Australia, July 28 -- New South Wales Land and Environment Court issued text of the following judgement on June 27:

1. This concerns two applications. By an originating process filed on 10 September 2024, the plaintiff applies for an order under s 459A of the Corporations Act 2001 (Cth) that the defendant be wound up in insolvency. By an amended interlocutory process filed on 10 June 2025, the defendant seeks relief on the basis that the proceedings being prosecuted by the plaintiff is an abuse of process and, effectively in the alternative, leave under s 459S to oppose the winding up application on the ground that there is a genuine dispute.

2. For the reasons given below, I propose to dismiss both applications.

Relevant background

3. The plaintiff owns commercial premises at Harris Street in Ultimo. It entered into a lease of those premises to the defendant on 29 August 2023. There was a dispute almost immediately about various matters, including about fit-out works and the suitability of the premises. Breach notices were served by the plaintiff in early 2024. In May 2024, the plaintiff took possession of the premises.

4. On 22 May 2024, the plaintiff served a statutory demand on the defendant claiming $132,000 as a debt in respect of unpaid rent said to be owing under the lease for the period October 2023 to May 2024. There is no issue about the proper service of the demand.

5. On 5 June 2024, the (former) solicitors for the defendant wrote to the solicitors for the plaintiff to assert that there was a genuine dispute about the debt. The letter set out the basis for the dispute. The letter invited the plaintiff to withdraw the statutory demand. The plaintiff did not take up the invitation.

6. The opportunity for the defendant to apply to set aside the statutory demand under s 459G expired on 12 June 2024. The defendant commenced proceedings in the Federal Court of Australia to set aside the statutory demand on 13 June 2024. The defendant contends that the failure to commence the proceedings within time was the fault of its former lawyers. The Federal Court proceedings were dismissed with costs in August 2024.

7. On 28 August 2024, the parties, with their lawyers, attended a mediation. A document called a "Binding Heads of Agreement" was executed on that day. It is an important document and it is appropriate to set out the relevant parts:

The Parties entered into this Binding Heads of Agreement on the basis that they are immediately bound regardless of whether or not a formal document comes into existence, however the Parties intend to bring into existence a more fulsome document.

1. On or before 9 September 2024 Doughkyo is to pay Good Fortune the amount of $180,000 inclusive of:

a. Rent payable by Doughkyo to Good Fortune pursuant to the lease entered on or about 29 August 2023 (Lease) which is the subject matter of the Federal Court Proceedings NSD758/2024 (Federal Court Proceedings).

b. Order for costs made on 9 August 2024 in the Federal Court Proceedings in the agreed amount of $45,000 inclusive of GST.

2. Subject to compliance by Doughkyo of its obligations in paragraph 1, Good Fortune covenants not to commence any wind-up proceedings against Doughkyo in relation to the creditor's statutory demand dated 20 May 2024.

3. Subject to paragraph 4 below, Doughkyo undertakes and covenants to enter into a lease with Good Fortune in the same terms as the Lease, for the same premises as the Lease, subject to the following: ...

e. Doughkyo is responsible for undertaking any fit out works, including electrical works that may need to be undertaken at the premises to enable it to conduct its business at the premises, including without limitation the electrical upgrade work which is the subject matter of the dispute in the Federal Court Proceedings...

4. Doughkyo undertakes and covenants to execute and return the lease referred to in paragraph 3 above, together with disclosure statement within 7 calendar days of receipt of the draft lease and disclosure statement.

5. Doughkyo releases Good Fortune from all Claims in relation to the Lease.

6. Subject to compliance by Doughkyo with its obligations within this Binding Heads of Agreement, Good Fortune releases Doughkyo from all Claims in relation to the Lease and the order for costs in the Federal Court Proceedings.

The contemplated "more fulsome document" never eventuated but there is no dispute that this was a binding contract upon execution. There is a dispute about the proper construction and operation of the agreement.

*Rest of the document can be viewed at: (https://www.caselaw.nsw.gov.au/decision/197aae61f4e3dc3bc4a7c534)

Disclaimer: Curated by HT Syndication.