Australian Securities and Investments Commission v Plymin

The Plaintiffs' pleaded case and applicable legal principles

1. The Plaintiffs plead (SOC [33]) that, at all times during the Relation-Back Period, the Company was insolvent for the purposes of s 95A of the Corporations Act. That allegation was extensively particularised as follows: "During the [Relation-Back Period], the Company: (a) Had limited but insufficient access to financial accommodation from its banker, Commonwealth Bank of Australia [("CBA")], to meet current liabilities in that period; (b) Had limited or insufficient access to alternative financial accommodation; (c) Had a negative and downward trending adjusted liquidity ratio from 30 June 2013 onwards (namely, the ratio of the Company's cash at bank, marketable securities and accounts receivable relative to its total current liabilities in the same period was below 1 from 30 June 2013 until 25 August 2014); (d) Received numerous overdue rent reminders from agents acting for its various landlords in the period between 1 July 2013 and 25 August 2014; (e) Had, between 1 July 2013 and 25 August 2014, creditors suspend credit to the Company and have it placed on cash on delivery terms on at least 80 occasions; (f) As at 25 August 2014, approximately 25% of the Company's aged trade creditor liabilities had been due for more than 120 days, approximately 14% of the Company's aged trade creditor liabilities had been due for more than 150 days and approximately 16% of the Company's aged trade creditor liabilities had been due for more than 180 days; (g) Taxation liabilities increased from $440,520.94 to $873,947.51, when amounts due under overdue PAYG, GST and BAS returns were brought to account; (h) Had entered a payment arrangement with the ATO prior to 15 October 2013; (i) Had, between 1 July 2013 and 25 August 2014, received at least 350 demands for payment from creditors, three statutory demands, 84 "stop supply" or "stop credit" notices from creditors and 32 legal or debt collection letters; (j) Made numerous round sum payments to creditors in the period from 26 February 2014 to 25 August 2014; (k) Was refused a request for a payment arrangement with the ATO on about 15 October 2013; (l) Failed to lodge Business Activity Statements when due between 23 November 2012 and 25 August 2014 and the ATO imposed at least 13 penalties on the Company as a consequence of that failure; and (m) Was in arrears of New South Wales, Queensland, Western Australia and Northern Territory payroll tax liabilities from at least as early 30 June 2013 onwards."
2. The question whether the Company was insolvent, in fact, at the time the relevant debts were incurred, or became insolvent by incurring those debts, is to be determined by reference to s 95A(1) of the Corporations Act. That section provides that a company is solvent if, and only if, it is able to pay all its debts, as and when they become due and payable. Section 95A(2) of the Corporations Act has effect that a person who is not solvent is insolvent. That definition adopts a "cash flow test" of insolvency which turns upon the income sources available to the company and the expenditure obligations that it has to meet, although a balance sheet test can provide context for the application of the cash flow test: Southern Cross Interiors Pty Ltd (in liq) v Deputy Commissioner of Taxation [2001] NSWSC 621; (2001) 39 ACSR 305; Australian Securities and Investments Commission v Plymin (No 1) [2003] VSC 123; (2003) 46 ACSR 126 at [370]ff, aff'd Elliott v Australian Securities and Investments Commission [2004] VSCA 54; (2004) 10 VR 369; and see Re Swan Services Pty Limited (in liq) [2016] NSWSC 1724 at [136]ff and SX Projects Pty Ltd (in liq) v V Battaglia & Ors [2018] NSWSC 1830 at [20]ff, on which I have drawn for this summary of the applicable principles.
3. Mr Golledge, who appears for the Plaintiffs, submits that whether or not a company is insolvent at a particular point in time is a question of fact to be ascertained from a consideration of the company's financial position taken as a whole; and that the focus of that inquiry should be the identification of those debts of the company which are due as at the date/s of alleged insolvency or which, although not immediately due, would become due at a time which, as a matter of commercial reality and common sense, have to be taken into account as at the date of alleged insolvency. The case law indicates that whether a company is 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]; White Constructions (ACT) Pty Ltd (in liq) v White [2004] NSWSC 71; (2004) 49 ACSR 220 at [289]; Lewis (as liquidator of Doran Constructions Pty Ltd) 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].
