Cudgegong 048 Service Pty Ltd as trustee for Cudgegong 048 Trust v Alpine Projects Pty Ltd (in liquidation)

The plaintiff, Cudgegong 048 Service Pty Ltd as trustee for the Cudgegong 048 Trust, makes this application for an order under s 500(2) of the Corporations Act 2001 (Cth) for leave to proceed against the defendant, Alpine Projects Pty Ltd (in liquidation).

The purpose of the application is to enable Cudgegong to:

On about 10 May 2021, Cudgegong and Alpine entered into a design and construct contract (Contract) for Alpine to carry out town house construction work for Cudgegong at a site in Rouse Hill, New South Wales (Site) for a contract sum of about $39.4 million.

Prior to 25 November 2021, Cudgegong and Alpine had a meeting at which they agreed that Alpine could claim a limited number of advance payments from Cudgegong for materials to carry out works under the Contract despite Alpine not yet having incurred the costs of obtaining those materials.

On about 25 November 2021, Alpine submitted a payment claim to Cudgegong requesting payment for, amongst other things, the supply of materials in the sum of $200,000.03 from its supplier, Royal Home Project Pty Ltd (RHP), in circumstances where Alpine had not yet incurred the cost of obtaining those materials and the materials were not yet incorporated into the work required by the Contract (Payment Claim 7).

On 1 December 2021, Cudgegong received a communication from Alpine which enclosed a letter from RHP raising the issue of a payment of an advance 60% deposit for the supply of wall frames, floor joists and roof trusses.

On 2 December 2021, the request from RHP was reduced to a 30% deposit before supplying any materials to the Site.

On 6 December 2021, Cudgegong agreed to pay Alpine the sum of $200,000.03 (excluding GST) as part of Payment Claim 7 for the specific purpose of Alpine paying RHP a deposit for the framing materials for stages 4, 5 and 6.

On 9 December 2021, Cudgegong issued a progress certificate in response to Payment Claim 7 (Progress Certificate 7) which indicated that Cudgegong would pay Alpine the requested advance payment of $200,000.03 for the supply of timber frames and steel beams by RHP.

On about 9 December 2021, Cudgegong paid Alpine the requested advance payment for Progress Certificate 7.

On 11 January 2022, Alpine submitted another payment claim to Cudgegong in which Alpine requested payment for, amongst other things, the supply of materials in the sum of $919,524.31 in relation to its suppliers, A-Tech Australia Pty Ltd, Topsteel Solutions Pty Ltd and RHP in circumstances where it had not yet incurred the costs of obtaining those materials and those materials had not yet been incorporated in the works required by the Contract (Payment Claim 8).

On 20 January 2022, Cudgegong received a communication from Alpine to which were attached the following letters requesting deposits from its suppliers:

On 24 January 2022, Cudgegong informed Alpine that it agreed to make the requested payment to Alpine for those materials not yet incorporated into the works required by the Contract.

On 25 January 2022, Cudgegong issued a progress certificate in response to Payment Claim 8 which indicated that Cudgegong would pay Alpine, amongst other payments, the requested advance payment of $919,524.31 (Progress Certificate 8).

On about 25 January 2022, Cudgegong paid Alpine the requested advance payment of $919,524.31 for Progress Certificate 8.

Together the two advance payments Cudgegong made to Alpine in respect of Payment Claim 7 and Payment Claim 8 total $1,195,524.32 (excluding GST) (Advance Payments).

In May 2023, Cudgegong discovered that the materials the subject of the Advance Payments were never supplied to the Site, with both RHP and Topsteel having confirmed that they never received any payments from Alpine.

On 4 and 18 May 2023, Cudgegong sent letters of demand to Alpine requiring a refund of the Advance Payments.

On 31 May 2023, the solicitors for Alpine responded to the two letters of demand by refusing to refund the Advance Payments and stating that although $440,000 of the Advance Payments had been used to pay A-Tech, the balance of the Advance Payments was used to pay unrelated suppliers.

