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[2026] NSWSC 1098
Supreme Court of NSW
2026-09-11
Nixon J
Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: In the matter of RD Beechworth Pty Limited [2026] NSWSC 1098
Hearing dates: 4-5 August 2026
Date of orders: 11 September 2026
Decision date: 11 September 2026
Jurisdiction: Equity - Corporations List
Before: Nixon J
1. Order, pursuant to section 461(1)(k) of the Corporations Act 2001 (Cth), that the Defendant be wound up on the ground that the Court is of the opinion that it is just and equitable that it be wound up. 2. Order that Jialan Xu of Grant Thornton Australia, Grosvenor Place, Level 26, 225 George Street, Sydney NSW 2000, and Michael Gerard McCann of King George Central, Level 18, 145 Ann Street, Brisbane QLD 4000, registered liquidators, be appointed as the joint and several liquidators of the Defendant. 3. The Plaintiffs’ costs of the proceeding (as agreed or assessed) be costs in the winding up and reimbursed in accordance with s 466(2) of the Corporations Act 2001 (Cth).
Original judgment source is linked above.
Catchwords: CORPORATIONS – application to wind up on just and equitable ground – where Plaintiffs own 40% of shares in Defendant – where Defendant is special purpose vehicle incorporated for purpose of pursuing a specific residential property development – where Plaintiffs advanced $5m to Defendant to partly fund the development project – where Defendant’s controllers entered into Services Agreement with related entity – where development project has not yet obtained necessary planning approval – whether development project is commercially viable – whether there is a realistic probability of Defendant obtaining construction finance to complete development project – whether Defendant is insolvent – whether it is just and equitable that the Defendant be wound up – whether there is an alternative remedy available
Legislation Cited: Corporations Act 2001 (Cth) ss 95A, 461, 467
Cases Cited: Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd (2008) 66 ACSR 325; [2008] VSCA 86
Anchorage Capital Master Offshore Ltd v Sparkes [2023] NSWCA 88
Anchorage Capital Master Offshore Ltd v Sparkes (No 3) [2021] NSWSC 1025
Asia Pacific Joint Mining Pty Ltd v Allways Resources Holdings Pty Ltd [2018] 3 Qd R 520; [2018] QCA 48
Australian Securities and Investments Commission v ABC Fund Managers Ltd (No 2) (2001) 39 ACSR 443; [2001] VSC 383
Australian Securities and Investments Commission v ActiveSuper Pty Ltd (No 2) (2013) 93 ACSR 189; [2013] FCA 234
Australian Securities and Investments Commission v Bilkurra Investments Pty Ltd [2016] FCA 371
Australian Securities and Investments Commission v CME Capital Australia Pty Ltd (No 2) [2016] FCA 544
Australian Securities and Investments Commission v Edwards (2005) 220 ALR 148; [2005] NSWSC 831
Australian Securities and Investments Commission v Pegasus Leveraged Options Group Pty Ltd (2002) 41 ACSR 561; [2002] NSWSC 310
Australian Securities and Investments Commission v Plymin (2003) 46 ACSR 126; [2003] VSC 123
Chan v First Strategic Development Corporation Ltd (in liq) [2015] QCA 28
Edwards v Australian Securities and Investments Commission (2009) 264 ALR 723; [2009] NSWCA 424
Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (2001) 37 ACSR 672; [2001] NSWCA 97
Haycraft v AF1 Services Pty Ltd (2023) 168 ACSR 489; [2023] FCA 774
In the matter of Catombal Investments Pty Ltd [2012] NSWSC 775
In the matter of CNPR Limited [2018] NSWSC 989
In the matter of Custom Bus Australia Pty Ltd (in liq) [2021] NSWSC 1036
In the matter of L&B Seafood Pty Ltd [2022] NSWSC 100
In re Straw Products Pty Ltd [1942] VLR 222
MF Lady Pty Ltd (Trustee) v Henry Morgan Ltd [2022] FCA 978
Mir v Mir [2023] NSWSC 408
Queensland Phosphate Pty Ltd v Korda [2019] VSCA 215
Re JSSP Holdings Pty Ltd [2021] VSC 33
Re Tivoli Freeholds Ltd [1972] VR 445
Ratul v Islam; In the matter of Australian Real Estate Relation Pty Ltd [2023] NSWSC 78
Treloar Constructions Pty Ltd v McMillan (2017) 120 ACSR 130; [2017] NSWCA 72
Category: Principal judgment
Parties: Long Spring Pty Limited (First Plaintiff)
Forevet Florish Pty Limited (Second Plaintiff)
RD Beechworth Pty Limited (Defendant)
Representation: Counsel:
A Zahra SC and F Tao (Plaintiffs)
D Weinberger SC and S Hernandez Kaiko (Defendant)
Solicitors:
Tahota Law Firm (Plaintiffs)
Jurisbridge Legal (Defendant)
File Number(s): 2026/0031936
Publication restriction: Nil
By Originating Process filed 23 January 2026, the Plaintiffs, Long Spring Pty Limited and Forevet Florish Pty Limited, seek an order, pursuant to s 461(1)(k) of the Corporations Act 2001 (Cth), that the Defendant, RD Beechworth Pty Ltd (the Company), be wound up on the just and equitable ground.
The Company is a special purpose vehicle which was incorporated for the purpose of undertaking a residential property development.
The Plaintiffs advanced the following propositions in support of their winding up application:
the sole purpose or substratum of the Company cannot be achieved, because the proposed development is unprofitable and unviable;
the Company is likely insolvent and has been for some time;
there is a risk to future creditors and a risk of ongoing insolvent trading if the Company continues to trade and steps are taken to incur significant further liabilities;
the prolongation of the development project will only serve to further erode any remaining equity in the Company and further prejudice the Plaintiffs’ ability to recover the $5m which they have advanced to the Company for the purposes of the development;
there is an inherent conflict of interest with respect to the two directors of the Company, who are also the only directors and shareholders of Rudder Development Pty Ltd, which “continues to gouge exorbitant ‘management’ fees” from the Company for each month that the development project continues;
there has been a breakdown in the relationship, and there is a lack of trust, between the individuals who formed the Company; and
it is in the interests of all stakeholders that a liquidator be appointed to investigate the affairs of the Company.
The Company opposed the winding-up application, disputing the propositions set out above, and contending that the Plaintiffs have failed to explain why less drastic remedies are inadequate.
Before addressing the parties’ contentions above, I will set out the background to the winding-up application and the relevant principles, and then deal with three factual issues which are central to the dispute, namely:
whether the development being undertaken by the Company is commercially viable;
whether there is any realistic prospect of the Company obtaining the finance necessary to complete the development; and
whether the Company is insolvent.
On 17 December 2021, the Company was registered.
The directors of the Company are, and at all times have been, Mr Zhiyu Ning and Mr Changyang Li.
At all times since incorporation, there have been 100 ordinary shares in the Company, held as follows:
NZY Pty Ltd holds 30 shares (30%);
LM Family Capital Pty Ltd holds 30 shares (30%);
Long Spring holds 20 shares (20%); and
Forevet Florish holds 20 shares (20%).
Mr Ning is the sole shareholder and director of NZY, and Mr Li is the sole shareholder and director of LM. Accordingly, the two directors of the Company control, as between themselves, 60% of the shares of the Company.
Each of Long Spring and Forevet Flourish is associated with Mr Wei Shu, who is a director of each of those entities. Mr Shu is not, and never has been, a director of the Company.
In December 2021, the Plaintiffs and the Company entered into an agreement (the December 2021 Agreement), which included the following terms:
the Plaintiffs would advance a sum of $5m to the Company;
the Company would acquire two parcels of land located at 46 Beechworth Road (No. 46) and 48 Beechworth Road (No. 48) in Pymble, New South Wales (together, the Properties);
the Company would take reasonable steps to obtain development consent to subdivide the Properties into four lots, construct a house on each of the four lots, and sell the four lots within a reasonable time (the Project); and
the Company would repay the Plaintiffs their $5m advance and 40% of the Company’s profit upon the completion of the Project when the sale of the four homes was completed.
On 21 and 22 December 2021, the Company exchanged contracts for the purchase of each of No. 46 and No. 48, for prices of $5.8 million and $3.2 million respectively. The contracts for No. 46 and No. 48 were completed on 21 and 23 September 2022 respectively.
The Company’s purchase of the Properties was funded from the Plaintiffs’ $5m advance, and also from two other loans:
a loan from La Trobe Financial in the amount of $4.35 million (La Trobe Loan); and
a loan from BC Invest Loans Pty Ltd in the amount of $2 million (BC Invest Loan).
The La Trobe Loan is secured by a registered mortgage in favour of Perpetual Corporate Trust Limited over No. 46 and the BC Invest Loan is secured by a registered mortgage in favour of BC Invest over No. 48. The Plaintiffs’ loan is unsecured.
