Supreme Court New South Wales Medium Neutral Citation: In the matter of GPJ Investments Pty Limited and in the matter of Angelides Investments Pty Limited [2016] NSWSC 1173 Hearing dates: 30 May 2016; supplementary written submissions 12 August 2016 Date of orders: 24 August 2016 Decision date: 24 August 2016 Jurisdiction: Equity - Corporations List Before: Brereton J Decision: Liquidators' remuneration approved. Special leave granted to distribute surplus. Catchwords: CORPORATIONS – external administration – liquidation – distribution of surplus – application for special leave to distribute surplus – where legal shareholding obscure but beneficial interest clear – leave granted to distribute to beneficiaries CORPORATIONS – external administration – liquidators – remuneration Legislation Cited: (CTH) Corporations Act 2001, s 473, s 485(2), s 488 (CTH) Corporations Regulations reg 5.6.71 (NSW) Supreme Court (Corporations) Rules 1999, r 7.9, 7.10 Cases Cited: Angelides Investments Pty Ltd and GPJ Investments Pty Ltd, In the matter of (Black J, 18 December 2014). Angstrom Assets Pty Ltd (in liq), In the matter of [2014] NSWSC 1779 Brealey v Shields [2009] NSWSC 1148 Catombal Investments Pty Limited, In the matter of [2014] NSWSC 313 D S Millard & Son Pty Ltd, Re (1997) 24 ACSR 71 FAI Car Owners Mutual Insurance Co Pty Ltd, Re (2009) 262 ALR 552; 76 ACSR 164; [2009] NSWSC 1350 Klaus Maertin Pty Ltd (in liq), Re [2009] NSWSC 618; [2009] 232 FLR 239 Paragon Holdings Ltd, Re [1961] Ch 346 Sakr Nominees Pty Ltd, In the matter of [2016] NSWSC 709 Trussted Frames and Trusses Pty Ltd, In the Matter of [2012] NSWSC 787 Visnic v Sywak [2011] NSWSC 1246 Visnic v Sywak [2012] NSWSC 1284 Category: Principal judgment Parties: John Melluish and Morgan John Kelly as liquidators of GPJ Investments Pty Limited (first applicant) John Melluish and Morgan John Kelly as liquidators of Angelides Investments Pty Limited (second applicant) Jo-Anne Eudoxia Angelides (plaintiff/first respondent) Nicholas Stamell as executor of the estate of the late George John Angelides (second defendant/second respondent) Peter Richard Angelides (first defendant/third respondent) Representation: Counsel: M L Rose (applicants) Solicitors: Kemp Strang (applicants) Self-represented (first respondent) JH Stamell & Co (second respondent) File Number(s): 2014/347429 Judgment 1. By interlocutory process filed on 24 March 2016, the liquidators of GPJ Investments Pty Limited ("GPJ") and of Angelides Investments Pty Limited ("AI") apply pursuant to (CTH) Corporations Act 2001, s 473(3)(b)(ii), for the approval of their remuneration, and pursuant to s 488(2), for special leave to distribute surplus in each winding-up. 2. The winding-up followed earlier litigation commenced in 2005 by the plaintiff Ms Jo-Anne Angelides for declarations to the effect that she and her brothers Peter and George were beneficially entitled to two properties ("Cunningham Street" and "Telopea Street"), then held in the names of Grahame Francis Funnell and GPJ respectively. Orders were ultimately made by Hamilton J, on 14 November 2006, that the (voluntary) winding-up of AI (which was then in liquidation) be terminated; that ASIC reinstate the registration of AI and GPJ, declaring that Mr Funnell held Cunningham Street, and Mr Funnell held 999 shares, and the second defendant Mr Nicholas Stamell (a solicitor, and the executor of the estate of the late Anastasia Angelides, the mother of Jo-Anne, Peter and George) held the remaining one share in GPJ, upon trust for AI; and also declaring "that all of the issued shares in [AI] are held beneficially by [Jo-Anne, Peter and George] in equal shares". 3. Between 2006 and 2012, Jo-Anne endeavoured to procure the transfer of the properties and shares to those beneficially entitled in accordance with the 2006 orders, without success. As at 25 November 2014, the title of Cunningham Street remained in the name of Mr Funnell, and that of Telopea Street in the name of GPJ; the shares in GPJ remained in the names of Messrs Funnell and Stamell. However, Mr Funnell had died on 10 April 2009, and his wife Karen Funnell as his executrix was legally entitled to Cunningham Street, all the shares in AI, and 999 of the 1,000 shares in GPJ, with Mr Stamell holding the remaining share. AI had no directors, and Jo-Anne and Peter were in deadlock as directors of GPJ. George was deceased, and Mr Stamell was his executor. 