On 28 July 2023, Cudgegong commenced these proceedings against Alpine by filing a summons seeking restitution to Cudgegong of an amount of $1,195,524.32 plus GST, or alternatively damages, with an accompanying Technology and Construction List Statement. Cudgegong currently alleges that Alpine received funds from Cudgegong to pay for specific materials in the project at the Site, but did not deliver the materials the subject of the Advance Payments to the Site, and therefore there was a total failure of consideration for the Advance Payments entitling Cudgegong to restitution.

On 19 September 2023, Alpine went into liquidation pursuant to a creditors’ voluntary winding up resolution. Mohammad Najjar of Vanguard Insolvency Australia Pty Ltd (Liquidator) was appointed as the liquidator of Alpine. As a result, these proceedings were stayed.

On 14 May 2024, Cudgegong’s solicitors wrote to the Liquidator advising that it intended to seek leave to proceed against Alpine and asked to be informed of the Liquidator’s attitude to the proposed application.

On 17 May 2024, Cudgegong filed and served on the Liquidator the present application in the form of the notice of motion of that date and the supporting affidavit.

On 30 May 2024, the Liquidator wrote to Cudgegong’s solicitors stating that he neither opposes nor consents to the application for leave to proceed.

Section 500(2) of the Corporations Act provides:

In ZOLL Medical Australia, in the matter of Cardiac Defibrillators Australia Pty Ltd (in liq) v Cardiac Defibrillators Australia Pty Ltd (in liq) [2022] FCA 167, Halley J at [25] conveniently summarised the principles from the authorities which are relevant to the exercise of discretion under s 500(2), saying:

The present case has a particular focus on the factor in subparagraph (g) in Cardiac Defibrillators, which is that leave should generally be granted for a proprietary claim which cannot be accommodated within the proof of debt procedure.

In Re Bigdeal Artist Management Pty Ltd (in liq) [2015] NSWSC 936, Black J dealt with an application for leave under s 500(2) of the Corporations Act in circumstances where a plaintiff (SEQ Pty Ltd) involved in a joint venture agreement for an Australian tour by the American magician, David Copperfield, claimed a proprietary interest in certain monies which were to be held by another party (Investec Bank (Australia) Ltd) to the joint venture agreement for the purposes of holding and paying monies to suppliers for the tour. Another party to the joint venture (Bigdeal Artist Management Pty Ltd) went into liquidation and the monies which had been held for the joint venture were then paid to the liquidators of Bigdeal. SEQ commenced proceedings against Bigdeal and Investec to recover the funds paid to the liquidators of Bigdeal on the basis that they were paid from trust monies as volunteers and subject to the trust. Black J granted leave under s 500(2) of the Corporations Act for the claim to be pursued against Bigdeal, stating at [16]:

I am satisfied that in these proceedings Cudgegong would be entitled to claim to have a proprietary interest in the Advance Payments to Alpine on express trust for a specific purpose and that, contrary to the purpose for which those funds would be used, the payments were made by Alpine to certain third parties as volunteers. Cudgegong would be entitled to seek to determine whether it has claims against those third parties who received the funds subject to the trust as volunteers.

As the form of the summons and Technology and Construction List Statement currently stands, that proprietary claim has not been stated against Alpine. Instead, a restitutionary claim has been made for monies had and received based on a total failure of consideration, which has been expressed as a personal claim, not a proprietary one.

As the claim that could be made by Cudgegong on the amendment of the summons and Technology and Construction List Statement is of a proprietary nature, it is not one which can be the subject of adjudication as part of the proof of debt procedure conducted by the Liquidator. I am also satisfied there is a serious dispute as to whether the payments were held by Alpine on trust and whether Cudgegong is entitled to a proprietary remedy for them.

The grant of leave will not dissipate Alpine’s assets because Cudgegong proposes as a term of the grant of leave not to be entitled to enforce any judgment or costs order against Alpine. Accordingly, it will not prejudice the interests of the creditors of Alpine but it may in fact benefit them if Cudgegong is able to recover its claims from the subcontractors and not be a creditor of Alpine.

The potential claim against the subcontractors is entirely dependent on Cudgegong first proving its claim against Alpine that the funds were received on trust. It is therefore necessary for Cudgegong to continue the current proceedings and then join as parties in those proceedings the subcontractors who received the funds if and when their identity is known.

For the reasons stated above, I propose to make the following orders: