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

Andrew Orford | Laura Berry | Jazmin Sherrington

Key takeout

• Courts exercise considerable caution in granting leave to proceed against a company in liquidation, particularly in the construction context.
• The threshold for departing from the proof of debt process is high; even complex or high-value claims will generally be dealt with through the insolvency regime.
• The existence of funds paid into court and the complexity of the dispute are not, without more, sufficient to justify continued litigation.
• The risk of prejudice to the general body of creditors is a central consideration and will often outweigh the interests of individual claimants.

Facts

Background

Taringa Property Group Pty Ltd (TPG) engaged Kenik Pty Ltd (Kenik) to design and construct a retail complex.  During construction, Kenik commenced an adjudication application against TPG under the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (BIF Act), resulting in a decision awarding Kenik $4,218,787.  Kenik subsequently obtained judgment against TPG in respect of the adjudicated amount.

TPG sought to have the adjudication decision set aside on the basis of alleged jurisdictional error.  However, the Court dismissed TPG’s application, upholding the validity of the adjudicator’s decision.  We covered this decision in our CLU Adjudicators don’t have to get it right – Construction Law Made Easy.

Following this, TPG applied to the Supreme Court seeking a stay of enforcement of the adjudication judgment, arguing there was a high risk Kenik would be unable to repay the adjudicated amount if it was later found not to be entitled to it.  As a condition of the Court hearing TPG’s application, TPG paid $4,825,708.11 into Court, representing the value of the adjudicator’s decision plus the adjudicator’s fees and interest.  The Court granted the stay, finding the balance of convenience favoured TPG due to Kenik’s financial position.  We covered this decision in our CLU High risk of inability to repay tips the balance in favour of a stay – Construction Law Made Easy.

Application for Leave

TPG and a related entity then commenced proceedings against Kenik, seeking to recover alleged overpayments of $5.3 million and damages for breach of contract of $6.3 million.  By this time, TPG had paid $6.3 million into Court in connection with the stay of the adjudication judgment.  Part of this amount was declared by the Court to be monies retained pursuant to the BIF Act in respect of yet to be determined subcontractors’ charges claims and payment withholding requests.

In early 2025, Kenik was placed into liquidation, affecting 216 unsecured creditors owed over $10 million and 21 secured creditors.  The liquidators identified over $14.7 million in potential recovery actions, including unfair preferences and uncommercial transactions.

TPG subsequently applied for leave under s 471B of the Corporations Act 2001 (Cth) (Corporations Act) to continue its proceedings against Kenik, rather than pursuing its claim by way of proof of debt.  TPG argued that the significance of the claims, the existence of funds held in Court, and the need to determine related subcontractor claims justified departure from the usual insolvency process.

Decision

The court dismissed TPG’s application for leave to proceed under s 471B of the Corporations Act.

Justice Williams accepted that there was a serious issue to be tried but held that the relevant factors did not amount to a good reason to depart from the proof of debt regime.  The Court undertook a detailed balancing exercise, considering:

• the seriousness and complexity of the claims;
• the stage of the proceedings and the work already undertaken;
• the existence of multiple related proceedings (including subcontractor claims);
• the resources available to the liquidators and the likely costs of continued litigation; and
• the potential prejudice to the general body of creditors if the litigation was allowed to continue.

While TPG pointed to the significant sums at stake and the complexity of the dispute, the Court found that these factors were not unusual in construction insolvency cases, with claims in the millions of dollars not being uncommon in a construction context.  Further, the funds paid into Court did not, in itself, justify a grant of leave, as the Court could make appropriate orders for payment out of Court following the proof of debt process or a mediated settlement.

Crucially, the Court found that the grant of leave would cause prejudice to the general body of creditors because of:

• the considerable litigation costs required to progress the proceeding to trial and conduct the trial itself (estimated at $415,000 to $670,000 to prepare for trial and attend mediation, not including the trial itself);
• the liquidator’s funding position; and
• the potential returns to creditors.

The practical reality of granting leave would be to force the liquidators to fund this proceeding at the expense of other investigations and to the prejudice of other creditors.

The Court concluded that the issues in the proceeding could be dealt with through the proof of debt process and as a result, the likely prejudice to creditors if leave to proceed was granted outweighed any prejudice to TPG.  The policy of ensuring equal treatment of creditors and minimising the depletion of the insolvent company’s assets was paramount, with the purpose of s 471B being to prevent a company in liquidation from being subjected to a multiplicity of actions which would be both expensive and time-consuming, and, in some cases, unnecessary.