Devmin International Pty Ltd v Belconnen Developments Pty Ltd

Case [2022] QSC 186

SUPREME COURT OF QUEENSLAND

CITATION:

Devmin International Pty Ltd v Belconnen Developments Pty Ltd [2022] QSC 186

PARTIES:

DEVMIN INTERNATIONAL PTY LTD
ACN 146 701 377

(applicant)

v
BELCONNEN DEVELOPMENTS PTY LTD
ACN 648 004 853

(respondent)

FILE NO/S:

BS No 7854 of 2022

DIVISION:

Trial

PROCEEDING:

Originating Application

ORIGINATING COURT:


Supreme Court at Brisbane

DELIVERED ON:

19 October 2022

DELIVERED AT:

Brisbane

HEARING DATE:

17 August 2022; further written submissions filed on 5 October 2022 and 17 October 2022.

JUDGE:

Cooper J

ORDER:

1.    Originating application filed 5 July 2022 dismissed.

2.    The applicant pay the respondent’s costs of and incidental to the application to be assessed on the standard basis if not agreed.

CATCHWORDS:

CORPORATIONS – WINDING UP – OTHER GROUNDS FOR WINDING UP – JUST AND EQUITABLE – OTHER CASES – where the respondent was one of a number of companies incorporated for the purpose of engaging in property development – where the respondent entered into a loan agreement for the purpose of obtaining funds to purchase and develop sites – where the respondent made no repayments of principal or interest under the loan agreement – where the debt under the loan agreement was assigned to the applicant who became a creditor of the respondent pursuant to ss 459P(1)(b) and 462(2)(b) of the Corporations Act 2001 (Cth) – where the applicant demanded payment of an amount claimed to be owed under the loan agreement – where the demand was responded to in the form of a Calderbank offer – whether the respondent should be wound up pursuant to s 461(1)(c) of the Corporations Act 2001 (Cth) because it suspended its business for a whole year – whether it is just and equitable that the respondent be wound up pursuant to s 461(1)(k) of Corporations Act 2001 (Cth) – whether the respondent is insolvent and should be wound up pursuant to ss 459A or 459B of Corporations Act 2001 (Cth)

Corporations Act 2001 (Cth), s 95A, s 459A, s 459B, s 459E, s 459P, s 461, s 462, s 465A, s 467, s 1367A
Corporations Regulations 2001 (Cth), reg 5.4.01A, reg 5.6.75
Uniform Civil Procedure Rules 1999 (Qld), r 5.6 in sch 1A

Australian Securities and Investments Commission v ABC Fund Managers Ltd (2001) 39 ASCR 443; [2019] FCA 1514, considered
Australian Securities and Investments Commission v Kingsley Brown Properties Pty Ltd [2005] VSC 506, cited
Australian Securities and Investments Commission v Merlin Diamonds Ltd [2019] FCA 1546, cited
Australian Securities and Investments Commission v Midland Hwy Pty Ltd (2015) 110 ACSR 203; [2015] FCA 1360, considered
Australian Securities and Investments Commission v Plymin (No 1) (2003) 175 FLR 124; [2003] VSC 123, cited
Cornhill Insurance plc v Improvement Services Ltd [1986] 1 WLR 114, cited
Deputy Commissioner of Taxation v Casualife Furniture International Pty Ltd (2004) 9 VR 549; [2004] VSC 157, considered
Fisher v Southern Logistics Pty Ltd (No 2) (1985) 3 ACLC 534, considered
Macquarie…

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Details
AGLC
Devmin International Pty Ltd v Belconnen Developments Pty Ltd [2022] QSC 186
Case
[2022] QSC 186
Decision Date

CaseChat Overview and Summary

In the matter of Devmin International Pty Ltd v Belconnen Developments Pty Ltd, the Federal Court was asked to consider an application by Devmin International, the assignee of a debt, to wind up Belconnen Developments, a property development company. The application was based on various grounds, including that Belconnen had suspended its business operations for an entire year, and it was just and equitable to wind it up due to the conduct of its sole director and shareholder, Jamie Garden, who was also involved with other companies within the Parity Group, some of which had already been placed into liquidation. The court was also asked to consider whether Belconnen was insolvent and therefore subject to compulsory winding up.

