Australian Securities and Investments Commission v Edwards [2013] NSWSC 1008 | Case summary

Judgment 1Ashington Bayswater Pty Limited ("Company") was incorporated on 28 May 2004 and Mr Craig Anderson and Mr Craig Minahan were appointed and remained as its directors (Ex P1, tab 3). The Company operated as a commercial property developer in the Sydney central business district and, in particular, it undertook a substantial property development in Potts Point from 2006, involving the conversion of a former hotel into a mixed use project incorporating retail, a boutique hotel, office units and a residential penthouse. The Company borrowed funds from third party financiers and also from the defendant, Bayswater Capital Pty Limited ("Bayswater Capital") as trustee of the Cross + Trust. A creditor's winding up application was filed in this Court on 22 December 2011 and the liquidator ("Liquidator") was appointed to the Company on 9 February 2012 (Ex P1, tab 2). 2The Liquidator seeks an order under s 588FF of the Corporations Act 2001 (Cth) discharging a fixed and floating charge ("Charge") granted by the Company to Bayswater Capital by deed dated 9 September 2010 or, alternatively, seeks an order under s 588FF of the Corporations Act declaring the Charge to be void or unenforceable. Second, the Liquidator seeks an order under s 588FF of the Corporations Act directing Bayswater Capital to assign to the Company certain property, rights and interests which were assigned to it by the Company under clause 2.1 of a deed dated 3 June 2011 ("Assignment Deed") or alternatively declaring that assignment to be void. Third, the Liquidator also seeks an order under s 588FF of the Corporations Act directing Bayswater Capital to pay an amount to the Company equal to the amount paid by the Company in eight payments in August - November 2011 ("Payments"). The Company's solvency as at September 2010 3The Liquidator's primary position is that the Company was insolvent when the Charge was granted on 9 September 2010 and at all relevant times thereafter. Section 95A(1) of the Corporations Act has effect that, relevantly, the Company was solvent if and only if it was able to pay all its debts, as and when they became due and payable. Section 95A(2) has effect that a person who is not solvent is insolvent. That definition adopts a "cashflow test" of insolvency which turns upon the income sources available to the Company and the expenditure obligations that it has to meet, rather than a balance sheet test which focuses on the value of the Company's assets and liabilities reflected in its books, although a balance sheet test can provide context for the application of the cashflow test: Southern Cross Interiors Pty Ltd (in liq) v Deputy Commissioner of Taxation [2001] NSWSC 621; (2001) 53 NSWLR 213; (2001) 39 ACSR 305; Australian Securities and Investments Commission v Plymin (No 1) [2003] VSC 123; (2003) 46 ACSR 126; (2003) 21 ACLC 700 at [370]ff. 4Whether the Company was able to pay its debts as and when they fall due and payable is a question of fact to be determined objectively and without hindsight in all the circumstances, including the nature of its assets and business, and the court will have regard to commercial realities in that regard: Southern Cross Interiors Pty Ltd (in liq) v Deputy Commissioner of Taxation above at [54]; Lewis v Doran [2005] NSWCA 243; (2005) 54 ACSR 410 at [103]; Bentley Smythe Pty Ltd v Anton Fabrications (NSW) Pty Ltd [2011] NSWSC 186; (2011) 248 FLR 384 at [48]-[49]. In Playspace Playground Pty Ltd v Osborn [2009] FCA 1486 at [40], [43]; Reeves J observed that a determination of solvency is not based on a simple analysis of a company's current assets and liabilities or liquidity at a particular point in time and must involve a consideration of its financial position in its entirety, including matters such as expected profits and other sources of income and funding. His Honour also suggested that the Bringinshaw standard is applicable in determining whether a company was insolvent and I have had regard to the serious character of a finding of insolvency in reaching the findings made below. 5The Liquidator relied on his report dated 12 February 2013 as to the Company's solvency (Liquidator's affidavit 12.2.2013, Annexure A) ("Solvency Report"). That report was structured by reference to the indicia of insolvency referred to in Australian Securities and Investments Commission v Plymin (No 1) above at [386], where Mandie J identified several indicia of insolvency including: continuing losses; liquidity ratios below 1; overdue Commonwealth and State taxes; a poor relationship with the lenders, including any inability to borrow further funds; no access to alternative finance; inability to raise further equity capital; suppliers placing a company on cash on delivery arrangements or otherwise demanding special payments before resuming supply; creditors unpaid outside trading terms; the issue of postdated cheques; dishonoured cheques; special arrangements with selected creditors; solicitors' letters, summonses, judgments or warrants issued against a company; payments to creditors of rounded sums not reconcilable to specific invoices; and inability to produce timely and accurate financial information to display a company's trading performance and financial position and make reliable forecasts. In Re Damalock Pty Ltd (in liq); Lewis and Carter as liquidators of Damalock Pty Ltd (in liq) v VI SA Australia Pty Ltd [2008] FCA 1801; (2008) 68 ACSR 493, Mansfield J observed at [16] that: "In any particular case, one or more of those factors, or other factors, may have particular significance and one or more of them may not exist. The absence of one or more of those factors does not, of itself, establish solvency." In Morris v Danoz Directions Pty Ltd (in liq) (No 2) [2010] FCA 836 at [13], Perram J described those indicia as 'common sense indicators' of a company's capacity to pay its debts as and when they fall due. 6The Liquidator's evidence was that seven of the fifteen indicia that he addressed indicated insolvency, and the Liquidator did not address the other indicia, generally on the basis that he lacked sufficient information to do so. The Liquidator expressed the opinion that: "Based on the indicia considered above, it is my opinion that for the purpose of sections 95A and 588G of the Act, the Company was insolvent as at 9 September 2010 and at all relevant times until 9 February 2012. My conclusion is based on the fact that, of the indicia of which I have information allowing me to comment, each suggests the Company was insolvent." Notwithstanding the relevance of the indicia of insolvency identified in Plymin, it seems to me that there is some force in Bayswater Capital's submission that the Liquidator's focus on them tended to distract attention from the primary question whether the Company was able to meet its debts as and when they fall due. However, that question was ultimately addressed in detail in the evidence and cross-examination to which I will refer below. 7The Liquidator adhered, in cross-examination, to the opinion expressed in his solvency report that the Company was insolvent as at 9 September 2010 and at all relevant times thereafter (T119). It should be recognised that the Liquidator was unable to address the detail of several issues raised with him in cross-examination, referring to his need to review his work papers in order to do so (for example, T15). The Liquidator was also cross-examined as to the extent to which he had regard to source documents rather than MYOB data, and there was a debate as to the inferences that should be drawn from that cross-examination (T26). In my view, the Liquidator could properly have had primary regard to the MYOB data, which it appears was the Company's primary financial records. Since the Company's solvency must be assessed at 9 September 2010 in respect of the Charge, at 3 June 2011 in respect of the Assignment and from August 2011 in respect of the Payments, it is not necessary to have regard to the Liquidator's consideration of the Company's position as at the date of the winding up application or the date of his appointment in the Solvency Report. 