Taringa Property Group Pty Ltd v Kenik Pty Ltd [2025] QSC 222

Rostron Carlyle Rojas Lawyers for the first defendant

• [1] The first and second plaintiffs apply for leave to proceed against the first defendant pursuant to s 471B of the Corporations Act 2001 (Cth) (Corporations Act). The liquidators of the first defendant oppose the granting of leave.
• [2] The issue to be determined is whether it is appropriate to grant leave to the first and second plaintiffs to proceed against the first defendant in this proceeding.
• [3] The plaintiffs contend that there is sufficient merit in this proceeding to justify the grant of leave and that there are good reasons why they should not be left to pursue their claims by way of a proof of debt. They further submit that this proceeding will finally determine the rights and obligations of the first defendant under the contract the subject of the dispute and will enable the monies paid into Court to be dealt with, including the claims in respect of the subcontractors' charges and a payment withholding request.
• [4] The first defendant contends that the plaintiffs' claims can be dealt with by the proof of debt process. Further, they submit that a grant of leave would result in significant prejudice to other creditors which far outweighs any factors that may favour the grant of leave.
• [5] It is relevant to consider the factual background to the application before considering the various factors relevant to the exercise of the Court's discretion.

• [6] On 3 August 2020, the first plaintiff and the first defendant entered into a written agreement for the first defendant to design and construct a Coles supermarket and Liquorland store at 222 Moggill Road Taringa (the Contract).
• [7] On 29 August 2023, the first plaintiff terminated the Contract.
• [8] On 26 October 2023, the first defendant made an adjudication application pursuant to the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (the BIF Act) seeking a progress payment of $9,689,767.44 including GST, being the amount the first defendant claimed under the Contract which the first plaintiff had refused to pay.
• [9] On 15 February 2024, the first defendant obtained an adjudication decision that determined that the first defendant was entitled to a progress payment of $4,218,787.02 including GST from the first plaintiff (Adjudication Decision).
• [10] On 21 February 2024, the first defendant obtained judgment in respect of the adjudicated amount of $4,218,787.02 (Judgment).[1]
• [11] On 23 February 2024, the first plaintiff filed an originating application in the Supreme Court challenging the Adjudication Decision and seeking a stay of enforcement of the Judgment.[2]
• [12] On 4 March 2024, the first plaintiff paid $4,825,708.11 into Court as a condition of the Court hearing the first plaintiff's application challenging the Adjudication Decision,[3] being the value of the adjudicator's decision plus the adjudicator's fees and interest.
• [13] On 26 March 2024, the first plaintiff and the second plaintiff commenced this proceeding.[4]
• [14] In this proceeding, the first plaintiff claims the amount of $11,601,295.32 including GST. The amount claimed consists of two distinct amounts, namely:

(a) $5,320,846.36 being overpayments of the monies due from the first defendant to the first plaintiff pursuant to the Contract or, in the alternative, collateral loan agreements or restitution.

(b) $6,280,448.96 claimed as damages for the first defendant's breaches of contract, being predominantly the costs incurred by the first plaintiff to complete the works.

• [15] The second plaintiff's claim in this proceeding relates to the recovery of a payment of $1,000,000 which was paid to the first defendant. The second plaintiff's claim is made in the alternative to a portion of the first plaintiff's claim for the overpayments.
• [16] On 6 December 2024, Hindman J dismissed the application challenging the Adjudication Decision.[5]
• [17] Further, on 23 December 2024 Hindman J stayed the first defendant's enforcement of the Adjudication Decision and the Judgment until after determination of this proceeding.[6]
• [18] On 31 January 2025, the first plaintiff paid a second payment of $1,597,940.94 into Court on the basis of the condition imposed by Hindman J in ordering the stay. This amount represents the value of the further interest that would accrue on the adjudication amount up to 30 June 2026. This date was selected as an estimate of the earliest that this proceeding might be concluded after a trial and judgment.
• [19] Accordingly, a total amount of $6,332,572.69 is being held in Court pursuant to the order of Hindman J on 23 December 2024 (Sum held in Court).
• [20] Three separate claims have been commenced by subcontractors of the first defendant to enforce subcontractors' charges. There is also one creditor of the first defendant that has given a payment withholding request.
• [21] Pursuant to ss 97B and 126 of the BIF Act, the first plaintiff is obliged to either retain sufficient monies to discharge those claims or to pay that amount into Court pending the determination of those claims.
• [22] As part of the orders made on 23 December 2024, Hindman J made a declaration that the amount of $803,267.16 (being part of the amount paid into Court) was monies retained pursuant to ss 97B and 126 of the BIF Act in respect of yet to be determined subcontractors' charges' claims and payment withholding requests.
• [23] On 20 January 2025, the first defendant filed an appeal of Hindman J's order made on 23 December 2024. On 18 February 2025, the first defendant filed an amended notice of appeal.
• [24] On 20 February 2025, Martin SJA ordered that the first defendant be wound up in insolvency pursuant to s 459A of the .

Section 471B of the Corporations Act and relevant authorities

• [30] Section 471B of the Corporations Act provides as follows:

"While a company is being wound up in insolvency or by the Court ... a person cannot begin or proceed with:

(a) a proceeding in a court against the company or in relation to property of the company; or

(b) enforcement process in relation to such property;

except with the leave of the Court and in accordance with such terms (if any) as the Court imposes."