On 22 December 2021 (that is, at around the same time as the Company entered into the contracts for the purchase of the Properties), the Company entered into a written Services Agreement with Rudder Development for the provision of project management services in relation to the Project.
By cl 6.1 of the Services Agreement, Rudder Development agreed to undertake all activities necessary for the development of the Project (the Services).
In return, the Company agreed, by cl 9.1 of the Services Agreement:
to pay Rudder Development a monthly “Service Management Fee” of $30,000 plus GST; and
to reimburse Rudder Development for any approved project-related costs incurred by Rudder Development on behalf of the Company in providing the Services.
The directors of Rudder Development are Mr Ning and Mr Li, each of whom is a 50% shareholder of that entity. Mr Ning and Mr Li executed the Services Agreement both in their capacity as directors of the Company and in their capacity as directors of Rudder Development.
It was common ground that Mr Ning and Mr Li did not inform, or consult with, the Plaintiffs in respect of the Company entering into the Services Agreement with Rudder Development.
Under the Ku-ring-gai Local Environment Plan 2015, the Properties are on land zoned as “Zone R2 Low Density Residential”. Development for the purpose of dwelling houses is permitted in the R2 zone with development consent.
On 3 August 2022, the Company lodged a concept development application with Ku-ring-gai Council (the Council) for the subdivision of the Properties into four lots.
On 20 October 2022, this application was rejected by the Council.
On 30 March 2023, the Company commenced a Class 1 appeal in the Land and Environment Court of NSW (NSWLEC) against the refusal.
On 27 February 2024, the NSWLEC upheld the Company’s appeal and granted consent to the Company’s concept development application, approving, in general terms, the subdivision of the Properties into four lots, the demolition of existing structures, and tree removal, driveway and stormwater work (Concept Development Consent).
Condition 2 of the Concept Development Consent provided that the “construction of dwelling houses and any other ancillary development” of the subdivided lots were to form part of a subsequent stage, subject to a separate development application.
As of the date of the hearing, no work on the Properties (including demolition) has commenced pursuant to the Concept Development Consent.
On 30 June 2026 – more than two years after the Concept Development Consent and around five months after the commencement of this proceeding – the second stage development application was lodged with the Council on 30 June 2026 (Stage 2 DA).
From around November 2022, the Company has engaged real estate agents to manage the leasing of the two existing residential houses at No. 46 and No. 48.
Rental statements annexed to Mr Ning’s affidavit of 16 March 2026 indicate that:
Kingsland Group Co Pty Ltd has been appointed as the managing agent for the Properties;
since February 2024, K&I Company Pty Ltd has been the tenant of each of No. 46 and No. 48;
K&I is paying monthly rent of $3,476.19 for No. 46 and $3,580.48 for No. 48;
Kingsland is charging a management fee equal to 5% of the gross rent; and
Kingsland has issued rental statements to Rudder Development, rather than to the Company.
The rent collected by Kingsland from K&I’s tenancy of the Properties has not been paid to the Company, but has instead been deposited into a bank account in the name of Rudder Development.
On 26 April 2024, the Plaintiffs, through their solicitors, sent a letter to the Company demanding repayment of the $5m advanced to the Company. A second demand for repayment was made on 19 July 2024.
In August 2024, the Plaintiffs commenced proceedings in this Court seeking recovery of the moneys advanced. The Plaintiffs’ primary contention in those proceedings was that the amounts of $2.5m advanced by each of Long Spring and Forevet Flourish were repayable after a fixed 18-month term.
On 7 May 2025, Peden J handed down judgment in those proceedings: Long Spring Pty Ltd v RD Beechworth Pty Ltd [2025] NSWSC 437. Her Honour dismissed the Plaintiffs’ claim and found that the Plaintiffs’ advance was repayable only following the sale of the developed Properties.
Section 461(1)(k) of the Corporations Act provides that the Court may order the winding up of a company if “the Court is of opinion that it is just and equitable that the company be wound up”.
The generality of the words “just and equitable” is deliberate and should not be limited in any way: In the matter of CNPR Limited [2018] NSWSC 989 at [8] (Black J). A person applying for a company to be wound up on the just and equitable ground is entitled to rely on any circumstances of justice and equity which affects that person in their relations with the company or shareholdings, at least so long as those circumstances have a direct and immediate relationship to, or bearing upon, the management or administration of the affairs of the subject company, or the conduct of its business: In the matter of Catombal Investments Pty Ltd [2012] NSWSC 775 at [20] (Brereton J). The Court is not restricted in exercising its discretion to particular factual categories, and the question whether it is just and equitable is a question of fact, in respect of which each case must depend on its own circumstances: ibid.
In In r**e Straw Products Pty Ltd [1942] VLR 222 at 223, Mann CJ observed that:
“Facts rendering it just and equitable that a company should be wound up cannot be resolved into categories. Cases upon the subject are to be read with this always in mind. They merely illustrate the diversity of the circumstances calling for an exercise of the Court’s discretion in winding up a company because it is just and equitable so to do.”
In Australian Securities and Investments Commission v ABC Fund Managers Ltd (No 2) (2001) 39 ACSR 443; [2001] VSC 383 at [119], Warren J set out three “general fundamental principles” with respect to a winding up on the just and equitable ground:
“First, there needs to be a lack of confidence in the conduct and management of the affairs of the company”;
“Second, in these types of circumstances it needs to be demonstrated that there is a risk to the public interest that warrants protection”; and
“Third, there is a reluctance on the part of the courts to wind up a solvent company”.
In Australian Securities and Investments Commission v ActiveSuper Pty Ltd (No 2) (2013) 93 ACSR 189; [2013] FCA 234 at [21]-[24], Gordon J made the following observations regarding the application of those three “general fundamental principles”:
as regards the first, “a lack of confidence may arise where, ‘after examining the entire conduct of the affairs of the company’ the Court cannot have confidence in ‘the propensity of the controllers to comply with obligations, including … looking after the affairs of the company’”;
as regards the second, “a risk to the public interest may take several forms”, for example, “a winding up order may be necessary to ensure investor protection”; and
as regards the third, although “it has been said that ‘a stronger case might be required where the company was prosperous, or at least solvent’”, solvency is “not a bar to the appointment of a liquidator on the just and equitable ground”.
Similar observations were made by the Victorian Court of Appeal in Queensland Phosphate Pty Ltd v Korda [2019] VSCA 215 at [264]-[266] (Kyrou, McLeish and Niall JJA).
In Re J**SSP Holdings Pty Ltd [2021] VSC 33 at [14], Hetyey AsJ observed that matters relevant to the question of whether a just and equitable winding up order should be made include:
a failure of the main object of the company’s formation;
a deadlock in the management of the company;
a breakdown in the relationship between the shareholders;
a lack of confidence in the conduct and management of the affairs of the company;
where there has been fraud, misconduct or oppression in relation to the affairs of the company;
serious concerns about the company’s compliance with its statutory obligations, including the filing of tax returns;
where there have been breaches of the Corporations Act, including breaches of directors’ duties or an inadequacy of accounts or recordkeeping;
questions of commercial morality in the conduct of the company’s affairs; and
a risk to the public interest that warrants protection.
A company may also be wound up on the just and equitable ground in order to protect investors, or at least limit loss to investors: Australian Securities and Investments Commission v Pegasus Leveraged Options Group Pty Ltd (2002) 41 ACSR 561; [2002] NSWSC 310 at [98] (Davies AJ).
One factual issue, which is central to a number of the grounds advanced by the Plaintiffs in support of their winding up application (outlined at paragraph [3] above), is whether the Project is unviable, in the sense that the costs incurred in completing the Project will substantially exceed the sales proceeds from the completed development.
In relation to this issue, the Plaintiffs relied on three expert reports, regarding:
the time required to obtain approval for the Stage 2 DA;
the costs of constructing the four houses proposed to be developed on the Properties; and
the anticipated market value of the completed four houses.
The Plaintiffs led evidence from a planning expert, Mr Arcangelo Antoniazzi. In his report, Mr Antoniazzi expressed the view that a period of around four to six months would be required for the assessment and determination of the Stage 2 DA by the Council; and that, in the event that the Stage 2 DA is refused, the determination of any appeal in the NSWLEC would take a further six to twenty-four months.
Mr Antoniazzi was not required for cross-examination, and the Defendants did not dispute any aspect of his report. I accept his estimates.
The Plaintiffs led evidence from a quantity surveyor, Mr Ken Whyte, who expressed opinions on the likely construction costs of the development.
In particular, Mr Whyte expressed the view that the construction costs would be around $15,266,315 (excl GST) or, on a “reduced scope option”, around $13,476,056 (excl GST); and that construction of the four houses would take around two years.
