Playspace Playground Pty Ltd v Osborn

Federal Court of Australia|2009-12-11|Before: Reeves J

introduction 1 During June 2004, The Toy Shed Pty Ltd ("Toy Shed") placed an order with Playspace Playground Pty Ltd ("Playspace") for the supply of the component parts necessary to assemble and install playground equipment in 15 City Council parks in Darwin in the Northern Territory. 2 By September 2005, Toy Shed had failed to pay Playspace the various invoices it had submitted for the supply of this equipment. As a result, Playspace obtained a default judgment against Toy Shed in the County Court of Victoria in the total sum of $116,525.81, including costs and interest. 3 On 19 October 2005, Toy Shed was placed in voluntary administration. Soon after that, its creditors voted to appoint a liquidator and have the company wound up. Mr Trevor Angus was appointed as the liquidator. 4 Ms Christine May Osborn, the defendant in these proceedings, was the sole director of Toy Shed throughout this period. 5 With the consent of the liquidator, Playspace has commenced these proceedings against Ms Osborn claiming that, when Toy Shed incurred the debt with Playspace, there were reasonable grounds for suspecting that Toy Shed was insolvent, or would become so as a consequence of incurring the debt.

RELEVANT LEGISLATIVE PROVISIONS 6 In making this claim, Playspace relies upon ss 588G and 588M of the Corporations Act 2001 (Cth) ("the Act"). Section 588M(3) allows Playspace, as a creditor of Toy Shed, to recover from Ms Osborn an amount equal to the loss or damage it has sustained if, as the director of Toy Shed, Ms Osborn contravened s 588G(2) or (3) of the Act. 7 Subsections 588G(2) and (3) of the Act relevantly provide that a person contravenes that section: (2) By failing to prevent the company from incurring the debt, the person contravenes this section if:

(a) the person is aware at that time that there are such grounds for so suspecting; or

(b) a reasonable person in a like position in a company in the company's circumstances would be so aware.

(a) a company incurs a debt at a particular time; and

(aa) at that time, a person is a director of the company; and

(b) the company is insolvent at that time, or becomes insolvent by incurring that debt, or by incurring at that time debts including that debt; and

(c) the person suspected at the time when the company incurred the debt that the company was insolvent or would become insolvent as a result of incurring that debt or other debts (as in paragraph (1)(b)); and

(d) the person's failure to prevent the company incurring the debt was dishonest.

8 Section 588H of the Act provides certain defences, but it is not necessary to set out those provisions at this point.

issues that arise 9 To begin with, I note that there is no dispute between the parties that Ms Osborn was a director of Toy Shed at all material times and that Playspace's loss or damage is equal to the amount of Toy Shed's debt to it. As to the matters that are in dispute, it was agreed between counsel at the hearing of this matter that the following issues arise for determination: 1. When did Toy Shed incur the debt to Playspace? 2. When did Toy Shed first become insolvent? 3. Were there reasonable grounds to suspect that Toy Shed was insolvent at the time the debt was incurred to Playspace, or it would become so by incurring the debt? 4. Did Ms Osborn have reasonable grounds to expect, and did she expect, that Toy Shed was solvent at the time the debt was incurred and would remain so notwithstanding the incurring of the debt? 10 I will turn to consider these issues in the order set out above. As will become apparent below, it will not be necessary for me to consider all these issues.

Factual Background 11 It is convenient to begin by providing some more of the factual background to this dispute. 12 From about June 2003, Toy Shed decided to expand its business activities to include installing playgrounds in public parks and at other locations around Darwin. 13 Playspace designed and manufactured for sale, playground and park equipment. Its principal place of business was at Dandenong in Victoria. 14 On 30 September 2003, Toy Shed entered into a Distributor Agreement with Playspace. Under that Distributor Agreement, Toy Shed became an authorised distributor in the Northern Territory for Playspace's products. 15 In or about May 2004, Toy Shed submitted a tender to the Darwin City Council for the installation of 15 playgrounds at various locations in Darwin. In or about June 2004, Toy Shed was awarded the contract for those works in the total sum of $210,000 plus GST. 16 On 21 June 2004, Toy Shed placed an order with Playspace for the supply of the equipment for the 15 playgrounds. The order form set out the general location of each of the 15 playgrounds and stated a base price for each playground. The total amount of the order, after allowing for discounts and adding GST, was $92,136.59. The order form also specified the dispatch date for the equipment as 26 July 2004. 17 The equipment for each of the playgrounds was delivered to Darwin from on or about 6 August 2004, until on or about 20 December 2004. After the various packages of equipment were delivered, Playspace issued invoices to Toy Shed. It issued 13 invoices in all. The first of them was dated 6 August 2004; and the last was dated 20 December 2004. The total amount shown on the invoices was $99,191.55. The difference between the amount shown on the order form and the total amount of the invoices, was due to various additional pieces of equipment that were required by Toy Shed during the course of the contract.

