Reform Projects Pty Ltd v Macarthur Projects Pty Ltd - [2022] NSWSC 672

Supreme Court

New South Wales

Medium Neutral Citation: Reform Projects Pty Ltd v Macarthur Projects Pty Ltd [2022] NSWSC 672
Hearing dates: 24, 25 May 2022
Date of orders: 25 May 2022
Decision date: 25 May 2022
Jurisdiction: Equity - Corporations List
Before: Parker J
Decision:
See [51]

Catchwords:
CORPORATIONS – winding up in insolvency – presumed insolvency from failure to comply with statutory demand – discretion to dismiss or adjourn winding up application – whether discretion should be exercised to allow insolvent company to pursue litigation – winding up order made

Legislation Cited:
Building and Construction Industry Security of Payment Act 1999
Civil Procedure Act 2005, s 98
Corporations Act 2001, ss 459P, 459s, 466, 467
Legal Profession Uniform Law 2014
Property (Relationships) Act 1984
Uniform Civil Procedure Rules 2005, r 33.11

Cases Cited:
Bungey v Magnate Projects Pty Ltd [2006] NSWSC 734
Deputy Commissioner of Taxation v TD Preece Pty Ltd [2013] FCA 1365
In the Matter of Macarthur Projects Pty Ltd [2021] NSWSC 1705

Category: Principal judgment
Parties: Reform Projects Pty Ltd (Plaintiff)
Macarthur Projects Pty Ltd (Defendant)
Representation:
Appearances:
D Ratnam (Counsel) (Plaintiff)
P Beazley (Solicitor Advocate) (Defendant)
Solicitors:
HWL Ebsworth Lawyers (Plaintiff)
Beazley Lawyers (Defendant)

File Number(s): 2022/35719
Publication restriction: Nil

Judgment – EX TEMPORE

(Revised from transcript and annotated; issued 30 May 2022)

24 May 2022

This is an application by the plaintiff ("Reform") to have the defendant company ("Macarthur") wound up in insolvency. The application is made under s 459P of the Corporations Act 2001 (“CA”).
Reform has the benefit of a District Court judgment against Macarthur in the sum of about $150,000. The judgment is unsatisfied. It was the subject of a statutory demand issued in April last year.
Macarthur applied to have the statutory demand set aside. That application was heard by Rees J in August. Her Honour refused the application in December: In the Matter of Macarthur Projects Pty Ltd [2021] NSWSC 1705.
Following her Honour's judgment, Macarthur failed to comply with the statutory demand. It is therefore presumed for the purposes of this application to be insolvent.
The present application was filed in February this year. Initially, it was opposed on the ground that Macarthur was not insolvent. That ground was abandoned in advance of the hearing. A second ground of opposition was that Macarthur had an offsetting claim against Reform. That ground was also abandoned.
The grounds of opposition which have been advanced are discretionary ones. On Macarthur's behalf the Court is asked to dismiss or to adjourn the proceedings so as to allow Macarthur, together with an associated company, to pursue claims against Reform.
The background is set out in the judgment of Rees J and a brief summary will suffice for the purposes of this judgment. The District Court judgment which Reform has obtained arises out of a large building development at Gosford. The project involves construction work valued at approximately $185 million. The land in question belongs to a…

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: [2022] NSWSC 672
Decision Date: 25 May 2022

CaseChat Overview and Summary

The case of Reform Projects Pty Ltd v Macarthur Projects Pty Ltd involved a dispute between two companies, Reform Projects and Macarthur Projects, regarding the insolvency of Reform Projects. The dispute came before the Supreme Court of New South Wales, where Macarthur Projects applied for a winding-up order against Reform Projects based on the latter's failure to comply with a statutory demand. The application raised questions about the court's discretion to dismiss or adjourn a winding-up application, particularly when the insolvent company seeks to pursue litigation.

The primary legal issues for the court to decide were whether the discretion to dismiss or adjourn a winding-up application should be exercised in favour of allowing the insolvent company to pursue litigation and, if so, under what circumstances. The court had to consider the principles governing the exercise of discretion in winding-up applications, the objectives of the winding-up provisions, and the potential impact on the administration of justice.

In delivering the judgment, the court held that the discretion to dismiss or adjourn a winding-up application exists to ensure that justice is done in individual cases. However, the court found that there were no exceptional circumstances present in this case that warranted the exercise of the discretion in favour of allowing the insolvent company to pursue litigation. The court emphasised the importance of preserving the integrity of the winding-up process and the need to protect creditors' interests. Consequently, the court made a winding-up order against Reform Projects.

The final orders of the court were that a winding-up order be made against Reform Projects, and the company be wound up. The court found that the discretion to dismiss or adjourn the winding-up application should not be exercised in this case, and the winding-up process should proceed in accordance with the relevant provisions of the Corporations Act.

Orders