4. Mr Golledge also submits that, in assessing a company's capacity to pay its debts, the Court should have regard to all of the assets of the company as at the relevant time in order to determine the extent to which those assets were liquid or realisable within a timeframe that would allow each of the debts to be paid as and when they became due. Mr Golledge recognises that, apart from an assessment of the company's own assets, regard can also properly be had to funds which the company can borrow, on a secured or unsecured basis, or otherwise obtain from lenders or shareholders and which were, as a matter of commercial reality, available to the company to enable its debts to be paid. The case law recognises that, in determining a company's solvency, the Court may have regard to the likelihood that it will have funds available to it from sources with which it has no formalised agreement or understanding, including loans from its directors or from third parties, at least if they are not repayable in the short term, and the company's ability to borrow funds can also be taken into account: Lewis (as liquidator of Doran Constructions Pty Ltd) v Doran above at [109]-[112]; International Cat Manufacturing (in liq) v Rodrick [2013] QCA 372; (2013) 97 ACSR 200; First Strategic Development Corporation Ltd (in liq) v Chan [2014] QSC 60 at [67]-[69].
5. Mr Golledge also recognises that, although each case is to be decided on its own facts, insolvent companies tend to share common symptoms of financial stress, which include those identified in Australian Securities and Investments Commission v Plymin (No 1) above at [386]. Mandie J there identified several indicia of insolvency including: continuing losses; liquidity ratios below one; 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 issuing 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; see also Morris v Danoz Directions Pty Ltd (in liq) (No 2) [2010] FCA 836 at [13].
6. Mr Golledge also refers to the summary of relevant principles in Quick v Stoland Pty Ltd (1998) 29 ACSR 130 at 138, where Emmett J observed that: "In order to determine whether the company was solvent at a given time, it would be relevant to consider the following matters: ● All of the company's debts as at that time in order to determine when those debts were due and payable. ● All of the assets of the company as at that time in order to determine the extent to which those assets were liquid or were realisable within a timeframe that would allow each of the debts to be paid as and when it became payable. ● The company's business as at that time in order to determine its expected net cash flow from the business by deducting from projected future sales the cash expenses which would be necessary to generate those sales. ● Arrangements between the company and prospective lenders, such as its bankers and shareholders, in order to determine whether any shortfall in liquid and realisable assets and cash flow could be made up by borrowings which would be repayable at a time later than the debts."

Factual background

1. By way of background, the Company was incorporated on 27 June 2007. On 31 July 2007, it was appointed as the managing agent of a "unit partnership" that originally had five members, under a Deed of Managed Unit Partnership, and took over the conduct of an existing business trading as "Bias Boating", which also appears to have traded under a business name "Bias Boating Warehouse", which conducted the business of a retailer of boating and related products and operated 14 retail stores situated in several states and a warehouse in West Gosford, New South Wales and sold goods to customers online. That Deed of Managed Unit Partnership (Ex P3, 9/12) recorded, under the heading "background" that the parties wished to set up a structure by which they may invest as partners in a boat accessories retailing business conducted over numerous sites and by mail order known as "Bias Boating", and that the Company had consented to become the managing agent. Clause 3 provided that all assets acquired by the Company in the exercise of its functions would be acquired in its name as nominee for the members for the time being of the partnership. Clause 16 provided for a right of indemnity in favour of the Company against members, proportionate to the unitholding. Clause 31 conferred specified powers on the Company, including the right to conduct the business. Several of the original members of that unit partnership subsequently withdrew from it, leaving Float Your Boat Pty Ltd as trustee for the Float Your Boat Unit Trust and ATEGG Pty Ltd as trustee for the Tegg Family Trust as the two remaining unitholders from 2012.