Contentions 18 Playspace contended that Toy Shed incurred the debt with it at various stages between August and December 2004, when the playground equipment was delivered to Toy Shed in Darwin and it issued invoices for the supply of the equipment. 19 For her part, Ms Osborn contended that the debt was incurred when she, on behalf of Toy Shed, placed the order for the equipment with Playspace on 21 June 2004. Her counsel contended that this followed from the fact that the order was for "manufacture to order" goods; and it also followed from the provisions of Clause 7.1.3 of the Distributor Agreement.

The Authorities 20 The question: when does a company incur a debt? is one that has been considered in a number of decisions in the recent past, some related to s 588G of the Act and others related to the various predecessors to that section, which were to similar form and effect. In Hawkins v Bank of China (1992) 26 NSWLR 562, Gleeson CJ said (at 572) the word "incurs" was "apt to describe, in an appropriate case, the undertaking of an engagement to pay a sum of money at a future time". Kirby P said (at 576): "… The act of 'incurring' happens when the corporation so acts as to expose itself contractually to an obligation to make a future payment of a sum of money as a debt". See also Woodgate v Davis (2002) 55 NSWLR 222 at [13] - [15] per Barrett J. 21 In Standard Chartered Bank of Australia Ltd v Antico (1995) 38 NSWLR 290 ("Standard Chartered Bank"), Hodgson J was required to consider this question in relation to a $30 million loan facility the terms of which had been varied, supplemented, or displaced on three occasions during a six to eight months period, without any further funds being advanced. His Honour identified (at 314) the appropriate approach as being: "… to construe the language of the section, according to the natural meaning of its words, but with due appreciation of the practical implications". He then stated his opinion (also at 314) as to what the section required, in the following terms: "… a company incurs a debt when, by its choice, it does or omits something which, as a matter of substance and commercial reality, renders it liable for a debt for which it otherwise would not have been liable". 22 While Hodgson J did not, in that decision, consider this question in relation to the specific situation that arises in this case, ie the sale of goods, he did, in a subsequent decision, about a week later, of Leigh-Mardon Pty Ltd v Wawn (1995) 17 ACSR 741 ("Leigh-Mardon"). In that case, his Honour was required to consider when a debt was incurred in connection with the sale of some items of packaging. The packaging in question was ordered on 15 September 1989, but delivered at various dates in November and December 1989. The defendant, Wawn, contended that the debts were incurred when the various consignments of the packaging were delivered, relying upon three decision: Hussein v Good (1990) 1 ACSR 710; Rema Industries and Services Pty Ltd v Coad (1992) 107 ALR 374 ("Rema Industries") at 381; and Taylor v Powell (1993) 113 ALR 374 at 379. In rejecting that contention, Hodgson J said (at 749): "… there is no hard and fast rule that a company incurs the debt for goods sold and delivered at the time when the goods are delivered to the company, and not at any earlier time." After reiterating what he had said in Standard Chartered Bank (above) about the question being "a matter of substance and commercial reality", his Honour turned to consider the specific situation in relation to the sale of goods. He observed that whether the debt arises at the time of the order, or the time of delivery, depends on the saleability of the goods and the extent of the resultant damage to the company if delivery were to be refused, as follows (at 749 - 750): … In relation to sale of goods, it seems to me that, in some cases, it will be the order which in substance and commercial reality renders the company liable for the price of the goods, even if that price is not actually payable until delivery; while in other cases, it will be the acceptance of delivery which, as a matter of substance and commercial reality, so renders the company liable. And intermediate positions are possible. For example, if the goods which are ordered are readily saleable by the vendor elsewhere at the same price, so that to refuse delivery not only precludes any liability for the price, but also involves at worst minimal damages, one might readily say that the debt is incurred, not by placing the order, but by accepting delivery. On the other hand, if what is ordered is goods which are to be specially manufactured for the company, and are not saleable elsewhere, so that to refuse delivery would be a breach of contract sounding in damages approximating to the full price of the goods, then, as a matter of substance and commercial reality, one would regard the debt as having been incurred by placing the order and binding the company to it, or possibly by not cancelling the order at a time before the damages flowing from such cancellation would be of a similar order to the price of the goods.