• [31] Section 471B can be understood to impose a stay of proceedings unless leave to proceed is granted. Consequently, the proceeding cannot be prosecuted by the taking of a step in the proceeding without leave being granted.
• [32] The proceeding is on the Building, Engineering and Construction List and is subject to case management on that List. Accordingly, it is necessary to determine whether leave should be granted prior to the taking of any further steps in the proceeding.
• [33] Generally, a person making a claim against a company in liquidation will be required to lodge a proof of debt in the winding up rather than proceeding with litigation against the company. In that regard, many of the authorities are focused on the practical choice between traditional litigation and the streamlined proof of debt procedure.[8]
• [34] Both parties seek to some extent to rely on the purpose of the prohibition on commencing or continuing claims against a company in liquidation without leave. The purpose has been stated in numerous cases over the years.
• [35] In the 1877 judgment of Re David Lloyd & Co, James LJ described the purpose as follows:

"These sections ... were intended, not for the purpose of harassing, or impeding, or injuring third persons, but for the purpose of preserving the limited assets of the company ... in the best way for distribution among all the persons who have claims upon them. There being only a small fund or a limited fund to be divided among a great number of persons, it would be monstrous that one or more of them should be harassing the company with actions and incurring costs which would increase the claims against the company and diminish the assets which ought to be divided among all the creditors."[9]

• [36] The more recent statement of McPherson J (with whom WB Campbell CJ and Sheahan J agreed) in Re Gordan Grant & Grant Pty Ltd[10] is regularly quoted at first instance and appellate level when consideration is being given to the purpose and function of s 471B of the Corporation Act or the equivalent provisions. McPherson J relevantly stated:

"The precise purpose and function of [provisions similar to s 471B of the Corporations Act] have seldom been explained. From time to time the suggestion has been made that the prohibition exists in order to effectuate the statutory policy of ensuring that corporate assets are distributed rateably amongst all creditors so that none of them will gain an advantage over others ... But in Australia at least it is not often that the institution of proceedings or even the recovery of judgment operates to confer a priority or advantage on a litigating creditor. A more convincing explanation is that, without the relevant restriction, a company in liquidation would be subjected to a multiplicity of actions which would be both expensive and time-consuming, as well in some cases as unnecessary."[11]

• [37] As was recognised by Refshauge J in Commonwealth v Davis Samuel Pty Ltd (No 5), the identification of the purpose, or purposes, is important to enable the Court to identify the relevant and the irrelevant considerations that may or must not be considered.[12] This is especially the case where, as here, the provision bestows a very broad discretion on the Court.[13]
• [38] To obtain leave to proceed it is necessary to satisfy the Court of two matters:

(a) that there is a "serious question to be tried";[14] and

(b) there is a good reason why it is not appropriate that the applicant lodge a proof of debt in the particular case.

• [39] Further, courts have recognised a variety of factors that are relevant to these considerations,[15] including:

(a) The amount and seriousness of the claims.

(b) The degree and complexity of the legal and factual issues involved.

(c) The stage of the proceedings.

(d) Whether there is a cross-claim.

(e) The risk that the same issues would be relitigated if the claims were to be the subject of a proof of debt.

(f) Whether the claim has arguable merit.

(g) Whether the proceedings had been commenced at the time of the liquidation.

(h) Whether the proceedings will result in prejudice to creditors.

(i) Whether the grant of leave will unleash an "avalanche of litigation".

(j) Whether the company has funds available to conduct litigation or is insured with respect to litigation.

(k) Whether pre-trial procedures such as discovery and interrogatories are likely to be required or beneficial.

(l) Whether it is a claim which could not be proved in the winding up such as specific performance, an injunction, an order for rescission of a contract, or a proprietary remedy.

• [40] Whilst these factors may be described in slightly different language, they are largely uncontroversial. Although, it is recognised that the list is not exhaustive and there are a wide range of considerations relevant in any particular case.[16]
• [41] Where the position of the parties often diverges, and does diverge in respect of the current application, is the evaluation of these factors in the exercise of the Court's discretion.
• [42] It is necessary to consider the various factors in light of the proceeding and liquidation of the first defendant.

• [43] In respect of the first issue of whether the case has sufficient merit to warrant a grant of leave (that is, a serious question to be tried), the plaintiffs point to a number of features of the proceeding. These include:

(a) The pleadings and particulars are extensive. The current pleading of the plaintiffs' claim is contained in the Amended Statement of Claim (CFI #9) and the plaintiffs' Further and Better Particulars (CFI #10).

(b) Whilst the claim does include oral communications between Mr Lowe and Mr Henderson on behalf of the plaintiffs and Mr Kennedy of the first defendant, the plaintiffs submit there is a sufficient evidentiary basis for the relevant pleadings.[17]

(c) The first plaintiff's overpayment claim is based on the Contract Sum[18] being $14,992,838.30 inclusive of GST and the first defendant being paid $20,313,684.66.[19] The amount claimed is $5,320,846.36, being the amount paid in excess of the Contract Sum.

(d) The amount of the overpayment is claimed on a number of alternate bases, being:

(i) Recovery of a debt due pursuant to clauses 2.1 and 37.2 of the general conditions of the Contract.

(ii) The monies were advances pursuant to loan agreements collateral to the Contract, falling within clause 37.6 of the general conditions of the Contract, and recoverable as a debt due.

(iii) The first defendant has been unjustly enriched by the overpayments at the expense of the first plaintiff and the first plaintiff is entitled to restitution.

(iv) Monies were advances made pursuant to loan agreements that were collateral to the Contract and the payments are due pursuant to those loan agreements.

(e) The first defendant pleads that it has been paid $17,989,689.09 including GST,[20] which is in excess of the Contract Sum. However, the first defendant pleads that as a result of 25 variations, the adjusted Contract Sum is $28,387,560.70 including GST which includes an additional amount of $12,563,297.66 in respect of the 25 variations.[21]

(f) The pleaded 25 variations are largely the same as the variations considered in the Adjudication Decision, where there were varying degrees of success in respect of the variations.

(g) The first plaintiff's claim for damages for breach of the Contract includes:

• [44] The plaintiffs contend that there is a serious case to be tried such as to warrant the grant of leave, particularly given the matters that the first defendant is raising by way of defence to the claims.
• [45] The first defendant accepts for the purposes of this application that there is a serious issue to be tried. It is accepted that the claims will need to be adjudicated or determined.
• [46] However, the first defendant contends that the real issue is what is the more appropriate procedure in the circumstances. Accordingly, the submissions of the first defendant focus on the question of whether there is a good reason to depart form the proof of debt regime.
• [47] In respect of the threshold issue of whether there is a serious issue to be tried, on the basis of the pleadings this threshold issue is satisfied. In the circumstances, it is not necessary to consider the threshold issue further.