2. The Company banked with the CBA and, during the Relation-Back Period, had an overdraft facility with a limit of $300,000, a trade finance facility with a limit of $800,000 and a bill facility, originally in an amount of $4 million which had been reduced by the CBA by July 2013 to $3,240,000 and which was required to be reduced to a limit of $2.66 million by August 2014. There was evidence as to transactions in the Company's trade finance facility, which was fully drawn from time to time (Ex P4) and the liquidator prepared a helpful summary of those transactions (MFI 2). In April 2014, the Company applied to another bank to refinance the CBA debt although that refinancing was not implemented. By an email dated 30 April 2014, a director of the Company referred to that application and proposed to "filler buster" the CBA, presumably while those arrangements were pursued (Ex P9, 10/578). That director there also noted issues arising from stock shortages and aged electronics stock, and that the Company had already incurred a loss in respect of the aging of old electronic stock but failed to book it where that stock had not been sold. Also in April 2014, the Company applied for an invoice discounting facility with Tower Trading Group. That facility was ultimately approved but did not become available until early August 2014 and the Company only submitted two applications for advances under that facility before it was placed in voluntary administration.
3. The Company incurred debts and liabilities, inter alia, to suppliers, employees, the CBA and state taxation authorities for payroll tax in conducting its business. Purchase orders were issued under the name "Bias Boating Warehouse" with a reference to the Company name (for example, Ex P3, 9/201). The extent of tax liabilities to state payroll authorities (Ex P3, vol 14) is strongly indicative of the Company's insolvency during the relevant period. The Company's business activities also gave rise to liabilities for GST and PAYG withholding tax. It appears that the Australian Taxation Office ("ATO") recorded those liabilities on a running balance account in the name of "Bias Boating" but recorded the relevant "client" as the trustees of the Float Your Boat Unit Trust and the Tegg Family Trust, to which I referred above. At least by 7 May 2014, the ATO had advised of a failure to meet superannuation guarantee entitlements, although they were, possibly incorrectly, attributed to the Float Your Boat Unit Trust and the Tegg Family Trust, although they had arisen in respect of the Company's business.
4. There is voluminous correspondence from lessors relating to late and unpaid rent (Ex P3, 14/1820ff). A number of the parties which had issued demands of various kinds to the Company, or placed Company's accounts on hold, or stopped supply, or required payment in advance, are Defendants in the proceedings and the liquidator also relied on a comprehensive matrix of creditor demands in the period between July 2013 and August 2014 (MFI 3), summarising those demands. In July 2014, a consultant to the Company advised several staff members that the Company was going through "some very difficult times" and made them redundant. Pay slips issued about that time recorded tax as withheld by the Company (Ex P3, 9/168ff).
5. The Company was placed in voluntary administration on 25 August 2014 and Mr Purchas was appointed as its voluntary administrator on that day. On 1 September 2014, the CBA appointed receivers and managers to the Company; those receivers and managers took control of the Company's assets and business on that date and traded it for a period in an attempt to sell it as a going concern, but were ultimately not successful in doing so. Trade at the Company's retail stores ceased on 18 September 2014 and the receivers and managers then sold the stock. The Company passed into creditor's voluntary winding up on 29 September 2014 at the second meeting of creditors in the voluntary administration. As the Plaintiffs points out, the winding up of the Company is therefore taken to have begun on the date of Mr Purchas' appointment as voluntary administrator on 25 August 2014 and that is the relation-back day for the purposes of the winding up. The six month period ending on the relation-back day for the purposes of s 588FE of the Corporations Act therefore commenced on 25 February 2014.