23 More recently, in Australian Securities and Investments Commission v Plymin (2003) 175 FLR 124 ("Plymin"), Mandie J reviewed the authorities on this issue (at [503] - [517]), including those mentioned above, and endorsed the approach outlined by Hodgson J (above) that the question turns on: "… when, in substance and commercial reality, the company is exposed to the relevant liability …" (at [516]). His Honour added (at [517]): "The words 'incurs a debt' cannot be disregarded but, because of the aim and intent of the section, the focus must be on the conduct and choice of the alleged insolvent company. It will often be necessary to identify the time when the conduct and choice of the company caused the debt to be incurred, or brought about the circumstances in which the debt was incurred, because it is at that time that it must be shown that the director failed to prevent the company from incurring the debt in the relevant sense, and it is also at that time that it must be shown that the director had or ought to have had the requisite awareness that there were reasonable grounds for suspecting insolvency. …"

24 In relation to the sale of goods, Mandie J concluded (at [517]) that: "… I think that it will often be the case, for the purposes of the section, that under a contract for the sale of goods where delivery times are left for future orders or instructions that, as a matter of substance and commercial reality, a debt will be incurred on each occasion when a delivery is ordered …". In this respect, it is also appropriate to mention the observation of Lockhart J in Rema Industries (at 381) that: "The time when a debt is 'incurred' will vary from case to case, depending principally upon the terms of the agreement between the parties, express or implied …".

Consideration 25 Taking into account these authorities, in determining when Toy Shed incurred the debt, it is appropriate to begin with the Distributor Agreement signed between Toy Shed and Playspace on 30 September 2003. Surprisingly, that Agreement does not expressly state when it was that Toy Shed became obligated to pay for any goods it ordered from Playspace. 26 However, Ms Osborn's counsel submitted that the obligation can be inferred from the terms of Clause 7.1.3. That clause provides that: "The Distributor shall not be relieved of any obligation to accept or pay for goods by reason of any delay in delivery or supply or dispatch". But, as I have already observed above, the "obligation" referred to in this clause is not described anywhere in the Agreement. Without the obligation being so described, that clause does not, in my view, provide any support for the contention that it can be inferred that Toy Shed was under an obligation to pay for the goods once they were ordered. 27 The Distributor Agreement does state that: "All orders will be subject to the provisions of this Agreement and the general terms and conditions of sale of the Company" (Clause 7.2) and that payment is due: "60 days from the date of invoice rendered in respect of the supply of the Products unless otherwise stated in writing by the Company" (Clause 8.1). However, the general terms and conditions of sale of Playspace were not tendered in evidence before me and, as a consequence, I do not know whether they placed any obligation on Toy Shed to pay for the goods from the time they were ordered or from some other time. Similarly, there was no evidence before me to suggest that Playspace had stated in writing a different period of payment in relation to Toy Shed's order as provided in Clause 8.1. In any event, the timing of the payment is not the critical issue. It is: when did the obligation for the debt arise? It follows that the Distributor Agreement does not assist in answering this question. 28 In addition to Clause 7.1.3 of the Distributor Agreement, Ms Osborn's counsel relied upon the observations made by Hodgson J in Leigh-Mardon to submit that Toy Shed incurred the debt when the goods were ordered because they were goods that were "specially manufactured". The difficulty with this submission is that Ms Osborn, herself, expressly denied the factual basis for it in re-examination, as follows: "Question: Is there any element of manufacture in the material before it gets to you? Answer: No, it comes up as posts, decks, clamps and the hangy-offy bits like slides and things, it comes up as bits. Then it was my responsibility to organise the installation in the ground and putting the bits together." 29 On the other hand, Ms Osborn also gave evidence that each of the 15 playgrounds was designed to the Darwin City Council's specific requirements. She said: "I designed the playgrounds to the Darwin City Council requirements. For instance, they would give me an instruction … it had to be for three to five year olds, it needed to include balance activities or a swing … they gave me specific instructions in the tender as to the age group." This is borne out by various aspects of the order form submitted by Toy Shed on 21 June 2004. In it, the goods are described as "non-standard products" which have to be "pack[ed] separately". The installation addresses are stated to be "various around Darwin (15)". Moreover, with two exceptions - Kapalga and Strele, which both had a base price of $8,000 - the base prices stated for each playground are different and range from $7,250 to $13,937. This suggests that almost twice as much product (at least by value) was installed at some playgrounds than others. 30 All this points to the conclusion that, while the goods were not specially manufactured to fill Toy Shed's order, they were specially collected together and packed into 15 separate packages, where the contents of each package were determined by criteria that were specific and unique to each playground. That being so, once these packages were dispatched from Melbourne to Toy Shed in Darwin, it is unlikely that they would be of any real commercial value to anyone else, should Toy Shed fail to take delivery of them. It follows from this that the substance and commercial reality of the situation meant that, once these packages of playground equipment were dispatched to Toy Shed, it became obligated to pay for them. Conversely, I do not consider that occurred, as a matter of substance and commercial reality, at delivery, as Playspace contends, because the delivery did not alter the inherent commercial value of the equipment. That was set once the playground equipment was assembled into 15 separate unique packages and dispatched. 31 Thus, while I do not consider Toy Shed was obligated to pay for the goods as at the date of its order on 21 June 2004, I consider it became so obligated on 26 July 2004 once the dispatch date shown on the order form passed without Toy Shed cancelling the order. In other words, in the terms of the authorities set out above, the omission to cancel the order before this dispatch date was the critical choice Toy Shed made giving rise to the obligation for the debt.

