In the Matter of Section 564 of the Corporations Law & in the Matter of Allquip (W.A.) Pty Ltd (in liq) v Allan, Robert Hector & Ors [1997] FCA 1368

Procedural Posture

Application by a Liquidator for an Order Under S 564 of the Corporations Law Concerning Distribution of Property Recovered in Recovery Proceedings Funded by a Creditor / Ex Tempore Reasons for Judgment After Notice to Unsecured Creditors

Legal Issues

1. 1 ["Whether the Commissioner of Taxation, as the only creditor who funded and indemnified the liquidator's recovery proceedings, should receive an advantage over other unsecured creditors under s 564 of the Corporations Law." 'Whether the whole of the net proceeds of the recovery proceedings should be paid to the Commissioner of Taxation or whether other unsecured creditors should receive a distribution.']

Ratio Decidendi

A preferential distribution under s 564 was justified because all creditors had an equal opportunity to contribute, the Commissioner was the only creditor who contributed, the Commissioner took a substantial risk and financed the proceedings from September 1995 onwards including the liquidator's expenses, and there was no relevant adverse response from unsecured creditors. However, the Commissioner should not receive the whole of the remaining fund because the proceedings had earlier been funded by the general body of creditors and the other unsecured creditors had lost the distribution they would otherwise have received; fairness required all unsecured creditors to receive 6.27 cents in...

Court Disposition

Application allowed in part; preferential distribution ordered in favour of the Commissioner of Taxation after an equal distribution to all unsecured creditors.

Orders

• ['The applicant bring in a minute to reflect these reasons.' 'There should be a distribution of 6.27 cents in the dollar to all unsecured creditors, including the Commissioner.' 'The balance remaining after that distribution should be paid to the Commissioner.']