4. It was in that context that in November 2014, Jo-Anne sought orders to implement the 2006 orders, and on 18 December 2014, Black J made orders that the executor of Mr Funnell's estate execute all documents and do all things necessary to transfer Cunningham Street, and 999 shares in GPJ, to AI, and for Mr Stamell to transfer one share in GPJ to AI. His Honour also ordered that the companies be wound up on the just and equitable ground – as one was without directors, and the other was deadlocked – and the liquidators were thereupon appointed on 18 December 2014. The companies were then, and remain, solvent. 5. Since their appointment, the liquidators have: 1. Procured the transfer of the Cunningham Street property, and the shares in GPJ, to AI; 2. Terminated residential tenancy arrangements in respect of Telopea Street and Cunningham Street, and undertaken work to render Cunningham Street safe; 3. Considered and assessed the respective rights of the shareholders, including liaising with them and their representatives; 4. Performed their statutory reporting and investigation functions; 5. Sold Telopea Street on 2 May 2015 for $950,000, and Cunningham Street on 24 June 2015 for $3,400,000; 6. Engaged in negotiations and legal proceedings with the Chief Commissioner of State Revenue in respect of duty charged on the transfer of Cunningham Street, resulting in a refund of duty of $191,190 as an Act of Grace. 1. After realisation of assets and payment of liabilities, the liquidators hold $901,093.02 in respect of GPJ, which represents the net realisations after payment of liabilities. If their remuneration claim in respect of GPJ, of $37,877.95 for past remuneration and $6,600 for the future is approved in full, and outstanding disbursements of $1,044.04 and anticipated further disbursements of $385 are paid, there will remain a balance of $855,186.03 available for distribution to AI, which is the sole shareholder. 2. Receipt of that distribution will increase the amount held in respect of Angelides to $3,751,860.41, which will be the net realisations in that liquidation. If their claimed remuneration of $67,522.50 and future remuneration of $15,325.25 is allowed in full, disbursements of $12,467.54 and anticipated future disbursements of $1,113.82 paid, together with estimated legal costs and disbursements of $19,646.00, there will be a balance available for distribution to shareholders of $3,635,755.30. 3. The liquidators seek the Court's approval of their remuneration, in the amounts which I have mentioned, in circumstances where it is not possible for the approval of creditors to be obtained as there are no longer any creditors; in those circumstances the court can approve their remuneration under Corporations Act, s 473(3)(b)(ii). [1] The remuneration claimed is calculated on a time basis at the liquidators' firm's standard rates. The liquidators have provided detailed summaries of the work done and to be done, and deposed that in their opinion the work undertaken was necessary and the time expended and amounts claimed reasonable. Notice of intention to apply for remuneration in the amount claimed was sent to the three shareholders, and none objected. Two of the shareholders (Jo-Anne and Mr Stamell) consent to the amount claimed; Peter has not filed an appearance. 4. In the case of GPJ, the amount claimed represents about 5% of net realisations. In the case of AI, it represents slightly in excess of 2% of net realisations. Those amounts are well within the range described in the cases. [2] 5. In those circumstances, I am satisfied that the remuneration claimed is reasonable, and should be approved. 6. Corporations Act, s 485(2), provides that the court must adjust the rights of the contributories amongst themselves and distribute any surplus among the persons entitled to it. Section 488(1) provides that the rules or regulations may enable or require a liquidator to exercise all or any of the powers and duties conferred and imposed on the court in respect of, inter alia, "(c) the adjusting of the rights of the contributories among themselves and the distribution of any surplus among the persons entitled to it". However, subsection (2) provides that despite anything in the rules or regulations made for those purposes, a liquidator may distribute surplus only with the court's special leave. (NSW) Supreme Court (Corporations) Rules 1999, r 7.10, delegates the powers reserved to the court under Part 5.4B of the Corporations Act to the liquidator, but subject to the Act, the regulations, the rules and any order of the court. Accordingly, the power to distribute surplus has been delegated to the liquidator; however, s 488(2) means that the liquidator nonetheless requires the court's special leave to distribute surplus. 