Conclusion 32 For these reasons, I conclude that Toy Shed incurred the debt to Playspace on or about 26 July 2004 when the nominated dispatch date for the playground equipment came and passed with the order still extant.

was toy shed insolvent at that time? 33 Having determined that Toy Shed incurred the debt to Playspace on or about 26 July 2004, the next issue is: when did Toy Shed first become insolvent? It is common ground that Toy Shed was insolvent in 2005, so the question is: was that insolvency present as early as 26 July 2004?

Contentions 34 Playspace contended that Toy Shed was insolvent by, at the latest, April 2004. It based this contention on the expert evidence of Mr Angus, Toy Shed's liquidator. In his report, Mr Angus set out a monthly insolvency calculation (Schedule 5) that showed that Toy Shed had a net deficiency of assets, or available funds, compared to liabilities, at the end of each month between April 2004 and December 2004. It followed, so Playspace contended, that Toy Shed was insolvent at all relevant times, including when it ordered the goods, when it took delivery of them and when it received the invoices for them. 35 On the other hand, Ms Osborn contended that Toy Shed was not insolvent until early 2005, and possibly until as late as April 2005. Ms Osborn relied upon the expert evidence of Ms Kylie Wright, a chartered accountant. Ms Osborn's counsel also criticised Mr Angus' report, claiming that it contained at least five "fundamental flaws" as follows: · it proceeded on the mistaken assumption that the invoices issued by Playspace for the goods were issued in July 2004 as opposed to various dates between August and December 2004; · it mistakenly assumed that Playspace's invoices were to be paid within 30 days, whereas Clause 8.1 of the Distributor Agreement allowed for payment to be made in 60 days; · it proceeded on the basis of a consideration of assets versus liabilities and did not have any regard for the possibility of alternative funding, or expected income; · it made no allowance, as an asset, for the income Toy Shed could expect for the invoice in the sum of $129,349 issued by it to the Darwin City Council in August 2004; and · it failed to make any assessment of the various indicators of insolvency set out in Ms Wright's report, which were taken from the decision of Plymin. 36 The answer to this question therefore requires a consideration of the evidence of the two expert witnesses. Before doing that, I should set out a summary of the relevant legal principles.