The Defendants submitted that Mr Whyte’s opinions should be given “little or no weight”, having regard to the following matters:
as at the date of Mr Whyte’s assessment, the Stage 2 DA had not been lodged, and there was no development consent, no construction contract drawings, and no finalised specifications for the development;
Mr Ning gave evidence that the standard to which the houses on the subdivided lots will be built will not be determined until after the Stage 2 DA is granted; and
in cross-examination, Mr Whyte acknowledged that his estimate was based only on “the DA drawings”, and that construction contract drawings would be significantly more detailed and would provide a more reliable basis for an estimate of construction costs.
While making these concessions, Mr Whyte rejected the suggestion that it followed that his estimate of the construction costs, based on the DA drawings, was unreliable. Mr Whyte explained that quantity surveying involves arriving at a bill of quantities by making “assessed judgments” based on the quantity surveyor’s “experience and knowledge to anticipate the type of construction based on the architect’s drawings”. Mr Whyte stated that, while such drawings might allow a range of choices to be made regarding, for example, joinery, it is necessary to look at “the type of the properties” being developed, and their “location and the market”; having regard to those matters, the range of options “has to be realistic”; and the quantity surveyor must make an assessment of this realistic range based on his or her experience.
Mr Whyte has almost 50 years of experience as a quantity surveyor. I am satisfied that, based on his knowledge and experience, Mr Whyte has a sound basis to make an informed estimate of the construction costs based on the DA drawings.
While a more accurate estimate might be made on more detailed information, it does not follow that Mr Whyte’s estimate is unreliable. Significantly, the Defendants did not lead any expert evidence in response to Mr Whyte’s report.
Further, the Plaintiffs pointed out that Mr Ning’s own evidence was that he told Mr Shu in December 2021 that “the estimated construction total additional development costs (sic) were about $11 to $12 million”. Mr Whyte gave evidence that, according to the Rawlinsons Guide’s data for Sydney, construction costs had increased by about 13% over the two year period from 2023 to 2025. If a similar rate were applied to the preceding two years, Mr Ning’s 2021 estimate would increase to around $14-$15.3m (which aligns with Mr Whyte’s estimate).
Mr Whyte’s estimate of the construction costs is also in line with an estimate which appears to have been given by the Company to its finance broker, as set out in an engagement letter dated 11 May 2026. This letter records that the cost of construction, including contingency, was estimated to be $16.125m (incl GST).
For those reasons, I accept Mr Whyte’s opinions as to the time and cost required to complete the development.
The Plaintiffs led evidence from a valuer, Mr Jason Field, regarding the “as is” value of No. 46 and No. 48 and the “as if completed” value of the four houses to be constructed on the subdivided lots.
Mr Field expressed the opinion that the value of each completed house, assuming each was built to a high standard, would be $6m (incl GST), yielding a total value of $24m (incl GST) for the completed development. Applying the GST margin scheme, the gross realisation from the completed development, net of GST, would be $22,636,364.
One matter which should be immediately noted is that Mr Field expressed an opinion on market value as at 1 April 2026 (with his report being issued 8 April 2026). Mr Field was not asked to estimate what the market value of the completed houses would be at some date around two-and-a-half years in the future, when the Project would likely be completed.
The Company did not lead any valuation evidence in response to Mr Field. However, Mr Field was cross-examined at some length, and the Company submitted that the Court should attach limited, if any, weight to his opinion for the following reasons.
First, the Company submitted that Mr Field placed reliance on Mr Whyte’s quantity surveying evidence and therefore, to the extent that the Court rejects or discounts Mr Whyte’s estimate, a substantial foundation of Mr Field’s analysis necessarily falls away. This submission can be put to one side, as I have determined that Mr Whyte’s evidence is reliable.
Secondly, the Company submitted that Mr Field accepted, in cross-examination, that his assessment was undertaken on the basis of the concept development application, and not with the benefit of all approvals required to construct the four houses. However, the Company did not explain why this meant that Mr Field’s opinion regarding value was understated, particularly where Mr Field made an assumption that “the project will be completed to a high standard, having regard to the QS report [of Mr Whyte], design, location and quality of new homes in the area”.
Thirdly, the Company submitted that Mr Field had failed to take account of the extensive basement levels of the proposed houses, because he proceeded on the basis of gross floor area (GFA) measurements, which may exclude basements and garages. However, Mr Field maintained, in cross-examination, that he did take the basement areas into account. In that regard, his report expressly referred to the fact that the houses would be “erected over three levels” and he annexed to his report plans which showed the basement areas.
Fourthly, the Company submitted that Mr Field was, in cross-examination, unable or at least hesitant to answer basic questions about his comparable sales analysis, such as questions concerning the age, condition, improvements or size of the properties which he selected. I do not accept this criticism. Mr Field provided, when challenged in cross-examination, coherent explanations of the reasons why he regarded particular properties as comparable or superior to the houses which are the subject of the proposed development.
For example, Mr Field explained that a property on Beechworth Road (being the same street as the Properties), showing a newly constructed home with five bedrooms, a double garage and a pool, and which was recently sold for $6.2m, was a superior property, in particular because it had direct street frontage, which was more desirable than the proposed houses, which were to be constructed on a battleaxe site.
I have attached, as Annexure A to this judgment, an extract from the drawings for the concept development application, which shows the “battleaxe” development site, with the four proposed dwellings being surrounded by neighbouring homes and accessible only via a shared driveway from Beechworth Road.
Finally, the Company pointed out that Mr Field’s analysis assumes the completion of the four houses in the future, but values them in today’s market. The Company submitted that, in those circumstances, “it cannot sensibly be relied on as a prediction of the likely realisable value of the Properties”.
It may be accepted that a valuation of the proposed houses as at 1 April 2026 cannot be relied upon to determine their value at, say, 1 January 2029 (being approximately 30 months after the Stage 2 DA was lodged).
However, that does not mean that Mr Field’s opinion cannot be taken into account when considering the feasibility and viability of the Project, which is a matter addressed below.
Loan statements in respect of the La Trobe Loan indicate that, for the period up to 31 March 2026, the Company incurred total interest and fees of $1.205m.
The Plaintiffs calculated that, based on the interest rate as at 31 March 2026 (and ignoring the increase in the cash rate target which occurred on 6 May 2026), the Company incurred further interest of $0.125m in the period up to 31 July 2026. The Company did not, in its submissions, dispute this calculation.
Loan statements in respect of the BC Invest Loan indicate that, for the period up to 22 April 2026, the Company incurred total interest and fees of $0.576m.
The Plaintiffs calculated (again, ignoring the May 2026 increase in the cash rate target) that in the period up to 31 July 2026, the Company incurred additional interest expenses in respect of the BC Invest Loan of $0.045m. Again, the Company did not dispute this calculation.
Having regard to those figures, the total financing costs in respect of the La Trobe Loan and the BC Invest Loan in the period up to 31 July 2026, which I describe below as the Incurred Financing Costs, is around **$**1.95m.
The Plaintiffs also estimated the interest that will be payable on the La Trobe Loan and the BC Invest Loan for a further period of 29 months from 1 August 2026. This period of 29 months represents the sum of Mr Antoniazzi’s estimate of the time required for approval of the Stage 2 DA (being 6 months less the 1 month already expired after lodgement on 30 June 2026) plus Mr Whyte’s estimate of the time required for construction of the development (being 24 months).
In particular, the Plaintiffs took the interest paid as recorded in the last available month of the loan statements (being $31,094.32 for the La Trobe Loan in March 2026, and $13,983.72 for the BC Invest Loan in April 2026), rounded down those amounts (to $31,000 and $13,500 respectively), and multiplied those rounded amounts by 29 months (thereby ignoring the rate increase which occurred in May 2026).
This resulted in an estimate of Future Financing Costs in the amount of **$**1.29m.
The Company’s own documents indicate that to date it has incurred the following costs in respect of the Project:
$0.503m in stamp duty associated with the acquisition of the Properties (as recorded in the Company’s FY2024 financial statements);
$0.099m in respect of legal fees and disbursements for the NSWLEC proceeding in respect of the Concept Development Consent (being the sum of the invoices issued by Addisons Lawyers);
$0.429m in respect of consultants’ fees (being the sum of the amounts in a Project Finance Summary as at 31 January 2026 and Mr Ning’s affidavit of 30 July 2026); and
other holding costs, including land tax, of $0.183m (as recorded in the Project Finance Summary as at 31 January 2026).
These costs, which I describe below as the Miscellaneous Incurred Costs, total around **$**1.21m.
In addition, the Company has incurred around $1.815m of service fees which are payable to Rudder Development pursuant to the Services Agreement. However, the Company has not, to date, paid any amount to Rudder Development in respect of those fees. (I will address these fees further below.)
The Company’s financial records indicate that the Company received rental income totalling $0.242m up to 30 June 2025.