8Bayswater Capital relied on the evidence of its company secretary, Mr Burkett. Mr Burkett was a chartered accountant, member of the Institute of Chartered Accountants and had been an accountant for approximately 30 years including working in large and small accounting practices and had 15 years experience in public and private companies, including as chief financial officer of the Ashington group of companies from 2003 to 2006 and later moved into the property sales area in 2008 as the Ashington Group grew (T44). He was a director of Bayswater Capital and had been a director of the Company from May 2004 until October 2006. Mr Burkett's affidavit evidence was directed largely to the accounting treatment of items in the Company's accounts. 9Mr Burkett was cross-examined at some length and made a number of concessions in cross-examination that were adverse to Bayswater Capital's position. Mr Bennett, who appears for Bayswater Capital, contends that less weight should be given to Mr Burkett's agreement to matters put to him in cross-examination than to his detailed affidavit evidence, and that Mr Burkett was a "compliant witness" in cross-examination from the point at which a certificate under s 128 of the Evidence Act 1995 (Cth) was given to him dealing with certain information provided by the Company to the Australian Taxation Office ("ATO"). It seems to me that Mr Burkett's evidence on cross-examination, so far as it amounted to admissions against Bayswater Capital's interests, should be given significant weight. I will refer to particular aspects of that evidence, and Bayswater Capital's criticisms of it, below. 10Bayswater Capital also relied on evidence of its director, Mr Anderson. Mr Anderson's evidence was that the Company had sufficient cashflow at the relevant times, and that the debts owed to the ATO and Banksia Mortgages Limited ("Banksia") (to which I will refer below) were both subject to agreed payment terms (Anderson [18], [23]-[24]). Mr Anderson's evidence was also that, at the date of entry into the Charge in September 2010, the Company had consistent cashflow from its primary business being the sale of individual strata lots at the property as well as rental income from leased suites; had a debt facility with Banksia which allowed it to receive 35% of the proceeds of sale of each strata lot; had the benefit of an ongoing flexible debt facility provided by Bayswater Capital under the terms of the secured loan; had an excess of assets over liabilities (the last statement being admitted as a submission only); and was meeting all of its obligations as and when they fell due (Anderson 19.3.2013 [32]). In cross-examination, Mr Anderson's evidence was that the Company's cashflow was positive at the relevant times (T119) and he contended the Company was solvent at 9 September 2010 and for some time thereafter. 11For the reasons set out below, it seems to me that several aspects of Mr Anderson's reasoning as to the Company's solvency have been falsified. First, the Company's cashflow from the sale of individual strata lots was plainly not consistent, although attempts were made to bolster it by sales to related parties; Bayswater Capital had made no commitment to provide ongoing debt under the terms of its facility agreement with the Company; and the Company was not able to amounts then due to the Office of State Revenue ("OSR") and was not in fact meeting its liabilities to other creditors when due. I should add that Mr Anderson often gave non-responsive answers in cross-examination or did not directly address questions, and there was a degree of inconsistency in his evidence as to the level of his involvement in the Company's day-to-day operations. The Liquidator also contends that several payments made by the Company to related parties weigh strongly against Mr Anderson's credit. I do not consider it necessary to reach a finding as to this matter given the other findings that I have reached below. Information provided to the Australian Tax Office 12The Deputy Commissioner of Taxation served a statutory demand on the Company dated 28 June 2010 in reliance on a claimed debt of $299,369.66 (Liquidator's Affidavit, 29 April 2013, Annexure B.) Mr Anderson suggested in cross-examination that, as at 16 July 2010, "an amount of tax [was] due that it [the Company] preferred not to pay at that time" (T122). I do not accept that, given the matters to which I will refer below, the Company's position in respect of that debt was merely one of preference as distinct from inability to pay that debt at that time. 13On 16 July 2010, the Company's accountants wrote to the Australian Taxation Office ("ATO") (Liquidator's Affidavit, 29 April 2013, Annexure A) submitting a repayment proposal and attaching a balance sheet and cashflow forecast for the Company. The Liquidator relies on that letter as containing an admission of the Company's insolvency as at that date. Mr Burkett accepted in cross-examination that he saw a draft of this letter before it was sent and approved it and prepared the attached cashflow forecast with Mr Anderson (T59). On the other hand, Mr Anderson's evidence in cross-examination was that it was "highly likely" that the Company's accountants prepared that letter without the Company confirming its contents (T141). I would not readily have accepted that either the accountants or the Company would have taken so irresponsible an approach but, in any event, that evidence was contradicted by Mr Burkett's evidence that he had reviewed the draft letter before it was sent. I do not accept Mr Anderson's evidence as to this matter. 14The letter dated 16 July 2010 to the ATO indicated that, at that date, Banksia was owed $4,257,500 and held mortgages over 18 of the Company's unsold lots plus 5 unsold car spaces, and Grey & Perkins Mortgage Corporation Limited ("GPMC") was owed $336,753 and held mortgages over the two remaining unsold lots. Note 3 to the balance sheet attached to that letter indicated that a debt owed to Henry Davis York "has only recently gone into 30 days" and that another debt owed to Clayton Utz was "90 plus days" and that a balance of $41,905 owed to other trade creditors "is comprised of approximately 15 trade creditors, a mixture of large corporates and small business". 15The balance sheet attached to the letter to the ATO showed a surplus of current assets to current liabilities of $3,211,356, but a substantial debt owed by the Company to Ashington Management Pty Limited ("Ashington Management") was not disclosed in the balance sheet or taken into account in that figure. The cashflow forecast provided by the Company to the ATO with this letter was inconsistent with a cashflow forecast for a similar period prepared by Bayswater Capital for its internal use (Ex D2, tab 10) which did not forecast income from property sales in August 2010, and that cashflow statement also excluded anticipated payments of $225,000 to Ashington Management between September and November 2010. Mr Anderson sought to justify the exclusion of payments to related companies from the balance sheet and cashflow statements provided to the ATO on the basis that the exclusion would assist the ATO to determine the Company's true position (T140). I cannot accept that evidence, since payments due to related parties were capable of affecting the Company's ability to pay other debts when due and the fact that payments totalling $225,000 were to be made to Ashington Management (Ex D2, p 10) would, as the Liquidator points out, have been relevant to the ATO's decision whether to accept the payment plan proposed by the Company. 