Beattie (Administrator), in the matter of Sharvain Facades Pty Ltd (Administrator Appointed) (No 3) [2025] FCA 671 (20 June 2025)

(1) A corporation in liquidation cannot serve a payment claim on a person under this Part or take action under this Part to enforce a payment claim (including by making an application for adjudication of the claim) or an adjudication determination.

(2) If a corporation in liquidation has made an adjudication application that is not finally determined immediately before the day on which it commenced to be in liquidation, the application is taken to have been withdrawn on that day.

1. Counsel was not able to identify any cases that had considered whether the words in s 32B "A corporation in liquidation cannot... take action under this Part to enforce a payment claim" could prevent the corporation from enforcing a judgment debt obtained as a result of the application of the SOPA.
2. The Second Reading Speech for the SOPA Bill contains the following relevant passage in relation to s 32B:

The bill will insert section 32B to prevent the Act applying to a claimant corporation in liquidation. This reform will ensure that the Act operates consistently with the object of promoting cash flow. The prime objective of the Act is to keep cash flowing in the contracting chain by enforcing timely payment. On this basis, the Act operates on a "pay-now-argue-later" basis, enabling claimants to obtain payment on an interim basis but preserving a respondent's final rights. If a claimant in liquidation were able to access the Act, any payment a respondent would be required to make to the claimant would not be interim as intended. This is because the respondent would not be able to sue for recovery as the payment would enter the general pool for distribution to the claimant's creditors.

1. Section 553C of the Corporations Act relevantly provides as follows:

(1) Subject to subsection (2), where there have been mutual credits, mutual debts or other mutual dealings between an insolvent company that is being wound up and a person who wants to have a debt or claim admitted against the company:

(a) an account is to be taken of what is due from the one party to the other in respect of those mutual dealings; and

(b) the sum due from the one party is to be set off against any sum due from the other party; and

(c) only the balance of the account is admissible to proof against the company, or is payable to the company, as the case may be.

(2) ...

1. In relation to the operation of s 32B of the SOPA, the relevant passage from the Second Reading Speech might, in a broad sense, be seen to support an approach that insolvency should bring an end to the utilisation of the benefits of the SOPA. However, the key words in the relevant passage are "access the Act". That is consistent with the language of s 32B, which refers to "take action under this Part", i.e. under Part 3 of the SOPA.
2. I do not consider that s 32B prevents a corporation which has obtained a judgment in a fixed amount from the NSWSC from enforcing that judgment. Section 32B relevantly operates to prevent a person from taking action "under this Part to enforce a payment claim". The words "this Part" are a reference to Part 3 of the SOPA, which comprises ss 13 to 32B. Part 3 provides (in ss 13-15) procedures whereby a person can make a payment claim and, if there is no payment schedule within the requisite time, recover the unpaid portion of the claim. Section 15 provides that such a person can "recover the unpaid portion of the claimed amount from the respondent, as a debt due to the claimant, in any court of competent jurisdiction".
3. Part 3 therefore provides a procedure by which a company can bring an application to, inter alia, the NSWSC to obtain a judgment debt. However, once a judgment is obtained, a company enforcing the judgment is not doing so pursuant to any procedure under Part 3. The relevant rights under the SOPA have merged in the judgment. The company enforcing the judgment does so pursuant to the Civil Procedure Act 2005 (NSW). It does not avail itself of any procedural mechanism set out in any section of Part 3. The procedural apparatus under Part 3 has concluded its operation. Further, the company is not enforcing "a payment claim". It is enforcing a judgment, which is the source of separate rights. This may be contrasted with the position if the company enters liquidation during the pendency of the process under the SOPA - for example, after a payment claim has been served but before the time has elapsed for a payment schedule, or after a proceeding has commenced but prior to judgment.
4. That position is not altered by the existence of a separate procedure in Part 3 for the adjudication of payment claims through the appointment of an adjudicator. Section 17 provides that a claimant may apply for adjudication of a payment claim. Section 22 provides that an adjudicator is to determine the payment claim. If the respondent fails to pay, s 24 provides that the authorised nominating authority may issue an "adjudication certificate". Section 25 provides that the adjudication certificate may be filed "as a judgment for a debt in any court of competent jurisdiction and is enforceable accordingly". None of these provisions apply in the present case. But in any event, nothing in those provisions suggests that the enforcement of a judgment debt involves the taking of action under Part 3 of the SOPA.
5. Any alternative construction would produce anomalous results. A judgment for a money sum creates a separate, enforceable right, as well as a res judicata. The claim merges in the judgment. If the plaintiff was forced to relitigate the claim to obtain a separate but duplicative judgment, how would the two judgments sit together? What is the second court to do with the first judgment? Why would the court give judgment twice, potentially for the same amount, or potentially for a different amount?
6. In light of this conclusion, I do not think that the potential operation of s 32B of the SOPA provides an adequate justification for postponing the second meeting of creditors, particularly when that postponement will cause prejudice to employees with entitlements, the payment of which will be postponed.
7. In relation to s 553C, I accept that the two types of prejudice identified by Sharvain could conceivably arise. The first type of prejudice is quite speculative, because it depends on Roberts going into liquidation. Further, if an extension of time was granted on that basis, it would involve the Court in a process of preferring the interests of one group of creditors (being the creditors of Sharvain) over another group of creditors (being the creditors of Roberts). No basis for making a choice of this type was identified by Sharvain.
8. The second type of prejudice is somewhat more concrete, in that I accept that if Sharvain goes into liquidation it might be more difficult and more costly for the liquidator to obtain the benefit of the $3,278,043.27 for Sharvain and its creditors. That benefit flowing from an extension of time is somewhat speculative. It depends upon:

(a) Sharvain avoiding a stay, and obtaining payment of the judgment debt from Roberts; and

(b) Roberts' counter-claim not being litigated, and being resolved on some pragmatic basis in the liquidation of Sharvain.

1. Further, in one sense there is something slightly curious about postponing a liquidation so as to avoid the consequences of the application of a provision (s 553C) which forms a conventional part of the suite of provisions applicable in the event of a corporate insolvency.
2. I do not find the present case to be a clear case. On balance, and not without hesitation, I conclude that there is a sufficient reason (but barely sufficient) to support a single extension of time to enable Sharvain to see if it can obtain prompt payment by Roberts of the judgment debt.
3. This, however, assumes that Roberts does not obtain a stay. If Roberts obtains a stay of the judgment pending an appeal, then I consider that there would be insufficient reason for a further extension of time. At that point, the prospect of avoiding some detriment, such as additional costs, for Sharvain and its creditors becomes quite speculative and attenuated, and would be outweighed by the prejudice to employees flowing from a further delay (which could be extensive) in the payment of their entitlements.
4. In those circumstances, I will order an extension of time. However, I will condition that order so that the extension of time comes to an end if Roberts obtains a stay of the NSWSC judgment.
5. The Administrator also seeks an order commonly described as a "Daisytek order" to allow the second meeting of the creditors required by s 439A to be held at any time before, or within five business days after, the end of the extended convening period, notwithstanding the operation of s 439A(2): In the matter of Daisytek Australia Pty Limited (2003) 45 ACSR 446; [2003] FCA 575 at [10] - [14] per Lindgren J. In effect, s 439A(2) does not permit an administrator to hold a creditors' meeting earlier than five days before the end of the convening period. Pursuant to the Court's power under s 447A, a "Daisytek order" will dispense with that timing requirement. As observed by Banks-Smith J in Algeri (Administrator), in the matter of Murray & Roberts Pty Ltd (Administrators Appointed) (No 2) [2022] FCA 1563 at [6], a "Daisytek order" "gives administrators greater flexibility in that they can convene a meeting earlier if appropriate in the circumstances". I consider that, in this instance, a "Daisytek order" is sensible and will enable the administrator flexibility to determine, if it sees fit, to convene the second creditors' meeting earlier than the time allowed.
6. I will otherwise order that the Administrator give notice of these orders to creditors, and give interested parties liberty to apply to vary or discharge the orders. I will also grant liberty to apply to the Administrator. The Administrator's costs of the interlocutory process will be costs in the administration.

I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Moore.