The most recent rental statements (for the month of December 2025) indicate that the net rental income in respect of No. 46 and No. 48 (after the fees payable to the managing agent) was $3,302.38 and $3,401.48 respectively. If those amounts are multiped by 18 months – to cover the period from 1 July 2025 to 31 December 2026 (on the assumption that demolition would start around that time) – the total net rent receivable for this period would be $0.121m.
The total past and future Rental Income would therefore be around **$**0.36m.
I deal below with the issue whether the Company has any realistic prospect of obtaining finance for the construction costs.
Assuming for present purposes that the Company is able to do so, the Plaintiffs calculated – on the basis of simple interest of 8% per annum for a period of two years (being the construction period estimated by Mr Whyte) – that the financing costs would be around $2.687m (assuming construction costs of $15.266m plus GST) or around $2.372m (for the “reduced scope” option considered by Mr Whyte) (Construction Finance Costs). As the Plaintiffs submitted, this assumes that the completed houses are sold immediately following practical completion and does not allow for any loan establishment fee or lender’s valuation fee.
The Company did not, in its submissions, put forward any alternative estimate of the Construction Finance Costs. I am satisfied that the Plaintiffs’ estimate is reasonable and, if anything, conservative, having regard to the terms of the engagement letter which was sent by to the Company by its finance broker on 11 May 2026. In that letter, the broker gave an indicative interest rate for construction finance of 8.59% on drawn funds (which is higher than the interest rate estimated by the Plaintiffs), and calculated the interest budget for a period of 21 months as being around $2.527m (suggesting that the interest budget for a period of 24 months would be around $2.888m). Further, the broker’s letter estimates finance establishment costs, which are not included in the Plaintiff’s estimate, to be $364,295.
Mr Ning estimated, in December 2021, that the costs payable for agents’ fees and marketing, for the sale of the four completed houses, would be $0.42m (Selling Costs).
In addition, the Plaintiffs calculated that the fees payable to Rudder Development for a further period of 29 months, at $33,000 per month, would be $957,000. However, Senior Counsel for the Company proffered, on behalf of Rudder Development, an undertaking not to charge any further service fees after the Stage 2 DA is obtained. On the assumption that the Stage 2 DA is approved by the Council within the timeframe estimated by Mr Antoniazzi, that would mean that Rudder Development would charge only a further five months of management fees (or $165,000) up until 31 December 2026. When this sum is added to the management fees payable to date (in the amount of $1.815m), the total amount for management fees is $1.98m.
| | $m | | Value of completed houses net of GST | 22.64 | | plus Rental Income | 0.36 | | less repayment of La Trobe Loan | (4.22) | | less Repayment of BC Invest Loan | (2.00) | | less Incurred Financing Costs | (1.95) | | less Future Financing Costs | (1.29) | | less Construction Costs | (15.27) | | less Construction Finance Costs | (2.69) | | less Miscellaneous Incurred Costs | (1.21) | | less Selling Costs | (0.42) | | less repayment of Plaintiffs’ $5m advance | (5.00) | | less Fees payable to Rudder Development | (1.98) | | TOTAL | (13.03) |
I accept that the value of the completed houses, which is the opening line of this table, is a value as at 1 April 2026, and any sale would not occur until around January 2029 at the earliest. Accordingly, there is a significant unknown variable, being the market price of the completed houses at that time.
There was evidence that, in the period from February 2025 to February 2026, prices in the Pymble housing market increased by around 4.6%. (This does not take account of any downturn in the housing market since that time, which has been widely reported.)
However, even if it were assumed that the market value of the four proposed houses were to increase by 25% in the two-and-a-half year period through to completion of the development (being an increase of around $5.66m), it would remain the case that the Project would make a significant loss. In this scenario, the loss on the Project – even before the payment of any fees to Rudder Development – would be around $5.4m.
Similarly, it would remain the case that the Project would make a substantial loss even if one assumed both that the value of the completed houses increased by 25% and that the costs of construction were the costs estimated by Mr Whyte on a “reduced scope” basis (being a reduction of $2.1m in construction costs and Construction Finance Costs). In this scenario, the loss on the Project – before the payment of any fees to Rudder Development – would be around $3.3m.
There is, of course, the potential for some of the costs figures to be lower, but there is also the potential for some of them to be higher. Further, the above figures do not include any allowance for further proceedings in the NSWLEC (in the event that the Stage 2 DA is refused), or any allowance for finance establishment costs, Council rates, water rates, or the costs of any architects, engineers, certifiers and other consultants who may be engaged in connection with any further planning and construction work.
Significantly, the Company did not:
adduce any competing expert evidence regarding the time or costs required to complete the development, or the value of the completed development;
tender any current internal budget or forecast for the Project which indicated that the Project would or might be profitable; or
undertake, in its submissions, any analysis of the available evidence with a view to showing that there was a prospect of the Project being able to cover its costs.
Having regard to those matters, the Plaintiffs have established, on the balance of probabilities, that the Project will be unprofitable and will make a significant loss, and is therefore commercially unviable.
A further factual issue – which is related to the issue of the commercial viability of the Project and which is also relevant to the various grounds advanced by the Plaintiffs – is whether the Company has any realistic prospect of obtaining the finance necessary to complete the Project.
As a starting point, the Company did not dispute that construction finance would be required. That is unsurprising, given that the Properties are subject to two registered mortgages, the Company has limited rental income (in an amount significantly less than the cost of servicing its debt), the construction costs will be in the region of $15.266m (excl GST), and the Company’s FY2025 (draft and unaudited) financial statements showed equity of only $2.362m. The latter figure was arrived at after applying a “valuation uplift” of $3.68m to the value of the Properties. Ms Robyn Karam, who was called by the Plaintiffs as an insolvency expert and who is also a chartered accountant and has expertise in forensic accounting, gave unchallenged evidence that this valuation uplift is unexplained and unjustified, and that its inclusion results in a “material misstatement of the accounts”. If it were removed, the result would be that the Company is in a negative equity position.
The Company has not received any binding offers of construction finance for the Project.
Mr Ning gave evidence that other entities related to Rudder Development have previously been able to obtain finance, or offers of finance, in respect of other developments, supported by personal guarantees from Mr Ning and Mr Li.
However, this evidence does not take matters very far, given that those developments were of different types and scale, and the Company did not advance any evidence or submissions regarding the financial position of the entities which obtained finance, or the overall net asset position of what was described as the Rudder Group of companies, and the extent of any available equity in properties owned by entities within the group.
Further, while Mr Ning deposed that he “planned” to provide a personal guarantee for the further financing of the Project, there was no similar evidence from Mr Li.
In any case, there was no documentary evidence of Mr Ning’s or Mr Li’s financial capacity to fund, or guarantee the funding of, any future development costs.
There was a one-page spreadsheet which contained assertions by Mr Ning regarding his asset position. However, given that this spreadsheet provided generalised description of assets with what appeared to be “ballpark” values (such as “Shares $1,000,000” and “Cheque Account $1,000,000”), and given that the entries in the spreadsheet were unsupported by any documentary evidence, I am unable to give this spreadsheet any weight.
Mr Ning referred in his affidavit to a letter sent by ANZ on 15 June 2023 which was marked “without prejudice”. This letter, which was addressed to Mr Ning and Mr Li, referred to a conversation on the previous day “regarding the englobo land loans” in respect of various sites, including No. 46 and No. 48. The letter stated that ANZ “may be able to assist with land loans up to a 60% LVR [loan to value ratio] post DA approval” (emphasis in original).
This letter, sent three years ago in relation to a discussion (of unknown content) about “englobo land loans”, does not provide any basis for concluding that the Company would be able to obtain construction finance for the Project.
Even if the letter were interpreted as indicting that ANZ “may be able to assist” with financing up to 60% of the value of the proposed development as if complete (that is, 60% of $24m, or around $14.4m), this would not be sufficient for the Company’s purposes. That is because there are already other secured debts of around $6.25m (being the La Trobe Loan and the BC Invest Loan), leaving less than $8.2m headroom up to a 60% LVR, in circumstances where construction costs (including GST) will likely be more than double that amount (as outlined at paragraph [48] above).
Finally, Mr Ning referred to the fact that the Company had recently engaged a finance broker to seek funding for the construction of the Project. However, the fact that funding is being sought does not lead to a conclusion that it will likely be obtained.
The retainer letter for the broker states that:
the amount of the facility being sought is $28,022,727 (on the basis that such facility will not only cover the costs of construction and related professional fees, but will also involve a refinance of the land); and
the proposed LVR is “75% of as if complete ex GST only”.
On the available evidence, there is no basis to conclude that it would be possible to obtain a facility on such terms. Any financier would seek a valuation of the “as if complete” development, and the only expert valuation evidence before the Court is that the current value of the “as if complete” development is $22,636,364.00 excl GST. The amount of the facility being sought ($28.02m) would represent an LVR of nearly 125%.
Having regard to those matters, I accept the Plaintiffs’ submission that there is no commercially realistic possibility of the Company obtaining external finance for the proposed development.