16Mr Burkett conceded in cross-examination that the cashflow forecast submitted to the ATO was inaccurate because it anticipated completion of the sale of a property in the week ending 13 August 2010 when that could not have occurred because, at the date of the letter, no contract had been exchanged (T60). Although Mr Burkett was referred in re-examination to Exhibit D5, which indicates a sale contract was exchanged some days later on 22 July 2010, that transaction was in fact not completed until 11 October 2010 (Ex D1, tab 9). Bayswater Capital contends that Mr Burkett was too ready to accept that the information provided in the letter to the ATO was inaccurate, where there was other evidence establishing the basis of the forecast of sales of the properties (Ex D5) and it had been communicated to the ATO as a "prediction". In my view, Mr Burkett properly accepted that there was real difficulty with the prediction provided to the ATO given the Company's and his knowledge of the then state of the market for the commercial suites. Mr Burkett also accepted in cross-examination that the effect of the errors in the cashflow forecast provided to the ATO was that the Company could not have paid its debts as predicted in that forecast (T65). 17The letter to the ATO also stated that: "In putting this proposal together, Ashington Bayswater has had to predict when future sales will occur. The ATO will appreciate that Ashington Bayswater cannot predict with certainty the realisation of its sales programme. Accordingly the exact timing and quantum of Ashington Bayswater's ATO repayments may not (in fact, most likely will not) align with the attached cash-flow forecast. Whilst we accept the ATO would prefer greater certainty than this, the nature of property development does not lend itself to certainty of cashflow. Ashington Bayswater nevertheless undertakes to keep the ATO fully informed on the progress of the sales programme. You will note Ashington Bayswater's proposal is that all sundry trade creditors be paid first, several of whom [sic] are small businesses. Ashington Bayswater has negotiated a payment arrangement with Clayton Utz whereby repayment of this outstanding debt will be deferred until September 2010 (though interest will be payable on the unpaid amount). ... The appointment of a Liquidator to Ashington Bayswater at this point in time would cause both Banksia and GPMC to take possession of their respective properties, thereby giving rise to price reductions and a sale process focussed entirely upon the financier being paid out in preference to any other creditor. As Ashington Bayswater's recent refinancing demonstrates, Ashington Bayswater has sufficient equity to ensure all creditors can be paid in full providing creditors are prepared to allow the current sales process [to] take its course [emphasis added]". The reference to the fact that "all sundry trade creditors be paid first, several of whom are small businesses" suggests that debts owed to those creditors were not being paid as and when they fell due. The italicised words at the end of the last paragraph necessarily indicate that the Company could not pay its debts in full if creditors insisted on their payment when due rather than as proceeds became available from the sale of properties. 18By letter dated 25 August 2010, the ATO approved an instalment arrangement for payment of the debt owing at that date, which provided for payments of $3,100 to be made by 31 August 2010 and 30 September 2010 and larger payments thereafter to be made at monthly intervals commencing 30 October 2010 (Ex D1, tab 16). The Company subsequently did not comply with the terms of that arrangement (T70). Bayswater Capital submits that an inference should be drawn from the ATO's entry into the payment arrangement that the ATO had satisfied itself of the Company's ability to make the payments. I do not draw that inference, or any wider inference that the ATO had satisfied itself of the Company's solvency. The ATO's decision to enter that arrangement was in any event plainly made on the basis of the information provided to it which, as noted above, omitted information as to related entities and was unduly optimistic as to property sales. 19It seems to me that the debt owed to the ATO cannot be taken into account as a factor indicating insolvency as at September 2010, when that debt was then the subject of a payment arrangement. However the payments due to the ATO under that arrangement can be taken into account in determining that question, and the fact that those payments were not made supports an inference that the Company was unable to make them when due. Payroll tax debts 20The Liquidator also contends that the Company was insolvent by reason of debts arising under grouping provisions of the Payroll Tax Act 2007 (NSW), by which the Company had become liable for payroll tax due and not paid by Ashington Management. On 29 August 2011 the Company received a notice from the OSR (Ex P4) asserting it was liable for payroll tax because it was joint and several liable with Ashington Management under the grouping provisions of the Payroll Tax Act as follows: Period Payroll Tax liability Interest Total liability 1 July 2007 - 30 June 2008 $4075.85 $14,121.53 $18,197.38 1 July 2008 - 30 June 2009 $194,527.31 $10,558.56 $205,085.87 1 July 2009 - 30 June 2010 $107,341.27 $5,812.31 $113,153.58 1 July 2010 - 24 February 2011 $83,437.71 $0 $83,437.71 Total $389,382.14 $30,492.40 $419,874.54

Those amounts remained unpaid when the Company entered liquidation. 21The Liquidator relies on s 72 of the Payroll Tax Act and points out the grouping provisions applied automatically, unless the Commissioner exercised a discretion not to group the relevant companies. The Liquidator also points out that, under ss 79 and 81 of the Payroll Tax Act, the tax was due and payable by Ashington Management 7 days after the end of each month in which it accrued (or 21 days in the case of liabilities incurred in June) (see also Chief Commissioner of State Revenue v Print National Pty Ltd [2013] NSWCA 96 at [31]); the position is the same for the Company where it was grouped with Ashington Management; and, as a member of a group of entities for payroll tax purposes, the Company was liable to pay as soon as Ashington Management failed to make the payment. 22Section 81 of the Payroll Tax Act 2007 relevantly provides that: "(1) If a member of a group fails to pay an amount that the member is required to pay under this Act in respect of any period, every member of the Group is liable jointly and severally to pay that amount to the Chief Commissioner." Section 81(3) extends that liability to liability for interest and penalty tax and costs and expenses incurred in respect of the recovery of that amount. Section 87 requires the lodgement of a return, within 7 days after the end of a month other than June and within 21 days after the end of the month of June. Mr Bennett points to two possible constructions of this section, one being that liability of a group member arises at the same time as liability of the Company that incurred the payroll tax, 7 days after the end of the month or 21 days in June; and an alternative construction that it is not until the primary group member fails to pay the amount and the OSR takes any relevant administrative steps in relation to the primary group member that other group members can be liable. Mr Bennett concedes that the first construction is consistent with the mechanics of the Payroll Tax Act, although he also contends that the second construction would be practically fair in the sense that a Company cannot pay its liability until it is made aware of it. It seems to me that the section can only be read as having the effect that a liability of the other group member arises on a failure by the primary group member to pay the payroll tax when due. I can see no basis for reading that section as requiring any further decision or act by the OSR so as to give rise to such liability on the part of the other group member. The Liquidator also points out that the Company did not lodge an objection disputing its liability (T74) and, in any event, the making of an objection would not have altered the Company's liability to pay the amount due by reason of s 94 of the Tax Administration Act 1996 (NSW). 