Supreme Court New South Wales Medium Neutral Citation: In the matter of Courtenay House Trading Group Pty Ltd v Courtenay House Pty Ltd [2018] NSWSC 55 Hearing dates: Monday, 29 January 2018 Date of orders: 29 January 2018 Decision date: 29 January 2018 Jurisdiction: Equity - Corporations List Before: Brereton J Decision: Interlocutory process dismissed with costs Catchwords: EQUITY – interlocutory relief – whether funds deposited with companies in liquidation should be released – interlocutory relief declined. Category: Procedural and other rulings Parties: Kyle Lester Sheridan (plaintiff) Courtenay House Capital Trading Group Pty Ltd (first defendant) Courtenay House Pty Ltd (second defendant) John McInerney (third defendant) Said Jahani (fourth defendant) Representation: Counsel: KL Sheridan (in person) (plaintiff) VE Whittaker (first to fourth defendants) Solicitors: Colin Biggers & Paisley Lawyers (first to fourth defendants) File Number(s): 2017/151478 Judgment (EX TEMPORE) 1. The plaintiff Lord Sheridan represents entities which claim to have invested $10.6 million in the defendant companies, which are now in liquidation. As to $7.8 million at least, the liquidators have confirmed that those funds have been received, and appear to have been retained in one of the company's two main accounts, being an NAB account. 2. The liquidators have identified there are two main accounts, a Westpac account in which more than $21 million was retained, and the NAB account in which some $28 million was held. The funds are now held in separate bank accounts controlled by the liquidators, and have been invested to earn a commercial bank term deposit interest rate. 3. The liquidators have formed a view that the Westpac account was apparently the company's general account. The funds in the NAB account appear to have resulted from a special investment opportunity, called The Brexit Investment, in which the plaintiff appears to have invested $7.8 million. 4. There is apparently a deficiency of funds in the defendants, and it is because of this insolvency that it has been wound up. 5. The plaintiff has repeatedly sought orders requiring the liquidator to repay immediately the sum of $7.8 million. In order to obtain such relief, the plaintiff requires leave to proceed against the company in liquidation given that it is now subject to a winding up by the Court. 6. The plaintiff is not the only person who has invested money in the defendants and who is disappointed that their moneys have been lost. 7. The liquidators have commenced proceedings to obtain a determination as to whether the funds held in the NAB account should be returned exclusively to the Brexit investors, or whether other creditors of the companies also have claims in respect of them. These are questions that not uncommonly arise in windings up of companies of this kind. A central question will be whether one fund, such as the NAB account, is to be treated separately, or "pooled" with other funds of the company. Another question will be, if there is a deficiency of funds in the NAB account, whether moneys are to be returned pro rata, or on some other basis. 8. It may be, as I have said in the past, that there are good reasons why the Brexit funds should not be pooled, and why the post 21 April 2017 Brexit funds in particular should not be pooled. But there are creditors with competing interests who have arguments, and wish to advance those arguments, in respect of those matters. There are other post 21 April 2017 investors, who are in substantially the same position as the plaintiff and if there is a deficiency of funds in respect of the post 21 April 2017 investors, then they will not be able to be repaid in full. 9. The proceedings which have been commenced by the liquidators pose for determination a number of questions, some of which have been identified for separate and preliminary determination: namely, whether the pre-21 April 2017 Brexit investors are the beneficial owners of the funds deposited by them in the NAB-1 account, and if so whether the liquidators are justified in distributing those funds to them only and not to other creditors; and whether the post-21 April Brexit investors (which include Lord Sheridan) are the beneficial owners of the funds deposited by them into the NAB-1 account and if so whether the liquidators are justified in releasing those funds to them only. 10. Directions have been made for the determination of those questions, which are fixed for hearing on 29 March 2018. That hearing should substantially resolve the issues which arise on the claim Lord Sheridan wishes to propound. 11. As I have indicated on more than one occasion up to this point, a fundamental purpose and characteristic of a liquidation is to enable the claims of all the creditors to be considered together in a relatively economical manner, without each of them having to bring a separate proceeding against the company to recover the moneys that that creditor claims to be due to it. 12. As I have pointed out on a previous occasion, it would be contrary to every principle upon which the liquidation of corporations proceeds to make an order that one particular creditor be paid in advance. The reason why leave to proceed separately against a company in liquidation is required is that ordinarily, once a company goes into liquidation, all creditors are required to submit a proof of debt to the liquidator, who will adjudicate and rule on that proof of debt. If a creditor is dissatisfied with the liquidator's ruling, the creditor can then appeal to the Court. 13. Because of the complexities that arise in this case, the liquidator has sought the advice of the Court as to how to deal with certain classes of claims and funds, and that application is, as I have said, to be heard on 29 March 2018. It remains the case that it would be contrary to every principle upon which leave to proceed against the company in liquidation is granted, to grant such leave in respect of Lord Sheridan's application filed on 22 December 2017, for the immediate return of the $7.8 million. 14. The plaintiff's concern and distress at being held out of these funds is totally understandable. However, it is a concern and distress which will be shared by many other creditors of Courtenay House. Whether the funds are to be returned pro rata, or on the basis that they have priority as trust moneys, or on some other basis, can only be determined by hearing all of those claims together, as they will be heard on 29 March 2018. 15. For those reasons it remains entirely inappropriate to grant leave to the plaintiff to proceed against the company in liquidation, rather than proceeding in the ordinary way of lodging a proof of debt with the liquidator. 16. The interlocutory process filed on 22 December 2017, is therefore dismissed, with costs. ********** 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: 02 February 2018