There is no reason, given the commercial unviability of the Project, to expect that a related party, such as an (unidentified) entity within the Rudder Group, would be willing to commit to providing the finance necessary to complete the Project.
There is no evidence of any offer from a related entity, let alone binding commitment, to provide such finance.
I acknowledge that there is evidence from Mr Ning that Rudder Development has previously provided substantial funds to the Company and paid various expenses on behalf of the Company. Mr Ning calculates the total contribution of Rudder Development to date as being around $2.21m.
However, there is no evidence of the ability of Rudder Development – or any (unidentified) entity or entities within the Rudder Group – to provide the necessary finance to complete the Project, which will vastly exceed the sums paid to date.
The Company did not refer the Court to any evidence, or advance any submissions, regarding the value of any assets held by Rudder Development or any related entities, the extent of their liabilities, or the extent of equity available in any property held by any entity within the Rudder Group.
Given that the Company is controlled by the two persons who control the Rudder Group – Mr Ning and Mr Li – the Company could readily have led evidence as to those matters. In circumstances where the Company has chosen not to do so, without any explanation, the Court will not draw inferences favourable to the Company in respect of those matters: Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418 (Handley JA).
For those reasons, there is no basis to conclude that there is any commercially realistic possibility of the Company obtaining the necessary finance to complete the Project from a related party.
While the Plaintiffs do not seek an order that the Company be wound up in insolvency pursuant to s 459B of the Corporations Act, the question of insolvency is relevant to their application for a winding up order under s 461(1)(k). In particular, where there is good reason to believe that a company is either cash flow insolvent or balance sheet insolvent, whether or not the formal elements of s 459A of the Corporations Act have been satisfied, such circumstances can be taken into account under the just and equitable ground as one of the factors to consider: Australian Securities and Investments Commission v Bilkurra Investments Pty Ltd [2016] FCA 371 at [58] (Beach J); Australian Securities and Investments Commission v CME Capital Australia Pty Ltd (No 2) [2016] FCA 544 at [21] (Moshinsky J).
Section 95A of the Corporations Act provides that a company is solvent if, and only if, it is able to pay all its debts as and when they become due and payable; and a company that is not solvent is insolvent.
The test in s 95A “is directed to a present inability to pay all debts as and when they become due and payable, including debts that will become payable in the immediate future”: Anchorage Capital Master Offshore Ltd v Sparkes [2023] NSWCA 88 at [235] (Ward P, Brereton JA, Griffiths AJA) (emphasis in original). The “correct question is whether, at the date of alleged insolvency, it can be said that the company is already in a state of inability to pay those debts when they fall due”: ibid at [245].
The definition in s 95A(2) adopts a “cash flow test” of insolvency, which turns upon the income sources available to the company and the expenditure obligations which it has to meet, rather than a balance sheet test which focuses upon the value of the company’s assets and liabilities as reflected in the company’s books. However, a balance sheet test can provide context for the application of the cash flow test: In the matter of Custom Bus Australia Pty Ltd (in liq) [2021] NSWSC 1036 at [33] (Black J) and the cases there cited.
Whether a company is able to pay its debts as and when they fall due and payable is a question of fact to be determined objectively and without hindsight in all the circumstances, including the nature of the company’s assets and business, and the Court will have regard to commercial realities in that regard: Custom Bus Australia at [34].
In assessing a company’s capacity to pay its debts, the Court should have regard to all of the assets of the company as at the relevant time in order to determine the extent to which those assets are liquid or realisable within a timeframe that would allow each of the debts to be paid as and when they become due. Apart from an assessment of the company’s own assets, regard can also properly be had to funds which the company can borrow, on a secured or unsecured basis, or otherwise obtain from lenders or shareholders and which were, as a matter of commercial reality, available to the company to enable its debts to be paid. The case law recognises that, in determining a company’s solvency, the Court may have regard to the likelihood that it will have funds available to it from sources with which it has no formalised agreement or understanding, including loans from its directors or from third parties, at least if they are not repayable in the short term: Custom Bus Australia at [35].
In order for financial support from a related financial entity to be relevant to the question of a company’s solvency, there is a need for cogent evidence establishing a degree of commitment from the related entity to the continuance of financial support for the company: Treloar Constructions Pty Ltd v McMillan (2017) 120 ACSR 130; [2017] NSWCA 72 at [142] (Beazley P, Gleeson JA and Emmett AJA), citing the observations of Morrison JA (with whom Gotterson JA and Boddice J agreed) in Chan v First Strategic Development Corporation Ltd (in liq) [2015] QCA 28 at [44].
In Australian Securities and Investments Commission v Edwards (2005) 220 ALR 148; [2005] NSWSC 831 at [99], Barrett J observed that “availability of loan funds for a very short term or payable on demand, as a source from which debts overdue may be paid, does not enhance solvency: it merely substitutes one form of immediate (or near immediate) obligation for another”. Those observations were accepted and applied on the appeal from his Honour’s decision: Edwards v Australian Securities and Investments Commission (2009) 264 ALR 723; [2009] NSWCA 424 at [163] per Macfarlan JA (Spigelman CJ and Campbell JA agreeing).
The test of insolvency is prospective, such that it is necessary to consider not only whether the company can pay debts falling due at or around the date the question arises, but also whether, as at that date, it can pay debts falling due in the future: Anchorage Capital at [244]. How far into the future the Court should look is a question to be answered having regard to the particular facts of the case. Normally, a court will not look far into the future “because there are so many unknowns and contingencies, though sometimes it may be appropriate to do so”: ibid.
In Custom Bus Australia at [36], Black J noted that although each case is to be decided on its own facts, insolvent companies tend to share common symptoms of financial stress, which include those identified in Australian Securities and Investments Commission v Plymin (2003) 46 ACSR 126; [2003] VSC 123 at [386] (Mandie J), namely:
continuing losses;
liquidity ratios below 1;
overdue Commonwealth and State taxes;
a poor relationship with the lenders, including any inability to borrow further funds;
no access to alternative finance;
an inability to raise further equity capital;
suppliers placing a company on cash on delivery arrangements, or otherwise demanding special payments before resuming supply;
creditors unpaid outside trading terms;
the issuing of post-dated cheques;
dishonoured cheques;
special arrangements with selected creditors;
solicitors’ letters, summonses, judgments or warrants issued against the company;
payments to creditors of rounded sums which are not reconcilable to specific invoices; and
an inability to produce timely and accurate financial information to display the company’s trading performance and financial position, and make reliable forecasts.
The Plaintiffs led expert evidence from Ms Karam on the question of insolvency.
Ms Karam applied the cash flow test of solvency, considering:
the cash resources available to the Company (including cash at bank, debtors, financial support from related parties, and funds available from assets that could be sold in the short term or utilised to raise funds) against the debts that are due and payable by the Company;
the ratio of the Company’s current assets to its current liabilities; and
the Company’s working capital position.
In forming her opinions, Ms Karam relied on the opinions of Mr Whyte regarding the time and cost required to complete the development, and the opinions of Mr Field regarding the “as is” and “as if completed” value of the Properties.
Ms Karam concluded that the Company is insolvent, having regard to the following matters:
first, the Company’s income (from rent and interest) is insufficient to discharge its holding costs, with there being a shortfall of around $570,000 per annum;
secondly, available funding from the La Trobe Loan, the BC Invest Loan and the Plaintiffs’ $5m advance was fully utilised by the end of FY2024;
thirdly, the Company’s current liabilities relate principally to the management fees owing to Rudder Development which, based on the terms of the Services Agreement, appear to be due and payable;
fourthly, the Company appears to have been relying, since FY2025, on related party funding to meet holding costs and development costs, with the result that the debt to Rudder Development will have increased and the net asset position will have accordingly deteriorated; and
fifthly, there is insufficient evidence to conclude that any entities in the Rudder Group have sufficient cash or other assets to meet existing debts of the Company and the debts that the Company proposes to incur. For example, there is no evidence to indicate that Rudder Development can or will discharge any shortfall upon completion of the Project, including the $5m debt owed to the Plaintiffs or any future income tax liability in circumstances where the Project realises insufficient funds to discharge the total Project costs.
Ms Karam also considered the balance sheet test of solvency and concluded that the Company had a net asset deficiency of:
$309,851 as at the end of FY2023;
$749,104 as at the end of FY2024; and
$1,317,554 as at the end of FY2025 (after removing the unexplained and unjustified “valuation uplift” in the draft and unaudited FY2025 accounts: see paragraph [97] above).
In addition, Ms Karam calculated that, once the fees payable to Rudder Development are taken into account, the Company had, in FY2024, a liquidity ratio of 0.02 and a working capital shortfall of $2.037m and, in FY2025, a liquidity ratio of 0.05 and a working capital shortfall of $1.536m.
