Australia, Sept. 10 -- New South Wales Land and Environment Court issued text of the following judgement on Aug. 11:

1. The plaintiff (Xela) is a building company. It entered into a building contract with the defendant (Leralais) on 17 June 2022. The contract provided for the construction of 7 townhouses on land owned by Leralais in Bowral, in the Southern Highlands of NSW. Xela and Leralais have had a falling out over the contract. Xela has 3 judgments against Leralais from the District Court, all arising from the operation of the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOPA). The total amount of the 3 judgments is $867,107.61. Leralais has sued Xela in the District Court by way of cross-claim, alleging that it does not owe the amounts claimed by Xela and seeks restitution under the SOPA and damages for alleged breaches of the building contract. It contends (as it can under the SOPA) that it is not indebted to Xela under the terms of the building contract.

2. Xela has attempted to enforce the judgments in various ways, so far with limited success. Xela now makes an application under s 459P of the Corporations Act 2001 (Cth) for Leralais to be wound up in insolvency. The Court has power to wind up Leralais on such an application by virtue of s 459A. Xela also seeks a freezing order.

3. Leralais contends that it is in a position to pay to Xela the amounts that are the subject of the judgments but that it does not wish to do so pending the adjudication of its cross-claim. It contends that it fears that if it makes the payment now and succeeds on its cross-claim, it risks losing whatever is paid above any net liability that is found to exist.

4. For the reasons set out below, Xela's applications must fail. The short reason why that is so is that Leralais is solvent.

5. There are two main questions that arise for consideration. The first is whether there is a rebuttable presumption that Leralais is insolvent. The second (having concluded that Leralais is not presumed to be insolvent) is whether Xela has established that Leralais is insolvent.

Is there a presumption of insolvency?

6. Xela contends that the Court must (rebuttably) presume that Leralais is insolvent by reason of s 459C of the Corporations Act. That section has effect for the purposes of an application under s 459P. It relevantly provides as follows:

(2) The Court must presume that the company is insolvent if, during or after the 3 months ending on the day when the application was made:...

(b) execution or other process issued on a judgment, decree or order of an Australian court in favour of a creditor of the company was returned wholly or partly unsatisfied...

7. Xela has secured judgments as follows:

a) a judgment issued by the District Court on 15 August 2024 in the sum of $129,157.06;

b) a judgment issued by the District Court on 3 October 2024 in the sum of $200,079.61; and

c) a consent judgment in the sum of $537,870.94 made on 14 October 2024.

The first two judgments arose from the registration of adjudication certificates issued under the SOPA. The third reflected summary judgment pursuant to s 15 of the SOPA by consent in respect of part of a claim brought by Xela in the District Court. Leralais is pursuing a cross-claim in those proceedings, which includes allegations that none of the debts that are the subject of the judgments are properly payable.

8. Xela has taken various enforcement steps which, it contends, give rise to a presumption of insolvency under s 459C(2)(b).

*Rest of the document can be viewed at: (https://www.caselaw.nsw.gov.au/decision/19888568454775597f5e0e33)

Disclaimer: Curated by HT Syndication.