Queensland Judgments
Authorised Reports & Unreported Judgments
Exit Distraction Free Reading Mode
  • Unreported Judgment

Northbuild Construction Pty Ltd v Discovery Beach Project Pty Ltd[2009] QSC 76

Reported at [2010] 1 Qd R 244

Northbuild Construction Pty Ltd v Discovery Beach Project Pty Ltd[2009] QSC 76

Reported at [2010] 1 Qd R 244

 

SUPREME COURT OF QUEENSLAND

 

CITATION:

Northbuild Construction Pty Ltd v Discovery Beach Project Pty Ltd [2009] QSC 76

PARTIES:

NORTHBUILD CONSTRUCTION PTY LTD
ACN 011 063 764
Applicant
v
DISCOVERY BEACH PROJECT PTY LTD
ACN 100 500 981
Respondent

FILE NO/S:

BS 3756/05

DIVISION:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court Brisbane

DELIVERED ON:

3 April 2009

DELIVERED AT:

Brisbane

HEARING DATE:

24, 25 and 27 February 2009

JUDGES:

White J

ORDER:

1.Refuse the application by Northbuild Constructions Pty Ltd for leave to use documents disclosed by Discovery Beach Project Pty Ltd in winding up proceedings.

2.Refuse the application by Discovery Beach Project Pty Ltd to vary the order made by Martin J on 26 November 2008.

3.Northbuild Constructions Pty Ltd to pay Discovery Beach Project Pty Ltd’s costs of and incidental to the application filed 16 February 2009.

4.Discovery Beach Pty Ltd to pay Northbuild Constructions Pty Ltd’s costs of and incidental to the application filed 10 December 2008. 

CATCHWORDS:

PROCEDURE – DISCOVERY AND INTERROGATORIES – DISCOVERY AND INSPECTION OF DOCUMENTS – DISCOVERY OF DOCUMENTS – USE OF DOCUMENTS – where applicant seeks leave to use documents obtained in present proceedings for the purpose of winding up proceedings against respondent – where parties are involved in ongoing arbitration proceedings – whether leave should be granted

CORPORATIONS – WINDING UP – WINDING UP IN INSOLVENCY – WHAT CONSTITUTES INSOLVENCY – EVIDENCE OF INSOLVENCY – where applicant seeks leave to use documents obtained in present proceedings for the purpose of winding up proceedings against respondent – whether respondent is insolvent

PROCEDURE – JUDGMENTS AND ORDERS – AMENDING, VARYING AND SETTING ASIDE – INHERENT POWER TO AMEND TO GIVE EFFECT TO MEANING AND INTENTION OF COURT – where respondent seeks variation of an order previously issued in present proceedings – whether court has power to vary the order – whether respondent has “liberty to apply” for variation pursuant to terms of previous order – whether previous order should be varied

Commercial Arbitration Act 1990 (Qld), s 47

Corporations Act 2001 (Cth), s 95A

Uniform Civil Procedure Rules 1999 (Qld), r 981

Atlas Maritime Co SA v Avalon Maritime Ltd (The Coral Rose)(No.3) [1991] 4 All ER 783, cited

Australian Hardboards Ltd v Hudson Investment Group (2007) 70 NSWLR 201, cited

Bailey v Australian Broadcasting Corporation [1995] 1 Qd R 476, cited

British American Tobacco Australia Services Ltd v Cowell (representing the estate of McCabe (deceased) No. 2) (2003) 8 VR 571, cited

Cardile v LED Builders Pty Ltd (1999) 198 CLR 380, cited

Central Queensland Cement Pty Ltd v Hardy [1989] 2 Qd R 509, cited

Crest Homes v Marks [1987] 1 AC 829, cited

Fylas Pty Ltd v Vynal Pty Ltd [1992] 2 Qd R 593, applied

Harrison Partners Construction Pty Ltd v Jevena Pty Ltd [2006] NSWSC 317, cited

Hearne v Street (2008) 235 CLR 125, applied

Northbuild Construction Pty Ltd v Discovery Beach Project Pty Ltd [2005] QSC 045, cited

Paris King Investments Pty Ltd v Rayhill [2006] NSWSC 578, cited

Prudential Assurance Co Ltd v Fountain Page Ltd [1991] 1 WLR 756, cited

Springfield Nominees Pty Ltd v Bridgeland Securities (1992) 38 FCR 217, cited

Virglet Ltd v Zabusky (No. 2) [2008] QSC 316, cited

COUNSEL:

D Savage SC and with him C Wilkins for the applicant

B Porter for the respondent

SOLICITORS:

Crouch & Lyndon Lawyers for the applicant

Clayton Utz for the respondent

  1. Northbuild Construction Pty Ltd (“Northbuild”) seeks leave to use documents obtained in the present proceedings including documents obtained by subpoenas to bring an application to wind up Discovery Beach Project Pty Ltd (“Discovery Beach”), the respondent in these proceedings. Discovery Beach resists leave being granted.
  1. In a separately heard application Discovery Beach applies for an order to vary the terms of an asset-freezing order made on 26 November 2008 by Martin J which is opposed by Northbuild.
  1. Although they are distinct applications and were heard on different days, counsel for the parties agreed that the applications could be considered together for the purpose of judgment as the extensive background is common to both applications.
  1. The originating proceedings were commenced in May 2005 for an asset-freezing order in aid of an arbitration[1] which had commenced between the parties and which continues.  Much of the lengthy and very detailed factual analysis by counsel for Northbuild relates to contested facts, or, in many cases, the construction which is to be put upon them.  Discovery Beach has not responded to each assertion but identifies a number of areas where explanations offered in affidavits would tend to eliminate concern that Discovery Beach has deliberately dissipated assets to defeat Northbuild’s claims.
  1. There are many issues in dispute between the parties. They are vigorously contested and bitter and have continued over many years. Each alleges dilatoriness by the other.[2]  The only proceedings in this court are ancillary to the arbitration proceedings.

Background

  1. Northbuild was the head contractor for the “Surfair Redevelopment” project at Marcoola on the Sunshine Coast. Discovery Beach was the developer of the project. Discovery Beach was the joint venture vehicle for the development. Its directors are Mr Derek McCartney (also described in the material as Derek Williams) and Mr Lawrence Robson.  Its shareholders are Great Northern Developments Pty Ltd and Moonbrook Holdings Pty Ltd.  Mr McCartney is the director of Moonbrook.  Its shareholders are Gnome Enterprises Pty Ltd, Mr McCartney and his wife, Mrs Jennifer McCartney (also described as English, her maiden name, in some of the material), a solicitor.  Mr Robson is a director of Great Northern Developments.  Its shareholders are Mr Robson, Mr Christopher Edwards, Mr Christopher Hawkins, Cloudland Holdings Pty Ltd, CPH Group Pty Ltd and Mountshannon Holdings Pty Ltd.
  1. Northbuild and Discovery Beach entered into a written building contract on 23 May 2003 for the development project.  The project was principally funded by a loan from Capital Finance Australia Ltd (“Capital Finance”).  Northbuild, Discovery Beach and Capital Finance entered into a tri-partite agreement on 28 July 2003 which gave Capital Finance a certain level of control over the works.  Disputes arose between the parties and further agreements were entered into in December 2003.  Further disputes arose, particularly about variations to the works.  Further agreements were entered into in August and September 2004. 
  1. By cl 8.3 of the agreement of 19 August 2004,[3] Northbuild and Discovery Beach agreed:

“Once CFAL [Capital Finance] has released its securities in full, the proceeds of sales within the development (net of GST and selling costs) shall be placed in Minter Ellison’s trust account until the amount held in trust equals the balance of the $31,700,000 after deducting the amounts which have been paid to Northbuild under the Building Contract (the “Trust Monies”).  The Trust Monies may only be released by Minter Ellison on certification by the Quantity Surveyor under the Building Contract: 

(a)to Northbuild to pay monies owing under the Building Contract (including amounts determined through expert determination); or

(b)to DBP [Discovery Beach] to the extent that it is agreed by the parties or determined by expert determination that the amounts payable to Northbuild under the Building Contract are less than $31,700,000.

The parties authorise Minter Ellison to invest the Trust Monies or the balance thereof …”

Trust Monies have not been deposited as described because Capital Finance’s securities have not been released, although, on Northbuild’s case, they could and should have been discharged.  The monies received from property sales have been directed elsewhere.  Discovery Beach rejects this articulation of the purpose of clause 8.3 and the alleged scheme to prevent Capital Finance being paid out.