Ms Karam stated that she did not regard the balance sheet test as being conclusive on its own, but instead as providing context for the cash flow test when considering the Company’s solvency.
Based on her analysis of the Company’s financial information, Ms Karam concluded that:
there has been a consistent “cashflow funding gap in terms of holding costs” (prior to any consideration of development and construction costs);
all “known and available sources of funding appear to have been exhausted”; and
the Company “may be relying on additional interim borrowings to discharge ongoing and development costs”, with such borrowings “increas[ing] the net asset deficiency and impact[ing] the overall project feasibility”.
In addition, Ms Karam concluded – based on the information in the reports of Mr Whyte and Mr Field (and consistently with the analysis in paragraphs [88]-[95] above) – that the Project is “commercially unviable”, and that allowing the Project to proceed to completion “would only increase the net asset deficiency (including the debt to creditors) and crystallise the forecast loss to be incurred by the Company”.
The Company did not lead any expert evidence in response to Ms Karam’s report. However, Senior Counsel for the Company did cross-examine Ms Karam at some length, and the Company submitted that her opinion was “fundamentally flawed and should not be accepted”, for five main reasons.
First, Ms Karam’s conclusion that the Project was not economically viable was based on the opinions of Mr Whyte and Mr Field, which the Company submitted should be given no weight. For reasons given above when dealing with the reports of Mr Whyte and Mr Field, I reject this submission.
Secondly, Ms Karam accepted in cross-examination that, apart from any amounts owing to Rudder Development, the Company had, to date, paid all its debts as and when they fell due, and this concession was said to be “inconsistent with any finding that the Company is unable to pay debts as and when they fall due”. I do not accept this submission. The test of insolvency is prospective. Ms Karam acknowledged in her report that the Company’s liabilities (other than to Rudder Development) had been met to date, but her analysis showed that there was a significant funding gap between the Company’s income and holding costs; that the Company had exhausted its available external finance; that the Company appeared to be meeting its liabilities from related party borrowings (which was, in turn, increasing the Company’s net asset deficiency); and that there was no basis to conclude that there would be sufficient related party funding to meet future liabilities as and when they fall due.
Thirdly, the Company submitted that:
Ms Karam’s analysis of the liquidity ratio was “heavily if not entirely dependent upon treating the Rudder [D]evelopment fees as presently payable debts”, with Ms Karam conceding that, if those fees were excluded, the liquidity ratio was no longer below 1; and
Ms Karam’s premise for treating the Rudder Development fees in this way – namely, that they were payable on demand – could not stand with her evidence that she understood that the Company and Rudder Development had the same directors, that Rudder Development had not made any demand for payment of its fees, and that Rudder Development had been instructed not to issue further invoices.
I do not accept that these matters undermine Ms Karam’s analysis. Pursuant to the terms of the Services Agreement, the management fees which have accrued to date are due and payable. Specifically, cl 9.1 provides that the management fees are “payable monthly in advance”. There is no requirement in the Services Agreement for an invoice to be issued before those fees become due and payable. While Rudder Development has not made a demand for payment of the fees which have accrued and are outstanding, this is presumably due to the fact that Mr Ning and Mr Li are aware that, by reason of the Company’s financial position, the Company has no means of making those payments. In simple terms, the Company could not pay Rudder Development unless Rudder Development provided it with the funds to do so. Rudder Development has not given any undertaking not to make a demand for those amounts.
Further, by reason of the continuing accrual of those fees on a monthly basis, the liabilities of the Company are increasing, and its negative net asset position is deteriorating. While the Company may presently be able to continue to operate due to the forbearance and funding of Rudder Development, there is no basis to conclude that Rudder Development or any other related entity has the ability to continue to fund the Company, given the substantial liabilities that it would need to incur in order to undertake the Project over the next two years.
Fourthly, the Company submitted that Ms Karam, in cross-examination, “abandoned much of her own analytical framework with respect to the indicia of insolvency”. This submission overstates the position. Ms Karam gave limited concessions in respect of a number of the factors which she considered. In particular:
as regards an “inability to raise further equity capital”, Ms Karam acknowledged that she did not know, as a matter of fact, whether Rudder Development or its directors were prepared to provide further funds to the Company, but presumed that “they won’t fund a loss-making company”;
as regards an “inability to produce timely and accurate financial information”, Ms Karam said that she had marked this factor as “present” because of the absence of any reconciliation of accounts between the Company and Rudder Development, but acknowledged that she did not know whether this was because the Company was “unable” to do so (and therefore accepted that this factor should be marked “not known”); and
as regards any “creditors unpaid”, Ms Karam accepted that she had marked this factor as present based on the fact that the Rudder Development fees had not been paid, although they were contractually due (which, as noted above, is correct).
In any case, the “indicia” of insolvency are only symptoms of financial stress. The test for insolvency remains the cash flow test.
Fifthly, the Company submitted that Ms Karam’s opinion that the Company was insolvent depended on her conclusion that the Project was not commercially viable, because the sale of the completed development would not cover the costs of the Project. The Company submitted that such an approach was at odds with the observations made by Ball J (as his Honour then was) in Anchorage Capital Master Offshore Ltd v Sparkes (No 3) [2021] NSWSC 1025. In particular, his Honour there said (at [266]) that, in order to reach a conclusion that a company was insolvent as at a particular date, by reason of its inability to pay debts falling due at a future point in time, there “needs to be a high degree of certainty that that state of affairs would come about on the basis of the facts known or knowable at the earlier date”.
I do not accept that Ms Karam’s opinion as to insolvency was dependent on her conclusion that the proceeds of sale of the completed development would not cover the costs of the development. Instead, this was one of the factors, along with various other matters, which she took into account in reaching her opinion (as set out in paragraphs [128]-[135] above). The fundamental issue which Ms Karam identified was that, even before considering construction costs or further development costs, the Company has exhausted its existing funding and has a shortfall of around $570,000 between its annual income and its annual holding costs, which it cannot meet unless it can obtain further financing (and there is no evidence to support the conclusion that it is able to do so).
For reasons set out above, I am satisfied that the Plaintiffs have established, on the balance of probabilities, that the Project is commercially unviable and that, even if the Company were able to obtain the necessary finance to complete the Project (which is not a realistic possibility), the Project would make a significant loss. At the same time, I accept that there is a degree of uncertainty as to those matters. In particular, there is a degree of uncertainty regarding both the future value of the completed development and the quantum of construction costs.
However, that is not critical for the present application. That is because the Plaintiffs have not brought an application to wind up the Company in insolvency, but instead an application on the just and equitable ground. Having regard to the matters set out above, I am satisfied that there is at least good reason to believe that the Company is cash flow insolvent and balance sheet insolvent, even if the evidence would not be sufficient to establish a basis for winding up the Company in insolvency.
The contentions raised by the Plaintiffs as justifying a winding up on the just and equitable ground fall into two main categories (which are, to some extent, overlapping).
The first category relates to the financial position of the Company and the unviability of the Project. The Plaintiffs submitted that:
the sole purpose of the Company cannot be achieved, because the Project is unprofitable and unviable;
the Company is likely insolvent, and there is a risk to future creditors and a risk of ongoing insolvent trading if the Company continues to trade and steps are taken to incur significant further liabilities; and
prolonging the Project will only serve to further erode any remaining equity in the Company and further prejudice the Plaintiffs’ ability to recover any of their $5m loan to the Company.
The second category relates to the management of the Company. The Plaintiffs submitted that:
Mr Ning and Mr Li are in a position of conflict by reason of being directors of both the Company and Rudder Development, which “continues to gouge exorbitant ‘management’ fees” from the Company for the Project;
there has been a breakdown in the relationship, and there is a lack of trust, between, on the one hand, Mr Shu and, on the other, Mr Ning and Mr Li; and
it is in the interests of all stakeholders that a liquidator be appointed to investigate the affairs of the Company.
The Company accepted that the second category of contentions was pleaded, but disputed that any issue was raised on the Points of Claim (POC) regarding the commercial viability of the Project. The Company submitted that, instead, the POC raised issues regarding the slow progress of the Project to date, which was said to give rise to a concern that the Project was unable to be completed within a reasonable period of time.
I accept that the POC did make a number of allegations about delay – such as the delay in commencing demolition work and the failure to lodge the Stage 2 DA – and that these allegations did not feature prominently in the Plaintiffs’ case at the hearing (which is unsurprising given that, by the time of the hearing, the Stage 2 DA had been lodged).