Is there a good reason to depart from the proof of debt regime?

• [48] The plaintiffs point to a number of factors in support of their submission that there is a good reason to depart from the proof of debt regime. These factors include:

(a) This proceeding will finally determine the rights between the first plaintiff and the first defendant under the Contract. This will necessarily include an adjustment of the Contract Sum, the total amount paid under the Contract, and any other adjustments.[23]

(b) Upon that determination of the issue in this proceeding, the Court will be able to make the orders it considers appropriate, including orders in respect of the monies paid into Court. This includes orders pursuant to s 101(3) of the BIF Act.

(c) The orders of Hindman J in respect of the stay included liberty to apply. Her Honours reasons reflected the possibility of bringing an application to transfer the monies held in Court in that proceeding to be held in respect of this proceeding.[24]

(d) Consequently, this proceeding will serve the purpose of determining the right to the $6,332,572.69 the first plaintiff paid into Court.

• [49] The first plaintiff contends that this aspect can only be resolved by court proceedings and cannot be accommodated in the proof of debt procedure. In this regard reliance is placed in the authority of Commonwealth of Australia v Davis Samuel Pty Ltd (No 5).[25]
• [50] In Commonwealth of Australia v Davis Samuel Pty Ltd (No 5), approximately $2.2 million was paid into Court and a further amount of $100,000 was held in a mortgage account. The plaintiff claimed to be entitled to these monies on the basis of a tracing claim. Ultimately the Court held that there was a good reason to depart from the proof of debt procedure as the claim related to the entitlement to the monies held in Court.
• [51] The plaintiffs contend that in the current matter similar considerations arise, namely:[26]

(a) The proof of debt regime cannot give rise to a determination that would ultimately result in an order of the Court pursuant to s 101(3) of the BIF Act and the payment out of part or all of the monies held in Court.

(b) The determination of this proceeding will result in an order of the Court pursuant to s 101(3) of the BIF Act and the payment out of part or all of the monies held in Court.

• [52] In all of these circumstances, the plaintiffs contend they should not be left to pursue their claims by lodging a proof of debt.
• [53] The first defendant contends that there is no good reason to conclude that the proof of debt process is unsuitable. The first defendant points to the following features in support of this contention:

(a) The plaintiffs' claim is a money claim for recovery of a debt and contractual damages, which is admissible to proof in a proof of debt process. There is no proprietary claim or claim for non-monetary relief, such as a permanent injunction, which are recognised as being in a category that cannot be dealt with by such a process. Further, the dispute involves claims under a construction contract which are of a nature that liquidators are experienced in considering as part of a liquidation.

(b) The liquidators currently have no funding to defend the proceeding and the proceeding would be more expensive and time-consuming than adjudicating the claims through the proof of debt process. All creditors would be required to bear the costs and time of conducting the proceeding if leave was granted.

(c) The amount paid into Court by the first plaintiff subject to the determination of the proceeding or further order of the Court is not a significant factor justifying the grant of leave.

• [54] The first defendant submits that the approach contended for by the plaintiffs in respect of the determination of the issue and empowering the Court for the purposes of s 101(3) of the BIF Act to deal with the amount held in Court is not the correct approach. The first defendant relies on a number of matters, including:

(a) The sum held in Court represents the amount of a judgment debt plus interest in favour of the first defendant following an adjudication decision under the BIF Act.

(b) The amount held in Court was originally paid into Court by the first plaintiff as a condition of its application to set aside the adjudication decision. The current proceeding had not been commenced at that stage. That application was subsequently dismissed.

(c) Hindman J subsequently stayed enforcement of the judgment debt pending determination of this proceeding or further order of the Court. A condition of the order was that the amount held in Court was maintained.

(d) The first defendant was not in liquidation when the stay order was made: that occurred later. Therefore, s 471B of the Corporations Act had no operation at the time the order was made.

(e) The submission that the Court is unable to deal with the amount held in Court under s 101(3) of the BIF Act or otherwise unless leave to proceed is granted is not correct. If leave is refused, an application could be made under the liberty to apply order to deal with the Sum held in Court. Another option may be a statutory mechanism such as s 553C of the Corporations Act allowing for the setting off of debts.

(f) It would be perverse for the first plaintiff to be granted leave to proceed against the first defendant in liquidation on the basis that, prior to liquidation, the first plaintiff had paid money into Court in respect of an outstanding judgment against it and where the non-payment of the judgment debt was a significant contributor to the insolvency of the first defendant.

• [55] Further, it is not correct that refusing leave results in the inability to deal with the amount held in Court. The proof of debt process does not preclude the first plaintiff from being able to apply for further orders in respect of the amount held in Court.
• [56] Consequently, the Court is faced with two possible scenarios:

(a) Leave being granted, with the effect that the stay order and the Sum in Court are maintained. This is the plaintiffs preferred outcome.

(b) Leave being refused, with the plaintiffs lodging a proof of debt and being able to apply to Hindman J in respect of dealing with the Sum held in Court.