  1. Northbuild alleges that Discovery Beach breached these further agreements. The disputes about progress claims and variation orders were submitted to an arbitration conducted by Mr W Fisher. He produced his interim award in February 2005 favourably to Northbuild’s position. On Northbuild’s application Muir J (as his Honour then was) made an order enforcing the award[4] on 3 March 2005.  That arbitration and two expert determinations, to some extent, are extant, although the material suggests that an award is anticipated. 
  1. Northbuild contends that some $13 million plus interest and costs “is claimable”.[5]  Discovery Beach contends that Northbuild has been overpaid which, after adjustments, will result in Northbuild being required to repay some $5 million to Discovery Beach.

The freezing order

  1. Northbuild filed an originating application on 9 May 2005 seeking a freezing order in the amount of $3,665,585.29 over Discovery Beach’s assets in support of the arbitration process.[6]  A material ground for seeking the order was an alleged conversation reported by Craig Dowling, an associate of Discovery Beach and Mr and Mrs McCartney, to Lance Alderton whose company had involvement in the development.  Mr Alderton deposed that Mr Dowling told him that Mr and Mrs McCartney had stated that they were determined to pay nothing more to Northbuild and would sell or divert assets to avoid doing so.[7]  That conversation is strenuously denied by Mr and Mrs McCartney,[8] but they did not do so until November 2008.  An order was made by consent by Byrne J on 9 May 2005 over assets to the amount sought.  There was no ancillary order for disclosure.  The order, consistently with Practice Direction No. 1 of 2007, did not prohibit Discovery Beach from spending any reasonable sum for legal expenses or of dealing and disposing of its assets in the “ordinary and proper course” of its business.  The order has been extended from time to time by consent during which the expert determinations and the arbitration have proceeded.
  1. During 2005, 2006 and 2007 Northbuild, through its solicitors, expressed concern to Discovery Beach’s solicitors about Discovery Beach’s alleged dissipation of assets. Discovery Beach responded that the concern was unfounded and that assets in excess of the amount in the order were held by Discovery Beach in Queensland.  In June 2005, Minter Ellison (Discovery Beach’s then solicitors) wrote that Discovery Beach had net freehold assets worth $18.8 million.
  1. However, in about October 2006 Northbuild expressed its concern in detailed correspondence[9] that Discovery Beach was disposing of real property at undervalue The responses were in the form “we are instructed that the total unencumbered value of [Discovery Beach’s] assets in Queensland exceeds $3,665,585.29”.[10]
  1. At about this time there was perceived to be a tension between paragraphs 1 and 2 of Byrne J’s order of 5 May which it is unnecessary to elaborate here.  Mr Williams [McCartney] and Mr Robson obtained senior counsel’s advice about the true construction of those paragraphs.[11]  Counsel was asked to advise whether, in order to settle internal disputes between Discovery Beach’s shareholders, certain transactions would contravene the freezing order of 5 May 2005, including Capital Finance providing a new facility for $11.570million to refinance the existing facility of $4.950million; pay out Suncorp-Metway $4.1million; return equity of $1.15million; pay costs of $711,725 and interest charges of $658,725; with the consent of the financier selling real property (to related parties) valued at $5.705million for $3,564,256.81 to repay debt.  According to the instructions, the net result would be that Capital Finance would be owed $7,185,743 and Discovery Beach would own real property with a reduced value of $13.66 million.  Senior counsel advised that so long as assets to the value mentioned were retained there would be no breach.
  1. From about mid-2008 Northbuild again sought assurances. In a letter dated 19 October 2008 Clayton Utz, Discovery Beach’s new solicitors, responded:

“… Our client instructs us that it cannot (in contrast to previous occasions) state that its net assets exceed the amount of $3,665,585.29.”[12]

  1. Discovery Beach offered to provide full details of its freehold assets, the most recent valuations and statements of what was due to its secured creditor. This was accepted by Northbuild. Relevantly for this application, Discovery Beach’s solicitors then responded:

“So that there is no doubt on the issue of the uses to which the information can be put, any such information is made available on condition that your client will only use it for the purposes of the Mareva proceedings, and for no other purpose.”[13]

Northbuild’s solicitors accepted that stipulation:

“Our client agrees to use the financial information provided for the purposes of the Mareva proceedings, and for no other purpose.”[14]

