Re Condev Construction Pty Ltd (in liquidation)

Case [2025] QSC 173

SUPREME COURT OF QUEENSLAND

CITATION:

Re Condev Construction Pty Ltd (in liquidation) [2025] QSC 173

PARTIES:

JASON BETTLES AND JAMES ROBBA AS LIQUIDATORS OF CONDEV CONSTRUCTION PTY LTD (IN LIQUIDATION) ACN 101 213 825

(applicants)

v
COMMONWEALTH OF AUSTRALIA (AS REPRESENTED BY THE DEPARTMENT OF EMPLOYMENT AND WORKPLACE RELATIONS) ABN 96 584 957 427

(first respondent)
WESTPAC BANKING CORPORATION ABN 33 007 457 141

(second respondent)

FILE NO/S:

BS 16298 of 2022

DIVISION:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court of Queensland at Brisbane

DELIVERED ON:

24 July 2025

DELIVERED AT:

Brisbane

HEARING DATES:

4 October 2023.  The parties filed further written submissions on 15 January 2024, 31 January 2024 and 7 February 2024.

JUDGE:

Bradley J

ORDERS:

THE COURT ORDERS THAT:

Pursuant to s 90-15(1) of Schedule 2 to the Corporations Act 2001 (Cth), the applicants in their capacity as liquidators of Condev Construction Pty Ltd (In liquidation) ACN 101 213 825 (the “Company”) are advised in relation to the external administration of the Company that: 1.   

The applicants would be justified in not causing the Company to pursue the second respondent to recover debts which were owed by the second respondent to the Company immediately before the commencement of the winding up; and (a)     

The applicants would be justified in not treating money paid to the Company by the second respondent since the commencement of the winding up as property comprised in or subject to a circulating security interest of the second respondent as at the commencement of the winding up.(b)     

The applicants’ costs of the proceeding are part of their costs in the winding up of the Company. 2.   

The application filed on behalf of the first respondent on 12 April 2023 is dismissed.3.   

The first respondent is to pay the applicants’ costs of the amended application filed on 21 February 2023 and the application filed on 12 April 2023. 4.   

The first respondent is to pay the second respondent’s costs of the amended application filed on 21 February 2023 and the application filed on 12 April 2023.5.   

CATCHWORDS:

CORPORATIONS – WINDING UP – CONDUCT AND INCIDENTS OF WINDING UP – APPLICATIONS TO COURT FOR DIRECTIONS OR ADVICE – where the applicants were appointed as liquidators of the company on 16 March 2022 – where the liquidators seek orders that they would be justified in not causing the company to pursue the second respondent, as a secured creditor, to recover certain debts, being choses in action represented by the credit balances in bank accounts, owed to the company immediately before the commencement of the winding up – where the liquidators seek orders that they would be justified in not treating money the secured creditor paid to the company since the commencement of the winding up as property comprised in or subject to a circulating security interest of the secured creditor as at the commencement of the winding up, by reason of those debts being subject to a set-off and those payments being the…

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AGLC
Re Condev Construction Pty Ltd (in liquidation) [2025] QSC 173
Case
[2025] QSC 173
Decision Date

CaseChat Overview and Summary

In the case of Re Condev Construction Pty Ltd (in liquidation), the primary focus was on the obligations and rights of the liquidators, the Commonwealth as a priority creditor, and Westpac as a secured creditor regarding the distribution of the company’s assets during its winding up. The liquidators sought advice from the court on whether they were justified in not pursuing certain debts owed to the company by Westpac and in not treating payments made by Westpac to the company post-liquidation as subject to Westpac's security interest. The Commonwealth, as a priority creditor, sought declarations and orders to ensure the liquidators distributed the company’s assets in accordance with specific statutory provisions and to prevent Westpac from exercising any set-off rights. The court was tasked with determining the appropriate application of statutory provisions concerning set-off, the liquidators' duties, and the priority of creditors' claims.

The legal issues primarily revolved around the interpretation and application of sections 553C and 561 of the Corporations Act 2001 (Cth). Specifically, the court had to decide whether the liquidators could lawfully decline to pursue certain debts and payments from Westpac, whether the Commonwealth had priority over the liquidators in the distribution of the company’s assets, and whether Westpac had notice of the company’s insolvency prior to certain transactions. The court also had to consider the appropriateness of providing judicial advice to the liquidators under section 90-15 of the Insolvency Practice Rules.

The court held that the liquidators would be justified in not pursuing the debts owed by Westpac and in not treating Westpac's post-liquidation payments as subject to a circulating security interest. This was based on the conclusion that Westpac did not have sufficient information to conclude that the company was insolvent before certain payments were made. The court found that the Commonwealth's claims regarding the priority of its creditors and the invalidity of Westpac’s set-off rights failed. The court also determined that it was appropriate to provide judicial advice to the liquidators under the applicable statutory provisions. The court issued orders directing the liquidators on their actions concerning Westpac, dismissed the Commonwealth's application, and ordered the Commonwealth to pay the liquidators' and Westpac's costs.