• [57] Here, the Sum held in Court is not the subject of a proprietary claim as was the position in Commonwealth of Australia v Davis Samuel (No 5), where those claims could not be dealt with in the proof of debt process. That the amount is held in Court does not in the current circumstance necessitate that the proceeding be allowed to continue.
• [58] The first defendant also submits that the plaintiffs do not suggest that it is not possible to deal with the claims within the proof of debt process. The claims raised are typical issues that arise in building and constructions matters and there is no particular complexity that arises in the present case. The claims include determination of any adjustments to the Contract Sum, the quantum paid, and any entitlement to recover payments. These issues are not out of the ordinary.
• [59] The proof of debt process is able to deal with claims that involve disputed questions of fact, some disputed issues of law, and assessment of damages. Those characteristics of a claim do not of themselves put the claim within an exception to the rule and justify a grant of leave.[27]
• [60] Further, Mr Roberto Crispino, the liquidator of the first defendant together with Mr Richard Albarran, deposes to a preparedness of the liquidators to adjudicate the entirety of the claims.[28]
• [61] Ultimately, the first defendant submits there is no good reason that the plaintiffs' claims should not be adjudicated by the liquidators under the proof of debt process.
• [62] As is evident from the pleadings, this proceeding involves a number of issues that commonly arise in construction disputes. In themselves, these issues can be analysed and evaluated, including by the liquidators as part of the proof of debt process.
• [63] As was recognised by Lehane J in Meehan v Stockmans, the fact that there are disputed questions of fact, some disputed questions of law, and questions relating to the assessment of damages does not make a claim within the exception to the general rule so as to justify a grant of leave.[29]
• [64] This proceeding involves a monetary claim and the issues in the pleadings, of themselves, are not of a nature giving rise to some of the recognised exceptions that would justify a grant of leave.

"1. Save for as provided in Order 3 hereof, the First Respondent is restrained from enforcing, relying upon or otherwise taking any steps, including pursuant to sections 92, 93 and 100A to 100H of the [BIF Act] in consequence of the Applicant's failure to pay to the First Respondent all or any part of:

(a) the adjudicated amount in respect of the Decision; and

(b) the judgment debt obtained by the First Respondent in Supreme Court proceeding 2046/24,

until the determination of Supreme Court proceeding 3773/24[30] or further order of the Court.

1. Any enforcement of the judgment debt obtained by the First Respondent in Supreme Court proceeding 2046/24 is stayed pursuant to rule 800 of the Uniform Civil Procedure Rules 1999 until the determination of Supreme Court proceeding 3773/24 or further order of the Court.

1. It is declared that the amount of $803,267.16 is to be retained in Court until further order of the Court pursuant to sections 97B and 126 of the [BIF Act].

1. The parties have liberty to apply in respect of these orders."

(a) The stay was granted on the condition that the further payment into Court was made reflecting the additional interest and upon the applicant (here the first plaintiff) providing the usual undertaking as to damages.[31]

(b) The amount owing to the adjudicator for the Adjudication Decision was paid from the monies held in Court. This was contained in order 3 and was the amount of $91,076.36. The payment out of Court was to the first respondent (here, the first defendant) as the first defendant had paid the adjudicator's fees for the Adjudication Decision and the challenge to the Adjudication Decision had been unsuccessful.[32]

(c) The first respondent (here, the first defendant) had raised the possibility of an order permitting access to part of the Sum held in Court for the purpose of funding this proceeding.[33]

(d) The order included liberty to apply and her Honour relevantly commented:

"I can see some merit to orders or conditions of the stay to that effect, but any such orders ought be properly considered after full argument on the issue, including as to the particular regime for access to funds that is practical and workable. Accordingly, I propose to grant liberty to apply for that issue to be agitated in the future should [the first defendant] wish to do so. Liberty to apply will also allow for the parties to make any applications necessary to potentially finalise payment of moneys out of court in respect of the subcontractors' charges matters, if there be agreement about that between all affected parties including the relevant subcontractors, and it will permit the possibility of the moneys in court being transferred into the substantive proceeding to await the outcome of that proceeding."[34]

• [68] It is clear from these comments that the Sum held in Court was not conditioned on it only being paid out following a judgment at the conclusion of a trial. Plainly, if all parties reached an agreement, under the liberty to apply the Court could be asked to make an order for the payment out of the Sum held in Court in a particular way or for a particular purpose.
• [69] In granting the stay, Hindman J considered the various relevant factors which included the financial position of the first defendant. The reasons included as follows:

"[16] Considerable caution should attend to the grant of the stay as to grant a stay detracts from the primary purpose of the BIF Act....

[17] The prima facie position, given the policy objectives evident in the BIF Act, is that in the ordinary case stays are not granted. The BIF Act is designed to improve cashflow for contractors, and any risk of non-recovery of payments made under the BIF Act as a consequence of the financial failure of the contractor after receipt of the BIF payment is generally to lie with the principal or superior contractor required to make the payment.

[18] ... two types of cases where the prima facie position might be able to be displaced. First, where the contractor has deliberately taken steps to make the task of recovering any BIF payment more difficult for the principal by way of restructuring its financial affairs, or, second, where the contractor engages in tactics to delay the resolution of the substantive proceeding. Neither of those examples apply in this case, but the examples are not exhaustive of the circumstances in which a stay of an adjudication decision might be granted by the Court.

[19] Another case where the prima facie position will usually be displaced is in circumstances where the contractor is, in fact, in liquidation or perhaps even in some form of external administration due to liquidity issues at the time the BIF payment would otherwise be made. ...

[20] Whilst in Queensland there is no express prohibition on a company in liquidation using the processes of the BIF Act as compared to, say, the express prohibitions that were brought into the New South Wales equivalent legislation in 2019, cases have held that it is a circumstance in which a stay can be granted. The underlying rationale is that whilst the scheme of the BIF Act is pay now, argue later, implicit in that is that the payer does have the right to curial proceedings to, in fact, recover the BIF payment, which is intended to be an interim process. If the financial position of the contractor is that the making of the BIF payment, intended to be interim, will, in fact, in essence, because of the external administration of the contractor, make it effectively a final payment, that would not be consistent with the purpose of the BIF Act and may justify a stay.

[21] The cases speak of the risk of irreparable damage to the payer of the BIF payment. ..."

• [70] Her Honour also recognised that the granting of the stay was likely to result in "the complete financial failure" of the first defendant.[35] This is in effect what transpired.
• [71] Further, her Honour specifically considering this proceeding, including that the proceeding included claims and parties wider than in the Adjudication Decision. This was not a factor that was given significant weight in the balancing exercise.
• [72] Ultimately, Hindman J concluded:

"[43] I conclude, therefore, on the evidence available to me, that there is a very high risk that if the stay is not granted that the consequence is, if it is ultimately determined that [the first defendant] was not entitled to the adjudicated amount on a final basis, that [the first defendant] will not be able to repay that amount with the effect that the payment of the adjudicated amount under the BIF Act intended to be an interim payment would, in fact, be, in essence, a final payment unrecoverable by [the first plaintiff]. ... It is making an assessment of the risk."