  1. On 27 October 2008 Clayton Utz provided a schedule setting out Discovery Beach’s freehold assets as at 22 October 2008, valuations by Herron Todd White dated 30 June 2006 addressed to Capital Finance, and a letter from Capital Finance that it was owed, as at 22 October 2008, $7,866,885.99 plus interest.  The property on the 2006 valuations was valued at $11.06 million.
  1. Northbuild continued to press for details about Discovery Beach’s net financial position which it firmly declined to provide. Independent searches conducted on behalf of Northbuild suggested that the Herron Todd White values could not be sustained as at September 2008 such that the value might be reduced by between $1.66 million and $3.225 million.
  1. On 14 November 2008 the Chief Justice gave leave to Northbuild and Discovery Beach to inspect and take copies of documents provided by Capital Finance in response to Northbuild’s subpoena. On 25 November 2008 before Martin J Northbuild sought to vary the freezing order and for an order that Discovery Beach disclose its secondary accounting records. There was also an application by Discovery Beach for the removal of caveats placed over its property by Northbuild.
  1. Mr Porter contended before his Honour that the freezing order permitted the payment of legal fees (said then to amount to some millions of dollars but on subsequent disclosure being in the vicinity of $4 million) and ordinary dealings of business and this might account for the depletion in assets. He submitted that the drop in real estate values might also in part account for the present position that Discovery Beach no longer had assets whose unencumbered value exceeded $3.6 million. Mrs McCartney’s affidavit of 17 November 2008 addressed concerns raised about certain transactions alleged to be at undervalue. Notwithstanding, his Honour concluded that the material raised a serious question about Discovery Beach’s assets and how they came to be so diminished.  His Honour “rectified” the order of 5 May 2005 more completely to reflect the form of such orders approved by the High Court in Cardile v LED Builders Pty Ltd.[15]
  1. The order is in the following terms:

“The respondent be restrained until further order from disposing of or further encumbering or otherwise dealing with in any way any of its money, property or other assets whether in its own name or not and whether solely or jointly owned up to the value of $3,665,585.29, other than for the following purposes:-

(a)to enable it to pay and to continue to pay the reasonable legal expenses;

(b)to meets its taxation liabilities;

(c)to comply with the statutory requirements to which it is subject;

(d)to meet their normal accountancy fees;

(e)to pay ordinary and proper business expenses bona fide incurred by it;

(f)to sell any of Lots 602, 604, 605, 6056 and 612 on SP171123, Lots 901 and 902 on SP171124, Lot 6 on SP168143 and Lot 74 on SP106179 County of Canning, Parish of Maroochy:

(i)at market value; and

(ii)provided that it pay the net proceeds of sale [being the sale price received after deduction of all costs of sale including agent’s commissions, adjustments for statutory levies (including rates, land tax and body corporate levies), legal fees and expenses, GST and any other usual adjustments effected upon settlement of contracts of sale of lots in community title schemes] to Capital Finance Australia Limited in discharge of its first registered mortgage, and in the event that no monies remain owing to Capital Finance Australia Limited on its first registered mortgage, into Court in this proceeding to abide the outcome of the various disputes between the applicant and respondent or further order.

  1. The respondent provide to the applicant within 21 days a copy of its secondary accounting records comprising (balance sheet, profit & loss statement and tax return) for the financial years ended 30 June 2005, 2006, 2007 and 2008 and in the event that these records or some of them do not exist, the primary accounting records of the respondent for those financial years demonstrating its assets and liabilities and payments and receipts.”
  1. Discovery Beach’s accountant, Mr Finlayson, prepared the accounts which were provided to Northbuild in accordance with order 2 on 30 January 2009. The balance sheet shows net assets of $721,609.86 which include trade dollars worth $708,380. Mr Porter conceded that if, as contended for by Mr Savage, that asset is worth little,[16] there are net assets of about $13,000.  Counsel for Northbuild criticised Mr Finlayson’s approach to the accounts and Mr Finlayson has responded about his treatment of those accounts on an historical cost basis.  He explained that the work in progress is Discovery Beach’s trading stock at its carrying value and not market value as submitted by Northbuild’s counsel.  It is shown at $8,743,207 in the accounts.  Mr Savage criticised Mr Finlayson’s failure to show the possibility of Northbuild’s success in the accounts as a contingent creditor.  Mr Finlayson explained that since Discovery Beach is not a reporting entity there is no basis on which to include contingent liabilities in the accounts.  Disputes involving Moonbrook Holdings Pty Ltd, Great Northern Developments Pty Ltd, Mr Williams, Mr Robson, Mr Edwards, Mr Hawkins and Discovery Beach involve claims by Moonbrook and Great Northern Developments (as identified by Northbuild) that, collectively, loans in excess of $6million were made to Discovery Beach but did not appear in the accounts.  Northbuild contended that this must be because Mr McCartney had failed to inform Mr Finlayson about them.  Mr Finlayson deposed that these contributions are represented in the balance sheet as partnership funds not loans.  He explained in his affidavit why the amount which appears is less than the loan figures.[17]
  1. This necessarily brief summary is sufficient to indicate that there are almost countless matters in dispute between the parties.