The Authorities 37 Section 95A of the Act provides that a person is solvent: "…if, and only if, the person is able to pay all the person's debts, as and when they become due and payable". It also provides that a person who is not solvent, is insolvent. 38 As Mandie J observed in Plymin (at [370]), this is the "cash flow test" of insolvency. His Honour described that test in the following terms: "The cash flow test provides that a company is insolvent when it is unable to pay its debts as they fall due. It is of no consequence, under this test, that assets exceed liabilities. The important point is: can the company pay its way in carrying on its business? The court, in examining whether a company is suffering cash flow insolvency, will consider whether the company is actually paying its debtors". 39 The question of Toy Shed's solvency, or insolvency, has to be determined objectively upon the whole of the admissible evidence: see Lewis (as liq of Doran Constructions Pty Ltd (in liq) v Doran (2005) 54 ACSR 410 ("Lewis") at [103] and Re Damilock Pty Ltd (In Liq); Lewis and Carter as Liquidators of Damilock Pty Ltd (In Liq) v VI SA Australia Pty Ltd (2009) 252 ALR 533 ("Damilock"); [2008] FCA 1801 at [15]. What has to be established is that the company has an endemic inability to pay its debts as and when they fall due: see Sandell v Porter (1966) 115 CLR 666 ("Sandell"); Southern Cross Interiors Pty Ltd v Deputy Commissioner of Taxation (2001) 53 NSWLR 213 at [54] and Damilock at [18]. 40 This determination is not to be limited to a simple analysis of Toy Shed's current assets and liabilities, or a consideration of its liquidity (or lack thereof) at a particular point in time. Instead, it must involve a consideration of Toy Shed's financial position in its entirety and include matters such as expected profits and other sources of income and funding that Toy Shed may be able to avail itself of: see Sandell at 670; Quick v Stoland Pty Ltd (1998) 29 ACSR 130 at 139; Emanuel Management Pty Ltd (in liq) v Foster's Brewing Group Ltd (2003) 178 FLR 1 at [73] and following; and the comprehensive review of the authorities in Plymin at [369] - [380] per Mandie J. 41 In Plymin, Mandie J adopted a checklist of indicators of insolvency which were put forward by one of the expert witnesses in that case. See also Damilock at [16]. They are as follows (at [386]): 1. Continuing losses. 2. Liquidity ratios below 1. 3. Overdue Commonwealth and State taxes. 4. Poor relationship with present bank, including inability to borrow further funds. 5. No access to alternative finance. 6. Inability to raise further equity capital. 7. Suppliers placing [company] on COD, or otherwise demanding special payments before resuming supply. 8. Creditors unpaid outside trading terms. 9. Issuing of post-dated cheques. 10. Dishonoured cheques. 11. Special arrangements with selected creditors. 12. Solicitors' letters, summons[es], judgments or warrants issued against the company. 13. Payments to creditors of rounded sums which are not reconcilable to specific invoices. 14. Inability to produce timely and accurate financial information to display the company's trading performance and financial position, and make reliable forecasts.

42 As Mansfield J observed in Damilock (at [16]): 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.

43 Finally, Playspace bears the onus of proving facts which establish that Toy Shed was insolvent (as defined above) at the time the debt was incurred: see TCN Channel Nine Pty Ltd v Scotney (1995) 17 ACSR 116 at 118 and Commonwealth Bank of Australia v Friedrich (1991) 5 ACSR 115 at 124 per Tadgell J. This is not to be done with the benefit of hindsight: see Lewis at [103]. Furthermore, because Playspace has to establish that Ms Osborn contravened s 588G of the Act, while the civil standard of proof applies, Playspace is required to meet the Briginshaw (Briginshaw v Briginshaw (1938) 60 CLR 336)) approach to the proof of its case: see Plymin at [367].