• [73] Another relevant factor was the undertaking as to damages provided by the first plaintiff.
• [74] There is nothing in any of the reasoning of Hindman J in respect of the grant of the stay and the making of the orders that supports a conclusion that the proof of debt process is not available or appropriate to deal with the claims. Ultimately, if a position is reached between the plaintiffs and defendants, an order of the Court would need to be made to provide for the payment out of the Sum held in Court. However, to whom and in what amount is not constrained by the terms of the current order or the proceedings themselves, subject to the claims in respect of the identified sums in [4] being addressed.
• [75] This position is in fact recognised by the plaintiffs in their submission in respect of a settlement being reached at mediation if leave to proceed was granted. Equally a settlement reached as part of the proof of debt process that, for example, deals with this proceeding and other related proceedings, could be the subject of an application to the Court for an order for the payment out of the Sum held in Court.
• [76] A number of provisions in the BIF Act may also be relevant including:

(a) Sections 92 and 93: These provisions apply where there has been non-payment of an adjudication amount. The claimant may suspend work on giving notice or obtaining a judgment debt. Here, the right to suspend does not arise and the first defendant already has the benefit of the Judgment. The stay operates to prevent the enforcement of the Judgment for the Adjudication Amount. Given the Sum held in Court can only be paid out by an order of the Court, an application could be made to the Court to deal with the stay and the sum held in Court in accordance with a position reached between all of the relevant parties. The provisions do not prohibit the claims being dealt with by the proof of debt process.

(b) Section 97B: This section provides for a payment holding request to be made to a higher party in respect of an amount claimed to be payable for construction work to which the adjudicated amount relates. Under the provisions in the BIF Act, the amount is to be retained (s 97C) and the amount is also the subject of a charge in favour of the claimant (s 97G). The charge expires where the adjudication decision is set aside and the amount is paid into Court "as security ... pending a final decision". Hindman J declared that the amount of $803,267.16 is to be retained in Court until further order of the Court pursuant to sections 97B and 126 of the BIF Act. The order in effect retained the money until the claim pursuant to the payment withholding request could be determined. Whilst an order of the Court would be required to ultimately deal with the amount of the payment holding request, the provisions do not prohibit the claim being heard and adjudicated under the proof of debt process.

(c) Section 126: This section applies where a person is given a notice of claim by a subcontractor under s 122 because "the person is obliged to pay money to a contractor under a contract". Sufficient money is to be retained until the claim is heard and determined or the amount may be paid into Court, whereby the person is discharged from any further liability. The money may only be paid out of Court under an order of the Court.[36] Here, the amount of $803,267.16 is to be retained in Court until further order of the Court pursuant to sections 97B and 126 of the BIF Act. It is clear from the terms of the order and the terms of s 126 that the money can only be paid out under an order of the Court. However, that does not prohibit the proof of debt process proceeding and an order of the Court obtained to reflect the final position relevant to all relevant parties.

• [77] Whilst several steps may be required, there is no impediment to the proof of debt process being followed by the nature of the claims or the BIF Act provisions.
• [78] Monies paid into Court are held pursuant to Part 11A of the Civil Proceedings Act 2011 (Qld). Section 75C provides that the money may be dealt with only in accordance with the Civil Proceedings Act, the rules of Court and any Court order about the money.
• [79] Rule 560 of the Uniform Civil Procedure Rules 1999 (UCPR) applies in respect of a payment into Court under an order of the Court and requires an affidavit complying with the relevant regulations.[37]
• [80] Rule 561 UCPR deals with an application for payment out of Court. The application must be served on all other parties and include a statement whether the applicant is aware of a right or a claim made by another person to all or part of the money.
• [81] There is nothing in these provisions which requires a determination of all issues before a payment out of the monies held in Court. From a practical perspective, an order of the Court would be required, but that could be based on an agreed position between the parties following the proof of debt process. This could also be following a mediation or other dispute resolution process by the relevant parties.

• [86] The plaintiffs also rely on a variety of factors in support of their position including:

(a) The seriousness of the claim: The plaintiffs point to the significant value of the plaintiffs' claims of over $11 million and that, due to the first defendant's insolvency, it is unlikely that the amount is recoverable in whole or in part even if the plaintiffs succeed. Conversely, the first defendant may obtain some or all of the monies paid into Court if the defence is wholly or partially successful. The determination of this proceeding has serious consequences for both the first plaintiff and the first defendant. This favours the grant of leave.

(b) The complexity of the proceeding: There are complex legal and factual issues in dispute, which is not uncommon in construction litigation. This favours the grant of leave.

(c) Multiple proceedings if leave not granted: This proceeding will determine what money is owed by the first plaintiff to the first defendant pursuant to the Contract. This is a central issue in the three proceedings to enforce subcontractors' charge claims in the District and Magistrates Courts. The first plaintiff and the first defendant are also parties to those proceedings. If:

(i) There is money owed by the first plaintiff to the first defendant under the Contract, then the subcontractors will have security over those monies.

(ii) There is no money owed by the first plaintiff to the first defendant, then the subcontractors will be unsecured creditors and will need to prove in the liquidation.

The liquidator does not have the power to determine the existence of the charges claimed and that can only be determined by a Court. This requires a determination that the first plaintiff does owe the first defendant money pursuant to the Contract.

Granting leave to proceed and consolidating the various proceedings could avoid a multiplicity of proceedings to determine the same question of whether the first plaintiff owes the first defendant any money pursuant to the Contract.

