The Supreme Court judgment opens the way for further claims by administrators of building companies before they liquidate a failed business.
Beleaguered building companies have scored a win with the NSW Supreme Court giving businesses in administration a legal way to claw back money owed to them before they failed, potentially boosting the pool of funds available to creditors.
“Recoveries can both assist a construction company that enters into administration to fund a deed of company arrangement and be able to continue to trade or return a far better result for creditors.”The judgment was likely to set a precedent that would be followed in all other states and territories except Victoria, where a 2016 judgment had already declared an insolvent company could not use security of payments provisions, Mr Terry-Whitall said.
The case stemmed from the failure of Kennedy Civil Contracting, engaged by Richard Crookes to carry out civil, stormwater and associated works for a project at Bankstown Airport. It’s an unwelcome development for builders, as it ties up capital in an already cashflow-thin industry. It is likely to be appealed.
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