26 May 2020

International Cases

Lean v. Banning holdings pty ltd




A contributory is a person who is liable to contribute to the property of company on winding up and if there is a surplus is entitled to a distribution

Present is an application by Mr Lean brought pursuant to Section 461(1) of the Corporations Act, 2001 for the Court to wind up Banning Holdings Pty Ltd (BH). BH is owned by the deceased estate of Martin Paul Banning. BH is incorporated as a proprietary company limited by shares. This application has been instituted as part of long running disputes and litigation between a number of parties which include Mr Lean, BH and Professional Services of Australia Pty Ltd (PSA), Computer Accounting and Tax Pty Ltd (CAT) and Mrs Angela Frigger and Mr Helmut Frigger. The application for an order for winding up is opposed on grounds that, Mr Lean has no standing to make the application because he is not entitled to remain a shareholder, having only become one for the limited purchase of his appointment as court appointed receiver; and Mr Lean's evidence fails to establish that BH should be wound up on just and equitable grounds.

The definition of 'contributory' in Section 9 must be read in context with provisions of the Corporations Act that provide for the application of and contributions by contributors on the winding up of a company, in particular, Sections 478, 480, 515 and Section 516. These provisions make it clear that, a contributory is a person who is liable to contribute to the property of the company on winding up and if there is a surplus is entitled to a distribution. Pursuant to Section 478(1) after a court orders a company be wound up, the liquidator must cause the company's property to be collected and applied in discharging the companies' liabilities and consider whether Section 478(1A) requires him or her to settle a list of contributions. Section 478(1A) requires a liquidator to settle a list of contributories if it appears to him or her there are persons liable as members (or past members) to contribute or there will be a surplus for distribution and it will be necessary to make calls on the contributories or adjust the rights of the contributories.

Pursuant to Section 480(a), a liquidator may apply to the Court to be released when he or she has realised all the property of the company, has distributed a final dividend (if any) to the creditors and adjusted the rights of the contributories among themselves and made a final return (if any) to the contributories.

Section 515 provides that a member or past member is liable to contribute to the company's property to an amount sufficient to pay the company's debts and liabilities and the costs, charges and expenses of the winding up and to adjust the rights of the contributories among themselves. Where a company is limited by shares (and not by guarantee) a member need not contribute more than the amount (if any) unpaid on the shares in respect of which the member is liable as a present or past member.

Mr Lean is not a creditor of BH. He is a creditor of PSA and Mr Campbell-Smith (as executor). Mr Lean's lien cannot be characterised as a liability of BH, as his equitable lien by order of Judge is expressly limited to the sale of the one share of BH registered in the name of Mr Banning pursuant to the order made on 10 November 2010. It is notable that, when that order was made, it appears that there was a possibility of portion of the judgment debt payable to CAT had not been satisfied (being an amount for costs of the action and enforcement costs) and Kenneth Martin J had not permanently stayed the Friggers proceedings in CIV 1727 of 2009 to compel the registration of the transfer of the share.

Mr Lean having only an equitable lien over the share, he cannot be said to be liable to contribute to the property of BH within the meaning of Section 515 and Section 516 as he cannot be called into account to contribute the amount paid on the share he holds. Nor can he said to be a person who is entitled as a 'contributory' to a distribution of a surplus within the meaning of Section 478 and Section 480. Mr Lean was not a 'contributory' of BH and consequently by operation of Section 462 had no standing to bring an application to the court for an order to wind up BH.

Tags : Contributory Winding up Grant

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