Bluechip Development Corporation (Gladstone) Pty Ltd v Sunstruct Pty Ltd and Ors (No.2)

Bluechip Development Corporation (Gladstone) Pty Ltd (the applicant) sought to restrain the enforcement of a judgment obtained by Sunstruct Pty Ltd (the respondent). The dispute arose from a building contract, and following arbitration, judgment was entered in favour of Sunstruct. Bluechip sought to set aside this judgment, and as a condition of an interlocutory injunction to restrain enforcement, was ordered to pay a sum of money into court. Subsequently, Bluechip entered into a Deed of Company Arrangement (DOCA). The central issue was whether the moneys paid into court, which were paid conditionally in support of Bluechip's application for relief, were impressed with an earlier trust and therefore not available to creditors under the DOCA.

The court was required to determine the effect of the DOCA on the moneys paid into court, specifically whether these funds were subject to an earlier trust and thus excluded from the DOCA's operation. Further, the court had to consider the extent to which the DOCA compromised the costs of related proceedings, including the costs of Sunstruct's defence and cross-claim, and costs associated with the protection and enforcement of a charge over funds in a solicitor's trust account. The court also had to consider whether costs constituted a "claim" as defined within the DOCA, and whether indemnity costs were warranted due to the unreasonable rejection of a Calderbank offer. Finally, the court was asked to determine if exceptional circumstances existed to justify an order for costs against a non-party director of the applicant corporation, based on allegations of mala fides.

Justice Burnett held that the moneys paid into court were impressed with an earlier trust and were not available to creditors under the DOCA. His Honour reasoned that the payment into court was conditional upon the grant of interlocutory relief, and that the DOCA did not extinguish this prior trust. Regarding costs, the court found that the costs of Sunstruct's defence were not compromised by the DOCA, nor were the costs associated with the protection and enforcement of the charge over the solicitor's trust account. The definition of "claim" in the DOCA was interpreted narrowly, excluding costs. Indemnity costs were awarded against Bluechip due to the unreasonable rejection of a Calderbank offer. Furthermore, exceptional circumstances were found to warrant an order for costs against the director of Bluechip, given the evidence of mala fides.