There is no evidence to suggest that it is clear that the liquidators will reject the plaintiffs' claim. The evidence, if anything, supports the conclusion that the liquidators will consider the claim and adjudicate the claim on the merits. Accordingly, this is not a case where it is inevitable that there will be an appeal, which may favour the grant of leave.[38]

(d) Proceedings commenced and the extent to which the litigation has proceeded: This proceeding had already been commenced for over a year when the first defendant went into liquidation. The proceeding has been managed on the Building, Engineering and Construction List from an early stage. There have been directions for amended pleadings, disclosure of documents in the pleadings and particulars, and mediation. The scheduled mediation was vacated as a result of the appointment of the liquidator.

While the matter is not ready for trial, if leave to proceed is not granted then the effort that has gone into the proceeding will be wasted. Being case managed, this proceeding should be able to proceed expeditiously to trial. These are factors in favour of the grant of leave.

(e) Existence and benefit of pre-trial procedures: Previously a mediation was ordered but was vacated due to the liquidation of the first defendant. If leave is granted a mediation could be held that could reach a compromise of this proceeding. This could result in a determination to provide for orders to deal with the Sum held in Court. Absent this, a compromise that determines this proceeding and facilitates orders to deal with the Sum held in Court may not be possible. This favours the grant of leave.

(f) Resources available to the first defendant and the liquidator: The plaintiffs accept that the costs of the proceeding may be considerable, particularly if there is not a compromise prior to trial. The plaintiff submits that the costs of conducting the proceeding is not a factor that should operate to deny the plaintiffs leave to proceed.

At the hearing of the application, the Statutory Report of the Liquidator dated 20 May 2025 (Updated Liquidator's Report) was put into evidence.[39] This will be considered further below.

(g) Procedural or substantive prejudice to the creditors: There is no evidence that the creditors of the first defendant will suffer procedural or substantive prejudice as a result of the continuation of the proceeding.[40] The continuation of the proceeding may place the creditors in a better position as it will not further delay the determination of their rights under the Contract and payment out of the Sum held in Court in accordance with that determination. This is not a factor that should operate to deny the plaintiffs leave to proceed.

• [87] The plaintiffs recognise that the Court may impose conditions on the grant of leave. The plaintiffs do not oppose the imposition of conditions provided that any condition does not prevent the first plaintiff from obtaining the benefit of an order in respect of the Sum held in Court and/or lodging a proof of debt for the balance if they are successful in the proceeding.
• [88] In response, the first defendant addresses these factors identified by the plaintiffs as tending to favour the grant of leave. The first defendant submits that, to the extent that these factors are relevant, none of these factors are sufficient to outweigh the prejudice to creditors.
• [89] In particular, the first defendant identifies the following matters in respect of these factors:

(a) The seriousness of the claim: Quantum alone is not a particularly relevant factor and claims of significant amounts are regularly adjudicated by liquidators. Further, the Sum held in Court is likely to be the only funds available and there is no evidence from the plaintiffs as to the significance of that amount to them. In any event, if leave is not granted the plaintiffs are not prohibited from seeking orders to deal with the amount paid into Court. Accordingly, this factor is neutral.

(b) The fact that proceedings are in train: While the proceeding has progressed to the close of pleadings, there is still a lot of work to be done before trial. The likely work includes disclosure by the defendants and the exchange of lay and expert evidence. The work done in respect of the pleadings will not be wasted if leave is not granted as that will be relevant to the plaintiffs' proof of debt and any adjudication in respect of it.

Whilst this factor has some weight, it is not sufficient to outweigh the serious prejudice to creditors. In Meehan v Stockmans Australia Café (Holdings) Pty Ltd, the Court had to consider an application for leave where the matter was ready for trial and had been listed "imminently".[41] However, in refusing leave the Court concluded that the prejudice to creditors by the costs of the trial outweighed the convenience of the trial continuing as listed. That was so where the legal costs would have substantially diminished the assets available for distribution to creditors.[42]

(c) The existence and benefit of pre-trial procedures: Mediation is available regardless of whether leave is granted or not. Both formal and informal without prejudice discussions are available in respect of a proof of debt.

(d) Multiple proceedings if leave not granted: It is not correct that the question of whether the first plaintiff owes money to the first defendant can only be determined in this proceeding for the purposes of the subcontractors' charges claims in the District and Magistrates Courts. The subcontractors could seek to enforce the charges over any sum to which the first defendant is entitled under an adjudication under the proof of debt process. Further, order 4 of the stay order of Hindman J identifies the sum of $803,267.16 in respect of these claims.

• [90] The principal feature identified by the first defendant which favours the refusal of leave is the "clear and obvious prejudice to the general body of creditors". In support of this contention, the first defendant points to the considerable litigation costs, the liquidator's funding position, the potential returns to creditors, and the effect of these matters on the body of creditors.
• [91] In respect of litigation costs, Mr Crispino estimates the likely costs that the liquidators will incur in defending the proceeding. The estimate of costs to prepare for trial and attend a mediation is $415,00 to $670,000.[43] This does not include the trial itself and also does not include the preparation of lay evidence. Further, given the trial is likely to run for at least two weeks, substantial additional costs are likely if the proceeding is to proceed to trial.
• [92] As to the funding position, the first defendant has no cash, the liquidators are unfunded, and no creditor or third party funder has been identified. The liquidators are incurring fees on a speculative basis. While there may be a possibility of recovering those fees, Mr Crispino was of the view that it was too early to determine this with any certainty.[44]
• [93] In respect of the potential returns to creditors, the position outlined in the Liquidators Report to Creditors dated 21 March 2025[45] includes:

(a) The first defendant was a party to a number of legal proceedings, as both a plaintiff and a defendant.

(b) The assets of the first defendant are overwhelmingly constituted by debtors. It can be inferred that a large portion of the assets of $9,579,611.53 is likely to be the amount claimed to be owing from the first plaintiff to the first defendant.

(c) The first defendant has liabilities of over $8 million, predominantly in respect of subcontractors and trade creditors.

