Liquidation) v McDonald

REASONS FOR JUDGMENT 1 This proceeding is brought by Mr Nicholas Cooper and Mr Andre Strazdins as joint and several liquidators of Wellness Group SA Pty Ltd (In Liquidation) ("the company") against Ms Susan McDonald. The proceeding is an application under s 588FF of the Corporations Act 2001 (Cth) ("the Act") and ss 21, 22 and 23 of the Federal Court of Australia Act 1976 (Cth) seeking a declaration that various transactions of the company are voidable and an order that the defendant repay moneys paid to her by the company. The plaintiff has filed a statement of claim. The defendant has not yet filed a defence. 2 The defendant applies for an order under O 11 r 16 of the Federal Court Rules that the plaintiffs' Statement of Claim be struck out. The basis of the application is that the Statement of Claim fails to plead the necessary material facts for the causes of action alleged and, therefore, it does not disclose a reasonable cause of action or other case appropriate to the nature of the pleading within O 11 r 16(a). The defendant also submits that, as a consequence of the said failure, the Statement of Claim has a tendency to cause delay in the proceeding (see O 11 r 16(b)). 3 The plaintiffs' case is that Mr Michael Panayi was a director of the company. He borrowed the sum of $227,000 from the defendant pursuant to a loan agreement. The advance was made on or about 19 September 2003. The plaintiffs' case is that between 8 April 2004 and 16 June 2006 the company paid sums totalling $140,107.49 in respect of Mr Panayi's liability to the defendant. 4 The plaintiffs' case is that the payments by the company were unreasonable director-related transactions within s 588FDA of the Act and were voidable within s 588FE(6A) of the Act. In the alternative, the payments by the company were insolvent transactions within s 588FC (relying on the uncommercial transactions limb) and were voidable within s 588FE(4) of the Act. 5 In the further alternative, the payments from 15 July 2004 to 16 June 2006, and totalling $131,385.49, were insolvent transactions within s 588FC and uncommercial transactions within s 588FB of the Act and were voidable within s 588FE(3) of the Act. 6 The plaintiffs acknowledge that there are two further allegations that need to be included in the Statement of Claim and they have put forward a proposed amended statement of claim. At the request of the defendant, the plaintiffs have also provided particulars of various allegations in the Statement of Claim and those particulars were put before me. 7 I turn now to address the particular complaints made by the defendant. 8 Paragraph 4: The complaint here is of a typographical error or proof-reading error and this can be remedied when an amended statement of claim is filed. The same can be said of the apparent error in paragraph 14.3. 9 Paragraphs 5 and 6: The complaint here relates to inadequate particulars rather than a failure to plead material facts. The plaintiffs' response to the defendant's request for particulars in relation to these paragraphs is that particulars cannot be provided until after discovery. I accept that that is the case. 10 Paragraph 7: The complaint here is without substance. The transactions are the payments by the company and the dates of the payments are clearly pleaded in the Statement of Claim. I refer to the definition of "transaction" in s 9 of the Act. 11 Paragraph 8: The complaint here is without substance. The basis of the allegation is linked back to paragraph 6 and, in my opinion, is sufficiently clear. 12 Paragraphs 12, 16.1 and 19.1: The complaint here is that there is a bare allegation that the company was insolvent at the time the payments were made without material facts supporting the plea. The concepts of solvency and insolvency are defined in the Act as the ability to pay all one's debts as and when they become due and payable: s 95A. The complaint by the defendant is not that that has not been pleaded. That fact may be assumed to be the effect of the plea. The complaint by the defendant is that the facts the plaintiffs will rely on to make out the allegation of insolvency are not pleaded. I reject this complaint. The material fact is that, at the relevant time or times, the company was unable to pay its debts as and when they became due and payable. It seems to me that the facts the plaintiffs will rely on to make out that allegation are, at best for the defendant, matters for particulars. The differences between material facts and particulars have been discussed in a number of cases. In the circumstances, I do no more than refer to my discussion of the differences in Procter v Kalivis [2009] FCA 795 at [44]-[46]. 13 In my opinion, there is no reason in this case to order particulars of insolvency before the defendant files a defence and, in fact, in due course, it may be appropriate for the necessary allegations to be provided in an expert's report rather than by way of particulars. 14 Paragraph 14: The complaint here is that the plea is uncertain. I reject this complaint. The plea is a plea that, in the circumstances of the case, the test postulated by s 588FDA(1)(c) ­­­­­­of the Act is met. It seems to me clear that the plaintiffs' case as to the benefits to the company, the detriment to the company and the benefits to the directors of the company are those previously pleaded. No doubt there are other ways in which the plaintiffs could plead that the paragraph in the Act was engaged, but I think, in the context of the pleadings as a whole, the plea is adequate and it cannot be suggested that there are unstated material facts or that the material facts are not those pleaded in the earlier paragraphs of the Statement of Claim. 15 Paragraphs 16 and 19: The complaint here is that it is not clear whether, with respect to the plea of insolvent transactions within s 588FC, the plaintiffs are relying only on s 588FC(a)(i) or may, in the alternative, rely on s 588FC(a)(ii) or (b). I reject this complaint as it seems to me clear that the plaintiffs rely on s 588FC(a)(i). 16 Paragraph 18: The complaint here is that the incorporation by reference of paragraphs 10-14 gives rise to confusion and uncertainty. I reject this complaint. It seems to me that the effect of the plea is clear enough. 17 There is one matter which I think should be in the plaintiffs' Statement of Claim. As I understand it, the limb of insolvent transactions relied on by the plaintiffs is uncommercial transactions (see s 588FC) for the purposes of bringing their case within s 588FE(4). The relevant plea that the case falls within s 588FE(4) is paragraph 16 of the Statement of Claim and I think there should be an express allegation in that paragraph that the limb of insolvent transactions relied upon is uncommercial transactions.