However, the POC pleaded not only that the Company was unable to complete the Project “within a reasonable period of time”, but also that the Company was unable to complete the Project “at all” (POC [3] bis). The allegation that the Company was unable to complete the Project “at all” was an allegation about the viability or feasibility of the Project. In this regard, the Plaintiffs pleaded that:
the Company’s balance sheets record a net deficiency of assets against liabilities and limited current assets, and the Company does not have any reliable and dependable source of income (POC [30]-[34]);
at all times since the Company completed the purchase of the Properties, it has not had either:
(a) a budget or cash forecast for the completion of the Project (POC [35]); or (b) any arrangements to finance the obtaining of further planning approval, the construction and completion of the Project, and the subsequent marketing of the completed dwellings (POC [36]);
the Company has neither identified nor secured a builder for the construction of the Project (POC [25]); and
the Company does not have the financial resources or means to finance the completion of the works contemplated by the Concept Development Consent and the further construction necessary to complete the Project (POC [1] bis).
Accordingly, the Plaintiffs’ pleading does raise issues as to whether there is any realistic prospect of the Company being able to fund, or obtain finance for, the construction of the Project. For reasons I have explained above, I consider that the question of the commercial viability of the Project is intrinsically tied to that issue. In particular, there is no realistic prospect of the Company being able to obtain finance for a development project either in circumstances where the Project is likely to make a very large loss, or in circumstances where the level of finance required would result in an LVR significantly in excess of 100% of the “as if complete” value of the development.
For those reasons, I reject the Company’s submission that the Plaintiffs’ contentions concerning the commercial viability of the Project do not arise on the pleading.
The Company is a special purpose vehicle, which was created solely for the purpose of acquiring the Properties, subdividing the Properties into four lots, constructing a house on each of the four lots, selling the completed houses, and sharing the profits between the Company’s shareholders (see paragraph [12] above).
For reasons given above, the Plaintiffs have established that there is no realistic possibility of the Company obtaining the finance necessary to complete the Project, which is commercially unviable.
The Plaintiffs submitted that, in those circumstances, the sole purpose or substratum of the Company cannot be achieved and that the Court would therefore be satisfied that it is just and equitable that the Company be wound up.
In this regard, the Plaintiffs referred to authorities such as:
CNPR at [9], where Black J observed that it may be appropriate to wind a company up on the just and equitable ground “where it is impossible to carry on the company’s business because the ‘substratum of the company’ has failed or, in other words, it has become impossible for the company to achieve the purpose for which it was formed”; and
MF Lady Pty Ltd (Trustee) v Henry Morgan Ltd [2022] FCA 978 at [48], where Jackson J observed that there are many cases where there has been held to be a failure of substratum even though fulfilment of the company’s original purpose is not impossible, provided that “something fundamental to the company’s business has fallen away”.
Cases regarding the failure of the substratum of a company generally arise where a company is engaging in acts which are “entirely outside what can fairly be regarded as having been within the general intention and common understanding of the members when they became members”: see Re Tivoli Freeholds Ltd [1972] VR 445 at 468 (Menhennitt J). A common theme in the case law is that a shareholder, who has invested in a company on the basis that it will undertake a certain activity, is entitled to recover their contribution if the activity becomes impossible, or if the company has departed from the basis on which that shareholder advanced its contribution: Catombal Investments at [22].
This is not such a case. The Company has not departed from the basis on which the Plaintiffs advanced their contribution. Instead, as matters currently stand, the Company is continuing to pursue the development of the Properties, having lodged the Stage 2 DA only shortly before the hearing. The Plaintiffs’ complaint is not that the Company is engaging in acts entirely outside the purpose for which it was formed, but instead that – despite the Company attempting to pursue the purpose for which it was formed – the Company has no realistic prospect of achieving that purpose.
I do not therefore consider that this is a case involving the failure of the substratum of the Company. However, I do accept the Plaintiffs’ submission that, having regard both to the lack of any realistic prospect of obtaining the finance necessary to complete the Project and to the commercial unviability of the Project:
there is at least good reason to believe that the Company is cash flow insolvent and balance sheet insolvent ;
there is a significant risk of insolvent trading and a risk to future creditors if the Company continues to pursue the development and incurs further substantial liabilities by taking steps such as engaging builders or consultants; and
the continued pursuit of the Project, in circumstances where there is no realistic prospect of its completion, let alone its profitable completion, will serve to further erode any remaining equity in the Company and will prejudice the Plaintiffs’ ability to recover any part of their $5m loan.
Those matters in turn give rise to a lack of confidence in the conduct of the affairs of the Company and a risk to the public interest that warrants protection. For those reasons, I am satisfied that it is just and equitable that the Company be wound up.
“It may be accepted that the existence of irreconcilable differences amongst persons involved in what is, in effect, a partnership, will destroy the personal relationship involving mutual confidence, that lies at the heart of the partnership analogy. This analogy has been applied both to applications for winding up on the just and equitable ground and also to oppression suits. … Irreconcilable differences may establish a basis for winding up, they do not of themselves constitute oppression or unfair prejudice. …
There will be circumstances in which the emergence of irreconcilable differences will cause the court to conclude that an understanding or expectation as to participation in management should be taken to have ceased, in a manner not entitling the person excluded from such participation to relief under the statutory provisions. That would be so where the Court decides that it is the person excluded who is responsible for the breakdown in the relationship.”
“Winding up is the characteristic remedy in circumstances where a working relationship predicated on mutual co-operation, trust and confidence has broken down, whether resulting in deadlock or otherwise. Equity would not ordinarily order the continuation of such an association where it would be a futility, would require continuing supervision or would be tantamount to specific enforcement of a contract of personal services.”
A breakdown or loss of confidence between directors and shareholders does not necessarily provide a sufficient foundation for winding up on the just and equitable ground. It is generally necessary to show that the breakdown is of such a nature and degree that it materially frustrates the commercially viable and sensible operations of the company in accordance with the shareholders’ expectations, that the loss of confidence is justified, and that there is a restriction on the transferability of the shares of the party seeking to wind up the company: In the matter of L&B Seafood Pty Ltd [2022] NSWSC 100 at [148] (Henry J); Haycraft v AF**1 Services Pty Ltd (2023) 168 ACSR 489; [2023] FCA 774 at [75] (Stewart J).
In Mir v Mir [2023] NSWSC 408 at [107], Ball J (as his Honour then was) observed that, where winding up is sought on the basis of a breakdown in the relationship between opposing camps of shareholders, what is critical is “not simply that there has been a breakdown in the relationship”, but instead that “[t]he breakdown must result in such a departure from the basis on which the company was formed or operated so as to make it just and equitable that the company be wound up”. In this regard, his Honour quoted the following observations of Brereton J in Catombal Investments at [22] (emphasis added):
“… a shareholder who has invested in a company on the basis of mutual understandings and arrangements as to how the affairs of the company will be managed is entitled to recover his or her contribution if these understandings and arrangements are falsified — for example, by exclusion of a shareholder who was intended originally to be involved in management from management [Ebrahimi]. On the other hand, it is not enough merely that the majority has lost trust and confidence in the minority, or vice versa.”
The Plaintiffs contended that there had been a breakdown in the relationship, and there was a lack of trust, between Mr Shu (who controls the Plaintiffs) and Mr Ning and Mr Li (who control the remaining shareholders of the Company). This was said to have arisen as a result of the failure of Mr Ning and Mr Li to disclose the Company’s entrance into the Services Agreement to Mr Shu, and the delays in the Project.
While I accept that these matters have caused Mr Shu to lose trust and confidence in Mr Ning and Li, I do not accept that this breakdown in the relationship between the persons controlling the various shareholders of the Company provides, of itself, a sufficient basis to conclude that it is just and equitable that the Company be wound up.
This is not a case where the Company is a quasi-partnership, or where there was an understanding or expectation that the Plaintiffs (or Mr Shu) would have an ongoing role in the management of the Company. Instead, the arrangement between Mr Shu, Mr Ning and Mr Li was that the Plaintiffs would be 40% shareholders, with the other 60% of shares being held by Mr Ning and Mr Li, and that Mr Ning and Mr Li would be the directors of the Company. Mr Shu has not at any time sought to have a role in the management of the Company or the Project. He has left those matters to Mr Ning and Mr Li. Accordingly, any breakdown in trust and confidence between Mr Shu and the directors is not of such a nature and degree as to materially frustrate the operations of the Company in accordance with the shareholders’ expectations.
Although the Plaintiffs asserted that Mr Ning and Mr Li were in a position of conflict as regards the fees charged by Rudder Development to the Company (by reason of being directors of each entity), the Plaintiffs did not, in closing written submissions, advance any allegation that Mr Ning or Mr Li had breached their duties as directors. Instead, they contended that the evidence before the Court “gives rise to a clear and obvious concern that Messrs Ning and Li have caused the Company to prefer the interests of themselves and Rudder Development to that of the Company”, and submitted that “there is sufficient concern with the nature of the Services Agreement and the quantum of the service payments to which Rudder Development is now entitled (and will be entitled as time ticks by) that the matter merits further investigation by an independent liquidator of the Company”.
