QBE Workers Compensation (NSW) Ltd v GJ Formwork Pty Ltd - [2006] NSWSC 98

Reported Decision:
56 ACSR 687

New South Wales

Supreme Court

CITATION: QBE Workers Compensation (NSW) Ltd v G J Formwork Pty Ltd [2006] NSWSC 98

HEARING DATE(S): 27/02/06

JUDGMENT DATE :
27 February 2006

JURISDICTION: Equity Division
Corporations List

JUDGMENT OF: Barrett J

EX TEMPORE JUDGMENT DATE: 02/27/2006

DECISION: Approval of compromise. Direction that liquidator justified in entering into compromise.

CATCHWORDS: CORPORATIONS - winding up - proposed compromise by liquidator - whether relevant claim "debt" - no need to determine precise nature of claim - compromise proposed on advice of lawyers - liquidator in any event without funds - approval granted and direction made

LEGISLATION CITED: Corporations Act 2001 (Cth), ss.477(1)(d), 477(2A), 479(3)

CASES CITED: Re HIH Insurance Ltd [2004] NSWSC 5
Re Spedley Securities Pty Ltd (1992) 9 ACSR 83 at 85

PARTIES: QBE Workers Compensation (NSW) Limited - Plaintiff
G J Formwork Pty Limited - Defendant

FILE NUMBER(S): SC 5323/04

COUNSEL: Mr S.M. Golledge - Liquidator

SOLICITORS: Access Business Lawyers - Liquidator

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

BARRETT J

MONDAY 27 FEBRUARY 2006

v G J FORMWORK PTY LIMITED

JUDGMENT

1 Mr Worrell is the liquidator of G J Formwork Pty Ltd which is a party to certain litigation with Holdmark Developers Pty Ltd arising from a building contract under which G J Formwork provided services to Holdmark. The litigation involves, among other matters, an adjudication in favour of G J Formwork under the Building and Construction Industry Security of Payment Act 1999.

2 The liquidator makes application under s.477(2A) of the Corporations Act for the court's approval of a proposed compromise intended to be entered into with Holdmark.

3 A deed of settlement and release has been prepared and embodies the proposed compromise. In essence, the parties will forego their respective claims against one another on the basis of a payment of a defined sum by Holdmark to G J Formwork.

4 There is a threshold question whether s.477(2A) applies, in that it is concerned only with the compromise of a debt. I had occasion to observe in Re HIH Insurance Ltd [2004] NSWSC 5 (at [12]) that where there is room for argument about whether a particular claim is, technically speaking, a debt, the court should err on the side of treating the claim as a debt rather than decline to grant approval under the section, assuming of course the case for the grant of such approval is made out.

5 This is because the power of a liquidator to compromise under s 477(1)(d) derives from a provision which begins with the words “Subject to this section", so that, in a case to which s.477(2A) is applicable, the power to compromise does not arise and is not available to the liquidator unless the approval of the court has been forthcoming. That of itself is sufficient to warrant the approach I have outlined in cases of doubtful classification of the particular claim. It may well be in the present case…

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 98
Decision Date: 27 February 2006

CaseChat Overview and Summary

QBE Workers Compensation (NSW) Ltd v GJ Formwork Pty Ltd involved a dispute between the liquidators of a company, GJ Formwork Pty Ltd, and the insurance provider, QBE Workers Compensation (NSW) Ltd. The liquidators sought to approve a proposed compromise of a claim against the insurer, which was a relevant debt for the purposes of the compromise, as well as directions for the payment of funds held by the insurer in relation to the insolvent company. The case was heard in the Supreme Court of New South Wales.

The primary legal issue before the court was whether the proposed compromise of the claim against the insurer constituted a "debt" for the purposes of the compromise. The court needed to determine whether the liquidators could approve the compromise without having to ascertain the precise nature of the claim. Additionally, the court had to consider whether the liquidators' decision to propose the compromise was made in good faith and on the advice of lawyers, and whether the liquidators were in any event without funds to pursue the claim.

The court found that there was no need to determine the precise nature of the claim to decide whether it was a "debt" for the purposes of the compromise. The court held that the liquidators had acted in good faith and on the advice of lawyers in proposing the compromise. The court also noted that the liquidators were without funds to pursue the claim, which supported the approval of the compromise. As a result, the court granted the liquidators' application for approval of the compromise and made the necessary directions for the payment of funds held by the insurer.

The court's decision in QBE Workers Compensation (NSW) Ltd v GJ Formwork Pty Ltd provides guidance on the approval of compromises by liquidators, and the factors that the court will consider in determining whether to grant such approval. The case highlights the importance of acting in good faith and on the advice of lawyers when making decisions regarding the insolvent company's claims.

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