In summary, the court provided significant guidance on the liquidators' duties, the application of set-off provisions, and the priority of creditors during a company's winding up. The decision emphasized the importance of an objective assessment of insolvency and the appropriate exercise of judicial powers to assist in the administration of a company's winding up.

Orders

Orders of the court

THE COURT ORDERS THAT:

Pursuant to s 90-15(1) of Schedule 2 to the Corporations Act 2001 (Cth), the applicants in their capacity as liquidators of Condev Construction Pty Ltd (In liquidation) ACN 101 213 825 (the “Company”) are advised in relation to the external administration of the Company that: 1.

The applicants would be justified in not causing the Company to pursue the second respondent to recover debts which were owed by the second respondent to the Company immediately before the commencement of the winding up; and (a)

The applicants would be justified in not treating money paid to the Company by the second respondent since the commencement of the winding up as property comprised in or subject to a circulating security interest of the second respondent as at the commencement of the winding up.(b)

The applicants’ costs of the proceeding are part of their costs in the winding up of the Company. 2.

The application filed on behalf of the first respondent on 12 April 2023 is dismissed.3.

The first respondent is to pay the applicants’ costs of the amended application filed on 21 February 2023 and the application filed on 12 April 2023. 4.

The first respondent is to pay the second respondent’s costs of the amended application filed on 21 February 2023 and the application filed on 12 April 2023.5.

Background

Background to the litigation

The second tranche are the facts related to Westpac’s knowledge. This second trance is followed by consideration of the parties’ respective contentions about whether Westpac had notice that Condev was insolvent. First tranche of agreed facts Agreed facts about events prior to the Appointment Date Between August 2002 and the Appointment Date, Westpac provided banking services to Condev. On 7 March 2008, Condev granted Westpac a fixed and floating charge (the FFC). The FFC contained relevant terms to the following effect:(a)Condev charged to Westpac all Condev’s present and future assets and undertaking as set out in the FFC and in a Memorandum of Common Provisions numbered 706487974 (the MCP).(b)The charge created by the FFC operated as a fixed charge in respect of all present and future property referred to in the MCP, and as a floating charge in respect of all assets not made subject to a fixed charge. The MCP relevantly contained terms that secured all money Condev owed to Westpac for any reason, whether the money was owing, or became owing in the future, by Condev alone, or together with others, actually or contingently, and whether or not it was currently contemplated. On 30 January 2012, the FCC was validly and effectively registered as an “All Present and After-acquired Property” security interest on the Personal Property Securities Register (PPSR), pursuant to the Personal Property Securities Act 2009 (Cth) (PPSA). On 14 December 2015, Westpac and Condev entered into a business finance agreement providing for a “Revolving Limit GX” facility under which Westpac would issue bank guarantees (the GX Facility). The GX Facility had a maximum limit of $7,500,000. The agreement about the GX Facility contained terms, amongst others, that Condev comply with an “Interest Cover Ratio” (the ICR) and “Capital Ratio” covenant. On 19 June 2019, by agreement Westpac and Condev varied the ICR, and the “Capital Ratio” was varied and was renamed the “Equity Ratio” (Equity Ratio). The business finance agreement about the GX Facility also incorporated General Conditions which provided:“4.4 Set-offIf any one or more of you have any money in any account with the Lender or are owed money by the Lender, the Lender can use it to pay amounts payable or secured under this Agreement, but need not do so. If the Lender does this, the balance of your account will reduce by the amount used for this purpose.To the maximum extent allowed by law you give up any right to set off any amounts the Lender owes you against amounts you owe under the Lender Agreements.You will pay money you are required to pay under this document without deducting amounts you claim are owed to you by the Lender or any other person.4.5 Combining AccountsIf there is a Default Event under this Agreement or a Lender Arrangement, the Lender may use any money you have in another account with the Lender towards repaying any amount you owe to the Lender under this Agreement (this is known as ‘combining accounts’). The Lender may combine accounts without giving you any notice but the Lender will tell you promptly afterwards.”

