Court of Appeal (WA)|2000-06-01|Before: Re J, Kennedy J, Pidgeon J, Templeman J

Minister for Transport v Ian Charles Francis and Antony Leslie John Woodings As Joint Liquidators of Civcon Pty Ltd (In Liq) [2000] WASCA 149 (1 June 2000)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : MINISTER FOR TRANSPORT -v- IAN CHARLES FRANCIS AND ANTONY LESLIE JOHN WOODINGS AS JOINT LIQUIDATORS OF CIVCON PTY LTD (IN LIQ) [2000] WASCA 149

IAN CHARLES FRANCIS AND ANTONY LESLIE JOHN WOODINGS AS JOINT LIQUIDATORS OF CIVCON PTY LTD (IN LIQ) (ACN 009 433 587)

Corporations - Winding-up - Unfair preferences - Whether principal under construction contract a creditor in respect of moneys - Whether moneys paid by way of prepayment - Meaning of "transaction" under Corporations Law, s 588FA

Appellant (Respondent) : Mr K J Martin QC & Ms G C Bracks

Respondents (Applicants) : Mr C L Zelestis QC & Mr C A D Ryder

Respondents (Applicants) : Corrs Chambers Westgarth

Algons Engineering Pty Ltd v Abigroup Contractors Pty Ltd (1997) 14 BCL 215

Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485

Re J F Aylmer (Manildra) Pty Ltd (1967) 87 WN (Pt 1) (NSW) 409

Re Blackpool Motor Car Co Limited [1901] 1 Ch 77

Blue Chip Pty Ltd v Concrete Constructions Group Pty Ltd (1996) 13 BCL 31

Burns v Stapleton [1959] HCA 34; (1959) 102 CLR 97

Community Development Pty Ltd v Engwirda Construction Co [1969] HCA 47; (1969) 120 CLR 455

Court v Hewett [1982] WAR 151

Day v McLea (1889) 22 QBD 610

Dixon v South Australian Railways Commissioner [1923] HCA 45; (1923) 34 CLR 71

V R Dye & Co v Peninsula Hotel Pty Ltd (In Liq) [1999] VSCA 60; (1998) 28 ACSR 167; (1999) 32 ACSR 27

Re Emanuel (No 14) Pty Ltd (In Liq); Macks v Blacklaw & Shadforth Pty Ltd (1997) 147 ALR 281

Grundt v Great Boulder Pty Gold Mines Ltd [1937] HCA 58; (1937) 59 CLR 641

Re Jaques McAskell Advertising Frith Division Pty Ltd (In Liq) [1984] 1 NSWLR 249

McDonald v Dennys Lascelles Ltd [1933] HCA 25; (1933) 48 CLR 457

Re Paine; Ex parte Read [1897] 1 QB 122

Perini Corporation v Commonwealth [1969] 2 NSWR 530

Prime Wheat Association Ltd v Chief Commissioner of Stamp Duties [1997] NSWSC 546; (1997) 42 NSWLR 505

Robertson v Grigg [1932] HCA 29; (1932) 47 CLR 257

Re Timbatec Pty Ltd [1974] 1 NSWLR 613

Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387

1 KENNEDY J: I have had the benefit of reading in draft the reasons to be published by Templeman J, with which I am in agreement. I would accordingly allow this appeal, set aside the orders made by the learned Master on 17 March 1999 and, in lieu thereof, order that the respondents' application be dismissed.

2 PIDGEON J: The respondent company, which is now in liquidation, entered into a contract with the appellant whereby the company was to construct a harbour at Exmouth. It was a lump sum contract where the price was to be paid by the appellant to the company progessively when progress certificates issued. The appellant responded to a request by the company to make a payment of $150,000 when such amount was not the subject of a progress certificate and at a time when the appellant was not required under the contract to make such a payment. It was agreed that the amount be brought to account under the contract by crediting it against future progress certificates. In addition, the company, when excavating rock for the harbour, found more overburden than it anticipated and it made a claim to increase the price under a clause in the contract dealing with latent conditions. An advance was made to the company in response to this claim prior to an increase in the contract price on account of a latent condition being either agreed or determined. This too was to be brought to account by deducting it from future payments when they became due under the contract. On 9 August 1996, the superintendent supervising the contract issued a certificate as to a payment due under the contract. From that certificate he deducted the $150,000 initially advanced and a further amount of $147,576 being described as: "recoup of waste advance". This was portion of the monies advanced by reason of the latent condition claim. The liquidator is claiming that the deduction of these two sums was an unfair preference by reason of s 588FA(1) of the Corporations Law. This section reads:

"A transaction is an unfair preference given by a company to a creditor of the company if, and only 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; ....

