Liquidator’s debt proof rejection could cost

A decision by a Sydney liquidator to refuse the bulk of a $423,935.53 proof of debt looks set to be reversed following the handing down of a judgment in the NSW Supreme Court.

In the matter of Azmac Pty Limited (in liquidation) [2020] NSWSC 204 Justice Kelly Rees details how Schon Condon, as liquidator of Azmac Pty Limited, knocked back the bulk of the proof of debt on a range of grounds, including that most of the sum claimed was in respect of invoices rendered by a former corporate entity that’s since been deregistered.

At the time of his decision Condon had had no way of verifying that the services had actually been supplied or were not excessive.

“Clearly, there is no love lost between them. Mr Bryant appeared a reasonable man. Mr Condon appeared a very firm-minded man.” Justice Kelly Rees.

But when the matter came before Justice Kelly Rees in February this year plaintiff Bruce Bryant said his company Stylequity Advisory (Australia) Pty Limited (SAA) was entitled to recover from Azmac by reason of an agreement reached between the former corporate entity, the plaintiff and Azmac in May 2013 that effectively made SAA a secured creditor.

While agreeing that Bryant has a security interest in respect of invoices SAA rendered for services, Condon did not regard that interest as extending to the invoices rendered by the former corporate entity.

Of the amount being claimed by the plaintiff, $398,866.55 fell into the former corporate entity category while $25,068.98 related to SAA’s invoices.

“Mr Bryant and Mr Condon were both cross-examined although no issues of credit arose on this application,” Justice Rees said in her judgment of March 10.

“Clearly, there is no love lost between them. Mr Bryant appeared a reasonable man. Mr Condon appeared a very firm-minded man.”

As it turned out the judge preferred Bryant’s arguments over those of the Parramatta-based practitioner, finding that SAA is a secured creditor of Azmac “within the meaning of section 51E of the Corporations Act 2001 (Cth)”.

Her honour concluded by inviting the parties to make submissions as to costs, saying she would “await agreed short minutes as to the precise amount of the secured debt if the parties consider that it is necessary to record it in further orders”. Support INO’s continued chronicling of the insolvency sector.