VA’s hypothetical risks no match for actual prejudice

Worrells’ Graeme Beattie is having a tense time balancing his hypothetical concerns against the current real world risk to creditors in his capacity as voluntary administrator (VA) of construction group Sharvain Facades Pty Ltd.

“…. in my view, the hypothetical risk identified by the Administrator is not a meaningful risk because s 32B of the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOPA) does not operate to prevent the enforcement of the NSWSC judgment.” Justice Cameron Moore.

Beattie was appointed on March 4, about a week after Sharvain served a payment claim on Roberts Co (NSW) Pty Ltd (Roberts) in relation to the Westmead Children’s Hospital development project.

Because Roberts didn’t respond with a payments schedule within the time limit under the Building and Construction Industry Security of Payment Act 1999 (NSW) SOPA Bettie directed Sharvain in late March to commence proceedings in the New South Wales Supreme Court to recover $3,207,999.03 plus interest, being the unpaid portion of its payment claim.

The conduct of the SOPA proceedings has meant Beattie has had to apply three times for orders extending the convening period for the second meeting in circumstances where no DoCA is being proposed.

Judgment in the Supreme Court proceedings was delivered on June 18 but Beattie, who made application for a third extension of the convening period on the 13th, has several pressing concerns, which are outlined in the judgment of Justice Cameron Moore in: Beattie (Administrator), in the matter of Sharvain Facades Pty Ltd (Administrator Appointed) (No 3) [2025] FCA 671.

Roberts could of course seek a stay pending an appeal, further delaying Beattie’s ability to convene the second meeting in circumstances where Sharvain staff will be tonguing to liquidate so they can claim their entitlements through FEG.

But Beattie foresaw a potential trap in a liquidation on the basis that if Sharvain were placed into liquidation, somebody could potentially argue that the enforcement of the Supreme Court judgment against Roberts is prevented by operation of s 32B of the SOPA.

“The Administrator is concerned that, in that event, Sharvain would have to enforce its money claim against Roberts by way of a conventional claim for breach of contract, which would give rise to delay, costs and uncertainty for Sharvain to the potential prejudice of its creditors,” Justice Cameron Moore said.

“The Administrator is therefore concerned with a hypothetical prejudice to creditors that might result if s 32B is construed in a way that prevents the enforcement of a judgment of the NSWSC and Sharvain is forced to pursue its claim against Roberts in another way.

“On the other hand, the Administrator has also identified an actual prejudice to employees of Sharvain which will result if an order is made delaying the second creditors’ meeting.

“In his first affidavit in these proceedings dated 26 March 2025, the Administrator estimated that there was an amount of approximately $1,260,820 in unpaid employee entitlements.

“In the event that the liquidation of Sharvain is delayed, this will delay the payment to employees of their entitlements, either by the company or pursuant to the Fair Entitlements Guarantee scheme (FEG) under the Fair Entitlements Guarantee Act 2012 (Cth).

“I accept that, if the Administrator’s feared scenario came about, that could cause prejudice to Sharvain and its creditors,” he said.

However, in my view, the hypothetical risk identified by the Administrator is not a meaningful risk because s 32B of the SOPA does not operate to prevent the enforcement of the NSWSC judgment.

“In those circumstances, the hypothetical risk identified by the Administrator is decisively outweighed by the actual prejudice to employees that would result from any further delay to the second meeting of creditors.”