Northbuild’s application

  1. If Northbuild obtains leave to use the documents identified it seeks leave as a contingent creditor, to wind up Discovery Beach on the ground of Discovery Beach’s insolvency and on the just and equitable ground that the directors have stripped the company of its assets.
  1. It may be accepted that Discovery Beach’s only source of funds to pay its legal expenses and other necessary incidentals comes from the proceeds of sale of the remaining lots in the development. However, by virtue of the amendments to the freezing order made by Martin J on 26 November 2008, those proceeds net of associated expenses are to be paid into court. Moonbrook Pty Ltd has funded and proposes to continue funding Discovery Beach’s legal costs.[18]  Discovery Beach does not, apart from selling the remaining lots, trade.
  1. Shortly put, Northbuild wishes to use the documents extracted from Discovery Beach, Capital Finance, other third parties, and the information derived therefrom[19] to demonstrate that Discovery Beach is insolvent and/or that the conduct of the directors vis-à-vis creditors dictates that it is just and equitable that Discovery Beach be wound up.

The “Implied Undertaking”

  1. The Uniform Civil Procedure Rules 1999 (Qld) do not contain an express prohibition on the use of documents obtained by court order being confined for the purposes of the proceedings in which they were obtained nor do they absolve a party from the implied undertaking once the contents of such documents have entered the public domain.[20]
  1. It is now accepted that the restriction on the use of documents generated by litigious processes is an obligation of the substantive law.[21]  Justices Hayne, Heydon and Crennan in Hearne v Street said:[22]

“Where one party to litigation is compelled, either by reason of a rule of court, or by reason of a specific order of the court, or otherwise, to disclose documents or information, the party obtaining the disclosure cannot, without the leave of the court, use it for any purpose other than that for which it was given unless it is received into evidence.  The types of material disclosed to which this principle applies include documents inspected after discovery, answers to interrogatories, documents produced on subpoena, documents produced for the purposes of taxation of costs, documents produced pursuant to a direction from an arbitrator, documents seized pursuant to an Anton Piller order, witness statements served pursuant to a judicial direction and affidavits.”

  1. There may be some controversy about the scope of “received into evidence”. In this application the documents sought to be used by Northbuild have been exhibited to affidavits filed in the court and, submitted by Northbuild, in that manner, to have entered into evidence, and thereby into the public domain. It is the case that pursuant to r 981 of the Uniform Civil Procedure Rules 1999 (Qld) a non-party may search a court file and, on payment of the prescribed fee, must be provided with the identified document which may then be inspected.  But that process does not bring the document into the public domain so as to bring to an end a party’s obligation not to use the documents for a purpose outside the proceedings in which it was produced.  In any event, Mr Savage referred to observations by the Victorian Court of Appeal in British American Tobacco Australia Services Ltd v Cowell (representing the estate of McCabe (deceased) No. 2)[23] which strongly suggest that a party will always need leave to make collateral use of a document containing private or confidential material about another party even where the document has been tendered into evidence.  That it has entered the public domain will be a factor in the exercise of the discretion to grant leave.  It is unnecessary to enter into that interesting debate because Northbuild has proceeded on the basis that the mere attachment of these documents to affidavits does not absolve Northbuild of its obligation not to use them or any information or understanding arising from perusing them “for a collateral or ulterior purpose”,[24] other than in the pursuit of the freezing order or the arbitration, without the leave of the court.
  1. The plurality in Hearne v Street noted:[25]

