Barrett Group Pty Ltd v Kenik Pty Ltd [2025] QSC 25

Robinson Locke Litigation Lawyers for a supporting creditor

• [1] Barrett Group seeks an order that Kenik be wound up in insolvency for failing to comply with a statutory demand. Kenik seeks a stay of this application.

• [2] In August 2020, Kenik, as the contractor, and Taringa Property Group Pty Ltd (TPG), as the principal, entered into a contract for the construction of a large shopping complex in Taringa. The construction took much longer than had been programmed for under the contract. Consequently, the cost of construction claimed by Kenik was substantially higher than the contract price for the original scope of works.
• [3] In September 2023, Kenik made a payment claim for $9,689,767. TPG's solicitors responded with a payment schedule with a scheduled amount of nil.
• [4] In October 2023, Kenik made an adjudication application. The adjudication decision was released in February 2024. It was in Kenik's favour in the sum of $4,218,787.
• [5] In February 2024, Kenik obtained judgment in this court in respect of the adjudicated amount (the judgment debt).
• [6] Soon after that, TPG commenced proceedings seeking to have the adjudication decision declared void in whole or in part as a consequence of alleged jurisdictional error. Related relief was also sought. Other proceedings were instituted by TPG and another party which, effectively, sought a finding that Kenik is not entitled to retain the adjudicated amount.
• [7] In late February 2024, Kenik undertook not to enforce the judgment debt and TPG agreed to pay the adjudicated amount into court.
• [8] In March 2024, Barrett filed this winding-up application based upon presumed insolvency as a result of Kenik's failure to satisfy a statutory demand. The application was then before the court on four occasions when Barrett was required to adjourn or amend or ask for an extension of time. On the fifth occasion (June 2024) the Chief Justice, upon Kenik's undertaking not to trade in Queensland or elsewhere, ordered that these proceedings be stayed until the earlier of:

(a) Seven days from the date of determination of Supreme Court proceeding 2242/24, or

(b) 13 September 2024.

• [9] Proceeding 2242/24 was determined in December 2024 when Hindman J ordered, among other things, that Kenik be restrained from enforcing the judgement debt referred to above until the determination of the other proceedings. Kenik has filed an appeal against that order.
• [10] It follows that the stay of these winding up proceedings expired on 13 September 2024.
• [11] In September 2024, a consent order was made extending the statutory period within which an order for winding up needed to be made to 28 March 2025.
• [12] There is also a separate claim by TPG against Kenik for approximately $11,000,000 for breach of contract (the TPG claim). If it proceeds, it is unlikely to be heard before the middle of 2026.

• [13] The history of these proceedings is a sorry one. Barrett has not pursued its application with anything approaching expedition. Kenik claims not to be in a position to deal with this application because, in the other proceedings about the construction contract, it is represented by different solicitors and its solicitors in these proceedings do not know what is happening in that action. Kenik submitted, unsuccessfully, that this application should be adjourned on the basis, among other things, that its solicitors in these proceedings needed to liaise with its solicitors in the other proceedings. It is hard to conceive of a submission less likely to engender judicial sympathy. The dislocation is entirely due to Kenik's decision to retain different solicitors.
• [14] Kenik accepts that it is insolvent. It cannot pay its debts. It has not traded since August 2023 when its building licence was suspended. At this hearing it relied on a single page document entitled "Working Capital Financial Position" which purported to show the company's financial position. I do not place any weight on it. It was merely the opinion of a director. There were no financial statements to support it. It relied on the monies which have been paid into court, but they cannot be used given the stay granted last year. It did not allow for the TPG claim against it. Why then, should it not be wound up?
• [15] Kenik submitted that the court should exercise its discretion under s 467(1) of the Corporations Act to stay the winding up application on the basis that it would, in the next month, engage in a mediation with TPG over the TPG claim. It was asserted that if that mediation results in an agreement which resolves the TPG claim in Kenik's favour then that would also resolve the appeal and this application because the monies in court would be released and Kenik could pay its creditors. Alternatively, a stay would allow the appeal to be heard which Kenik says would be resolved in its favour.