• [94] Given this position, the first defendant submitted that if the plaintiffs' claim was accepted in full, then there would be nothing available for other creditors.
• [95] The first defendant submits that if leave to proceed is granted, given the financial position of the first defendant, the liquidators will "face an impossible position". Funding will need to be found quickly or the proceeding will need to be compromised, otherwise the proceeding will "go by default". If the first defendant is in default in the proceeding, then this will be detrimental to the other creditors as the negotiating position will be significantly weakened as a result.
• [96] This position is exactly what the statutory provision is seeking to avoid. The first defendant points to the comments of Hunt J in Maher v Taylor in this regard:

"If the proceedings are continued, the liquidator must elect either to expend the company's assets in defending them or to allow the plaintiff's claim to go by default. If the proceedings went by default, although the rights of the creditors would be protected, there could be in most cases be a considerable effect upon the rights of the company itself and of its shareholders to the eventual return of their funds invested in the company. In those cases it may often be quite inappropriate for the liquidator to allow the plaintiff's claim to go by default."[46]

• [97] It is also submitted that this would result in the plaintiffs obtaining an advantage over other creditors when Hindman J has already found that the first defendant's "financial woes [were] at least significantly the result of the non-payment of the adjudicated amount".[47]
• [98] This position needs to be considered in light of the Updated Liquidator's.[48] The Updated Liquidator's Report contains further information about the financial position of the first defendant, including:

(a) There are 216 unsecured creditors, with a liability value of $10,415,774. Over $3.6 million relates to unsecured creditors of amounts less than $100,000.[49]

(b) There are 21 secured creditors, with a liability value of $228,291.

(c) The liquidators have identified possible recovery actions in relation to unfair preference payments, insolvent trading, uncommercial transactions and "unreasonable director-related" transactions.

(d) Further steps and inquiries would need to be able to be taken to obtain further information to support any litigation to pursue actions against the director for insolvent trading. Any recovery of funds would be subject to the costs of litigations and winding up. Further, there is currently insufficient information to determine whether the director has any capacity to pay, even if recovery action was successful.

(e) Further, preliminary investigations identify:

(i) $5,482,670 made to related parties that may be unfair preference payments within the relation back date.

(ii) $9,015,738 to be further investigated as to whether the individual payments are uncommercial transactions.

(iii) $218,176 to be further investigated as to whether the payments constitute unreasonable director-related payments.

(f) The first defendant's debtors include the Sum held in Court. The total debtors excluding the Sum held in Court is $3,155,635.

(g) A balance of $2,629,838 is owed by the first defendant to related parties.

• [99] Considering these further factors in turn:

(a) The seriousness of the claim: It is clear on the pleadings that serious issues arising out of the contractual relationship between the parties are in dispute and there is a substantial amount of money at stake. However, that cannot be determinative of whether leave to proceed should be granted or not. The proceeding concerns claims for money and that is quite usual where a company goes into liquidation. Whilst the size of the money claims is in the millions of dollars, they are not of an unusually large amount, particularly in a construction context. This factor is neutral in determining the current application.

(b) The complexity of the proceeding: Again, a consideration of the pleadings does not indicate that the claims are unusually complex. The issues raised on the pleadings quite commonly occur in construction disputes. The Adjudication Decision and the challenge to the Adjudication Decision, including the Sum held in Court, are also not unusual. Those types of issues regularly occur. There is nothing in the nature or the history of the proceedings which is particularly relevant to the determination of whether leave to proceed should be granted or not. This factor is neutral in determining the current application.

(c) Multiple proceedings if leave not granted: It is possible that if the proof of debt process is followed and the plaintiffs are unhappy with the outcome, they may seek to appeal the adjudication. However, that is always the case with that procedure. That alone cannot be determinative. Equally, if the matter proceeds to trial and the plaintiffs are unhappy with all or part of the judgment then they may appeal. Again, that cannot be determinative.

The policy behind the approach of requiring leave results in the proof of debt process being adopted unless there is a good reason not to. The argument that multiple proceedings may result needs to be considered in that context. Here, there are claims by subcontractors and others and the Sum held in Court is identified as a debtor amount. The liquidator is well placed, through the proof of debt process and the wider investigations being undertaken, to consider and evaluate all claims and the availability of funds from all sources. The claims in the Supreme, District, and Magistrates Courts can be considered as part of the liquidation and dealt with in an efficient way, consistent with the policy objectives.

(d) Proceedings commenced and the extent to which the litigation has proceeded: While proceedings have been commenced prior to the liquidation and the pleading stage has been completed, there are considerable steps that still need to be completed in order for this proceeding to be ready for trial. This is likely to include disclosure of documents and both lay and expert evidence.

Completing the steps to have this proceeding ready for trial is likely to incur considerable expense, as identified in the estimate provided by Mr Crispino.

This factor has some relevance and has to be considered in the context of the current stage of this proceeding. In contrast to Meehan v Stockmans Australian Café (Holdings) Pty Ltd and Anor,[50] this proceeding is not ready for trial. Even where a matter is ready for trial, like in Meehan v Stockmans Australian Café (Holdings) Pty Ltd and Anor, the cost of conducting the trial itself may weigh against leave being granted to proceed.

Whilst this factor is relevant, it is not determinative of the current application. Any benefits of the proceeding progressing need to be considered and balanced with other issues, including consideration of the prejudice likely to be suffered by creditors if the proceeding was to be progressed and the trial proceed.

(e) Existence and benefit of pre-trial procedures: Mediation is identified as a relevant factor. However, mediation is available in either context: the proceeding continuing or a proof of debt process. The availability of mediation is neutral.

Expert evidence may be provided in support of a proof of debt claim and/or could be relied upon in a mediation. Again, this factor is neutral.

Disclosure may be available if the proceeding was to continue but the cost of the disclosure process may outweigh the benefit. The liquidator would need to adjudicate on any proof of debt made by the plaintiffs, and this would require consideration of relevant records of the first defendant in undertaking that exercise. Given the key documents relevant to the variations claimed by the first defendant are likely to have been included in the material relied on as part of the process under the BIF Act, it is also likely that these would have been provided to the plaintiffs pursuant to the Contract or with the payment claim and submissions. Accordingly, the prejudice by reason of not having the disclosure process is likely to be outweighed by the prejudice to creditors if the proceeding was to proceed through the disclosure process and then to trial.