“The importance with which the courts have viewed the obligation under discussion is indicated by the fact that although it can be released or modified by the court, that dispensing power is not freely exercised, and will only be exercised where special circumstances appear:

‘Circumstances under which the relaxation would be allowed without the consent of the serving party are hard to visualise, particularly where there was any risk that the statement might be used directly or indirectly to the prejudice of the serving party.’”[26]

  1. If a party wishes to be released from its obligation not to use material obtained from one proceeding in a different proceeding[27] what have been described as “special circumstances” must be shown.[28]  Lord Oliver in Crest Homes suggested that an order granting leave ought not occasion injustice to the disclosing party and whether granted will be dictated by the facts of each application. 
  1. In Springfield Nominees Pty Ltd v Bridgeland Securities[29] Wilcox J said that an applying party must identify “a special feature of the case” which is not usually present and which justifies the course proposed.  He concluded, after mentioning several factors which may be relevant to the exercise of the court’s discretion[30]

“… and, perhaps most important of all, the likely contribution of the document in achieving justice in the second proceeding.”

  1. There is an overall public interest in insolvent companies not trading which Mr Savage urged would cause the court to exercise its discretion to grant leave in this case.  Mr McCartney has deposed[31] that the only action in which Discovery Beach is engaged is the holding and selling of lots it owns in the development at Marcoola, the costs associated with which are payable out of sale proceeds.  There are no outstanding demands from Capital Finance in respect of the finance facility it has provided Discovery Beach; there are no creditors pressing for payment of any amounts alleged to be owing to them apart from Northbuild; there are no outstanding statutory demands against Discovery Beach.  Furthermore, Mr McCartney deposes that Discovery Beach has paid all amounts which it has been ordered to pay to Northbuild by the interim determinations.  Whilst Northbuild characterises itself as a substantial creditor of Discovery Beach, that is denied by Mr McCartney and, over payment to $5 million is asserted.  Those very issues are the subject matter of the arbitration and expert determinations.
  1. Mr McCartney deposed that Discovery Beach’s only continuing financial commitment is its legal costs in the proceedings involving Northbuild and that Moonbrook, a company of which he is director and which is a 50% shareholder in Discovery Beach, has supported and will continue to support by capital contributions Discovery Beach in those proceedings.
  1. A company is required to pay all of its debts as they fall due[32] but not necessarily from its own money.  As a matter of commercial reality, Moonbrook and Mr McCartney’s close involvement, will continue to support Discovery Beach financially.  As an aspect of leave to be relieved of the undertaking I conclude that Discovery Beach is not insolvent.
  1. As the many authorities to which counsel have referred make plain, where a party acting under the compulsion of a curial regime discloses private documents, it must be confident that will not thereby be unfairly disadvantaged.[33]  If leave were given to Northbuild to use the documents in an application for leave to commence winding up proceedings against Discovery Beach it would, in effect, pre-empt the arbitration outcome.  A winding up on the just and equitable ground will involve complex issues of the solvency of Discovery Beach when the impugned undervalue transactions occurred.  If there is anything in that claim it, too, should await the outcome of the arbitration which will decided what, if anything, is owing to Northbuild by Discovery Beach and when that entitlement arose.
  1. In conclusion, Northbuild has not advanced any circumstance which would cause the court to grant leave to use the documents identified or any others for the purpose of commencing winding up proceedings. Northbuild’s application is refused.

Discovery Beach’s application

  1. The order made by Martin J on 26 November 2008 is set out above.[34]  Discovery Beach wishes to have that order varied by permitting it to use the proceeds of sale of the lots referred to in paragraph 1(f) for the exceptions to the restraint in paragraph 1(a)-(e).  In effect, it seeks to be permitted to use the proceeds to pay its reasonable legal expenses.  The purpose of paragraph 1(f)(ii) is plainly to require Discovery Beach to use the proceeds of sale of its remaining lots to discharge its obligations to Capital Finance and create a fund with any surplus (which may, presumably, be available to satisfy any arbitral award made in Northbuild’s favour).
  1. Mrs McCartney, who provides advice to Discovery Beach and to Mr McCartney, did not appreciate, when she was provided with a copy of Martin J’s order, that it operated to preclude Discovery Beach from utilising the proceeds of sale of the lots for any of the purposes set out in paragraph 1(a)-(e), namely:

“(a)to enable it to pay and continue to pay the reasonable legal expenses;

(b)to meet its taxation liabilities;

(c)to comply with the statutory requirements to which it is subject;

(d)to meet their normal accountancy fees;

(e)to pay ordinary and proper business expenses bona fide incurred by it.”

