Fitz Jersey Pty Ltd v Atlas Construction Group Pty Ltd (in liq); Yazbek v Gleeson as Liquidator of Atlas Construction Group Pty Ltd (in liq); Fitz Jersey Pty Ltd v Gleeson as Liquidator of Atlas Construction Group Pty Ltd (in liq) [2021] NSWSC 1692

Supreme Court New South Wales

Medium Neutral Citation: Fitz Jersey Pty Ltd v Atlas Construction Group Pty Ltd (in liq); Yazbek v Gleeson as Liquidator of Atlas Construction Group Pty Ltd (in liq); Fitz Jersey Pty Ltd v Gleeson as Liquidator of Atlas Construction Group Pty Ltd (in liq) [2021] NSWSC 1692 Hearing dates: 30 August – 1 October 2021; further written submissions 6, 15 and 29 October 2021, 9 and 11 November 2021 Decision date: 22 December 2021 Jurisdiction: Equity - Technology and Construction List Before: Stevenson J Decision: The Plaintiff succeeds; see [37] to [45] Catchwords: BUILDING AND CONSTRUCTION – building contract – adjudication – first defendant builder now in liquidation – payment claim by first defendant under Building and Construction Industry Security of Payment Act 1999 (NSW) – adjudication determination in favour of defendant – judgment entered – garnishee order served on plaintiff's bank – adjudicated amount paid to first defendant – whether first defendant had already been paid amounts claimed in payment claim – whether claims in payment claim were payable by plaintiff to the first defendant under the building contract CONTRACT – oral agreement made at February 2013 Meeting – subject matter of the 2013 Agreement – whether October Letter accurately set out contents of 2013 Agreement CORPORATIONS – directors and officers – resolution by directors of the first defendant to pay a dividend immediately after first defendant received adjudicated amount following adjudication under Building and Construction Industry Security of Payment Act – first defendant now in liquidation – where liquidator has assigned certain of first defendant's rights to the plaintiff – whether by paying the Dividends the first defendant contravened s 254T of the Corporations Act 2001 (Cth) – whether directors procured that contravention – whether first defendant's assets exceeded its liabilities at the time of paying the Dividends – whether payment of Dividends materially prejudiced first defendant's ability to pay its creditors – whether plaintiff was then a creditor of the first defendant CORPORATIONS – whether payment of the Dividends was an alienation of property with intent to defraud creditors for the purposes of s 37A of the Conveyancing Act 1919 (NSW) CORPORATIONS – whether directors acted in breach of their duties to the first defendant – whether plaintiff has suffered a loss by reason of the payment of the Dividends – whether directors liable to compensate plaintiff for any such loss CORPORATIONS – whether the payment of the Dividends was an undue preference for the purposes of s 588FA of the Corporations Act, an uncommercial transaction for the purposes of s 588FB of the Corporations Act, an insolvent transaction for the purposes of s 588FC of the Corporations Act, an uncommercial director-related transaction for the purposes of s 588FDA of the Corporations Act and a voidable transaction for the purposes of s 588FE of the Corporations Act CORPORATIONS – whether writing off of shareholder loans was an unreasonable director-related transaction for the purposes of s 588FDA of the Corporations Act CORPORATIONS – whether orders should be made under s 588FF of the Corporations Act EQUITY – tracing – whether plaintiff able to trace proceeds of Dividends into the hands of non-director defendants Legislation Cited: Building and Construction Industry Security of Payment Act 1999 (NSW) Clean Energy Act 2011 (Cth) Conveyancing Act 1919 (NSW) Corporations Act 2001 (Cth) Corporations Amendment (Corporate Reporting Reform) Act 2010 (Cth) Evidence Act 