(c) The services were necessary if the company was to continue trading, and were inherently valuable even if they did not result in a quantifiable addition to turnover or inventory.
24 The liquidator contended that the trial judge's reasoning turned on his finding that nothing was achieved other than to the detriment of the company.
25 The liquidator's written submissions continued (paras 4-9: footnotes omitted):
"4. The appellant relies on a qualification placed by Ormiston J on passages from judgments of the High Court. His Honour said in V R Dye v Peninsula Hotels Pty Ltd (In Liq) and another [1999] 3 VR 201 at 214:
' .. a precise evaluation of services and goods provided can never be made satisfactorily and, unless there be some dishonest attempt to overvalue particular goods or services, they ought for practical purposes to be taken as having been received at face value, that is, at the value at which the company agreed to acquire them. This process of analysis of each transaction was later described by the majority (in Airservices ) as the 'doctrine of ultimate effect.'
5. If his Honour meant by this that any creditor who is paid for services has not received an unfair preference because, at the end of the day, those services necessarily increased the amount available to creditors by the amount paid, he was wrong. The doctrine of ultimate effect was explained by the majority in Airservices at 502:
' To have the effect of giving the creditor a preference, priority or advantage over other creditors, the payment must ultimately result in a decrease in the net value of the assets that are available to meet the competing demands of other creditors.'
6. In this passage the majority refer in a footnote to the decision of Fox J in Re Discovery Books Ltd (1973) 20 FLR 470 where his Honour said, at 475:
' one must ultimately come back to considering whether by reason of the payment, or dealing, there is less money available for the general body of creditors.'
7. The appellant implicitly accepts that the services provided by him did not result in any quantifiable addition to turnover or inventory [submissions paragraph 4(c)(ii)]. On this basis, applying the ultimate effect doctrine, there was less money for the general body of creditors and the transaction constituted an unfair preference.
8. Further, it is not accurate to say that the services rendered by the appellant were necessary to allow the company to continue trading. Although Mr Miller, a director of the Company, gave evidence in cross-examination that the company would not survive unless the appellant or someone else got the accounts in order [Black AB 24 I- J], that does not mean that the appellant's services were necessary to allow the company to continue trading. The circumstances in Airservices were quite distinct from the present circumstances. In that case, the creditor had the power to cancel the debtor's certificate of registration or seize the aircraft if the debts were not paid. Without aircraft, of course, the business of the debtor in that case could not continue. Here, although the Company's bank put pressure on Mr Miller to have the accounts prepared properly, the appellant's retainer [Blue AB 41] went well beyond the task as did the work actually performed by him and his employees [Blue AB 9-28].
9. For these reasons the trial Judge applied the law correctly in finding that the appellant's services did not increase the assets available to creditors and so the payments to the appellant constituted unfair preferences."
Conclusion
26 To my mind it is irrelevant that in fact, as matters turned out, the defendant's services "achieved nothing other than to the detriment of the other creditors of the company". Underlying this finding appears to be a conclusion that the creditors of the company at the time the defendant was engaged would have been better off if Mr Miller had never approached the defendant, or if the defendant had refused to supply any services to the company. The underlying reasoning appears to be that even if the result of the defendant not giving assistance would have been that the company entered liquidation in July 1994 rather than February 1995, the creditors would have had access to $52,000 more than was otherwise the case.
27 The fact that the defendant's intervention was, in that sense, ultimately detrimental to the creditors is not determinative, though the trial judge appeared so to treat it. This is because the "doctrine of ultimate effect" does not depend on an evaluation of whether the overall result of the impugned transaction, taken with all other circumstances affecting the company, was to improve or worsen the company's position. Rather, the doctrine looks to the "ultimate effect" of the particular transaction. If a company gives up $1,000 in cash, but gains goods which are unquestionably worth $1,000 or more, the ultimate effect has not been to decrease the net value of the assets.
28 Further, it is important not to read the word "money" as used by Fox J in Re Discovery Books Pty Ltd (1973) 20 FLR 470 at 475 too narrowly. Fox J was not referring to cash resources alone. By "money" he was referring to the company's assets as a whole. It was in that sense that the majority in Airservices Australia v Ferrier (1996) 185 CLR 483 at 502 was speaking when it referred to Fox J with approval.
29 The liquidator did not explain the basis for his submission that the Victorian Court of Appeal in V R Dye & Co v Peninsula Hotels Pty Ltd (In Liq) [1993] 3 VR 201 at 214 was wrong. It is not the case that a failure to show any quantifiable addition to turnover or inventory means that the services supplied are without value, or that a payment made for them necessarily decreases the company's net assets. There is here no evidence of, and no endeavour by the liquidator to establish, any "dishonest attempt to overvalue particular … services". Nor is there any other reason to conclude that the services were not worth what was paid for them.
30 In any event, the court ought not to refuse to follow the decision of the Victorian Court of Appeal in V R Dye & Co v Peninsula Hotels Pty Ltd (In Liq) without being convinced that it is plainly wrong: Akins v Abigroup Ltd (1998) 43 NSWLR 539 at 547. The same is true in my opinion of well-considered dicta even if, which is questionable, the statements of the Victorian Court of Appeal can be regarded as obiter dicta. I am far from being convinced that either the decision or the dicta, if that is what they are, were wrong.
31 As a fall-back position, the liquidator submitted that the Victorian Court of Appeal was not stating a hard and fast rule of law but rather that each case turned on its own facts. If one examines the facts of this particular case, they do not suggest the existence of an unfair preference.
32 The liquidator's submission that the defendant's services were not necessary to allow the company to continue trading must in my view be rejected. The distinction propounded in that submission between the powers available to the creditor in the Airservices case to cancel the certificate of registration or seize the aircraft and the powers available to the bank in this case is without substance. The bank, it seems, was owed a debt payable on demand which would not have been repaid if that demand had been made whether under
s 449E of the Corporations Law or otherwise. It could have had a liquidator appointed. It dishonoured numerous cheques between July 1994 and February 1995 (Blue 59J-60Q). Its support was as essential to the trading life of the company as the certificate and the aircraft were in the Airservices case.
33 In essence, the trial judge appears to have reached the conclusion which he did on the basis of two matters. One was that the defendant knew that the company was insolvent. The other was that in due course the company went into liquidation. It seems to have been assumed that those facts alone were sufficient to support a conclusion of an unfair preference.
34 I repeat that this is a case in which there was no suggestion that the services were supplied at excessive fees, nor that the services were not needed for the immediate purposes which the defendant and Mr Miller saw as being served. In short, there was no deliberate over-servicing and no overcharging.
35 If the argument of the liquidator was sound, then no person assisting a company in financial difficulties could recover if that company goes into liquidation, so long as the person assisting was aware of the company's insolvency. In my opinion, the law does not go so far.