  1. Mrs McCartney deposed:[35]

“7.The difficulty with this is that the only source of revenue for DBP (aside from any potential recovery from Northbuild) is from the sale of the units, so that unless the order is varied, paragraph 1(f)(ii) means that DBP cannot meet the obligations referred to in paragraphs 1(a) to 1(e) from its own assets without brining an application to the Court, and it would be forced to secure further funds from its shareholders.[36]

 

  1. The secured debt of the Company might extend to the whole of the likely sale proceeds of the remaining units.  However, it is not clear that this will be so because it depends on the sale prices obtained for the remaining units owned by DBP as well as the interest that accrues prior to their sale.  However, even if that is the case, CFAL [Capital Finance] might not require the whole of the net proceeds of sale to be paid to it on each settlement so that DBP has funds to pay unsecured creditors from time to time.  For that reason, there is a real prospect that funds will be available from the net proceeds of sale which can be used by the respondent for the purposes identified in paragraphs 1(a) to 1(e) of the order, regardless of the extent of the secured debt at the time of any particular sale.”
  1. Counsel for Northbuild contends that Discovery Beach’s application is a de facto appeal from Martin J’s order while Mr Porter maintains that it is an aspect of the “liberty to apply” provision in the order. This application is well beyond the usual express (or implied) leave to apply which is a feature of interlocutory orders. It is necessary to refer only to Fylas Pty Ltd v Vynal Pty Ltd[37] and the extensive discussion by McPherson SPJ (as his Honour then was) on this issue.[38]  This application clearly does not concern the “working out” of the order even on the broadest understanding of that expression. 
  1. If not explicit (as it is here) then it is implicit in interlocutory orders that they subsist until trial or earlier order. But that cannot assist Discovery Beach because some new fact[39] needs to be identified as arising since the making of the order (if the variation is opposed) otherwise a disappointed party would be able to renew its application (or resistance to an order made on an application) endlessly.  A perusal of the transcript of proceedings before Martin J on 26 November reveals that Mr Porter’s request to have an opportunity to make submissions about the form of the order related to the orders about disclosure of the secondary financial documents in paragraph 2 and not about paragraph 1.[40]  His Honour makes reference to the legal fees in his reasons which may have depleted Discovery Beach’s assets.  It is likely that he considered the very issue which Discovery Beach wants to ventilate on this application without actually expressing it and decided against extending the exception in paragraphs 1(a)-(e) to the proceeds of sale of the lots.  Clearly his decision is a matter for appeal and not variation.  Accordingly I refuse Discovery Beach’s application to vary the order.

Orders

  1. The orders are:
  1. Refuse the application by Northbuild Constructions Pty Ltd for leave to use documents disclosed by Discovery Beach Project Pty Ltd in winding up proceedings.
  1. Refuse the application by Discovery Beach Project Pty Ltd to vary the order made by Martin J on 26 November 2008.
  1. After hearing submissions about costs, the orders are:
  1. Northbuild Constructions Pty Ltd to pay Discovery Beach Project Pty Ltd’s costs of and incidental to the application filed 16 February 2009.
  1. Discovery Beach Pty Ltd to pay Northbuild Constructions Pty Ltd’s costs of and incidental to the application filed 10 December 2008.

Footnotes

[1] Pursuant to s 47 of the Commercial Arbitration Act 1990 (Qld).

[2] See, for example, the affidavit of Dale Stuart Brackin filed by leave on 24 February 2009 and the affidavit of Lloyd Sidney Nash filed by leave on 27 February 2009.

[3] Affidavit of Lloyd Sidney Nash filed 5 November 2008 (hereafter referred to as “Nash”) para 81, “LN1” p 448.

[4] Northbuild Construction Pty Ltd v Discovery Beach Project Pty Ltd [2005] QSC 045.

[5] Affidavit of Lloyd Sidney Nash filed by leave 27 February 2009 at [14].

