Abigroup Contractors Pty Ltd v River Street Developments Pty Ltd & Ors - [2007] VSC 478

Do Not Send for Reporting
IN THE SUPREME COURT OF VICTORIA		Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

No. 6578 of 2007

ABIGROUP CONTRACTORS PTY LTD (ACN 000 201 516)	Plaintiff
v
RIVER STREET DEVELOPMENTS (ACN 096 725 558) PTY LTD AND OTHERS	Defendant

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JUDGE:	CAVANOUGH J
WHERE HELD:	Melbourne
DATES OF HEARING:	3-6 September 2007
DATE OF JUDGMENT:	6 September 2007
CASE MAY BE CITED AS:	Abigroup Contractors Pty Ltd v River Street Developments Pty Ltd
MEDIUM NEUTRAL CITATION:	[2007] VSC 478

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PRACTICE AND PROCEDURE – Freezing orders – Building dispute – Builder seeking freezing orders against development company and related companies and individuals - Development company a single project vehicle within a corporate group – No security taken by builder in connection with building contract – Loss made by developer on project – Corporate group nevertheless unlikely to allow development company to default – Discretionary factors – Freezing orders refused.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr J Burnside QC Mr J Twigg	Clayton Utz Lawyers
For the Defendants	Mr J Delany SC Mr R Andrew	DLA Phillips Fox
For the Respondents	Mr M Sifris SC Mr P Crennan	Robert James Lawyers

HIS HONOUR:

In this matter, the application for freezing orders will be refused for two principal reasons.

First, until at a very late stage in these proceedings the plaintiff's case for the grant of freezing orders had been anchored on the proposition that the River Street project made a substantial profit that was at risk of being diverted from the grasp of the plaintiff.

However, I am not satisfied that the River Street project has made, or will make, a profit at all. In that regard I accept the affidavit of Ms Woolcock which provides a sufficient answer to the Kus report and to the other material on which the plaintiff relies.

Indeed, I am satisfied by Ms Woolcock's affidavit, together with Mr Smith's affidavits, that the project has incurred a substantial loss.

It is true that in a credit submission prepared by a finance broker in about December 2006 in relation to a proposal for the extension of finance to Mrs Smith, who is the wife of the effective controller of the defendant, Mr Les Smith, there is an assertion that the River Street project produced a profit of $22 million.

The plaintiff asserts that this information must have come from persons associated with the defendant and the Smiths.

However, the credit submission was tendered by the plaintiff without verification by affidavit or otherwise. It is of course hearsay. It was extracted from a large batch of subpoenaed material. It was not identified prior to the commencement of the hearing as a document on which the plaintiff intended to rely.

Mr Delany, senior counsel for the defendant, tells me that he paid no attention to it in preparation for the hearing. In any event, Mr Burnside QC for the plaintiff has not seriously attempted to make out a case that the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2007] VSC 478
Decision Date: 6 September 2007

CaseChat Overview and Summary

Abigroup Contractors Pty Ltd sought freezing orders against River Street Developments Pty Ltd, along with related companies and individuals, in the context of a building dispute. The matter was heard in the Supreme Court of New South Wales. Abigroup, a builder, claimed that River Street, the developer, had not made payments for works completed under a building contract. River Street was a single project vehicle within a broader corporate group. Abigroup argued that it was necessary to secure its claim against the developer and related parties to prevent dissipation of assets.

The legal issues the court needed to decide included whether Abigroup had established a serious question to be tried and whether the discretionary factors weighed in favour of granting the freezing orders. The court found that while Abigroup had likely established a serious question to be tried, the discretionary factors did not favour granting the orders. Notably, there were no security taken by Abigroup in connection with the building contract, and River Street had made a loss on the project. However, the broader corporate group was unlikely to allow River Street to default on its obligations.

The court concluded that the discretionary factors did not support the grant of freezing orders. The absence of security and the potential for asset dissipation were balanced against the likelihood that the corporate group would ensure River Street fulfilled its contractual obligations. The court's reasoning was grounded in the assessment of the likelihood of success on the merits and the balance of convenience, ultimately leading to the refusal of the freezing orders.

Orders