The position was put as follows by Senior Counsel for the Plaintiffs in closing address:
“HIS HONOUR: What do you ask me to find about the Rudder arrangements, if I put it that way? There [were] various questions asked, but you’re not asking me to find that there has been a benefit obtained in a position of conflict.
ZAHRA: At the highest, I would ask your Honour to find that there are difficulties created by the fact that the two directors are the directors of both companies and managing both companies.
HIS HONOUR: But are you saying that that gives rise to, in terms of the authorities, a lack of confidence in the management?
ZAHRA: Yes, that’s one of the matters, yes. It’s a matter that a liquidator can properly investigate.”
I would not have concluded that the issues raised by the Plaintiffs regarding the Services Agreement and the accrued fees payable to Rudder Development are, of themselves, sufficient to give rise to a lack of confidence in the management of the Company such that it is just and equitable that the Company be wound up. Nor would I have been concluded that a liquidator should be appointed for the purpose of investigating those matters.
However, in circumstances where I have determined, for other reasons, that it is just and equitable that the Company be wound up, the arrangements between Rudder Development and the Company, and payments moving between those two entities, are matters which the liquidators will have power to investigate, should they consider it appropriate to do so.
The same applies in relation to the concerns expressed by the Plaintiffs regarding the Company’s record-keeping. Those concerns would not be sufficient of themselves to lead to the conclusion that it is just and equitable that the Company be wound up, but the state of the records is plainly a matter that will be the subject of investigation by the liquidators following their appointment.
Section 467(4) of the Corporations Act provides that where the winding-up application is made by members as contributories on the ground that it is just and equitable or that the directors have acted in a manner that appears to be unfair or unjust to other members, the Court must, if satisfied that the applicants are entitled to the relief sought, make the order unless it is of the opinion that some other remedy is available to those members and that they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy.
In Asia Pacific Joint Mining Pty Ltd v Allways Resources Holdings Pty Ltd [2018] 3 Qd R 520; [2018] QCA 48 at [47], McMurdo JA (with whom Gotterson JA and Jackson J agreed) observed that:
“The evident purpose of the proviso in s 467(4) is to avoid the extreme step of a winding up if there is an alternative and adequate remedy. Consequently a winding up will be ordered if there is no other remedy which is adequate, in that it would redress the consequences of the facts and circumstances which are the basis for relief. This is another way of saying what McPherson J said in Re Dalkeith Investments Pty Ltd about the statutory predecessor of s 467(4) namely ‘that winding up is to be regarded as a remedy of last resort and which ought not to be granted if some other less drastic form of relief is available and appropriate.’ In referring to a winding up as ‘drastic form of relief’, McPherson J was referring to the far reaching consequences of a winding up. In referring to an alternative form of relief which was ‘appropriate’, his Honour was referring to what was necessary, in the interests of the applicant, to redress the consequences of the relevant events and circumstances.”
The Company submitted that this was “a case in which other remedies may be available”, such as a “buy-out”, but that the Plaintiffs had not “pursued” any such remedy.
This submission ignores that, by a letter dated 23 April 2026, the Plaintiffs made the following open offer:
“… we are instructed to offer that our clients be paid $5,500,000 in consideration for:
a. the discharge of the $5,000,000 loan [made by the Plaintiffs]; and
b. the buyback of the [Plaintiffs’] shares by [the Company] or the sale of their 40% shareholding in [the Company] to a nominated party,
upon which the proceedings will be dismissed with no order as to costs.”
The Company did not provide any response to this offer.
No buy-out offer has been made to the Plaintiffs by Mr Ning and/or Mr Li.
In those circumstances, I am not satisfied that there is any alternative remedy available to the Plaintiffs.
The Company further submitted that the Plaintiffs were acting unreasonably in pursuing the winding up application, for two main reasons.
First, the Company submitted that, having failed in the proceedings before Peden J to obtain repayment of their $5m advance, the Plaintiffs were seeking to “outflank” that result and achieve the same outcome by applying to wind up the Company.
Importantly, the Company did not advance any contention that the present proceeding was an abuse of process.
The question before Peden J was a narrow one regarding the time at which repayment of the Plaintiffs’ advance was due. Paragraph 1 of her Honour’s judgment describes this question of timing as the “single issue” in that proceeding.
The Plaintiffs do not, in this proceeding, seek to “outflank” the findings made by Peden J in respect of this issue. Instead, the Plaintiffs have pleaded the terms of the December 2021 Agreement in a manner consistent with her Honour’s findings – namely, that repayment of the $5m loan would occur only “upon the completion of the Project when the sale of the four homes are completed” (SOC [9(d)]).
Secondly, the Company submitted that it was unreasonable for the Plaintiffs to pursue a winding up application in circumstances where the Plaintiffs will (based on Mr Field’s “as is” valuation of the Properties) receive an amount of only around $1m in a winding up, but – if the Project proceeds to completion – “the Plaintiffs retain the prospect of achieving a better outcome”.
The contention that the Plaintiffs would receive around $1m depended on the assumption that, following the repayment of the La Trobe Loan and BC Invest Loan from the net sale proceeds, the balance of around $2.55m would be split between the creditors, with the major creditors being the Plaintiffs (for $5m) and Rudder Development (for a total amount, including service fees, of around $4m).
However, even accepting that was the case (and putting aside any issues which might be investigated in a liquidation in relation to the service fees), the Company has not led evidence to establish that there is a realistic prospect of any return to the Plaintiffs in the event that the Project is completed. Instead, as I have explained at paragraphs [88]-[95] above, the evidence supports the conclusion that the Project is unfeasible and, even it were able to be completed, would likely result in a very substantial loss, such that the Plaintiffs would likely not receive any repayment in respect of their advance.
As noted above, the Company did not tender any current budget or feasibility analysis in respect of the Project and did not, in its submissions, advance any analysis of the available evidence with a view to demonstrating that the Project is commercially viable. In closing address, Senior Counsel for the Company submitted that the Court should nonetheless infer that Mr Ning had performed some (internal) calculation to determine that it remained commercially worthwhile to pursue the Project:
“HIS HONOUR: … wouldn’t I infer that normally an experienced developer would have some evolving sense at any given point in time of what the costs would be, what [the development will] be realised for and what the bottom line’s looking like and they’d be keeping an eye on that and seeing how it’s changing over time, some budget that evolves?
WEINBERGER: Your Honour, in the real world, it might not operate that way. A lot of these statistics and data [are] often kept in the developer’s mind.
HIS HONOUR: But Mr Ning didn’t say that. He didn’t say, ‘I never put down budgets’, or, ‘I just do all the sums in my head’.
WEINBERGER: His evidence was silent one way or the other, but your Honour would infer, as your Honour knows about the various developments, Mr Ning was taken to it. Whether he prepares his feasibility studies on the back of an envelope or in his head or using an Excel spreadsheet, clearly, he’s sufficiently sophisticated to know whether a development is worthwhile proceeding with or not.”
While Mr Ning may subjectively be of the view that it remains commercially worthwhile to pursue the Project, I would not draw any inference that this view is based on any analysis of the Project’s current and anticipated costs, in circumstances where Mr Ning did not give any evidence to that effect.
In any case, I would not infer – based on any unarticulated internal analysis by Mr Ning – that there is any realistic possibility of the completion of the Project resulting in a better return for the Plaintiffs than the winding up of the Company. Nor could it be said, having regard to the expert evidence led by the Plaintiffs regarding the costs of construction, the value of the completed development, and the commercial viability of the Project, that the Plaintiffs are behaving unreasonably in pursuing a winding up application.
Having regard to those matters, I reject the Defendants’ submission that there are alternative remedies available to the Plaintiffs and that they are acting unreasonably in pursuing a winding up order.
For the reasons set out above, I am satisfied that it is just and equitable that the Company be wound up.
Ms Jialan Xu and Mr Michael Gerard McCann of Grant Thornton Australia have provided their consent to act, and will be appointed as the joint and several liquidators of the Company.
The Plaintiffs are entitled to their costs of the proceeding. They sought an order, which I will make, that their costs, as agreed or assessed, be costs in the winding up and reimbursed in accordance with s 466(2) of the Corporations Act.
Accordingly, I make the following orders:
Order, pursuant to s 461(1)(k) of the Corporations Act 2001 (Cth), that the Defendant be wound up on the ground that the Court is of the opinion that it is just and equitable that it be wound up.
Order that Jialan Xu of Grant Thornton Australia, Grosvenor Place, Level 26, 225 George Street, Sydney NSW 2000, and Michael Gerard McCann of King George Central, Level 18, 145 Ann Street, Brisbane QLD 4000, registered liquidators, be appointed as the joint and several liquidators of the Defendant.
The Plaintiffs’ costs of the proceeding (as agreed or assessed) be costs in the winding up and reimbursed in accordance with s 466(2) of the Corporations Act 2001 (Cth).
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(2005) 220 ALR 148
(2009) 264 ALR 723
(1991) 22 NSWLR 389