[6] Pursuant to Chapter 8 Part 2 Division 2 of the UCPR: “Freezing Orders”.

[7] Nash “LN1” p 25.

[8] Affidavit of Derek William McCartney filed 13 November 2008, [12]-[14]; Affidavit of Jennifer Cecilia McCartney filed 17 November 2008, [6]-[14].

[9] See particularly letters at Nash “LN1” p 193, 195, 200 and especially 208.

[10] Nash “LN1” p 207.

[11] The advice dated 29 November 2006 was provided to Northbuild after request in January 2009.  Counsel’s instructions were disclosed to Northbuild under cover of a letter dated 23 February 2009.

[12] Nash “LN1” p 233.

[13] Nash “LN1” p 237.

[14] Nash “LN1” p 239.

[15] (1999) 198 CLR 380 at 428.

[16] Mr Finlayson saw no reason not to include that figure in the accounts, see Affidavit of Kenneth Scott Finlayson filed by leave 24 February 2009, [5].

[17] See [11] of the affidavit of Kenneth Scott Finlayson filed by leave 24 February 2009 which it is unnecessary to set out here.

[18] Affidavit of Derek William McCartney filed by leave 24 February 2009 at [4].

[19] Northbuild accepts that it could not seek non-party disclosure outside these proceedings because to do so would involve using knowledge gained in these proceedings.

[20] For example, Order 15 rule 18 of the Federal Court Rules.

[21] Hearne v Street (2008) 235 CLR 125 at [106]. 

[22] At [96].

[23] (2003) 8 VR 571.

[24] Central Queensland Cement Pty Ltd v Hardy [1989] 2 Qd R 509 per McPherson J at 510.

[25] At [107].

[26] Quoting from Prudential Assurance Co Ltd v Fountain Page Ltd [1991] 1 WLR 756 at 775.

[27] The exception, generally, being to commence contempt proceedings against the offending party and within the proceedings themselves, Crest Homes v Marks [1987] 1 AC 829.

[28] Crest Homes v Marks.

[29] (1992) 38 FCR 217.

[30] At 225.

[31] Affidavit of Derek William McCartney filed by leave 24 February 2009.

[32] Section 95A Corporations Act 2001.

[33] Excluding the special case of criminal (particularly serious) conduct revealed by the documents, Bailey v Australian Broadcasting Corporation [1995] 1 Qd R 476 and the discussion by Lee J at 484-490.

[34] Paragraph [9].

[35] Affidavit of Jennifer Cecilia McCartney filed 11 December 2008.

[36] Discovery Beach does not submit that its ability to conduct the arbitration and ancillary proceedings would be stifled by a refusal to vary the order, see Atlas Maritime Co SA v Avalon Maritime Ltd (The Coral Rose)(No. 3) [1991] 4 AII ER 783 per Nicholls CJ at 792; Harrison Partners Construction Pty Ltd v Jevena Pty Ltd [2006] NSWSC 317 at [10]-[12].

[37] [1992] 2 Qd R 593.

[38] At 597-601 see also Australian Hardboards Ltd v Hudson Investment Group (2007) 70 NSWLR 201 at [50]-[60].

[39] Paris King Investments Pty Ltd v Rayhill [2006] NSWSC 578 at [15]; Virglet Ltd v Zabusky (No. 2) [2008] 2 SC 316.

[40] Ex.1; Discovery Beach had brought an application for the removal of caveats lodged over the remaining lots.  His Honour ordered their removal with costs on 26 November apparently accepting Discovery Beach’s submission that Northbuild had disclosed no caveatable interest.

Close

Editorial Notes

  • Published Case Name:

    Northbuild Construction Pty Ltd v Discovery Beach Project Pty Ltd

  • Shortened Case Name:

    Northbuild Construction Pty Ltd v Discovery Beach Project Pty Ltd

  • Reported Citation:

    [2010] 1 Qd R 244

  • MNC:

    [2009] QSC 76

  • Court:

    QSC

  • Judge(s):

    White J

  • Date:

    03 Apr 2009

Litigation History

EventCitation or FileDateNotes
Primary Judgment[2010] 1 Qd R 24403 Apr 2009-

Appeal Status

No Status

Require Technical Assistance?

Message sent!

Thanks for reaching out! Someone from our team will get back to you soon.

Message not sent!

Something went wrong. Please try again.