3 The critical question which arises is whether the appellant was a creditor of the company when the monies were deducted from the progress payments. If the appellant was not a creditor then the section would not apply. The first ground of appeal claims that the appellant never was a creditor of the company and if this ground is established, that would determine the question.

4 The first payment made and now sought to be recovered by the liquidator is the initial payment of $150,000. The circumstances in which it was paid were that the company, after it went into possession of the site and had commenced to perform the contract, wrote to the superintendent appointed by the appellant pursuant to the terms of the contract. The superintendent was to oversee the contract. The company in that letter, pointed out that there had been delays commencing the contract and those delays were not the fault of the company. The delays included a delay in approval by the Environmental Protection Authority. As the company was delayed in commencing the contract, it could not receive its progress payments and this prevented the company from paying its Exmouth creditors. The company therefore asked for a special advance so that the works could be continued in a correct and proper manner. It was followed by a letter in which the company confirmed that the purpose of the advance was "to clear existing debtors for the Exmouth Boat Harbour Project". The letter contained a list of the creditors it proposed to pay. The letter said that the advance would be paid into a trust account and it would be strictly disbursed in the way outlined. The letter contained the following sentence in respect of repayment, "It is also proposed that the advance is repaid in three equal instalments out of the progress claims for the months of June, July and August 1996." The superintendent replied that the appellant was agreeable to make an advance of $150,000 on conditions which the superintendent set out. The superintendent required the monies to be paid to a trust fund to be disbursed in the way earlier mentioned and it confirmed that the repayment was to be by way of deductions from the three progress payments. The advance was made but the repayments were not deducted from the three progress payment claims referred to. The certificates did not credit it and the company did not pay it. The appellant raised the question of payment and the company asked if it could defer repayment until the amount could be deducted from the retention money payable at a later stage under the contract. This was not responded to. The amount advanced was ultimately deducted from a certificate I shall later describe and which was dated 9 August 1996.

5 It would appear that the matter was argued before the learned Master by submitting the question whether or not the initial payment was "a genuine repayment under the contract". This was the question the learned Master asked himself. The Master said that it seemed to him that the proper approach was to ask whether or not the payment concerned was a prepayment. He held it was not. He considered two factors appeared to be decisive. He referred firstly to the fact that the superintendent attempted to control the way in which the advance made was to be used by the company. He felt this was inconsistent with a genuine repayment. The second factor to which he referred was that the parties in their subsequent negotiations spoke in terms of "repayment of the advance".

6 Although the learned Master asked the question whether or not the amount was a prepayment it was, nevertheless, still clearly in his mind that it was necessary for the company to be a creditor because he said later that if the advances he was considering were genuine prepayments, then as at 9 August 1996 the appellant had no right to be repaid any amount of money advanced by the company. I consider however, with respect, that asking the question whether or not the payment was a prepayment, has a tendency to cloud the issue. The essential question is whether the appellant was a creditor of the company. The Master referred to the decision of Steytler J in Ballan Pty Ltd (In Liq) v Hood (1994) 13 WAR 385 as he considered that this case was an illustration of what is a genuine prepayment. I do not consider that case is of assistance. Steytler J said that the relevant element to be proved was whether the monies claimed were paid to the respondent in his capacity as a creditor of the company. The respondent, in that case, was an accountant who received payments of $1,200 in advance for professional work it was anticipated he would do. He paid it to his general account and was not required to pay it to his trust account. He later did that work. Steytler J held that at the time the monies were paid, they were not paid to the respondent as a creditor. His Honour held that other payments made to the respondent after other work was done were payments made to him as a creditor. The learned Master also referred to Higgins GS Enterprises Pty Ltd (In Liq) (1989) 7 ACLC 410 which case was also referred to by Steytler J in the case to which I have referred. This case again was decided on the basis that the solicitors were creditors after they performed the work that they were asked to do. The question is whether on the facts of each of the cases the person receiving the payment from the company was a creditor of the company.