(f) Resources available to the first defendant and the liquidator: The Updated Liquidator's Report shows that, at the current stage, there are no available funds to cover the costs of this proceeding continuing to trial. Whilst there is the possibility of recovering some amounts through the actions identified, there are no currently available funds to undertake the further investigations in respect of those possible claims. In any event, it is currently not known whether some or all of those claims would be successful.

The practical reality of leave being granted would be to force the liquidators to fund this proceeding at the expense of other investigations and to the prejudice of other creditors. If the proceeding could not be funded, then the liquidators may be faced with having to be in default in respect of the proceeding. This could ultimately result in the plaintiffs obtaining a considerable benefit to the prejudice of other creditors. This could be a benefit by way of a strengthened bargaining position or potentially a default judgment, with monies not being owed by the first plaintiff to the first defendant, thereby removing the Sum held in Court from any claims by subcontractors.

This factor also overlaps with the following factor.

(g) Procedural or substantive prejudice to the creditors: There is a basis to conclude that the grant of leave would cause prejudice to the general body of creditors. This prejudice is constituted by:

(i) The considerable litigation costs that are likely to be required to progress the proceeding to trial and the conduct of the trial itself.

(ii) The liquidator's funding position as reflected in the affidavit of Mr Crispino and most recent Updated Liquidator's Report.

(iii) The potential returns to creditors as reflected in the affidavit of Mr Crispino and the most recent Updated Liquidator's Report.

• [100] Given the issues in the proceeding could be dealt with by the proof of debt process, the likely prejudice to the creditors generally if leave to proceed is granted outweighs any prejudice to the plaintiffs of not being able to pursue the proceeding.

• [101] In all of the circumstances, the order of the Court is that:
  1. The application for leave to proceed is dismissed.
  2. The Court will hear further from the parties as to costs.

[3] Pursuant to s 93(4)(b) of the BIF Act.

[5] Taringa Property Group Pty Ltd v Kenik Pty Ltd [2024] QSC 298.

[6] Taringa Property Group Pty Ltd v Kenik Pty Ltd [2024] QSC 327.

[8] See for example discussion in DSG Holdings Australia Pty Ltd v Helenic Pty Ltd (2014) 307 ALR 143; [2014] NSWCA 96 at [55] and earlier in Re Gordon Grant & Grant Pty Ltd [1983] 2 Qd R 314, 316-17.

[9] [1877] UKLawRpCh 247; (1877) 6 Ch D 339, 344.

[10] [1983] 2 Qd R 314.

[11] Re Gordon Grant & Grant Pty Ltd [1983] 2 Qd R 314, 316-317.

[12] (2008) 164 ACTR 1, 5 at [15].

[13] Commonwealth v Davis Samuel Pty Ltd (No 5) (2008) 164 ACTR 1, 5 at [15].

[14] This threshold question has been expressed in varying language but can be understood to be whether there is a serious issue to be tried.

[15] Commonwealth v Davis Samuel Pty Ltd (No 5) (2008) 164 ACTR 1, 8 at [30].

[16] Re Gordon Grant & Grant Pty Ltd [1983] 2 Qd R 314, 317 (per McPherson J).

[17] As deposed to by Mr Doyle in his Affidavit affirmed 4 April 2025 (CFI #39).

[18] Being the amount payable under the Contract.

[19] This does not include the monies that have been paid into Court.

[20] At [18] of the Amended Defence (CFI #11).

[21] At [20] of the Amended Defence (CFI #11).

[22] Pursuant to clause 20 of the general conditions of the Contract. See also Schedule 1 of the Amended Defence (CFI #11).

[23] That is, any entitlement of the first defendant to receive payment from the first plaintiff or any entitlement that the first plaintiff has to recover payments that have been made to the first defendant.

[24] Taringa Property Group Pty Ltd v Kenik Pty Ltd [2024] QSC 327 at [13].

[25] (2008) 68 ACSR 336.

[26] The submissions made in respect of the appeal are no longer relevant.

[27] Meehan v Stockmans Café (Holdings) Pty Ltd (1996) 22 ACSR 123, 128 per Lehane J.

[28] Affidavit of Roberto Crispino affirmed on 24 April 2025, at [23] (CFI #44).

[29] Meehan v Stockmans Café (Holdings) Pty Ltd (1996) 22 ACSR 123, 128.

[31] Taringa Property Group Pty Ltd v Kenik Pty Ltd [2024] QSC 327, at [10].

[33] At [12]. See also Queensland Bulk Water Supply Authority v McDonald Keen Group Pty Ltd (in liquidation) (2009) 26 BCL 360.

[37] Civil Proceedings Regulation 2024 (Qld).

[38] Meehan v Stockmans Café (Holdings) Pty Ltd (1996) 22 ACSR 123, 128from line20.

[39] Affidavit of Kayla Amanda Webb affirmed 19 August 2025 (CFI #49).

[40] The submissions in respect of whether there is an impact on the appeal are no longer relevant.

[41] (1996) 22 ACSR 123.

[43] Affidavit of Roberto Crispino affirmed 24 April 2025 (CFI #44), see [27] and [28] (CFI #44).

[44] Affidavit of Roberto Crispino affirmed 24 April 2025 (CFI #44), see [19] and Exhibit RC-1 at 26 (CFI #44).

[45] Exhibited to the Affidavit of Roberto Crispino affirmed 24 April 2025 (CFI #44).

[46] [1984] 1 NSWLR 231, 235.

[47] [2024] QSC 327 at [28].

[48] Affidavit of Kayla Amanda Webb affirmed 19 August 2025, Exhibit KAW-1 (CFI #49).

[49] One of the subcontractor's claims is the claim of CES Civil SEQ Pty Ltd for $696,570 with the remaining three claims being part of the "other" amounts as less than $100,000 claimed.

[50] (1996) 22 ACSR 123.