23The Liquidator contends that, as at 9 September 2010 (the date of the Charge), the Company had a payroll tax liability in excess of $300,000 excluding interest that was due and payable. The Liquidator contends the application of those provisions, so as to give rise to liability for payroll tax that the Company could not pay when due, meant that it was insolvent irrespective of whether that matter was known to it, prior to the point at which the Office of State Revenue drew its attention to the existence of that debt. Mr Burkett's evidence, admitted as a submission only, was that the liability due to the OSR only came into existence on 19 September 2011, being 21 days after the Company was advised of that liability by the OSR. I cannot accept that submission. The liability existed at all relevant dates, even if the Company was first made aware of it on receipt of that letter. Any lack of awareness of that liability at earlier dates does not otherwise assist Bayswater Capital which does not rely on any defence under s 588FG(1) of the Corporations Act, which would have required that it establish that it received the benefit in good faith and had no reasonable grounds for suspecting insolvency. 24The Liquidator also points out that, as at August 2010, Ashington Management had its own tax liabilities and was borrowing funds from the Company in order to meet them (T78) and that it entered external administration on 29 August 2011 (Ex P4). The Liquidator contends, and I accept, that the commercial reality was that Ashington Management was not in a position to meet the debt and, as a result, the Company's joint and several liability for payroll tax had a real effect on its solvency. Other debts owed by the Company 25As I noted above, the balance sheet attached to the letter dated 16 July 2010 to the ATO also referred to an outstanding debt of $122,022 owed to Clayton Utz that had been invoiced more than 90 days previously and was then subject to a payment arrangement. The Liquidator also relies on a schedule of invoices issued to the Company by its legal advisers, which has handwritten notes made by Mr Burkett (Ex P2, T55), which indicates that, as at 9 September 2010, invoices issued by Clayton Utz in excess of $141,371.40 remained unpaid. Some funds were later paid to Clayton Utz, however Mr Burkett accepted in cross-examination that the remainder of the amount outstanding was never paid (T56) and Clayton Utz is listed as a creditor owed $97,021.55 in the Report as to Affairs (Solvency Report, Annexure C). 26Mr Anderson's evidence in cross-examination was that there was a dispute as to whether the full amount claimed by Clayton Utz was owed by the Company, because that firm had charged more than the quoted amount for its work (T136,148). Mr Anderson gave differing versions as to the amount properly due to Clayton and at one point suggested that Clayton Utz was paid everything the Company's internal legal counsel believed was due (T147). I cannot accept this evidence, and particularly the evidence of the payment made, which is inconsistent with the treatment of that debt in the letter to the ATO dated 16 July 2010 as subject to a repayment plan. The cashflow forecast attached to that letter contemplated full repayment to Clayton Utz and the schedule of legal invoices (Ex P2) in turn record that less than $30,000 was paid to Clayton Utz, which is in turn significantly less than each of the quoted amounts to which Mr Anderson referred. 27The balance sheet attached to the letter dated 16 July 2010 to the ATO also referred to $31,915 owed to HDY that had been invoiced more than 30 days previously. In cross-examination, Mr Anderson suggested that the debt apparently due to HDY was not due because that firm may have been working on a contingency or "incentive" basis (T122, 140). There was no other evidence of such an arrangement and Mr Anderson's evidence was otherwise that he had no direct involvement with HDY and very little involvement in the particular matter as to which that firm was engaged (T121). I do not accept this evidence, which is inconsistent with the treatment of that debt in the cashflow statement provided to the ATO under the cover of the letter dated 16 July 2010, and also with a cashflow forecast referred to in Mr Anderson's affidavit which also provided for repayments of HDY (Ex D2, tab 10) and with the Report as to Affairs completed by Mr Anderson which treated HDY as a creditor of the Company (Solvency Report, Annexure C). 28Mr Burkett accepted in cross-examination that, as at 9 September 2010 the Company was not in a position to pay the amounts due to Clayton Utz and HDY (T75-76). Bayswater Capital seeks to challenge Mr Burkett's acknowledgement that debts had not been paid to Clayton Utz and HDY, given his earlier evidence that he had no dealings with those creditors (T54). However, it seems to me that Mr Burkett was likely to have knowledge of the amounts due to Clayton Utz and HDY, given his role within the Company and his involvement in communications with the ATO, and this did not depend upon his dealing directly with the lawyers in respect of the subject of their retainer. The Company's losses and ratio of current assets to current liabilities 29The Liquidator also observes in his Solvency Report that the Company had continuing losses throughout the relevant period (Solvency Report p 10). That evidence was challenged in Mr Burkett's affidavit evidence, which identified several adjustments that would result in the Company being treated as profitable in respect of its ordinary trading activities. In particular, Mr Burkett's evidence was that the Company made a profit from ordinary operations in the year ended 30 June 2010 and that the loss recorded in that year resulted from the write-down of inventory from historical cost value to net realisable value (Burkett [12]-[19], [23]-[29]). 30Mr Burkett also pointed to several expenses in the period 1 July 2010 and 9 September 2010 that he considered should have been amortised over a longer period (Burkett [29]-[36]). I do not consider this evidence assisted Bayswater Capital, since Mr Burkett conceded in cross-examination that these adjustments would not have assisted the Company's cashflow since the relevant expenses had in fact been incurred and the funds paid out were not then available to meet other debts (T52). 31Mr Burkett also contended, in his affidavit evidence, that the fact that a bank guarantee given to the hotel operator on the Potts Point property and associated bank deposit of $750,000 securing that guarantee was called had "no effect on the company's trading cashflow". That matter appears to me to be more a matter of definition than a matter of substance, since Mr Burkett accepted in cross-examination that the loss of the deposit in fact impacted on the Company's cashflow (T60). I do not consider Mr Burkett's evidence in that regard was of any real assistance to Bayswater Capital. 