7 I consider, in the present case, that the inference is compelling that at the time the $150,000 was paid, it was paid on account of the contract price. It was paid at a time when the contract was on foot and whilst the company was performing the contract. When the contract was further performed and a progress certificate issued, then it was intended that portion should be credited against that certificate. The appellant could not have demanded that money back and would not have had a right of action to recover that money. I do not consider this position changed. It would not have changed when the request was made to debit it against retention money. It was still intended to be debited against future payments due under the contract. Although the amount advanced was to be paid into a trust account to pay creditors, there was no suggestion that the appellant was a beneficiary of that trust account or that the appellant would have any right to repayment from the trust account. The creditors listed exceeded $300,000 and there was no suggestion of any amount going back to the appellant.

8 In my view it makes no difference that the appellant specified how the money was to be disbursed. It is perfectly open to say, "I will pay portion of the contract price at this earlier stage provided that you spend it in a certain way". It is still being paid on account of the contract price. This is given greater weight, in the present circumstances, as it would appear that the intention was for it to be paid to the subcontractors who were causing the company to perform the contract. It is open to say in any contract initially, or at a later stage, that subcontractors must be immediately paid from progress payments. The progress payments are still being paid in reduction of the contract price. The fact that it is a requirement to pay it in this manner means that there would be a breach of the contract if the monies were not so paid.

9 Once the conclusion is reached that the initial payment was made on account of the contract price, and that there was no right of action to the appellant to recover it, then it matters not how the parties in their subsequent negotiations and correspondence described the payment. When examining the next head I shall refer to this factor in a little more detail. I consider, however, that the parties in the later correspondence were referring to the payment for the purpose of making sure that its deduction would not be overlooked.

10 A further question could arise and that is if the appellant paid the contract price in full without making a deduction of the $150,000, then it would have a right of action for its recovery as an overpayment. I do not consider this situation arose for reasons which I will consider when examining the circumstances in which the next payment was made. I am satisfied that the appellant was at no stage a creditor of the company in respect of the $150,000.

11 I shall now set out the circumstances in which the second amount claimed by the liquidator was paid to the company. The company claimed that it was finding that the overburden in the quarry was much greater than it originally anticipated. The company claimed that it was entitled to a payment over and above the contract price by reason of a clause relating to latent conditions. The superintendent did not accept the claim but made the advance on the basis that it was to be repaid from that part of the contract price which became payable in the future. The company accepted the money on that basis but pursued its claim to increase the contract price by reason of the latent conditions. To this point the position was the same as I have outlined in respect of the first payment. The money paid on account of the contract price. The appellant would have no right of action for it and had not become a creditor.

12 There was reference by the Master to a further sum of $87,544.20 payable on account of waste. This appeared to me to have been paid pursuant to a progress certificate signed by the superintendent (AB 184) so was on account of the price. If it was not, then this further payment would be the subject of the same principles as the first overburden payment.

13 There was a continuing dispute as to whether further monies were payable by reason of the latent conditions. It was in these circumstances that the certificate of 9 August 1996 issued. It was issued by the superintendent and was described as Variation order No 6 (AB248). It was expressed to be "in accordance with an earlier without prejudice offer". It set out a revised contract price described as a revised contract value. There was credited to the amount payable monies paid earlier and which were paid on account of the contract price. The net amount was $153,536 which was banked by the company. The letter containing the "without prejudice offer" showed that the figure was the appellant's estimate, on the information it then had, of the amount due under the latent condition clause. Although the letter referred to some areas where the appellant said that it was not liable, it did indicate that the appellant was liable for the amount tendered. It also indicated that the appellant was considering and would consider any further information supporting a further claim. The amount was not tendered in full settlement and was certainly not accepted on that basis as the company made it clear it was continuing arbitration proceedings if the matter could not be resolved.

14 The letter and the certificate which supported it was an acknowledgment that there was this further amount payable under the contract. It was an amount over and above the initial contract price, but was nevertheless further monies payable under the contract as part of the increased price by reason of the latent conditions. It was by reason of this that the position did not arise of the contract having been paid in full giving the appellant a right to treat the monies initially advanced as monies overpaid. They were at no stage in this category and the price prior to the tendering of the final payment had never been paid in full. Whether or not it has now been paid in full is the subject of arbitration proceedings.

15 It could not be argued that the company, by reason of its not accepting a without prejudice offer and pursuing its claim for an extra amount, was required to repay the amount tendered. It was tendered as part of the price and the appellant acknowledged the price up to the amount tendered. It was not the case of its being monies which the appellant considered it did not owe, but was nevertheless prepared to pay to resolve a dispute.