7. The cases establish that the words "special leave" are essentially of historical origin, and do not denote that any particular standard is required so far as establishing grounds for leave is concerned, but only that it be shown that it is appropriate in all the circumstances for the distribution to be made. [3] The purpose of requiring the court's special leave is essentially concerned with ensuring that all appropriate steps have been taken to identify creditors; that there is, in truth, a surplus to be distributed; and that the distribution proposed is one that accords with the rights of the contributories. [4] 8. Rule 7.9 specifies that the affidavit in support of an application for special leave to distribute surplus must state how the liquidator intends to distribute surplus, including the name and address of each person to whom the liquidator intends to distribute any part of the surplus, and that at least fourteen days before the date fixed for hearing, the liquidator must publish, in accordance with r 2.11, a notice of the application in accordance with Form 15. The purpose of the requirement to advertise notice of the application is to give all creditors or contributories an opportunity to have their claims considered before the distribution of any surplus. [5] 9. While there are difficulties in respect of r 2.11 (which contemplates publication on the ASIC Insolvency Notices website, but such a notice does not fall within the scope of (CTH) Corporations Regulations 2001, reg 5.6.75, and cannot be published on that site), the liquidators have published advertisements in Form 15 in the Sydney Morning Herald, which meets the intent of the requirement for publication. They have previously published notices of their appointment. No creditors have been identified. 10. The liquidators have not considered it necessary to formally settle a list of contributories, as the shares are fully paid up and there is only one shareholder in GPJ, and three in AI. 11. In respect of GPJ, I am satisfied that there is surplus of $855,186.03, and that AI is now the sole shareholder and therefore entitled to the whole of that surplus, and it is appropriate that such surplus be distributed, as the liquidators propose, to AI which accords with its rights both beneficially and now legally as sole contributory. 12. I am satisfied that upon that distribution being made, there will then be surplus in AI of $3,635,755.30. However, while the order of November 2006 declares that Jo-Anne, Peter and George are beneficially entitled to the shares, it is not apparent that they are the legal holders. If shares are held on trust, surplus should at least ordinarily be distributed to the trustee registered shareholder, not the beneficiary; it is then for the trustee to give effect to the trust. The evidence does not establish who the present registered shareholders in AI are. The November 2006 order declares the beneficial ownership without reference to the legal ownership. The current search of the ASIC records does not reveal the names of any shareholders. The liquidators have not located any share register. It seems likely that the register has not changed since it recorded Mr Funnell and Anastasia Angelides as the shareholders, and that upon the death of Anastasia, Mr Funnell was the sole shareholder (as trustee). If so, the person legally entitled now would presumably be Mrs Funnell (as Mr Funnell's executrix, in the absence of any trustee having been appointed). While the liquidators have obtained a transfer from Mrs Funnell of the shares she held in GPJ, they have not done so in respect of the shares in AI. 13. But assuming that Mrs Funnell (as Mr Funnell's executrix) is the current legal owner, considerable doubt and disputation attends the legitimacy of the process by which Mr Funnell came to hold the shares in question. The November 2006 order, by resolving the beneficial interests, rendered it unnecessary, in those proceedings, further to explore those doubts, which remain unresolved. 