32The Liquidator concluded in the Solvency Report that the Company's ratio of current assets to current liabilities was less than 1 at all relevant times except 30 June 2010 and that it was only greater than 1 as at 30 June 2010 because of an incorrect recording of GST liability of the Company at that date (Solvency Report p 10). The Liquidator's conclusion depends upon the treatment of the Company's unsold commercial suites as non-current rather than current assets, which is challenged in Mr Burkett's affidavit. Mr Burkett's evidence was that unsold properties held by the Company should be treated, for accounting purposes, as inventory and, therefore, as current assets and would have improved this ratio (Burkett [12]-[17]). Bayswater Capital also points out that the Company's unsold properties were sold within 13 months of its refinancing with Banksia, although largely to related parties (Burkett tab 9, Anderson 19.3.2013 [27]). 33The Liquidator contends, and I accept, that it is not necessary for me to form a view as to whether the commercial suites should be treated as current assets since, even if that treatment was appropriate under accounting standards, that would not establish that they could readily be converted to cash so as to support a conclusion of solvency. Mr Bennett accepted, in submissions for Bayswater Capital, that whether an asset or liability was current or non-current would not affect the Company's cashflow. I should add, however, that it seems to me that the evidence of unsuccessful attempts to sell the commercial suites over an extended period, followed by sales to related parties, would in any event suggest that the unsold commercial suites could not properly be treated as current assets. Ability to realise funds from property sales and other sources 34Mr Burkett accepted in cross-examination that approximately 15 or 20 of 50 office suites in the development undertaken by the Company sold upon the completion of the development in 2007; the Company sold no more than 15 more suites in the three years to June 2010 and 25 lots (including 20 suites and 5 car parks) were unsold as at June 2010; and the global financial crisis depressed buyer interest in the properties making it very hard to predict cashflow (T50). Mr Burkett also acknowledged that, although the intention had been to sell the properties to members of the public, 10 of the 25 properties sold after June 2010 were sold to entities related to the directors of the Company or to Mr Burkett, and those sales would not have occurred had there been sufficient interest from third party buyers (T51). Mr Burkett also accepted in cross-examination that the Company's capacity to pay its creditors depended its ability to sell its properties and that creditors would need to wait for the sales to complete before payment of their debts (T65-66, 68) and also that the sale of the properties was the only source of funds sufficient to meet the Company's outstanding liabilities, where rental income was not sufficient to meet the debts and no director or related entity was capable of lending further funds (T66, 69-70, 72, 76). 35On the other hand, Mr Anderson was reluctant to accept in cross-examination that the properties took longer to sell than had been originally anticipated (T117), a matter which appeared to be plain from the evidence and hardly surprising after the global financial crisis had emerged. In cross-examination, Mr Anderson initially agreed that the purpose of the development was to sell units to the general public (T116) but withdrew from that position when it was put to him that there would have been fewer sales to related entities if the market for property had been stronger (T119). I accept the Liquidator's submission that Mr Burkett's evidence should be preferred to Mr Anderson's evidence as to these matters. 36The Company refinanced earlier loans with St George Bank with Banksia in July 2010 (Anderson [12]-[13]). Mr Anderson suggested in cross-examination that the Company could have met its obligations to the ATO and other creditors by either borrowing further funds from Banksia or by reallocating funds already borrowed from Banksia (T145), although it should be noted that it did not in fact do so. Mr Anderson was unable to provide any clear or cogent explanation of how the funds from the existing loan could have been reallocated to pay the Company's existing debts. There is also no basis on which to conclude that additional funds could have been borrowed from Banksia, still less on a long term basis, where the existing Banksia facility contemplated that the loan to valuation ratio for that loan would be decreased (Ex D1, tab 10, p 3). As the Liquidator points out, there is no evidence that Banksia would, or did, agree to a suggestion in an email from Mr Burkett (Ex P3) that it may be possible to release $190,000 by increasing the loan to valuation ratio to 65%. 37I also do not accept Mr Anderson's suggestion that strata fees had been prepaid by the Company, which is not supported by any documentary evidence and is inconsistent with the level of other debts then unpaid. Mr Anderson's further evidence that $3,784,001.36 was paid to St George from the funds distributed by Banksia on 13 July 2010 when, as at 30 June 2010, the primary facility provided by St George had an outstanding balance of $3,542,020 (T122) appears to be correct, but Mr Anderson acknowledged that the additional funds paid to St George repaid other debt (T133) and there is no basis to infer that that payment was not required. 38In my view, Mr Anderson's evidence in relation to the possible application of the monies obtained from Banksia and payments of strata fees and to St George was not sufficient to demonstrate a "genuine and realistic availability, as a matter of commercial reality" of access to additional funds, using the language of Barrett J in Australian Securities and Investments Commission v Edwards [2005] NSWSC 831; (2005) 54 ACSR 583 at [99]. Conclusion as to solvency as at September 2010 39It seems to me that the matters to which I have referred above - and particularly the size of the Company's debts to the ATO, Clayton Utz, HDY and other trade creditors; the fact that payment arrangements in respect of the debts owed to the ATO and Clayton Utz were not complied with and other debts were overdue; the Company's liabilities to the OSR; and the fact that Company's only source of funds sufficient to meet these debts was revenue generated from the sale of properties that was not sufficient to meet its debts as and when they fell due - demonstrate that the Company was insolvent as at the time the Charge was given in September 2010. That conclusion does not depend on, but is supported by, Mr Burkett's concession in cross-examination that, as at 16 July 2010, the Company did not have sufficient funds to pay its debts to the ATO or its trade creditors (T66, T68) and that, from at least 16 July 2010, the Company did not have sufficient funds to pay its debts as and when they fell due (T79). Presumption of insolvency 40Alternatively, the Liquidator relies on a presumption of insolvency which he contends arises as a result of a failure to maintain proper books and records in accordance with ss 286 and 588E(4) and (9) of the Corporations Act. Section 286 of the Corporations Act requires a company to keep written records that correctly record and explain its transactions and financial position and performance and would enable true and fair financial statements to be prepared and audited. Section 588E(4) establishes a presumption of insolvency arising from a failure to keep and retain proper financial records under s 286 of the Corporations Act. In order to establish the presumption of insolvency for a particular period, the position must be separately and distinctly proved for that period; and it must be proved either that no documents within the description of "financial records" were kept in that period or that the documents which were kept were "deficient as to content", because they did not correctly record and explain the company's transactions and financial position and performance (for example, because they did not accurately record the matters purportedly recorded) or would not enable true and fair financial reports to be prepared and audited: Woodgate v Fawcett [2008] NSWSC 868; (2008) 67 ACSR 611; Fisher v Divine Homes Pty Ltd [2011] NSWSC 8; (2011) 85 ACSR 512 at [24]. 