Management 3 Group Pty Ltd (in liq) v Lenny's Commercial Kitchens Pty Ltd (No 2)

The applicants, Management 3 Group Pty Ltd (in Liq) and its liquidators, sought remedies, including damages for conversion and breach of s 440C of the Corporations Act 2001 (Cth) or restitutionary remedies in relation to various goods purchased by M3G prior to its voluntary administration on 7 April 2009. M3G had purchased kitchen goods from Lenny’s Commercial Kitchens Pty Ltd for a total sum of $961,076.60 and additional goods from various third parties for a total amount of approximately $417,838.13 for installation in a mining workers’ accommodation camp M3G was constructing for Sino Iron Pty Ltd pursuant to a construction contract. The applicants claimed that Sino converted the goods and that Lenny’s was accountable for money had and received. Sino claimed to have paid M3G for the kitchen goods and took possession of the goods, asserting that it had also paid M3G for all additional goods, the majority of which had been affixed to Sino’s site.

The court was required to determine several legal issues. Firstly, whether the applicants had an immediate right to possession or possession of the kitchen goods and the additional goods. Secondly, whether Sino had acquired title to the kitchen goods and the additional goods pursuant to clause 42.2 of the construction contract. Thirdly, whether the applicants’ claim for conversion and breach of s 440C of the Corporations Act 2001 (Cth) was viable, and whether the applicants were entitled to restitutionary remedies. Lastly, whether the consideration for the kitchen goods totally failed, and whether Lenny’s was accountable for money had and received.

The court found that the applicants did not have an immediate right to possession or possession of the kitchen goods and the additional goods. The Purchase Agreement contained a retention of title clause, which meant that Lenny’s retained ownership until full payment was made. The court also found that Sino had acquired title to the kitchen goods and the additional goods pursuant to clause 42.2 of the construction contract, as the preconditions of the clause were satisfied. The court held that the applicants’ claim for conversion and breach of s 440C of the Corporations Act 2001 (Cth) was not viable, as Sino had acquired title to the goods. However, the court found that the applicants were entitled to restitutionary remedies in relation to the additional goods that had not been affixed to the site, as Sino was liable for conversion of those goods. The court also found that the consideration for the kitchen goods had not totally failed, and therefore, Lenny’s was not accountable for money had and received.

The court dismissed the application and ordered the parties to file and serve any affidavits and brief written submissions in relation to costs. The matter was fixed for a hearing on costs at 2.15pm on 22 June 2011.