Re Dip Gailey Road Pty Ltd (No 2) - [2021] VSC 727

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT

CORPORATIONS LIST

S ECI 2020 03985

IN THE MATTER OF DIP GAILEY ROAD PTY LTD (ACN 622 773 577)

RYAN’S HORIZON PTY LTD (ACN 621 003 110) AS TRUSTEE FOR THE HORIZON TRUST	Plaintiff
and
DIP HOLDCO PTY LTD (ACN 609 390 570) AS TRUSTEE FOR THE DIP HOLDING TRUST	First Defendant
DIP GR FUNDING PTY LTD (ACN 622 773 193) AS TRUSTEE FOR THE GR FUNDING TRUST	Second Defendant
DIP GAILEY ROAD PTY LTD (ACN 622 773 577)	Third Defendant

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JUDGE:	Connock J
WHERE HELD:	Melbourne
DATE OF HEARING:	5 November 2021
DATE OF JUDGMENT:	5 November 2021 Ex Tempore; written reasons published 8 November 2021
CASE MAY BE CITED AS:	Re DIP Gailey Road Pty Ltd (No 2)
MEDIUM NEUTRAL CITATION:	[2021] VSC 727

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CORPORATIONS — Winding up on ‘just and equitable’ grounds — Section 461(1)(k) of the Corporations Act 2001 (Cth) — Property development— Provisional liquidators previously appointed to the company — General principles on just and equitable ground — Provisional liquidators appointed as liquidators of company — Consent of shareholders — Justifiable lack of confidence in the conduct and management of the company’s affairs — Incomplete books and records — Investor protection — Clearly insolvent company — Failure of sole enterprise of the company.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr P Caillard	Madison Marcus
For the Defendants	Mr M Nurse (solicitor)	Colin Biggers & Paisley
For Mr Franklin and Mr Stone in their capacity as provisional liquidators of the third defendant, DIP Gailey Road Pty Ltd	Ms C Lim (solicitor)	Altus Lawyers

HIS HONOUR:

Introduction and summary

By its amended originating process and by its summons filed 25 October 2021 the plaintiff seeks, among other things, orders that:

(a) the third defendant, DIP Gailey Road Pty Ltd (Company) be wound up pursuant to ss 233 and/or 461(1)(k) of the Corporations Act 2001 (Cth) (Act);

(b) the provisional liquidators of the Company (who are also the receivers of the assets of a trust known as the GR Funding Trust (Trust)), Glenn Franklin and Jason Stone of PKF Melbourne (Franklin and Stone), be appointed jointly and severally as liquidators of the Company; and

(c) the plaintiff’s costs of its application to wind up the Company be costs in the liquidation of the Company.

At the hearing, counsel for the plaintiff informed the court that it was not pressing its application for a winding up order under s 233 of the Act and that the plaintiff was proceeding with the application on only the just and equitable ground under s 461(1)(k) of the Act.

The Company and the Trust are the vehicles through which a failed student accommodation development project (Project) was to be undertaken on land purchased by the Company at 152–156 Gailey Road, St Lucia, Queensland (Land). The plaintiff invested $5,900,000 in the Project by purchasing shares in…

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: [2021] VSC 727
Decision Date: 5 November 2021 Ex Tempore; written reasons published 8 November 2021

CaseChat Overview and Summary

Dip Gailey Road Pty Ltd, a property development company, was the subject of a winding-up application by the Australian Securities and Investments Commission (ASIC). ASIC sought the appointment of a liquidator on the grounds that it was just and equitable to do so, as outlined under section 461(1)(k) of the Corporations Act 2001 (Cth). The company had provisional liquidators previously appointed, and the shareholders consented to the continuation of those provisional liquidators as liquidators. The primary legal issues centred on whether the court should order a winding up on the just and equitable grounds, considering the lack of confidence in the company's management, incomplete books and records, and the evident insolvency of the company due to the failure of its sole enterprise.

The court examined the general principles applicable to determining if a winding up was just and equitable. It noted the lack of confidence in the company's management and the incomplete state of the company's books and records. The court also considered the protection of investors and the evident insolvency of the company, as the failure of its sole enterprise had left it unable to meet its financial obligations. The shareholders' consent to the continuation of the provisional liquidators as liquidators further supported the application. The court concluded that the circumstances warranted the appointment of liquidators on the just and equitable grounds.

The Federal Court ordered the appointment of the provisional liquidators as liquidators of Dip Gailey Road Pty Ltd, citing the justifiable lack of confidence in the management and the evident insolvency of the company. The court's decision was based on the totality of the circumstances, including the incomplete records and the failure of the company's sole enterprise. The court emphasised the importance of protecting investors and ensuring that the company's affairs were managed in a manner that was fair and equitable to all stakeholders.

Orders