16 The parties in their negotiations used terminology consistent with the money having been advanced by way of loan. The party's description of the transaction at this stage could not affect the legal position which had arisen at the time the payments were made. I would see it and the earlier correspondence as being in substance no more than acknowledging the fact that when the final amount payable under the contract had been agreed, the monies already paid on account of the contract price must be deducted from it as that portion of the price had already been paid.

17 The learned Master decided the matter on an alternate basis as much as he said, if his analysis were wrong and the amounts were not genuine prepayments, then the appellant had no right to be repaid any money by the company. In other words the appellant was not a creditor. He considered, however, that the situation changed on 9 August 1996. The learned Master said: (AB40)

"On 9 August 1996 all that changed. The respondent issued a variation which entitled Civcon to a payment of just over $460,000. In turn, Civcon acknowledged that it was indebted to the respondent in the amount of the advances. The parties reached an agreement. At the instant the agreement was reached Civcon was indebted to the respondent. That debt was discharged by the way in which the transaction was effected without the need for Civcon to take any action, but discharged nonetheless. The debtor/creditor relationship was established and the debt was paid. This was a voidable preference."

18 The parties did not reach an agreement on 9 August. The dispute continued. Even if the amount of the certificate had been accepted in settlement of the balance of the contract price, then the agreement reached would have been no more than an agreement as to what was the new contract price under the main agreement. There was no new agreement establishing that the appellant was a creditor. Whatever the position, the appellant could never have brought an action to recover the two amounts. The company was not acknowledging a loan. It was doing no more than acknowledging that the earlier monies had been received and must now be deducted.

20 TEMPLEMAN J: The question raised by this appeal is whether the transaction in which amounts paid previously to a company were deducted from the face value of a certificate issued pursuant to a construction contract, was an unfair preference, within s 588FA of the Corporations Law.

21 The company, Civcon Pty Ltd, entered into a contract with the Minister for Transport on 15 January 1996, for the construction of a harbour at Exmouth. The contract required Civcon to quarry limestone, to transport it to the harbour, and there to construct a breakwater.

22 In April 1996, Civcon complained that unforeseen problems which it had encountered in the performance of the contract were causing financial difficulties. It sought an advance payment of $300,000.

23 Civcon's claim was considered by the Superintendent appointed pursuant to the contract, Dr Michael John Paul, a civil engineer employed by the Department of Transport.

24 By a letter dated 23 April, the Superintendent offered "an immediate advance of $150,000" to assist Civcon in overcoming its difficulties. He imposed conditions, including:

"... repayment of the advance ... by way of deductions from the June, July and August (progress) claims in three equal instalments ...."

Civcon agreed to that condition: and the payment was duly made.

25 Civcon then notified the Superintendent of a latent condition claim. Civcon contended that the rock encountered in the course of quarrying limestone differed materially from that which it could reasonably have anticipated when tendering for the contract.

26 Following investigation, the Superintendent rejected this claim. He was persuaded, however, that Civcon had been required to remove a disproportionate amount of waste rock in the early stages of the contract. As a result, Civcon had incurred substantial costs for waste removal without yet deriving the income (by way of progress payments) from which it had expected to pay those costs.

27 That being so, the Superintendent agreed to pay Civcon an amount of $143,871.60 on the basis that it would be "recovered over the period of the contract" at the rate of 86 cents per tonne of limestone placed. Civcon agreed.

28 Thus, there was no increase in the total price payable under the contract.

29 The payment was made on 24 May 1996. On 28 May, the Superintendent made a further payment of $87,544.20. This was also to reflect the disproportionate cost of waste rock removal, but at a greater cost than had been allowed previously. It was agreed that this further payment would be recouped at the rate of $1.40 per tonne of limestone placed.

30 Civcon pursued its latent condition claim. It met with greater success. On 9 August, the Superintendent wrote to Civcon offering to increase the contract price by an amount of $451,115. In his letter the Superintendent said:

"... any agreement to pay a variation ... would be dependent on an agreement by the Contractor to repay any monies currently held by him outside the terms of the Contract...."

31 The monies were identified as the $150,000 paid on 23 April and the balance of the payments made in May, after taking into account partial recoupment at the rates of 86 cents and $1.40 per tonne respectively.

32 On that basis, the Superintendent calculated the amount payable as $153,536. He went on to say that he was still considering more recent information submitted by Civcon in relation to the latent condition claim.

33 Civcon replied to the Superintendent's letter on the same day. It accepted the payment of $153,536 against the variation order, without prejudice to its outstanding claim.