• [16] Kenik does not oppose the application on the basis that it is solvent. It does not seek to rebut the presumption of insolvency that arises from the failure to comply with a statutory demand. It relies upon the decision of Austin J in Bungey v Magnate Projects Pty Ltd[1] in which his Honour stayed the winding up application until the entry of judgment in another proceeding. This decision was analysed by Parker J in Reform Projects Pty Ltd v Macarthur Projects Pty Ltd[2]. He considered an application to adjourn the matter before him so that the debtor company could pursue claims against applicant creditor. He said:

"[21] I was referred in the course of argument to two cases in which a winding-up application was adjourned, or effectively adjourned, to allow the company the subject of the application to pursue existing proceedings. The first case was the decision of Austin J in Bungey v Magnate Projects Pty Ltd [2006] NSWSC 734. The second was the decision of Griffiths J in Deputy Cmr of Taxation v TD Preece Pty Ltd [2013] FCA 1365.

[22] In Bungey, the defendant company was pursuing proceedings in the Commercial List of this Court. Those proceedings had been fixed for hearing which was to begin a matter of weeks after the date on which the winding-up application came on for hearing. If the company succeeded in the proceedings, it would have had sufficient funds to repay its creditors. Those creditors were Mr Bungey, the applicant creditor; the company's solicitor; and the defendant in the Commercial List proceedings. There were no trade or other creditors.

"It seems to me that there is a public interest in the court not taking steps that would prevent litigation, which has been prepared for hearing on allocated hearing dates, from being heard. I infer that the practical effect of making a winding up order three weeks before the scheduled commencement of the hearing of substantial and complex commercial litigation would be likely to be that the hearing dates would be vacated, to give the liquidator the opportunity to assess the claim and receive advice."

"[25] In Preece, the company was party to proceedings under the Property (Relationships) Act 1984 in this Court. Judgment had been reserved and the delivery of judgment was imminent. The company had been operating a business which had been disrupted by the proceedings in this Court. But the evidence before Griffiths J was that the company had put the disruption behind it and was paying its employees and suppliers out of its trading income. It was not in a position to repay the tax liability which was the subject of the winding up application, but there were plans afoot which would allow that to happen once judgment had been delivered in the proceedings.

[26] Griffiths J, who heard the application in December 2013, intimated that he would make what he described as an additional order for winding up. Under this order, the company would not be wound up if it satisfied the relevant conditions by February 2014. The final form of orders is not included in the published judgment to which I have referred, but presumably the winding up application was adjourned until some point after the relevant date in February."

• [18] The following facts and observations by Richards J are relevant and applicable in this case:

(a) The debtor was not trading.

(b) The conduct of legal proceedings usually incurs costs.

(c) The making of a winding up order would not prevent the other proceedings from being prosecuted.

(d) The fact that any proceedings would be conducted by an independent liquidator is itself something which has advantages from the point of view of the public interest.

• [19] His Honour ordered that Macarthur be wound up. In arriving at that conclusion, he said:

"[30] ... I think it must be rare for the Court to exercise its discretion so as to permit a company which is insolvent to pursue litigation. Griffiths J described Preece as a "most unusual" case. His Honour also relied, by analogy, on authorities where the discretion has been exercised so as to permit a company which is insolvent because of transient financial circumstances to be allowed to "trade out" of those difficulties.

[31] A feature of both Bungey and Preece was that in each case the proceedings were nearly complete (in Preece of course they had in fact been completed and judgment was reserved). That is not the case here. Given that the proceedings have been commenced in the general list of the Common Law Division and no expedition has apparently been sought a hearing would appear to be at least a year away."

• [20] The feature present in Bungey and Preece identified by Richards J as lacking in the case before him is also absent in this case. There is no material which demonstrates that the appeal will be determined other than in the ordinary course and, even if it were resolved speedily and in Kenik's favour, the shadow of the TPG litigation still may fall across any hope of that money becoming available.
• [21] Kenik requires all the dominoes to fall in its favour and, even if they did, the creditors would be left waiting even longer. Kenik has not demonstrated a case for staying this application.

• [22] Kenik is insolvent. There is no basis for staying the prosecution of this application.
• [23] I order that Kenik Pty Ltd be wound up in insolvency.
• [24] As there is disagreement about who should be appointed as the liquidator I will hear the parties on that matter.
• [25] I will hear the parties on costs.

[1] [2006] NSWSC 734

[2] [2022] NSWSC 672