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

According to Mr McNaughton, Westpac did not have Condev on a “watch list” before the Liquidators were appointed. Conclusion on notice of insolvency The test for notice is objective. The subjective view of any Westpac officer is irrelevant. However, the transfer of information to and among the Westpac officers assists in an objective assessment of the ability of an entity in Westpac’s position to reach a conclusion of insolvency about Condev before the relevant credits to the General Accounts were received between 13 and 15 March 2022. The Courier Mail Article, added to what Westpac knew by then,[28] could not have permitted Westpac, through its officers, based on a consideration of what was known about Condev’s financial position in its entirety, to reach a conclusion that utilising such cash resources as Condev then had, or could command through the use of its assets, Condev was unable to meet its debts then due or would not be able to pay all its debts, as and when they would become due and payable. [28]Seven Westpac officers received the Courier Mail Article between 7:45pm on 12 March 2022 and 7:30am on 13 March 2022. Nor did the further information known to Westpac after the Courier Mail Article satisfy the test for notice of insolvency, prior to 9:49pm on 15 March 2022, when Westpac received information that Condev intended to appoint administrators the following morning. In the circumstances, the information then known to Westpac does not satisfy the test for notice of insolvency under s 553C(2). Whether to provide judicial advice The Liquidators sought advice under section 90-15(1) of Schedule 2 to the Act. They also sought ancillary orders, including an order for costs. Section 90-15(1) provides:“The Court may make such orders as it thinks fit in relation to the external administration of a company.” Some relevant amplification is found in s 90-15(3)(a):“Without limiting subsection (1), those orders may include any one or more of the following:(a)an order determining any question arising in the external administration of the company”. Section 90-15 authorises a court to exercise the power when it is “just and beneficial” to do so and where it is “of advantage in the liquidation”.[29] The provision stands in a line of statutes traced to s 34 of the Joint Stock Companies Winding Up Act 1848 (UK),[30] which in turn reflects the practice of the Court of Chancery in giving directions to those entrusted with the administration of property under the control of the court. The approach to the exercise of the power is informed by similar considerations to those applied by the Court to advice to trustees. [29]Dean-Willcocks v Soluble Solution Hydroponics Pty Ltd (1997) 42 NSWLR 209 at 212 (Young J); Handberg v MIG Property Services Pty Ltd (2010) 79 ACSR 373 at 377 [7] (Warren CJ).[30](11 & 12 Vict, c 45). See Re GB Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674 at 677A-D (McLelland J). The Court’s power to give judicial advice is confined only by the subject matter, scope and purpose of the statutory provision conferring the power. Section 90-15(1) contains no express words of limitation. It is not appropriate to read it down or imply any limitation on the power or the discretionary factors relevant to its exercise.[31] Its purpose, as part of regulating the external administration of companies consistently, is to facilitate officers of those companies (such as liquidators) performing their functions. It should be interpreted widely to give effect to that intention; so, the Court may give advice where it is in the interests of the liquidation to do so.[32][31]Macedonian Orthodox Community Church St Petka Inc v Petar (2008) 237 CLR 66 at 89 [55] – 90 [59] (Gummow A-CJ, Kirby, Hayne and Heydon JJ).[32]Re Octaviar Administration Pty Ltd (in liq) [2017] NSWSC 1556 at [9] (Black J).

Ratio Decidendi

Legal Principle Established

As the Commonwealth’s case on statutory set-off fails, it is not necessary to consider Westpac’s alternative claim for a contractual set-off, under cll 4.4 and 4.5 of the General Conditions. Nor is it necessary to consider an equitable set-off. So, it is also necessary to consider the Commonwealth’s submissions challenging Westpac’s contractual or equitable rights in those respects. Whether the Commonwealth has priority over the Liquidators’ right to be paid general remuneration and expenses The Commonwealth did not dispute that the Liquidators were entitled to an equitable lien over the circulating assets for “costs, expenses and remuneration incurred in the care, preservation and realisation” of those assets. The Commonwealth’s submission that its claim as a priority creditor ranked ahead of the Liquidators’ right to be paid any other general remuneration and expenses was based on two contentions. (a)The first was that “Westpac required payment from the circulating assets of Condev” because Westpac was not entitled to a set-off under s 553C. (b)The second was that Kendall was a secured creditor with a claim against the circulating assets. The first contention has failed. The second is no longer pursued. So, the Commonwealth’s case for priority over the Liquidators’ right to be paid their general remuneration and expenses also fails. Second group of issues: timing of an assessment by the Liquidators under s 561 It was common ground that there are two “preconditions” for the operation of s 561. First, property of the company available for payment of creditors other than secured creditors must be insufficient to meet payment of s 561 priority creditors. Second, there must be a secured party with a circulating security interest created by the company. The Commonwealth contended that both preconditions were to be assessed on and as at the Appointment Date. The Commonwealth advanced the same submission in Tonks. There the New South Wales Court of Appeal concluded: “[T]he insufficiency threshold in the prefatory words to s 561 will almost inevitably only be able to be assessed well after the liquidator’s appointment when the liquidator is in a position to ascertain the precise amount of the secured creditor’s debt, the net amount recovered from non-circulating and circulating assets, the recoveries from voidable transactions and the extent of the liquidator’s costs and remuneration. At the time of that assessment, the liquidator will also usually be in a position to know whether a secured creditor has made or will be making a claim against circulating assets, so as to make s 561 applicable. If, as here, no such claim can be made at that time (whatever might have been the situation at the time at which the liquidator was appointed), s 561 does not apply. Section 561 neither requires nor authorises the liquidator to turn a blind eye to the actual situation at the time of the assessment for the purposes of s 561. Indeed, such assessment can only be made when sufficient facts are known to make the assessment.”[20][20](2023) 383 FLR 297 at 308 [57] (Adamson JA; Bell CJ and Griffiths AJA agreeing).