34 The Superintendent then issued a variation order and a payment certificate in an amount of $451,115. He noted on the certificate that:

"Disbursements have been made as per the following:

Department of Transport - recoup of advance $150,000.00

35 On 4 October 1996, the respondents were appointed as administrators to Civcon: and on 31 October they became its liquidators.

36 The respondents contended that the first two "disbursements" referred to above, totalling $297,576 constituted an unfair preference in favour of the Minister for Transport. They commenced proceedings for a declaration to that effect.

37 The application was heard by a Master. He agreed with the respondents. He held that neither the amount of $150,000 paid on 23 April nor the two amounts paid on 24 and 28 May was a "genuine prepayment": and that they were therefore amounts which were to be repaid. As the balance of those amounts had been repaid in the relevant period before Civcon's liquidation, the transaction was necessarily an unfair preference.

38 Alternatively, the learned Master held, an agreement had been reached on 9 August in which Civcon acknowledged that it was indebted to the Minister in the amount of the advances: and by paying the balance of those advances and thereby discharging the debt, Civcon unfairly preferred the Minister over the other creditors.

40 A transaction will be an unfair preference within s 588FA of the Corporations Law, if, and only if:

* the transaction results in a 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.

41 The appellant's principal submission is that on 9 August 1996, there was an attempt to settle Civcon's outstanding claim, but that the attempt failed. Thus, it is submitted, Civcon was obliged to repay the amount of $153,536: and because there was no agreement, there is no basis in law on which a "deduction" could have been made from the amount of $451,115.

42 I do not accept that submission. The Superintendent offered a net sum of $153,536. It was accepted by Civcon. Both parties knew that the payment was not accepted on the basis that it was in full and final settlement of the outstanding latent conditions claim. That was stated expressly in the material correspondence and accepted by the Superintendent in cross-examination before the Master. But whatever the correct legal analysis of the events of 9 August, there was undoubtedly a commercial transaction on that day.

43 The question is, therefore, what is the "transaction" on which attention must be focused for the purposes of s 558FA?

"'transaction' ... means a transaction to which the body [corporate] is a party, for example (but without limitation);

(a) a conveyance, transfer or other disposition by the body of property of the body; and

(b) a charge created by the body on property of the body; and

45 It is to be noted that (although the definition is not exhaustive) none of those examples involves any corresponding transaction, such as the receipt of goods in return for payment. Yet it cannot have been intended that composite transactions should be excluded from the operation of s 588FA, because such transactions might well involve a preference. As the majority of the High Court said, in Richardson v The Commercial Banking Company of Sydney Ltd [1952] HCA 8; (1951-52) 85 CLR 110, 132:

"In considering whether the real effect of a payment was to work a preference its actual business character must be seen and when it forms part of an entire transaction which if carried out to its intended conclusion will leave the creditor without any preference priority or advantage over other creditors the payment cannot be isolated and construed as a preference."

46 This passage was applied by Dawson, Gaudron and McHugh JJ, who constituted the majority of the High Court in Airservices Australia v Ferrier (1995-96) 185 CLR 483, 502:

"Resort must be had to the business purpose and context of the payment to determine whether it gives the creditor a preference over other creditors. 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 the other creditors."

47 It must follow, I think, that if there is a complex transaction, involving a number of elements, it is necessary to regard each element as a separate transaction for the purposes of s 588FA. And in particular to identify any sub-transaction which results in a creditor receiving something from the company "in respect of an unsecured debt that the company owes to the creditor".

48 That sub-transaction, or element of the complex transaction is then the relevant transaction for the purposes of the section.

49 If that transaction involves the repayment of a debt, it then becomes necessary to carry out the hypothetical exercise of notionally setting the transaction aside and considering whether the creditor would receive less from the company if he were to prove for the debt in a winding-up.

50 In the present case, there is an issue as to the precise character of the payments made to Civcon in April and May 1996. The appellant contends that they were pre-payments: the respondents contend that they were loans.

51 The learned Master held that the basis on which the payments had been made was unclear: but that on any view, they were not pre-payments. He therefore concluded that Civcon had been obliged to repay the relevant amounts, with the result that the "repayment" on 9 August 1996 was a voidable preference.

