Hanson Construction Materials Pty Ltd v FEC Civil Pty Ltd

The case of Hanson Construction Materials Pty Ltd v FEC Civil Pty Ltd concerned a statutory demand issued by Hanson against FEC, claiming FEC owed Hanson $66,000. Hanson alleged that FEC had become insolvent due to non-compliance with the demand. FEC sought leave to defend the winding up application on the basis that it could prove solvency and that it had other grounds that could have been raised when applying to set aside the statutory demand. The court had to determine whether FEC could raise these grounds in a defence to the winding up application.

The central legal issue was whether FEC was precluded from arguing solvency and other grounds in the winding up application that it could have raised in a prior application to set aside the statutory demand. The court examined the relevant statutory provisions and case law to discern the appropriate considerations in granting or refusing leave to defend. The court had to balance the rights of the creditor to pursue a winding up application against the potential prejudice to the debtor if the defence was not allowed.

The court concluded that leave to defend should be granted if there was a real prospect that the defence could succeed, and it was in the interests of justice to allow the defence. The court found that FEC had provided evidence indicating a strong possibility of proving solvency, and it had raised other valid grounds for contesting the statutory demand. The court considered these factors and the potential prejudice to FEC if the defence was not allowed. It found that the prejudice outweighed the rights of Hanson to pursue the winding up application without further argument.

Accordingly, the court granted FEC leave to defend the winding up application, allowing it to contest the statutory demand on the grounds of solvency and other relevant issues. The case highlights the importance for debtors to carefully consider the grounds for contesting a statutory demand and to seek legal advice promptly to ensure they are not prejudiced in any subsequent winding up application.