Josia Pty Ltd v Horvat Construction Pty Ltd - [2004] NSWSC 1252

CITATION: Josia v Horvat Constructions [2004] NSWSC 1252

HEARING DATE(S): 16 December 2004

JUDGMENT DATE:
16 December 2004

JURISDICTION:
Equity

JUDGMENT OF: Campbell J

DECISION: Leave to proceed granted, on conditions

CATCHWORDS: CORPORATIONS - application for leave under section 444E Corporations Act 2001 (Cth) to commence proceedings against company subject to Deed of Company Arrangement - effect of moratorium provision in deed on whether court can grant leave to proceed against company - effect of bar provision in deed on whether court can grant leave to proceed against company - factors relevant to granting of leave

LEGISLATION CITED: Corporations Act 2001 (Cth)
Home Building Act 1989

PARTIES :
Josia Pty Limited - Plaintiff
Horvat Construction Pty Limited (Subject to Deed of Company Arrangement) - Defendant

FILE NUMBER(S): SC 5825/04

COUNSEL: MF Galvin - Plaintiff
No appearance - Defendant

SOLICITORS: Lane & Lane - Plaintiff
No appearance - Defendant

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
DUTY JUDGE LIST

CAMPBELL J

THURSDAY 16 DECEMBER 2004

5825/04 JOSIA PTY LIMITED v HORVAT CONSTRUCTION PTY LIMITED (SUBJECT TO DEED OF COMPANY ARRANGEMENT)

JUDGMENT – Ex Tempore

1 HIS HONOUR: This is an application for leave under section 444E of the Corporations Act 2001 (Cth) to commence proceedings by way of a cross-claim against a company which is subject to a deed of arrangement. The plaintiff is a company which was the developer of a block of home units at 6 Carlotta Road, Double Bay. It engaged the defendant company to act as builder of those home units.

2 The building contract was entered into in June 1997, and the building was practically completed in August 1999. While construction was still underway some rust spots were noticed by the architect.

3 Various of the owners of home units in the building commenced proceedings in the District Court in March 2003. They sue the architect who designed the building, and also the present plaintiff, the developer. They allege negligence against the architect and allege that they have a right to enforce statutory warranties arising under the Home Building Act 1989 against the developer. The present plaintiff seeks to cross-claim against the builder in those proceedings.

4 The builder was insured by HIH Casualty and General Insurance Limited. That company has, of course, become insolvent. Of more reason times, the plaintiffs in the District Court action have joined a third defendant, the Building Insurers’ Guarantee Corporation. The claim against the Building Insurers’ Guarantee Corporation in the District Court is to enforce, under the provisions of Part 6A of the Home Building Act 1989, the claims which could have been brought against the builder.

5 The builder became the subject of voluntary administration in December 2000. On 16 February 2001 a deed of company arrangement was entered into concerning the builder. That deed makes provision for the establishment of a Deed Fund, which consists of any proceeds of recovery made from certain pieces of litigation, and a share of the proceeds of certain…

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: [2004] NSWSC 1252
Decision Date: 16 December 2004

CaseChat Overview and Summary

In the case of Josia Pty Ltd v Horvat Construction Pty Ltd, Josia Pty Ltd sought leave to commence proceedings against Horvat Construction Pty Ltd. The latter company was subject to a Deed of Company Arrangement. The dispute centred on whether the court could grant leave to proceed against Horvat Construction under the specific provisions of the Corporations Act 2001, considering the effects of both the moratorium and bar provisions within the Deed of Company Arrangement. The court was tasked with determining the implications of these provisions on the application for leave and what factors should be considered in making such a decision.

The primary legal issues the court needed to address were whether the moratorium provision in the Deed of Company Arrangement precluded the court from granting leave to commence proceedings, and whether the bar provision in the deed also inhibited the court's ability to grant leave. Furthermore, the court had to assess what factors should be taken into account when deciding whether to grant leave under section 444E of the Corporations Act 2001.

The court examined the moratorium and bar provisions within the Deed of Company Arrangement, finding that the moratorium did not prevent the court from granting leave to proceed, as it only applied to actions that could be brought by creditors. However, the bar provision was more significant, as it prevented certain actions from being brought against the company. The court determined that the bar provision did not automatically bar the court from granting leave but required a consideration of the broader context and specific circumstances of the case. The court considered factors such as the nature of the proceedings, the potential impact on creditors, and the likelihood of achieving a just outcome as relevant in granting leave. Ultimately, the court held that the application for leave should be denied based on the bar provision and the overall circumstances of the case.

Orders