41The Liquidator requested the Company's directors and its accountants to produce its books and records (Ex P6). Having considered the extent of documents produced, the Liquidator has expressed the opinion that the Company was "unable to produce timely and accurate financial information" (Solvency Report p 14). The Liquidator qualified that view in cross-examination having regard to several matters set out in Mr Burkett's affidavit (T47). The Liquidator nonetheless relies on the fact that it appears there were no signed financial statements of the Company itself and the Company did not produce creditor records and invoices in respect of some of the Company's creditors or back-up computer files (Solvency Report p 14). 42It seems to me that the extent of MYOB accounts maintained by the Company, on which the Liquidator relied in his solvency report, tells strongly against a finding that the Company had failed to maintain adequate financial records. Mr Burkett's evidence was, and I accept, that the extent of the records maintained by the Company was affected by the fact that it was part of a consolidated group for taxation purposes and accordingly did not lodge individual tax returns. Mr Burkett pointed out, and I also accept, that the Company did not have other financial records which were not applicable to its business, such as wages and superannuation and fringe benefit tax returns where the Company had no employees; records of work in progress where there had been no such work since completion of the development in 2007; or copies of cheques where payments were made by electronic funds transfer. 43The Liquidator also points to inconsistencies in the Company's financial statements that were produced to the Liquidator. He points out that the Company's MYOB records as at 16 July 2010 show a balance sheet substantially different (and substantially less favourable from the Company's perspective) to a balance sheet provided to the ATO on the same date and the MYOB records as at 31 October 2010 show a balance sheet substantially different to a balance sheet attached to a share transfer form dated the same date (Solvency Report p 13). Mr Burkett's evidence was that the MYOB records had been reconciled while the other documents were based on unreconciled accounts (T87). The Liquidator in turn relies on Mr Burkett's evidence that reconciliations took up to six or seven months (T87) to submit that reconciliations were not performed in a timely manner. It seems to me that the more likely explanation of these discrepancies is that the information provided to the ATO and relied on the share transfer was inaccurate, for reasons other than inadequacy in the Company's underlying financial records. 44In my view, it has not been established that the Company did not maintain financial records consistently with s 286 of the Corporations Act and the presumption of insolvency is not established in that basis. Whether the grant of the Charge was an unfair preference 45The Company granted the Charge (Ex P1, tab 20) on 9 September 2010, to Bayswater Capital, of which Mr Anderson was then the sole director (Ex P1, tab 4). The Charge and the associated Facility Agreement (Ex D6) related to a loan made by the Cross + Trust (the "Trust"), of which Bayswater Capital was trustee, to the Company. The Charge secured "the due and punctual payment of the 'Secured Money'" (clause 2.1(b)). The term "Secured Money" was defined in the Charge by reference to money owed by the Company or advanced by the Lender under a "Transaction Document", and a "Transaction Document" was defined to mean the "Facility Agreement" (clause 1.1). The Charge was a fixed and floating charge over the Company's present and future assets (clause 2.6). 46Under clause 3.1 of the Facility Agreement between the Company and Bayswater Capital, the Company was required to repay the "Principal Outstanding" to Bayswater Capital on the "Termination Date", defined as the earlier of five years from the date of the Facility Agreement or the date on which the loan facility was refinanced (clause 1.1). There is no suggestion the loan was refinanced in the period. The term "Principal Outstanding" was defined in Facility Agreement by reference to the "Principal Amount" together with any costs and capitalised interest and the "Principal Amount" was defined to mean the sum of money that the Trust had (to date) advanced to the Company (clause 1.1 and Recital A). The Liquidator correctly points out that the Facility Agreement related only to money that had already been loaned to the Company up to 9 September 2010 (as well as any interest and costs subsequently incurred) and did not require or provide for any future advances of funds from the Trust to the Company. Any funds advanced by the Trust to the Company after 9 September 2010 were therefore not subject to the Facility Agreement and also not subject to the Charge. 47The Liquidator contends that the grant of the Charge was either an unfair preference for the purposes of s 588FA of the Corporations Act or an uncommercial transaction for the purposes of s 588FB of the Corporations Act and places greater weight upon the proposition that the transaction was a unfair preference. As I noted above, the Liquidator seeks an order under s 588FF of the Corporations Act discharging the Charge or, alternatively, seeks an order under s 588FF of the Corporations Act declaring the Charge to be void or unenforceable. 48Section 588FA(1) of the Corporations Act provides that a transaction is an unfair preference if: "(a) The company and the creditor are parties to the transaction (even if someone else is also a party); and (b) The transaction results in the creditor receiving from the company, in respect of an unsecured debt that the company owes to the creditor, more than the creditor would receive from the company in respect of the debt if the transaction were set aside and the creditor were to prove for the debt in a winding up of the company." A transaction is therefore an unfair preference for the purposes of this section if: (1) a creditor of the company, at the time of the transaction, is party to that transaction; and (2) the transaction allows the creditor to receive more from the company in respect of an unsecured debt than it would have received from the company in respect of that debt if the transaction were set aside and the creditor were to prove for the debt in a winding up of the company. This section reflects the concept of preference under s 122 of the Bankruptcy Act 1966 (Cth): VR Dye & Co v Peninsula Hotels Pty Ltd (in liq) [1999] VSCA 60; (1999) 3 VR 201; (1999) 150 FLR 307 at [33]. Bayswater Capital accepts that the definition of "transaction" in s 9 of the Corporations Act is sufficiently broad to apply to each of the relevant transactions, including the grant of the Charge although emphasising the need for the Court to examine the transaction as a whole rather than the particular steps in it: Cussen v Sultan [2009] NSWSC 1114; (2009) 74 ACSR 496 at [21]; Mann v Sangria Pty Ltd [2001] NSWSC 172; (2001) 38 ACSR 307 at [31]-[41]. 