1A Eden Pty Limited [2021] NSWSC 82

“There’s no deadlock, so there’s no windup!”

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P, a director, applied to wind up a Co that was Tee of a unit trust: [2]

P’s fellow directors were S and D. P said there was a deadlock and relations had broken down: [4]

P and S were builders. D was a property developer. The 3 agreed to found the Co to develop a site together with P and S to share 50% of the profits and D to take the remaining half as unit holders: [13]

There was no written agreement: [12]

In 2013 the Co was established and the unit trust settled: [16]

Even though it was intended an entity of P and S would do the building work, a new cheaper contractor was found: [26]

In 2016 the building was completed: [37]

In 2016 P, S and D agreed to take unsold apartments as profit share with S also taking $500K cash: [38]

In 2017 the CO declared profit of ~$8m: [40]

The parties agreed on notional values of units for the purpose of profit distribution: [41], [42]

The OC commenced building defect proceedings against the Co and the contractor: [45]

In 2018 P and S received their apartments, though D did not: [52]

In 2019 the Co, as part of the defect proceedings, was obliged to pay $15K for expert fees. D did not agree to contribute and the Co was then out of money. P paid on the Co’s behalf: [57]

P suggested a deadlock had arisen about paying the expert: [58], [59]

P lodged caveats over the Co’s properties which were to be transferred to D: [61]

P took the approach that while P and S should retain their profits (via apartment ownership), the apartments to be transferred to D ought to be retained for any liability the Co might have pursuant to the defect proceedings: [64]

D sued seeking (among other things) to remove the caveats and restore the 50:25:25 distribution: [66] - [71]

P suggested the profit calcs had a $156K shortfall for which P blamed D: [74]

D denied any deadlock and proposed an audit: [76], [77]

The Court found the suggestion of a breakdown of the relationship artificial. From 2013 to 2019 P was happy to leave admin and accounting in D’s hands, the venture made $8m in profit, *and* all agreed on its distribution: [102]

The court considered this windup application, which might thwart the caveat proceedings and defect proceedings, was “infused with self interest”: [107]

While a liquidator could investigate defending claims and seeking an account, the cost may be disproportionate noting P was chasing an estimated $156K. Nor did P undertake to fund the liquidator: [108]

Winding up would affect the OC adversely. Winding up is a last resort and alternative, less drastic remedies are available: [110]

The application was dismissed. Costs followed the event: [111]