Background
The proceedings arose from a priority dispute over the net proceeds of sale of a property in Hinchinbrook, New South Wales, owned by James Leon, an undischarged bankrupt. The property was sold on 22 November 2024 by Thyge Trafford-Jones, trustee of Leon’s bankrupt estate, generating net proceeds of $363,830.62, which were paid into court on 7 April 2026 pursuant to orders made by Williams J.
The plaintiff, Alloys International Printer & Hardware Division Pty Ltd, had commenced proceedings on 29 July 2025 against six defendants including Print Management Facilities Australia Pty Ltd, asserting competing claims to the sale proceeds. Print Management held a proprietary interest arising from an operating lease agreement, while Alloys International’s interest arose under a deed of guarantee. Both claims significantly exceeded the funds in court — Print Management claimed $327,047.69 and Alloys International claimed $220,996.65.
Rather than litigate the priority question, the two competing secured creditors entered a settlement deed dated 23 February 2026 agreeing to pay the trustee’s expenses in full and divide the remaining balance equally. Print Management then brought a notice of motion seeking payment out of court under r 55.11 of the Uniform Civil Procedure Rules 2005 (NSW). All other defendants either filed submitting appearances, confirmed they had no interest in the funds, or indicated they neither consented to nor opposed the orders sought.
The Court’s Holding
McGrath J ordered that the $363,830.62 be paid out of court in accordance with the parties’ agreement. Applying the three-part test from Commonwealth Bank of Australia v The Estate of the Late Mahmoud Slieman [2010] NSWSC 661, his Honour was satisfied that: Print Management and Alloys International were the only parties asserting any proprietary entitlement to the balance; each held a secured, beneficial interest in the specific fund (not merely unsecured claims); and all other potential claimants had been properly notified and either submitted to the orders or confirmed they pressed no interest.
The court ordered that $36,691.60 be paid first to the trustee in bankruptcy for his expenses, with the remainder — including any accrued interest — distributed equally between Alloys International and Print Management. Because the parties with competing priorities had resolved the dispute by settlement deed, the court found it unnecessary to determine the underlying priority question. The proceedings were otherwise dismissed with no order as to costs.
Key Takeaways
- Under r 55.11 of the UCPR, an applicant for payment out of court must identify the person primarily entitled to the funds, establish a beneficial (not merely unsecured) interest in the specific fund, and account for all other potential claimants by notification and proof that their claims do not prevail.
- Where competing secured creditors resolve a priority dispute by settlement, a court acting under r 55.11 need not determine the underlying priority question — it need only be satisfied that no other claimants exist and that the agreed distribution is supported by evidence.
- A trustee in bankruptcy’s expenses rank for payment ahead of the competing proprietary claimants where all parties have agreed to that order of priority.
- The court’s power to direct payment out of funds held in court under r 55.11 is unconfined, provided the three requirements identified in CBA v Slieman are met on strict proof.
Why It Matters
This decision illustrates a practical pathway for resolving multi-creditor priority disputes over property sale proceeds without the expense and delay of a contested priority hearing. Where secured creditors can negotiate an agreed distribution and demonstrate to the court that no other claimants have a valid interest in the fund, the UCPR r 55.11 procedure provides an efficient mechanism for releasing proceeds from court control.
The case also serves as a useful procedural reminder that strict evidentiary requirements apply to payment-out applications: the court requires best-available proof of entitlement, evidence of notice to all potential claimants, and confirmation — through submitting appearances, written correspondence, or consent — that no competing interests remain unaddressed before funds will be released.