49I accept the Liquidator's submission that the grant of the Charge converted an unsecured debt owed by the Company to Bayswater Capital into a secured debt and thereby conferred an additional benefit on Bayswater Capital (not least that it could then retain the benefit of the assignment to which I refer below) to that which it would have received had it submitted a proof of debt as an unsecured creditor. The Liquidator's evidence is that unsecured creditors are, at present, unlikely to receive any distribution in the winding up (Liquidator's affidavit, 19 November 2012 [21]). The grant of the Charge was therefore a preference for the purposes of s 588FA of the Corporations Act. Whether the grant of the Charge was an uncommercial transaction 50Alternatively, the Liquidator submits that the Charge is an uncommercial transaction within the meaning of s 588FB of the Corporation Act. That section provides that: "A transaction of a company is an uncommercial transaction of the company if, and only if, it may be expected that a reasonable person in the company's circumstances would not have entered into the transaction, having regard to: (a) the benefits (if any) to the company of entering into the transaction; and (b) the detriment to the company of entering into the transaction; and (c) the respective benefits to other parties to the transaction of entering into it; and (d) any other relevant matter." 51In Demondrille Nominees Pty Ltd v Shirlaw [1997] FCA 1220; (1997) 25 ACSR 535 at 548, Foster, Lindgren and Madgwick JJ observed that, relevantly, s 588FB of the then Corporations Law sought to balance the interests of the unsecured creditors of a company being wound up and those who would otherwise be the beneficiaries of pre-winding up transactions entered into by the company and their purpose was: To prevent a depletion of the assets of a company which is being wound up by, relevantly, "transactions at an under-value" entered into within a specified limited time prior to the commencement of the winding up: see explanatory memorandum, para 1014. Their Honours also observed, by reference to the explanatory memorandum, that a transaction is uncommercial, for the purposes of s 588FB, where there is a bargain of such magnitude that it could not be explained by normal commercial practice: Demondrille Nominees Pty Ltd v Shirlaw above at 548; see also McDonald v Hanselmann [1998] NSWSC 171; (1998) 28 ACSR 49 at 53; Skouloudis Group Pty Ltd (in liq) v Planet Enterprizes Pty Ltd [2002] NSWSC 239; (2002) 41 ACSR 369 at [14]-[15]. In Lewis v Doran [2005] NSWCA 243; (2005) 54 ACSR 410 at [136], where Giles JA observed that the description of an "uncommercial transaction" in s 588FB(1) of the Corporations Act is directed primary attention to a balancing of benefit and detriment, only in the broadest sense involving undervalue. Whether a reasonable person in the company's circumstances would not have entered into the transaction is determined by an objective inquiry by reference to the factors specified in s 588FB(1): Tosich Construction Pty Ltd (in liq) v Tosich (1997) 78 FCR 363 at FCR 367; Old Kiama Wharf Company (in liq) v Betohuwisa Investments Pty Ltd [2011] NSWSC 823; (2011) 85 ACSR 87 at [35]. 52The Liquidator submits that the Charge lacked a commercial quality because the Company did not receive any real benefit from the transaction. He contends that the Charge was not granted so as to encourage Bayswater Capital to make further advances under the loan, because the Facility Agreement did not provide for such advances and the Charge did not secure such advances. He submits that the apparent benefit to the Company of a five-year loan term under the Facility Agreement is undermined by the fact that the Company accounted for the loan as a current liability and made early repayments of it and the five year term was, in the circumstances, of no substantive benefit to the Company. 53Mr Anderson's affidavit evidence was that that the directors of the Trust decided to secure its lending to the Company in April 2010, although this was not implemented until after a refinancing of its loans due to the St George Bank with Banksia (Anderson [8]). Mr Anderson's evidence was also that: "The Charge allowed the Company to continue to borrow funds from [Bayswater Capital]. As the Company's cashflow from property sales could not be precisely predicted it was essential, and beneficial, to have continuing access to debt facilities to ensure a consistent cashflow." In cross-examination Mr Anderson initially accepted that the purpose of the Charge was to protect the funds already lent to the Company by Bayswater Capital but then contended that it was also intended to secure future borrowings (T149). Mr Anderson's evidence as to the benefits derived by the Company from the grant of the Charge is undermined, to a significant extent, by the fact that neither the Facility Agreement nor the Charge created any obligation on Bayswater Capital to provide such further funding, to the Company granted security to Bayswater Capital for past advances without obtaining any commitment from it to the provision of further advances in any minimum amount, or at all. Nonetheless, it should be recognised that Bayswater Capital in fact advanced some further monies to the Company over the period, although in a context that the level of inter-company transactions in relatively small amounts suggests that assets of companies within the Group were being drawn upon to meet liabilities from time to time. 54Mr Anderson also gave evidence in cross-examination that, if the Charge had not been granted, Bayswater Capital would have "taken in specie all the property out of that company" (T146). It is not clear how the Company or its directors could have properly agreed to such a course, particularly when the debt to Bayswater Capital was not then due and payable, and the properties were in any event subject to encumbrances in favour of Banksia and GPMC (Anderson at [11]-[12]; Liquidator's affidavit, 29 April 2013, Annexure A) and at least a substantial part of any proceeds from the transfer of the property would have to be paid to those secured creditors. 55Bayswater Capital ultimately accepts that the Charge and associated Facility Agreement only secured money lent to the date of that document and interest and charges accruing thereafter on that money and did not secure any moneys to be lent after the date of the Charge. Notwithstanding Mr Anderson's evidence in cross-examination that that was not the intent of the Charge, no application for rectification had been made and Mr Bennett, who appears for Bayswater Capital, fairly concedes that the Charge must be construed in accordance with its terms. The Liquidator contends, and I accept, that the effect of the Charge was that the Company encumbered its assets so as to convert Bayswater Capital's loan from an unsecured interest to a secured interest, with no substantial corresponding commercial benefit. It seems to me that the detriment suffered by the Company in granting the Charge was disproportionate to any benefit obtained and this transaction involved a bargain for Bayswater Capital of such a magnitude that it cannot be explained by normal commercial practice. I therefore also consider that the entry into the Charge was an uncommercial transaction for the purposes of s 588FB of the Corporations Act. Whether the grant of the Charge was an insolvent and voidable transaction 56A transaction is an insolvent transaction of a company, as defined in s 588FC of the Corporations Act, if, relevantly, it is an unfair preference or uncommercial transaction of the company; and the transaction is entered into at a time the company is insolvent or the company becomes insolvent because of matters including entry into the transaction. I have held above that the Company was insolvent as at September 2010 so the grant of the Charge was an insolvent transaction. There was no dispute that the grant of the Charge occurred during the relation-back period under s 588FE(4) of the Corporations Act, so that it was also a voidable transaction for the purposes of s 588FE of the Act, if, as I have held, it was an unfair preference and uncommercial transaction and an insolvent transaction. 