Affidavit evidence

1. The Plaintiffs relied on the affidavit dated 21 August 2017 of Mr Purchas, which referred to his appointment as voluntary administrator and subsequently as liquidator of the Company and exhibited six lever arch folders of documents relating to the Company's solvency. Mr Purchas set out the Company's history and also set out the activities he had undertaken since his appointment as voluntary administrator and later as liquidator. His evidence was that, although the Company's affairs were intermingled with affairs of other entities which were parties to the Deed of Managed Unit Partnership, the Company had entered into a number of leases in connection with the retail stores; it had numerous employees at the date of his appointment as voluntary administrator and submitted, in its name, purchase orders and credit applications to suppliers; and its balance sheet for the financial year ending 30 June 2014 contained inventory with a substantial stated value, although his investigations showed that value was overstated. Mr Purchas also noted that the Company had incurred significant outstanding tax liabilities to the Commonwealth, had outstanding employee entitlements and had outstanding tax liabilities to the offices of state revenue in several States for payroll tax. He noted that the amount of the Company's indebtedness to the CBA was in excess of $4 million when the receivers ceased trading its business at its retail stores on 18 September 2014. That affidavit also addressed payments to Defendants which will be relevant to the proceedings, after the determination of this separate issue.
2. Mr Purchas there expressed his opinion that the Company was not solvent from at least as early as 1 January 2014 until 25 August 2014 and identified several factors that supported that opinion. None of the remaining Defendants sought to cross-examine Mr Purchas or lead any evidence to contest his opinion; and, as I will observe below, the documents that were led in evidence provide overwhelming support for that opinion. Mr Purchas recognised that the Company had made a small net profit for the year ended 30 June 2014, although it then made a substantial loss in the two months ending 25 August 2014. He observed that, notwithstanding that profit, the Company had been unable to pay rent to landlords or to pay tax and payroll tax due to the ATO or the offices of state revenue in a timely way, or to pay suppliers or employee entitlements in a timely way. He also noted that the Company had liquidity ratio below 1 since at least 1 July 2013, and that liquidity ratio was negative and downward trending, and was 0.45 as at 30 June 2014. His evidence was that the Company was making round sum payments to the ATO that were not attributable to specific business activity statements; outstanding taxation liabilities referable to its business had substantially increased to $873,947.51 as at 22 August 2014; and general interest and penalty charges were being incurred on the running balance account referable to its business between 3 March 2014 and 22 August 2014. Several repayment arrangements had been reached with the ATO, which were not complied with; the Company was not complying with its superannuation obligations; and there was evidence of late payments and arrears of payroll tax in several States dating back to June 2013.
3. Mr Purchas also noted that the Company's main trading facility consisted of an overdraft account with the CBA which reached its overdraft limit from time to time, although the CBA appeared to process transactions in excess of that overdraft limit. The Company maintained several other bank accounts with the CBA at the date of his appointment as voluntary administrator, one of which had a modest credit balance, and the others of which were substantially in debit. He noted that there was no evidence that the Company had any access to alternative finance in the period (other than for the invoice discounting facility to which I referred above) and that there were many instances on which creditors had placed the Company on cash on delivery terms or demanded payment before resuming supply between 1 July 2013 and 25 August 2014. Mr Purchas' evidence was that trade creditor liabilities in excess of $1,100,000 were outside trading terms by 180 days or more as at 25 August 2014 and, as at that date, more than $500,000 had been outstanding since before 25 February 2014. A number of repayment arrangements had been entered into between the Company and its creditors, and the Company had received numerous demands for payment from creditors, stop supply or stop credit notices from creditors, letters from solicitors or debt collectors in respect of debts, and three statutory demands during the Relation-Back Period. Mr Purchas also referred to occasions on which the Company made payments to creditors in round sums, as I noted above, or which were not referable to invoices, during the Relation-Back Period.
4. Mr Purchas also undertook an adjusted working capital analysis and an analysis of the extent of aged creditor liabilities of the Company as at 25 August 2014. He concluded that the Company had a net asset deficiency, once an allowance was made for assets that were not realisable and liabilities that had not previously been brought to account, including tax liabilities under BAS returns, and that the Company's cash flow was insufficient throughout the Relation-Back Period to enable it to make payments to creditors when such payments became due and payable, a matter which would itself be sufficient to establish insolvency.
