The Court held that a liquidator may apply the rule in Cherry v Boultbee to prevent shareholders who owe debts to the company from receiving surplus distributions until their debts are satisfied. The Court found that lodging a proof of debt in a shareholder's liquidation for voting purposes only did not constitute an irrevocable election preventing reliance on the rule, particularly where the proof was withdrawn before any adjudication. The Court rejected arguments that the rule was inconsistent with Part 5.4 of the Corporations Act or that an equitable charge over shares could defeat the rule where the underlying debt arose before the charge was created.
The full text is available to signed-in members, including the 5 later cases that cite this judgment.
1 of the 5 citing cases carry a classified treatment. How each court treated it is available to signed-in members.