The Plaintiff provided security under its building contract with the Defendant, part of which was a bank guarantee entitling the Defendant to deduct retention monies. On certification of practical completion, the Defendant’s entitlement to security reduced to 50% and it had to release security.
The Defendant provided the Bank with a fixed and floating charge over its assets including the security. The Plaintiff, the Defendant and the Bank executed a deed entitling the bank to security provided by the Plaintiff.
The Plaintiff obtained an injunction restraining the Defendant from calling on the bank guarantee.
Practical completion was reached. The Plaintiff obtained an adjudication under the Building & Construction Security of Payments Act.
The Defendant was placed into liquidation, and the Plaintiff submitted the adjudication amount as a proof of debt.
The liquidators report stated it was unclear if a surplus was available to the Plaintiff after paying debt to the Bank. There was no evidence that the Bank was a creditor of the Defendant.
The Plaintiff sought leave to continue proceedings against the Defendant in liquidation and to amend its summons.
The purpose of s 500 of the Corporations Act prohibition is to avoid a multiplicity of proceedings when the appropriate procedure is to lodge a proof of debt in the liquidation.
Onus is on the claimant to show its claim has a serious foundation and gives rise to a serious dispute. Relevant factors include:
- Degree of recollection of Corporations Act and issues involved;
- Prospects that a proof of debt will be rejected; and
- Stage of proceedings: .
The relief sought by the Plaintiff was not capable of being dealt with by the proof of debt procedure. It was self evident it would be refused and involved a serious issue to be tried: .
Leave for the plaintiff to continue the proceedings was granted. No step to enforce the judgment is to be taken without the Court’s leave.
Relevant paragraphs of Ford
[26.070], [26.071], [27.080], [27.126], [27.440], [27.450], [27.590]