5. By a further affidavit dated 12 July 2018, Mr Purchas annexed his detailed expert report in respect of the Company's solvency. Broadly, he expressed the view that the Company was insolvent at all times from 30 June 2013 to 25 August 2014, within the meaning of s 95A of the Corporations Act; that its financial records did not correctly record and explain its financial position and financial performance or enable true and fair financial statements to be prepared and audited for the purposes of s 286 of the Corporations Act; that it was insolvent on a balance sheet basis from 30 June 2013 to the relation-back day; that it had limited, but insufficient, access to alternative or further funding to meet its deficiency in net assets from 30 June 2013; that it demonstrated each of the indicators of insolvency identified in Australian Securities and Investments Commission v Plymin (No 1) above between 30 June 2013 and the relation-back day, and was insolvent from 30 June 2013 until the relation-back day; and, in the alternative, was at least insolvent from 1 January 2014 until 25 August 2014.
6. In dealing with the Company's balance sheet position, Mr Purchas also addressed several other matters including the correctness of the treatment of pre-payments, which do not seem to me to be necessary to an assessment of solvency on a cash flow basis. He also referred to the decline in the Company's adjusted quick ratio and adjusted liquidity ratio in the period between 30 June 2012 and 25 August 2014, and expressed the view that those ratios indicated that the Company's working capital was insufficient to meet its liabilities as and when they fell due from at least 30 June 2013 until the relation-back day, on a balance sheet basis. In dealing with the application of the cash flow test, Mr Purchas referred to the lack of borrowing capacity under the Company's overdraft facility in the relevant period, although he recognised that the level of that overdraft varied from time to time; he referred to the substantial liabilities owed to the CBA on other accounts; he noted the absence of support by the CBA for the Company, at least in the latter part of the period, and an unsuccessful attempt made by the Company to seek to have another bank refinance the CBA loans; and he also referred to the CBA's classification of the Company's debts as impaired and internal documents of the CBA that had recognised the Company's failure to comply with its repayment obligations, difficulties as to stock levels and issues as to dealings with the Company's management staff. He also gave evidence of matters which indicated the lack of alternative funding available to the Company, either from existing investors in the Company or from third parties, and its lack of access to equity funding. Mr Purchas also noted the highly cyclical character of the marine retail industry and that the Company had suffered a significant outflow of cash between January 2014 and March 2014. He concluded that the Company was insolvent on the cash flow test from at least 30 June 2013, or alternatively from 1 January 2014, until his appointment as voluntary administrator on 25 August 2014. Mr Purchas also elaborated on the factors which indicated that each of the matters identified in Australian Securities & Investments Commission v Plymin (No 1) above, as indicators of insolvency, were applicable in respect of the Company.
7. By a further affidavit dated 9 November 2018, Mr Purchas led additional evidence as to dealings with the ATO which had not recorded the Company as the relevant "client", and noted that the Company had been funding payment of taxation obligations, to the extent that they were met by the Company.
8. I have not neglected the fact that there were inconsistencies in the way in which the Company conducted its affairs, fairly recognised in Mr Purchas' evidence, including that several of the store leases were executed in the Company's name, but recorded the Australian business number of another entity, Float Your Boat Pty Ltd (recs and mgrs apptd) (in liq) as trustee for Float Your Boat Unit Trust and Tegg Family Trust, which, as I noted above, was one of the two partners in the relevant partnership; employees were issued pay slips and group certificates in the Company's name, although showing that Australian business number; Float Your Boat was recorded as the registered employer of employees in records maintained by the ATO, although payslips and PAYG summaries indicated that the Company was the employer; and creditors entered into credit agreements with the Company which also on occasion recorded the Australian business number of Float Your Boat.