52 The learned Master went on to hold that in any event, the debtor/creditor relationship between Civcon and the appellant was established on 9 August, when the Superintendent issued a variation and Civcon acknowledged that it was indebted to the appellant in the amount of the advances:

"The parties reached an agreement. At the instant the agreement was reached Civcon was indebted to the respondent. That debt was discharged by the way in which the transaction was effected without the need for Civcon to take any action, but discharged nonetheless. The debtor/creditor relationship was established and the debt was paid. There was a voidable preference."

53 I agree with the learned Master that it is not necessary to decide the precise nature of the payments made in April and May 1996. The question is whether the transaction of 9 August resulted in the discharge of an unsecured debt.

54 In answering that question, I differ, with respect, from the learned Master. That is because I do not construe the events of 9 August as embodying an agreement that Civcon was indebted to the appellant. It is true that in his letter of that date, the Superintendent said that:

"... any agreement to pay a variation ... would be dependent on an agreement by [Civcon] to repay any monies currently held by him (sic) outside the terms of the Contract...."

However, it was common ground that the language used by the parties should not be determinative of their relationship.

55 In fact, there was not a payment by the appellant of the whole amount certified and a "repayment" by Civcon. The appellant paid the net amount. In calculating that amount, the payments made in April and May 1996 were brought into account. They were treated as being part-payments of the total. Indeed, the situation on 9 August was precisely the same as it would have been if the earlier payments had not been made. That being so, I am not persuaded that either the overall transaction, or any element of it, resulted in a decrease in the net value of the assets available to Civcon's creditors. In short, the appellant was not a creditor of Civcon: he was a debtor, with the result that s 588FA had no application.

56 If, contrary to my view, Civcon had been indebted to the appellant, the effect of the transaction was to release Civcon from the debt. The transaction was not, in substance, a disposition by Civcon of its property within par (a) of the definition of "transaction" in s 9: it was a disposition of the appellant's property.

57 I accept that the statutory definition of "transaction" is not exhaustive. If, contrary to my view there was on 9 August a transaction which fell within the ambit of s 588FA, or if the transaction is to be regarded as involving a repayment by Civcon of the amounts taken into account in calculating the net figure, it would be necessary notionally to set that transaction aside. But if that were done, then so too must the payment of $153,536 be set aside. It would be unrealistic to separate them.

58 In those circumstances it seems to me to be inappropriate to ask what the appellant would receive if he were to prove for the debt in the winding-up. The appellant would not then be a creditor: he would be a debtor who would no doubt be the subject of a claim by the respondent liquidators for the whole amount of the certificate. But he would then be entitled to set-off the balance of the earlier payments, pursuant to s 553C(1). The result would be the same.

59 In reaching that conclusion I am mindful of s 553C(2) which provides that:

"A person is not entitled under this section to claim the benefit of a set-off if, at the time of giving credit to the company, or at the time of receiving credit from the company, the person had notice of the fact that the company was insolvent."

60 This is not a matter which has been addressed in evidence or submissions, either before the learned Master or this Court. With that reservation, it seems to me that there is no evidence about the appellant's state of knowledge at the relevant times, which must be 23 April and 24 to 28 May 1996: the "time of giving credit to the company".

61 It is true that the appellant received credit from Civcon on 9 August. But that date is not relevant for present purposes. That is because, on the hypothetical approach required by s 588FA, the 9 August transaction is to be set aside.

62 Assuming for present purposes that the Superintendent's knowledge could be attributed to the appellant, I do not think it can be said that the Superintendent knew in April or May 1996 that Civcon was insolvent. The Superintendent was aware of Civcon's financial difficulties, but that is not knowledge of insolvency. Civcon appeared to be able to pay its debts as they fell due: see Law v James [1972] 2 NSWLR 573, 575 - 577. Indeed, one of the objectives of the payment made on 23 April was to ensure that it continued to do so.

63 In these circumstances, I do not think it can be said that if the transaction of 9 August was set aside, and the appellant was to prove for in the winding-up for the balance of the April and May payments, he would receive less than he received in respect of those payments than he did on 9 August.

64 I therefore conclude that, however viewed, the transaction of that date did not involve an unfair preference within s 588FA of the Corporations Law.

Minister for Transport v Ian Charles Francis and Antony Leslie John Woodings As Joint Liquidators of Civcon Pty Ltd

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (111 paragraphs)

Minister for Transport v Ian Charles Francis and Antony Leslie John Woodings As Joint Liquidators of Civcon Pty Ltd (In Liq) [2000] WASCA 149 (1 June 2000)

Parties

Cases Cited (12)