Jem Developments Pty Ltd v Hansen Yuncken Pty Ltd - [2006] NSWSC 1308

CITATION: Jem Developments v Hansen Yuncken [2006] NSWSC 1308

HEARING DATE(S): 30 November 2006

JUDGMENT DATE :
4 December 2006

JURISDICTION: Equity

JUDGMENT OF: Austin J

DECISION: Period for compliance with statutory demand extended, otherwise originating process dismissed with costs.

CATCHWORDS: CORPORATIONS - winding up in insolvency - presumption of insolvency through failure to comply with a statutory demand - offsetting claim - meaning of "offsetting" - effect of contractual provision excluding counter claims - CONTRACTS - settlement of building dispute - parties agree that "a payment obligation is to rank in priority" before any entitlements of payer to receive monies in connection with building project - proper construction

LEGISLATION CITED: Corporations Act 2001 (Cth) ss 459C, 459E, 459F, 459G, 459H

CASES CITED: Asia Pacific Glass Pty Ltd v Sindea Trading Co [2003] NSWSC 334
Carter v Roberts [1903] 2 Ch 312
Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785
Gilbert-Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689
Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452
Macleay Nominees Pty Ltd v Bell Property East Pty Ltd [2001] NSWSC 743
POS Media v B Family [2003] NSWSC 147
Re Polaroid Australia Pty Ltd (Supreme Court of New South Wales, Santow J, unreported, 15 December 1997)
Robowash Pty Ltd v Robowash Finance Pty Ltd (2000) 158 FLR 338

PARTIES: Jem Developments Pty Ltd (P1)
Pacifico Holdings Pty Ltd (P2)
Hansen Yuncken Pty Ltd (D)

FILE NUMBER(S): SC 2349/06

COUNSEL: D S Weinberger (P1,P2)
P Fury (D)

SOLICITORS: Salim Lawyers (P1,P2)
Crisp (D)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

AUSTIN J

MONDAY 4 DECEMBER 2006

2349/06 JEM DEVELOPMENTS PTY LTD & ANOR V HANSEN YUNCKEN PTY LTD

JUDGMENT

1 HIS HONOUR: This is an application by the plaintiffs (to whom I shall refer, together, as "Jempac") under s 459G of the Corporations Act 2001 (Cth) to set aside a statutory demand served on them by the defendant ("HY"). The plaintiffs say they have offsetting claims which exceed the amount demanded. In the alternate, they submit that the demand should be set aside on "other grounds" within the meaning of s 459J, on the basis that the defendant failed to follow a contractual dispute resolution procedure and that the demand is an abuse of process.

The building contract

2 Jempac are property developers and the proprietors of a site in Wollongong. On 27 January 2004 they entered into a building contract with HY in the sum of $25.08 million, for HY as a builder to construct a building on the site, to be known as "The Landmark", comprising a block of residential apartments, a ground floor commercial area, and several levels of basement/car park.

3 The building contract appointed Jempac Developments Pty Ltd as "Superintendent", and contained the following relevant provisions:

· HY was obliged to comply with the Superintendent's "directions" (defined to include payment certificates and decisions) (clause 23);

· if HY was…

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: [2006] NSWSC 1308
Decision Date: 4 December 2006

CaseChat Overview and Summary

Jem Developments Pty Ltd initiated proceedings against Hansen Yuncken Pty Ltd, seeking to wind up Hansen Yuncken on the basis of insolvency, as Hansen Yuncken failed to comply with a statutory demand. Hansen Yuncken countered with an offsetting claim, arguing that Jem Developments had failed to pay amounts owed under a building contract. The case was heard in the Supreme Court of New South Wales. The primary legal issue before the court was whether Hansen Yuncken's claim could be considered an "offsetting" claim for the purposes of the relevant statute. The court also needed to determine the effect of a contractual provision excluding counterclaims and the proper construction of a clause prioritising certain payment obligations over other entitlements.

The court found that Hansen Yuncken's claim was not an "offsetting" claim as it did not directly relate to the statutory demand but rather arose from a separate building contract. Additionally, the court held that the contractual provision excluding counterclaims did not prevent Hansen Yuncken from asserting the priority of certain payment obligations over other entitlements. The court concluded that the priority clause meant that Jem Developments' payment obligations were to be met before Hansen Yuncken could claim any entitlements in connection with the building project. This interpretation was consistent with the intention of the parties as expressed in the contract.

As a result, the court dismissed Jem Developments' winding-up application, finding that Hansen Yuncken was not insolvent. The court's decision emphasised the importance of properly construing contractual provisions and the distinction between offsetting claims and other types of claims in the context of statutory demands.

Orders