The Plaintiffs' submission and determination

1. In oral submissions, Mr Golledge pointed out that this was not a case where a single substantial event had the result that the Company became insolvent, but its position reflected adverse developments over time, so that a conclusion as to insolvency would be drawn from a range of evidence (T6), with the question being whether the Company was insolvent by the start of the Relation-Back Period on 25 February 2014. Mr Golledge points out that the liquidator's report concentrates on a comparison between cash or other liquid resources and existing debts or liabilities of the Company which would fall due during the Relation-Back Period and which were, as a matter of commercial reality, relevant to determining the Company's solvency throughout that period. Mr Golledge points out that the liquidator's report also had regard to the Company's asset position, where a company's assets may provide a resource from which funds can become available from which due or near due debts can be paid, although the test of insolvency under s 95A of the Corporations Act is more directly concerned with a debtor's cash flow rather than its balance sheet.
2. Mr Golledge submits, and I accept, that the Company's records, although incomplete, indicate that the borrowing capacity that was from time to time available to the Company under its overdraft with the CBA was never enough to meet all of the Company's debts then due. Mr Golledge also points out that the Company's business was seasonal, with its peak trading period being in the months leading up to summer and revenue dropping dramatically after summer, and that the Company suffered substantial net cash outflows during the Relation-Back Period. Mr Golledge submits, and I accept, that the Company was not, during the Relation-Back Period, generating significant cash flow surpluses from which existing debts could be paid.
3. Mr Golledge recognises that, where the liquidator had not obtained access to any aged creditor listing maintained by the Company, it is not possible to identify the precise quantum of the debts due to trade creditors on particular dates during the Relation-Back Period. However, as Mr Golledge points out, the schedule that the liquidator prepared from proofs of debt lodged in the winding up demonstrates substantial overdue debts owed to those creditors, whose debts were not paid either when due or by the commencement of the winding up. The summary of that information below demonstrates the extent and continuing character of the Company's inability to pay those debts as and when they fell due: Pre-Feb 2014 End Feb 2014 End March 2014 End April 2014 End May 2014 End June 2014 End July 2014 25 August 2014 $88,593 $144,512 $399,572 $455,884 $473,848 $85,995 $108,116 $1,529,079

1. As Mr Golledge pointed out in submissions, the known amount of aged trade creditor liabilities incurred by the end of February 2014, and still the subject of claims in the winding up, creates an inference that the Company was unable to pay those debts as they became due, consistent with insolvency. Mr Golledge also submits, and I accept, that a comparison of those figures and the Company's borrowing capacity under its overdraft facility demonstrates that the Company had insufficient available funds throughout the Relation-Back Period for payment of its outstanding trade creditors, even apart from other amounts due to employees for superannuation, state payroll tax debts, amounts due to lessors and the scheduled reductions in the amount of the Company's bill facility with the CBA.
2. Mr Golledge also refers to the liquidator's analysis, in his solvency report, as to the tax position in respect of the Company's business, although I have recognised above that the running balance account was not recorded in the Company's name. As Mr Golledge points out, arrangements with the ATO to repay outstanding amounts had been breached by mid March 2015 and the liquidator's report indicates that the Company did not have funds available to pay the instalments required under those arrangements, although it had, in practice, previously made such payments to the extent it had funds available to do so. The Plaintiffs also draw attention to the proof of debt lodged by the ATO in the liquidation in the amount of $3,144,802.72 (Ex P2, 63), partly relating to running balance account deficit debts, which the Deputy Commissioner of Taxation characterised (possibly incorrectly) as relating to the Company's role in the partnership and also to a superannuation guarantee charge amount of $2,174,633.56. An attachment to that proof of debt also identified numerous outstanding lodgements, including in respect of fringe benefit tax returns, income tax returns and PAYG payment summary statements.
