Owners Corp out to make VAs rue casting vote

No doubt Andrew Spring and Peter Moore expected challenges when they accepted appointments last year as voluntary administrators (VAs) of embattled builder Academy Construction & Development Pty Ltd (AC&D).

“At this stage we have no reason to doubt the account provided by the Director”. Jirsch Sutherland’s Andrew Spring and Peter Moore.

At the time the referrer came calling in July 2023 AC&D had been defending proceedings commenced in the NSW Supreme Court in 2021 by an Owners Corporation claiming almost $8 million in compensation for alleged defects in a residential development in Botany, NSW that AC&D completed in 2015.

After AC&D’s sole director concluded that defending the proceedings was unaffordable he resolved to appoint the Jirsch Sutherland partners as VAs on August 31, 2023.

At the second meeting of creditors in October Spring used his casting vote to break the deadlock on a DoCA proposal that split unsecured creditors into two classes.

Class A creditors would receive 100 cents in the dollar. Class B, a class seemingly created solely for the Owners Corporation, would receive 2.4 cents in the dollar.

Unsurprisingly the Owners Corporation decided that it would need to terminate what it saw as a hostile DoCA before the defect proceedings could continue.

As a result the parties are in a whirl preparing for trial before Justice Ashley Black in the NSW Supreme Court on June 13 and on Monday they came before chief judge in equity David Hammerschlag to resolve a spat over a notice to produce.

The Owners Corporation wants a copy of the company’s running account via full access to its Xero software. The purpose apparently is to shed light on the relationship between the company and a related party, Academy Constructions Pty Ltd.

The court heard however that whilst the notice was issued to Spring and Moore in their capacities as deed administrators as well as defendants, the books and records have been returned to the director upon execution of the DoCA.

The court also heard that the Owners Corporation would argue before Justice Black that the information contained in Spring and Moore’s report to creditors ahead of the second meeting didn’t justify their recommendation that creditors vote in favour of the deed.

Further, the Owners Corporation is preparing to argue that the provisions of Part 5.3 of the Act were used for an improper purpose because the DoCA stymied investigations and examinations of the director and former director which could be conducted if AC&D was wound up.

According to the VAs’ Report to Creditors issued in September last year the Company has denied that any alleged defects, assuming they exist, are sufficient to justify the amount claimed.

The VAs were told that because the Owners Corporation refused access to the site when the company wanted to prepare and propose a remediation plan the Owners Corporation had effectively relinquished its entitlement to any claim, particularly in circumstances where the proceedings were commenced six years after the development was completed.

“At this stage we have no reason to doubt the account provided by the Director”, Spring and Moore said.

We asked Spring if he and Moore had been indemnified in respect of an adverse costs order but no response had been received as at time of publication.

In the event the termination application is successful it’s almost certain that AC&D will be wound up.

iNO understands DWA Advisory’s Anthony Elkerton and Paul Weston have provided consents.