14. The purpose of the requirement for special leave to distribute surplus includes ensuring that it is paid to the persons entitled to it. Thus it has been suggested that in distributing surplus, liquidators can have regard to equitable as well as legal interests. [6] Although a company is ordinarily entitled to disregard unregistered equitable interests and justified in proceeding on the face of the register, it is not a corollary that it must disregard equitable interests, or is not justified in having regard to them. In the absence of any available evidence of the legal shareholdings, and where the beneficial ownership of the shares is conclusively established by the November 2006 order, I am satisfied that the persons to whom the liquidators propose to distribute the surplus in AI – namely Jo-Anne, Peter, and Mr Stamell (as George's executor) – are the persons entitled to it. 15. The liquidators propose to distribute the surplus in AI to Jo-Anne, Peter, and Mr Stamell subject to an adjustment which involves the reduction of Peter's share by an amount that reflects rental received by him from Telopea Street for which he did not account to GPJ, net of expenses incurred by him. The liquidators have explained this adjustment to Peter, and he has not disputed it. Peter has been served with the application and has not appeared to oppose it, and I accept that it is appropriate as an adjustment of the rights of the contributories to achieve equality of treatment. 16. Given that there is only one shareholder in GPJ, and only 3 in AI, it is appropriate to dispense with the requirement under Corporations Regulations, reg 5.6.71, that the order have annexed to it a schedule in Form 551; the information that would otherwise be required by Form 551 can in a simple case be included in the order itself. [7] 17. The Court therefore orders that: 1. Pursuant to Corporations Act, s 473(3)(b)(ii), the remuneration of the applicants John Melluish and Morgan John Kelly as liquidators of GPJ Investments Pty Limited is approved: 1. In the amount of $37,877.95 (inclusive of GST) for the period 18 December 2014 to 21 October 2015; and 2. In the amount of $6,600.00 (inclusive of GST) for the period 22 October 2015 to the conclusion of the winding-up. 1. Pursuant to Corporations Act, s 473(3)(b)(ii), the remuneration of the applicants John Melluish and Morgan John Kelly as liquidators of Angelides Investments Pty Limited is approved: 1. In the amount of $74,307.75 (inclusive of GST) for the period 18 December 2014 to 21 October 2015; and 2. In the amount of $15,325.25 (inclusive of GST) for the period 22 October 2015 to the conclusion of the winding-up 1. Pursuant to Corporations Act, s 488(2), the applicants have special leave to distribute the whole of the surplus in the winding up of GPJ Investments Pty Limited, being $855,186.03, to Angelides Investments Pty Limited. 2. Pursuant to Corporations Act, s 488(2), the applicants have special leave to distribute the whole of the surplus in the winding up of Angelides Investments Pty Limited, being $3,631,102.75, as follows: 1. $1,261,253.73 to Jo-Anne Eudoxia Angelides; 2. $1,108,595.29 to Peter Angelides; and 3. $1,261,253.73 to Nicholas Stamell as executor of the estate of the late George John Angelides. 1. Pursuant to Corporations Regulations, reg 5.6.71, the requirement that there be annexed to orders 3 and 4 a schedule in accordance with Form 551 be dispensed with. ********** Endnotes 1. In the matter of Angstrom Assets Pty Ltd (in liq) [2014] NSWSC 1779 at [5]. 2. See, for example, In the matter of Sakr Nominees Pty Ltd [2016] NSWSC 709 at [17]-[22]. 3. Re Klaus Maertin Pty Ltd (in liq) [2009] NSWSC 618; [2009] 232 FLR 239 (Austin J), citing Re D S Millard & Son Pty Ltd (1997) 24 ACSR 71 (Young J); see also In the Matter of Trussted Frames and Trusses Pty Ltd [2012] NSWSC 787 at [4] 4. In the matter of Catombal Investments Pty Limited [2014] NSWSC 313. 5. Visnic v Sywak [2012] NSWSC 1284 at [5]. 6. Re Paragon Holdings Ltd [1961] Ch 346 at 352–353; Visnic v Sywak [2011] NSWSC 1246 at [20]–[21], [35]. 7. Re Klaus Maertin Pty Ltd [2009] NSWSC 618; (2009) 232 FLR 239 at [15]; Brealey v Shields [2009] NSWSC 1148 at [8]-[15]; Re FAI Car Owners Mutual Insurance Co Pty Ltd (2009) 262 ALR 552; 76 ACSR 164; [2009] NSWSC 1350 at [28]. Amendments 24 August 2016 - Typographical error Order (5) 21 October 2016 - Orders 2 and 4 amended pursuant to UCPR r 36.17. 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: 21 October 2016