3. Mr Golledge fairly recognises that, had the Defendants appeared, they may have contended that those debts could be ignored because they were recorded on a running balance account of different entities. The Defendants did not choose to appear to put that submission. Having said that, it seems to me that it is at least arguable that, as Mr Golledge contends, where the liabilities for PAYG, superannuation, GST and other tax liabilities were incurred as a result of the Company's trading activities, and its management accounts recorded those liabilities and it made partial payments against them, they should be taken into account in assessing its ability to meet its other debts as and when they fell due. It is not necessary to express a final view as to that matter, where, as Mr Golledge also points out, the Company was insolvent by reason of its liabilities without regard to its tax debts owed to the Deputy Commissioner of Taxation.
4. Mr Golledge also submits, and I accept, that the other evidence on which the liquidator relies, including repeated occasions of creditors stopping supply, threatening to stop supply or demanding long overdue payments and of the Company's decisions as to which payments to make to creditors and landlords for overdue rent, provides strong evidence of insolvency. As Mr Golledge pointed out in oral submissions, the significant number of creditors who were placing the Company in cash on delivery terms, or threatening to do so, or stopping supply, is a matter that is indicative of insolvency, although one creditor having done so might not be (T9).
5. It is not necessary to determine whether, as the liquidator concludes in his report, the Company was insolvent from 30 June 2013, although there is certainly some evidence that is capable of supporting that conclusion. It seems to me clear, on the evidence to which I have referred above, that the Company was at least insolvent by the relation-back day of 25 February 2014, and that conclusion follows from the extent of unpaid taxes, including state payroll taxes, in respect of the conduct of its business; its dealings with creditors, including long delays in payment of debts which remained unpaid as at the date the voluntary administrator was appointed; and the very substantial number of demands for payment and instances of suspension of supply, to which the Company would not have exposed itself but for its inability to pay those creditors as their debts fell due.
6. Although the Company had a bill facility at the commencement of the Relation-Back Period and thereafter, that bill facility was fully drawn; the Company had limited capacity to draw down on the overdraft facility at the commencement of the Relation-Back Period, and that facility was often fully drawn in that period; and neither were sufficient to pay its liabilities as they fell due on any view. The Company's trade facility was also fully drawn at the beginning of the Relation-Back Period and remained so for the balance of that period, although it did allow a capacity to draw down the facility, as other debts were excluded from it after 120 days, in a manner that allowed, in practical terms, an extension of time for the payment of debts that fell within it.
7. As Mr Golledge points out, the Company made efforts to address its difficulties within the Relation-Back Period, by seeking additional finance from the CBA or to refinance its loans through a different lender or to obtain additional access to equity, but none of those attempts were successful. Shortly before being placed in voluntary administration, the Company obtained access to an invoice discount facility, to which I referred above, but that facility was not sufficient to restore its solvency or to avoid the need for the appointment of the voluntary administrator. The Court may more readily infer that other funds were not available, by borrowings or equity investment, to support the Company's solvency, where those funds were not in fact made available when the Company was in a position of significant difficulty, and it was ultimately placed in voluntary administration. The conclusion that the remaining unitholders of the partnership were unable to provide additional equity to support the Company is reinforced by the fact that receivers and managers were appointed to both of them at about the time the Company was placed in voluntary administration, and no assets were available in the receivership of either of those entities. The right of indemnity against those unitholders was also of no apparent value, during the Relation-Back Period, for the same reason.

Orders

1. For these reasons, I find that the Company was insolvent, within the meaning of s 95A of the Corporations Act, for the whole of the Relation-Back Period from 25 February 2014 to 25 August 2014. The separate question should be answered accordingly. The First, Second, Third, Eleventh, Thirteenth, Sixteenth and Seventeenth Defendants should pay the costs of this application. It is not necessary to give them a further opportunity to be heard in that regard, where they already had that opportunity but did not attend the hearing. The Plaintiffs should bring in short minutes of order to give effect to this judgment within 7 days.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 23 December 2018