1995 (NSW) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Arnold v Britton [2015] AC 1619 Atlas Construction Group Pty Ltd v Fitz Jersey Pty Ltd [2017] NSWSC 72 Australian Securities and Investments Commission v Maxwell [2006] NSWSC 1052; 59 ACSR 373 Australian Securities and Investments Commission v Plymin (No 1) (2003) 46 ACSR 126; [2003] VSC 123 Beach Petroleum NL v Johnson (1993) 43 FCR 1; [1993] FCA 392 Bernard Elsey Pty Ltd v Federal Commissioner of Taxation (1969) 121 CLR 119; [1969] HCA 46 BM Sydney Building Materials Pty Ltd v AWT Building Group (Aust) Pty Ltd [2019] NSWSC 421 Box Valley Pty Ltd v Kidd [2006] NSWCA 26 Brash Holdings Ltd v Katile Pty Ltd [1996] 1 VR 24; (1994) 13 ACSR 504 Breen v Williams (1996) 186 CLR 71; [1996] HCA 57 Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34 Cannane v J Cannane Pty Ltd (in liq) (1998) 192 CLR 557; [1998] HCA 26 Chan v First Strategic Development Corporation Ltd (in liq) [2015] QCA 28 Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101 Connective Services Pty Ltd v Slea Pty Ltd (2019) 267 CLR 461; [2019] HCA 33 Crowe-Maxwell v Frost (2016) 91 NSWLR 414; [2016] NSWCA 46 Cuthbertson & Richards Sawmills Pty Ltd v Thomas [1998] SCACT 58; 28 ACSR 310 Darvall v North Sydney Brick & Tile Co Ltd (1989) 16 NSWLR 260 DSHE Holdings (Receivers and Managers Appointed) (in liq) v Abboud (No 3); National Australia Bank Ltd v Abboud (No 4) [2021] NSWSC 673 Dungowan Manly Pty Ltd v McLaughlin [2012] NSWCA 180; 90 ACSR 62 ET-China.com International Holdings Ltd v Cheung [2019] NSWSC 1874; 142 ACSR 121 ET-China.com International Holdings Ltd v Cheung [2021] NSWCA 24; 150 ACSR 461 Exception Holdings Pty Ltd v Albarran (No 2) [2005] NSWSC 981 Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 Fitz Jersey Pty Ltd v Atlas Construction Group Pty Ltd (2017) 94 NSWLR 606; [2017] NSWCA 53 Fitzgerald v Masters (1956) 95 CLR 420; [1956] HCA 53 Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 Gautam v Health Care Complaints Commission [2021] NSWCA 85 Goodrich Aerospace Pty Ltd v Arsic (2006) 66 NSWLR 186; [2006] NSWCA 187 Grove v Flavel (1986) 43 SASR 410; 11 ACLR 161 Heesh v Baker [2008] NSWSC 711; 67 ACSR 192 Helton v Allen (1940) 63 CLR 691; [1940] HCA 20 Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41; [1984] HCA 64 In the matter of Centro Properties Ltd and CPT Manager Ltd in its capacity as responsible entity of Centro Property Trust [2011] NSWSC 1171; 87 ACSR 131 In the matter of CSR Ltd (2010) 183 FCR 358; [2010] FCAFC 34 In the matter of Molopo Energy Ltd; Molopo Energy Ltd v Keybridge Capital Ltd [2014] NSWSC 1864; 104 ACSR 46 In the matter of Rossfield Group Operations Pty Ltd & Morton Holdings Pty Ltd [1981] Qd R 372; (1980) 5 ACLR 237 Ishac v David Securities Pty Ltd (No 6) (1992) 7 ACSR 199 Kalls Enterprises Pty Ltd (in liq) v Baloglow [2007] NSWCA 191; 63 ACSR 557 Kinsela v Russell Kinsela Pty Ltd (in liq) (1986) 4 NSWLR 722; 10 ACLR 395 Knauf Plasterboard Pty Ltd v Plasterboard West Pty Ltd (In Liq) (Receivers and Managers Appointed) (2017) 254 FCR 559; [2017] FCA 866 Lahey Constructions Pty Ltd v State of New South Wales [2021] NSWCA 69 Links Golf Tasmania Pty Ltd v Sattler (2012) 213 FCR 1; [2012] FCA 634 Linter Group Ltd (in liq) v Goldberg (1992) 7 ACSR 580 Lloyds Bank Ltd v Marcan [1973] 1 WLR 1387; 3 All ER 754 Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 89 NSWLR 633; [2014] NSWCA 184 Marcolongo v Chen (2011) 242 CLR 546; [2011] HCA 3 Melbase Corporation Pty Ltd v Segenhoe Pty Ltd [1995] FCA 279; 13 ACLC 823 Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 Murphy Corporation Ltd v Acumen Design & Development (QLD) Pty Ltd [1995] 11 BCL 274 National Australia Bank Ltd v Clowes [2013] NSWCA 179 New Cap Reinsurance Corporation Ltd (in liq) v A E Grant [2008] NSWSC 1015 Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221; [1987] HCA 