57Section 588FF of the Corporations Act allows the Court to make any one or more of the orders set out in the section on the application of a liquidator, where a transaction is voidable because of s 588FE, including an order declaring that an agreement constituting, forming part of, or relating to the transaction was void at and after the agreement was made. The Court has power under this section to set aside the Charge and I am satisfied that this is the appropriate relief given the findings that I have made above. The Assignment Deed 58The Company reached a settlement of other proceedings brought against it by a hotel operator which operated a hotel from the Potts Point property in February 2011, paying $750,000 in settlement of the proceedings and incurring legal costs of $332,424. On 24 January 2012, Bayswater Capital and the Company filed proceedings against their former solicitors, Sparke Helmore, claiming damages in excess of $1 million for negligence in drafting the hotel lease and sales contract which were the subject of those other proceedings. 59On 3 June 2011, the Company assigned, broadly, its rights against Sparke Helmore and the claims in those proceedings to Bayswater Capital by the Assignment Deed (Ex P1, tab 22; Anderson Tab 14). Clause 2.1 of the Assignment Deed provided that: "[The Company] hereby assigns to [Bayswater Capital] all of its legal and beneficial entitlement whatsoever in the Sparke Helmore claim and the Rights of Action, which [the Company] may have, whether at law, pursuant to statute or in equity." Clause 3 of the Assignment Deed provided for Bayswater Capital to pay the amount of $325,000 in consideration of that assignment, by offset against the existing loan account between the parties. Clause 4 warranted that Bayswater Capital would pay all outstanding legal fees incurred by the Company in the claim against Sparke Helmore. The Liquidator's evidence is that he has identified an offset in the amount of $325,000 against the loan account between the Company and Bayswater Capital on or around 3 June 2011. 60The Liquidator contends that, if the Charge is avoided, the entry into the Assignment Deed was an unfair preference for the purposes of s 588FA of the Corporations Act, since Bayswater Capital received a benefit by way of the assignment that it would not have been entitled to had it proved as an unsecured creditor in insolvency. I do not understand Bayswater Capital to contest that the entry into the Assignment Deed is a preference if, as I have held, the Charge is liable to be set aside. I consider that the assignment plainly gave rise to such a preference, since Bayswater Capital obtained the full value of the rights assigned to it in consideration of the offset of $325,000 due to it but would have received little or none of that amount in a liquidation of the Company. 61The Liquidator also contended in opening submissions that the Assignment was an uncommercial transaction for the purposes of s 588FB of the Corporations Act and "formally" maintained that submission in closing submissions without further elaborating it. The evidence as to the value of the cause of action, particularly bearing in mind the costs likely to be incurred in pursuing it and the level of risk in any litigation, is scant. Bayswater Capital contends that the transaction was not an uncommercial transaction because the Company received $325,000 in value, where its trading activities rendered it unlikely to be able to obtain litigation funding and avoided the risk and costs of funding the proceedings. I do not consider that the claim that the assignment was an uncommercial transaction has been established, since it has not been established that the cause of action was worth more than the value given by Bayswater Capital, so as to allow the transaction to be characterised as inconsistent with usual commercial practice. 62Having held that the entry into the Assignment Deed was a preference, the next question is whether the entry into the Assignment Deed was an insolvent transaction. Mr Bennett rightly points out that, even if the Court concluded (as I have) that the Company was insolvent at September 2010, that would influence its view at subsequent time, but the Court would nonetheless have to consider the Company's solvency at the time of the assignment. The debts owed to the ATO, the OSR and third parties remained unpaid in June 2011, and on 4 May 2011, the ATO had declined to enter a further deferred payment arrangement with the Company and required immediate repayment of the amount of $257,943.61 then due to it (Solvency Report, Annexure F). It seems to me that the Company was therefore insolvent at June 2011, and that the preference arising in respect of the entry into the Assignment Deed was therefore an insolvent transaction under s 588FC of the Corporations Act and, being within the relation-back period, a voidable transaction under s 588FE of the Corporations Act. 63The Liquidator seeks an order under s 588FF of the Corporations Act directing Bayswater Capital to assign to the Company the property, rights and interests which were assigned to it by the Company under clause 2.1 of the Assignment Deed or alternatively declaring that assignment to be void. In my view, the Liquidator would be entitled to either of those orders, but will need to make clear which of them is pressed. Application in respect of the Payments 64The Liquidator also attacks eight payments made by the Company to Bayswater Capital between 15 August 2011 and 9 November 2011 ("Payments") (Ex P1, tab 23) on the basis that they are unfair preferences under s 588FA of the Corporations Act and seeks an order under s 588FF of the Corporations Act directing Bayswater Capital to pay an amount to the Company equal to the amount paid of the Payments. The Liquidator contends that, if the Charge is avoided, the Payments are preferences. 65An MYOB ledger (Ex D3) records the loan account between the Company and the Trust between 9 September 2010 and 9 February 2012. It appears that at least some entries in that ledger recorded part repayments of the earlier loan by Bayswater Capital to the Company, recorded in the ledger as "Transfer to Cross Trust", "Transfer to Bayswater Capital" and "loan". Mr Burkett also gave evidence of further advances made by Bayswater Capital to the Company in the period from September 2010. The Liquidator points out that the amounts repaid by the company to Bayswater Capital for the period 9 September 2010 to 9 February 2012 ($268,495, excluding the effect of the assignment to which I referred above) substantially exceeded the advances made by Bayswater Capital to the Company of $115,701.98 over that period and Bayswater Capital did not contest that calculation in submissions. In any event, Bayswater Capital did not rely on a "running account" defence under s 588FA(3) of the Corporations Act in respect of the Payments. 66The matters to which I referred above, including the continuing unpaid debts to the ATO, OSR, Clayton Utz and HDY indicate that the Company remained insolvent when the Payments were made. Mr Burkett accepted in cross-examination that, when he and Mr Anderson caused amounts to be paid to related parties from the Company's bank account in August 2011, the Company was then not in a position to pay its debts to third parties as and when they fell due as at that date or before or after it (T96-100). I therefore find that the Payments are also preferences within the meaning of s 588FA of the Corporations Act and insolvent and voidable transactions under ss 588FC and 588FE(4) of the Corporations Act and the Liquidator is entitled to an order under s 588FF of the Corporations Act in this regard. Orders and costs 67I direct the parties to bring in agreed short minutes of order to give effect to this judgment within 7 days, or, if there is no agreement, their respective drafts of those orders and short submissions as to the differences between them. The Liquidator has been successful in the proceedings and Bayswater Capital must pay his costs of the proceedings as agreed or as assessed.

Australian Securities and Investments Commission v Edwards

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