TGIF 23 October 2026 – Failed property developments: when a just and equitable winding up provides an exit

This week’s TGIF considers a recent New South Wales Supreme Court decision, In the matter of RD Beechworth Pty Limited [2026] NSWSC 1098, where the Court ordered the winding up a property development vehicle under section 461(1)(k) of the Corporations Act 2001 (Cth) on the just and equitable ground as the vehicle’s sole project was commercially unviable and there was no realistic prospect of obtaining finance.

Key takeaways

• Section 461(1)(k) is an available exit tool where formal insolvency is hard to prove. For stakeholders in single-project vehicles, the just and equitable ground lets a court look at substance, such as a stalled project. The plaintiffs in this case succeeded by establishing project unviability, lack of financing, and a good reason to believe the Company was insolvent.
   
• A company resisting a winding up needs evidence of viability. Directors and controllers of development SPVs should be ready to prove viability with internal budgets, feasibility studies, expert evidence and documented funding commitments. The Company, in this instance, tendered no budget or feasibility analysis and presented no competing experts. 
   
• Failing to engage with an exit proposal can be fatal under section 467(4). Winding up is a remedy of last resort, and it will be refused where another remedy is reasonably available. Here, the Company did not respond to a buy-out offer, and the directors made no buy-out offer of their own, so the Court was not satisfied that any alternative remedy was available.

Background

RD Beechworth Pty Ltd (the Company) was incorporated in December 2021 to acquire two adjoining residential properties in Pymble, subdivide them into four lots, build and then sell four houses, and share the profits among its shareholders.

Its directors, Mr Ning and Mr Li, controlled 60% of the shares through their own entities. The plaintiffs, Long Spring Pty Limited and Forevet Florish Pty Limited, held the remaining 40% and advanced an unsecured $5 million towards the land acquisition, making them both minority shareholders and unsecured creditors. Two secured loans totalling $6.35 million funded the balance.

The directors also caused the Company, without telling the plaintiffs, to enter into a Services Agreement with Rudder Development Pty Ltd (Rudder), a company they controlled, for $30,000 plus GST a month. By the time of the hearing, about $1.815 million in fees had accrued unpaid.

Subdivision consent was obtained on appeal in the Land and Environment Court in February 2024, but the stage two development application for the houses was not lodged until June 2026, after proceedings began. No work had commenced.

The plaintiffs first sued to recover their advance, but in Long Spring Pty Ltd v RD Beechworth Pty Ltd [2025] NSWSC 437 Peden J held it was repayable only on sale of the completed houses. The plaintiffs then applied to wind up the Company under section 461(1)(k).

Applicable principles

The just and equitable ground is deliberately broad. Nixon J referred to the principles in ASIC v ABC Fund Managers Ltd (No 2) (2001) 39 ACSR 443: lack of confidence in the conduct and management of the company’s affairs; a risk to the public interest; and a reluctance to wind up a solvent company. Good reason to believe a company is insolvent can be weighed under section 461(1)(k), whether or not section 459A is satisfied.

Was the project commercially viable?

Viability was the central factual question. The plaintiffs relied on planning, quantity surveying and valuation experts. The methodology was attacked in cross-examination but no competing expert evidence was led.

Nixon J accepted the plaintiffs’ experts. Estimated construction costs of about $15.27 million were consistent with the directors’ own 2021 estimate (adjusted for escalation) and figures given to the Company’s finance broker. Against an as-if-complete value of about $22.64 million net of GST, the project was projected to lose about $13.03 million.

Even assuming a 25% rise in property values, the loss would be about $5.4 million before Rudder fees, and about $3.3 million if reduced-scope construction costs were also assumed. With no competing evidence, budget or feasibility analysis, the project was found commercially unviable.

Could the Company obtain finance?

Construction finance was undisputedly required, and no binding offer of finance had been received. A 2023 bank letter about land loans, the directors’ track record and an unsupported summary of Mr Ning’s assets carried little or no weight.

The facility sought, about $28.02 million, represented a loan-to-value ratio of nearly 125% of the only valuation in evidence. There was no evidence any Rudder group entity would fund the shortfall, though that evidence could have been adduced by the directors. The Court declined to draw inferences in the Company’s favour and found no commercially realistic possibility of finance.

Was the Company insolvent?

The Company stressed it had paid all debts other than the Rudder fees as they fell due. Nixon J rejected this explanation because the section 95A insolvency test is prospective. The insolvency expert identified an annual shortfall of about $570,000 between income and holding costs, exhausted external funding, and reliance on related-party support with no evidence it would continue.

The Court refused to disregard the undemanded Rudder fees: they were payable monthly in advance, had presumably not been demanded because the directors knew the Company could not pay, and Rudder had given no undertaking not to demand them.

Nixon J found good reason to believe the Company was cash flow and balance sheet insolvent; remaining uncertainty did not matter on a just and equitable application.

Rejected arguments

Three grounds failed. First, the Company’s substratum had not failed: it was still pursuing its purpose, albeit with no realistic prospect of success. Second, the breakdown of trust was insufficient, as this was not a quasi-partnership and the plaintiffs never expected a management role. Third, the Rudder arrangements and record-keeping concerns did not alone justify winding up, and no breach of directors’ duties was alleged, though liquidators may investigate those matters.

Why winding up was just and equitable

The lack of finance and the project’s unviability supported three conclusions: 

• there was good reason to believe the Company was insolvent;
   
• engaging builders and consultants would create a significant risk of insolvent trading and prejudice to future creditors; and
   
• pursuing a project with no realistic prospect of completion would further erode equity and prejudice recovery. 

Together, these demonstrated a lack of confidence in the conduct of the Company’s affairs and a risk to the public interest.

No adequate alternative remedy

Under section 467(4), the Company argued a buy-out was available and that the plaintiffs were trying to outflank Peden J’s judgment. Both arguments failed. The plaintiffs’ open $5.5 million exit offer went unanswered, with no counteroffer. No abuse of process was alleged, the loan was pleaded consistently with Peden J’s findings, and the Company could not show the plaintiffs would do better if the project continued. Liquidators were appointed, with the plaintiffs’ costs to be costs in the winding up under section 466(2).

Comment

The decision confirms the just and equitable ground is an available tool for stakeholders in stalled single-asset vehicles where formal insolvency is difficult to prove, and that a court will undertake a methodical commercial assessment of viability, even where the company resisting the winding up leads minimal evidence.

For directors of development SPVs, the lesson is obvious: be ready to prove viability with budgets, feasibility studies, expert evidence and documented funding commitments. An experienced developer’s instincts will not suffice.

Finally, engage constructively with exit proposals, even those made after proceedings begin. The Company’s silence on the buy-out offer and absence of alternative buy-out offer was fatal to its section 467(4) argument.