The central legal issues before the court were whether Belconnen should be wound up because it had suspended its business for a whole year and whether it was just and equitable to wind it up due to the conduct of its sole director. Additionally, the court had to determine whether Belconnen was insolvent and, if so, whether this was a sufficient ground for compulsory winding up. The court found that although Belconnen had suspended its business operations, the evidence did not establish that it was insolvent. Furthermore, while the conduct of the sole director was questionable, it did not reach the threshold required for a just and equitable winding up. The court held that Devmin's application to wind up Belconnen should be dismissed.

The court's reasoning was based on an assessment of the evidence presented, which did not conclusively show that Belconnen was insolvent or that the conduct of its director was sufficiently egregious to warrant a just and equitable winding up. The court found that the applicant had not discharged the burden of proving the necessary grounds for winding up, and therefore, the application was dismissed. The court ordered that Devmin International pay Belconnen's costs of and incidental to the application, to be assessed on the standard basis if not agreed.

Orders

Orders of the court

1. Originating application filed 5 July 2022 dismissed.

2. The applicant pay the respondent’s costs of and incidental to the application to be assessed on the standard basis if not agreed.

Background

Background to the litigation

It is ultimately unnecessary to determine whether it is appropriate to dispense with the requirement for publication because, for the reasons set out below, I have concluded that it is not appropriate to exercise the discretion to make a winding up order in the circumstances of this case.Background Belconnen was registered on 17 February 2021. Its sole director and secretary since that date has been, and remains, Jamie Garden. The sole shareholder of Belconnen is Garden Bells Pty Ltd (Garden Bells). Mr Garden is also the sole director of, and owns 100% of the shares in, Garden Bells. The evidence establishes that Belconnen was one of a number of companies which Mr Garden caused to engage in various aspects of a property development business under the name Parity Group. Another company in the Parity Group was Parity Developments Pty Ltd (Parity Developments). On or about 13 May 2022, Parity Developments changed its name to Canlux Pty Ltd, but for simplicity’s sake I will continue to refer to it as Parity Developments. That company was placed into voluntary administration on 30 May 2022 and then into liquidation on 27 June 2022. It will be necessary to return to aspects of Mr Garden’s conduct with respect to Parity Developments when considering Devmin’s arguments, particularly concerning the just and equitable ground. In early 2020, Mr Garden had identified a potential development site in Beresfield in New South Wales which he considered could be developed as a cold storage facility. He registered Parity Developments on 15 March 2020 to purchase the development site in Beresfield. Parity Developments needed funding to acquire and develop the Beresfield site. In that context, Mr Garden engaged in discussions with James O’Dwyer, the director of Holistic. Mr Garden’s evidence is that during the course of that meeting, and in subsequent meetings, Mr O’Dwyer represented to Mr Garden that he had expertise in raising capital for property development and that Mr Garden should consider funding the Beresfield development by way of 50% capital raising and 50% borrowings. Mr Garden swore that Mr Dwyer made statements to the effect that:(a)Mr O’Dwyer had access to unlimited funds;(b)Mr O’Dwyer would have no difficulty raising the funds Mr Garden needed for the development;(c)Mr O’Dwyer had a business partner (identified in Mr Garden’s affidavit only as “Shane”) who had previously worked at Babcock and Brown and who was a “guru” of the type of deal that Mr O’Dwyer was proposing;(d)Mr Garden was very lucky to have Mr O’Dwyer and his business partner involved in the fund raising because, between the two of them, they had Mr Garden covered. Mr Garden asserts that there was then an agreement that Mr O’Dwyer would take up a half interest in the Beresfield development. That would be achieved by the incorporation of a further company called Parity Partners Pty Ltd (Parity Partners) owned in equal shares by a company controlled by Mr Garden and a company controlled by Mr O’Dwyer. From that time, it was intended that Parity Partners would purchase the Beresfield site and Parity Developments would be appointed manager of the Beresfield development.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

In circumstances where, as already discussed, Belconnen maintains that the obligation to pay the debt under the Loan Agreement is disputed I am not satisfied that the evidence before me is sufficient for me to infer than Belconnen is insolvent.Conclusion For the reasons set out above, I dismiss Devmin’s application to wind up Belconnen. The applicant is to pay the respondent’s costs of and incidental to the application to be assessed on the standard basis if not agreed.

Ratio Decidendi

Legal Principle Established

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