 ACSR 71 at 72; 15 ACLC 808. In dealing with the application, the Court must therefore be satisfied that, first, there is in fact a surplus and, implicitly, that creditors of the Company have been paid; and, second, that the proposal is to distribute the surplus to persons properly entitled to it. 3. The application is supported by an affidavit of Ms Boyd dated 17 November 2014, which annexes a company search of the Company. That search is relevant, for present purposes, because it discloses that there are two current shareholders of the Company, Mr John Baird, who holds one thousand ordinary shares, and Mr Abhay Chandra, who also holds one thousand ordinary shares. As will emerge below, the liquidator has proceeded on that basis in the proposal for a distribution of the surplus to contributories. 4. The application is also supported by an affidavit of Ms Zhou sworn 8 December 2014, who refers to service of the application on persons who, from other evidence, were former members of the committee of inspection. The application has also been served upon the Australian Securities and Investments Commission and upon the contributories of the Company; I infer that the reference to Mr Bird in paragraph 4 of Mr Zhou's affidavit is in fact to one of those contributories, Mr Baird, and service is shown as having taken place at the address recorded for him. Service upon the Australian Securities and Investments Commission was appropriate, not only for the usual reasons, but also because it had some previous involvement in respect of questions as to the liquidator's remuneration in the matter. The Australian Securities and Investments Commission has not sought to be heard in respect of the application. 5. Mr Brailey, by affidavit dated 3 December 2014, sets out something of the background of the matter. In broad terms, Mr Brailey had previously drawn remuneration as a provisional liquidator, before he was appointed as liquidator. It appears, possibly by oversight, that that remuneration had not been approved by the Court, and an application subsequently to approve it was unsuccessful because of issues as to uncertainty as to the amount properly to be approved. Mr Brailey has ultimately determined to repay an amount to the Company, and that amount has been repaid. He indicates that he does not propose to make a further approval application to the Court for approval of his remuneration, costs and expenses as provisional liquidator. He indicates that the result of that repayment of an amount of $57,877.60 into the Company's account is that there is now a surplus in respect of the liquidation. It is that surplus that he seeks to distribute to the Company's contributories, although the amount ultimately to be distributed will turn upon the amount of legal costs incurred in making this application. 6. There is evidence as to the estimate of costs provided, but Mr Brailey has been informed by his solicitors that costs presently incurred are significantly less than that sum. That may ultimately be the result, because the application will be determined on the first occasion on which it was mentioned, and the costs estimate appears to have assumed that additional directions might be required. To the extent that legal costs incurred in the application are less than those which were estimated, then the amount of the surplus available to distribution would be correspondingly larger. 7. Mr Brailey's evidence is that he has determined all of the proofs of debt in the liquidation and paid all unsecured creditors, and there is a copy of his receipts and payments ledger in evidence. He has advertised the notice of application for leave to distribute the surplus although, as Mr Johnson, who appears for him, fairly points out, that occurred in slightly less than the fourteen days contemplated for such an advertisement, under r 7.9 of the Supreme Court (Corporations) Rules 1999 (NSW). In the relevant circumstances, it seems to me highly unlikely that that will have caused any difficulty, because the liquidation has been in place for a considerable period, and any issues in respect of dealings with creditors are likely to have emerged in that period, and the contributories are aware of this application so far as it has been raised with the committee of inspection. Accordingly, I dispense with the requirement for advertisement of the application, fourteen days prior to the hearing, with the intent that the existing period prior to the hearing should be treated as sufficient, under s 14 of the Civil Procedure Act 2005 (NSW). 8. Mr Brailey's evidence is, as I have noted, that this application had been considered by the committee of inspection at a meeting on 3 November 2014, and the minutes of that meeting are in evidence. The committee discussed the payment made by Mr Brailey, in repayment of fees claimed during the provisional liquidation, and certain arrangements were approved in respect of that matter and in respect of the payment of legal fees and costs at that meeting. Accordingly, I can infer that contributories do not oppose the relevant application. 9. By further affidavit dated 3 December 2014, Mr Brailey indicates that he settled a list of the contributories of the Company and that list of contributories records Mr Baird and Mr Chandra as contributories, each for one thousand shares, consistent with the information recorded in the records of the Australian Securities and Investments Commission, to which I have referred above. 10. In the present circumstances, I am satisfied that a surplus does exist, having regard to Mr Brailey's evidence as to the steps which have been taken to identify the Company's unsecured creditors and pay them out. I am satisfied that the proposed distribution, as set out in Mr Brailey's affidavit, reflects the entitlements of contributories, in a relatively straightforward situation where there are two shareholders, each holding fully paid shares, in equal numbers. 11. Accordingly, I make orders that: 1. There be special leave to distribute the surplus to the contributories of CB Constructions (NSW) Pty Ltd. 2. The cost of this application be a cost and expense of the liquidation. ********** 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. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 05 February 2015