5 Permanent Building Society (in liq) v Wheeler (1994) 11 WAR 187; 14 ACSR 109 Pink Floyd Music Ltd v EMI Records Ltd [2010] EWCA Civ 1429; [2011] 1 WLR 770 Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd (2017) 95 NSWLR 82; [2017] NSWCA 151 Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 264 CLR 1; [2018] HCA 4 Puglia v Basol [2005] NSWSC 1271 Re Diplock's Estate [1948] Ch 465 Regal Castings Ltd v Lightbody [2009] 2 NZLR 433 Regentcrest plc (in liq) v Cohen [2000] All ER (D) 747; [2001] 2 BCLC 80 Rejfek v McElroy (1965) 112 CLR 517; [1965] HCA 46 Sandell v Porter (1966) 115 CLR 666; [1966] HCA 28 Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq) (2019) 99 NSWLR 317; [2019] NSWCA 11 Silvera v Savic (1999) 46 NSWLR 124; [1999] NSWSC 83 Smith v Starke, in the matter of Action Paintball Games Pty Ltd (in liq) (No 2) [2015] FCA 1119; 109 ACSR 145 Société d'Avances Commerciales (Société Anonyme Egyptienne) v Merchants' Marine Insurance Co (The "Palitana") [1924] 20 Ll L Rep 140 Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd (2016) 260 CLR 340; [2016] HCA 52 Treloar Constructions Pty Ltd v McMillan [2017] NSWCA 72; 120 ACSR 130 Walker v Wimborne (1976) 137 CLR 1; [1976] HCA 7 Watson v Foxman (1995) 49 NSWLR 315 Weaver v Harburn [2014] WASCA 227; 103 ACSR 416 Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) (2012) 44 WAR 1; [2012] WASCA 157 White in his capacity as joint and several liquidator of Port Village Accommodation Pty Ltd (in liq) v ACN 153 152 731 Pty Ltd (in liq) (2018) 53 WAR 234; [2018] WASCA 119 Yore Contractors Pty Ltd v Holcon Pty Ltd (1990) 2 ACSR 663 ZBB (Australia) Ltd v Allen (1991) 4 ACSR 495 Texts Cited: T F Bathurst and S Merope, "It tolls for thee: Accessorial liability after Bell v Westpac" (2013) 87 ALJ 831 J D Heydon, Heydon on Contract (2019, Thomson Reuters) J D Heydon, M J Leeming, P G Turner, Meagher, Gummow & Lehane's Equity: Doctrines and Remedies (5th ed, 2015, LexisNexis Butterworths) K Mason, J W Carter, G J Tolhurst, Mason & Carter's Restitution Law in Australia (3rd ed, 2016, LexisNexis Butterworths) P Herzfeld and T Prince, Interpretation (2nd ed, 2020, Thomson Reuters) R P Austin and I M Ramsay, Ford, Austin and Ramsay's Principles of Corporations Law (17th ed, 2018, LexisNexis Butterworths) R P Austin, H A J Ford AM and I M Ramsay, Company Directors: Principles of Law and Corporate Governance (2005, LexisNexis Butterworths) Category: Principal judgment Parties: In proceedings 2017/11963: Fitz Jersey Pty Ltd (Plaintiff) Atlas Construction Group Pty Ltd (in liq) (First Defendant) Robert Yazbek (Second Defendant) Kebzay Pty Ltd (Third Defendant) Botany Road Project Pty Ltd (Fourth Defendant) Scott Sweeney (Fifth Defendant) Sweenham Pty Ltd (Sixth Defendant) Annette Yazbek (Seventh Defendant) Kebzay Custodian No. 2 Pty Ltd (Eighth Defendant) Castlefield Corner Pty Ltd (Ninth Defendant) 620 Botany Road Pty Ltd (Tenth Defendant) In proceedings 2019/305131: Robert Yazbek (First Plaintiff) Scott Sweeney (Second Plaintiff) Kebzay Pty Ltd (Third Plaintiff) Sweenham Pty Ltd (Fourth Plaintiff) Bruce Gleeson t/as Liquidator of Atlas Construction Group Pty Ltd (in liq) (First Defendant) Fitz Jersey Pty Ltd (Second Defendant) In proceedings 2020/87065: Fitz Jersey Pty Ltd C/- Economos Group Pty Ltd (Plaintiff) Bruce Gleeson t/as Liquidator of Atlas Construction Group Pty Ltd (in liq) (First Defendant) Robert Yazbek (Second Defendant) Scott Sweeney (Third Defendant) Representation: Counsel: M Christie SC with L Shipway, B Mostafa and M Sherman (Plaintiff) G A Sirtes SC with A R R Vincent and J Adamopoulos (Second to Tenth Defendants) Solicitors: Eakin McCaffery Cox (Plaintiff) Matthews Folbigg (First Defendant) Madison Marcus (Second to Tenth Defendants) File Number(s): 2017/11963; 2019/305131 and 2020/87065