Consideration 44 Mr Angus conceded in cross-examination that his report and, in particular, Schedule 5 thereof, was limited to a consideration of "pure assets and liabilities". It is clear that, on the authorities I have referred to above, this is not the relevant consideration. Instead, what is required is an assessment of Toy Shed's financial position as a whole, taking into account the commercial realities of the situation. Even if the apposite consideration were a comparison of assets and liabilities, or "liquid funds and current debt" as he also described the process earlier in his evidence, I have serious doubts about the reliability of the calculations made by Mr Angus. I say this for three reasons. 45 First, Mr Angus accepted in cross-examination that he made an assumption that the Playspace invoices were payable by Toy Shed within 30 days of the invoices being rendered. However, it is clear from Clause 8.1 of the Distributor Agreement that Toy Shed was allowed 60 days in which to pay those invoices, unless some contrary indication in writing was given by Playspace and, as I have noted above, there is no evidence of such before me. Secondly, Mr Angus could not explain why the trade debtors' figure as at 31 August 2004 was only $113,000 when he said earlier in his evidence that Toy Shed's payment claim dated 20 August 2004 to the Darwin City Council for $129,349 would have been included in that figure. 46 Finally, Mr Angus said in cross-examination that he did not take into account any future income that Toy Shed might derive from the Darwin City Council and others for work in progress. I took this to include the balance of the contract price over and above the claim already submitted for the sum of $129,349. Since the contract sum was for $231,000 inclusive of GST, there was approximately $100,000 of future income to be received from the Darwin City Council upon the completion of this contract alone. 47 Moreover, it is apparent from Mr Angus' report and his evidence that he did not attempt to make the required assessment of Toy Shed's financial position as a whole. With the possible exception of Toy Shed's liquidity ratio, Mr Angus did not turn his mind to any of the 14 matters set out on the Plymin checklist of insolvency indicators. If he had, Ms Wright's report shows that the only indicator that suggested Toy Shed may have been insolvent was that it had an outstanding taxation liability to the Australian Taxation Office of $23,611 as at 26 February 2004. However, whilst Toy Shed did not reduce its liability to nil until May 2005, Ms Wright noted that it did make regular payments in reduction of this liability throughout the intervening period. 48 On the other hand, the other indicators for which Ms Wright was able to locate relevant documentation, allowed her to express the opinion Toy Shed was solvent, at least until early 2005. In summary, Ms Wright's comments about those indicators were (I have used Ms Wright's descriptors rather than those in Plymin): · Continuing losses - Toy Shed made modest profits in the four years prior to the appointment of the administrator in 2005 and a small loss in 2004 of ($5,866). [I might add that I consider it is of some significance that in the financial year 2004/2005 (which obviously encapsulated 26 July 2004) Toy Shed made a profit of $13,280.] · Relationship with financiers - Toy Shed maintained an overdraft facility with the Australia & New Zealand Banking Group Limited with a limit of $10,000 and, on the whole, Toy Shed remained within that limit. · History of dishonoured cheques - only two incidents of dishonoured cheques were identified: one in July 2004 and the other in May 2005. · Demands, summonses, judgments - Playspace's writ issued on 14 September 2005 [sic 2 August 2005] was the only legal action taken against Toy Shed. · Inability to produce accurate and timely information - Toy Shed engaged an external bookkeeper and an external accountant to maintain its accounting records and produce its financial statements. 49 It should also be noted that Ms Wright was unable to obtain the relevant documentation to allow her to reach any conclusion about the following indicators: · Cash on delivery of goods/special arrangements with creditors. · Issuing post-dated cheques. 50 Finally, there are two other indicators in the Plymin checklist that merit separate treatment. They are: (5) No access to alternative finance; and (6) inability to raise further equity capital. Mr Angus was specifically asked about these matters in cross-examination. He said that he only enquired into Ms Osborn's ability to finance further loans to Toy Shed "in a general sense" and concluded that there was "no practical opportunity". However, the evidence contained in Ms Wright's report indicates that this conclusion is doubtful. Ms Wright noted that the financial statements of Toy Shed demonstrated that Ms Osborn had been providing loans to Toy Shed over a period of years and had also arranged to pay various company expenses by way of her personal credit card. Ms Wright also expressed the view that Toy Shed appeared to have access to funding from an associate of Ms Osborn - a Mr Milhinos. It is also of some significance, in my view, that earlier in her report, Ms Wright notes that the freehold property from which Toy Shed operated, was owned personally by Ms Osborn and had been used by her in the past to secure funds to support Toy Shed. 51 Mr Angus' failure to consider these indicators of insolvency (or solvency) and any of the other indicators mentioned above, leads me to conclude that his opinion that Toy Shed was insolvent from at least April 2004 should not be accepted. This is so because it is not based upon a proper consideration of Toy Shed's financial position as a whole, including the factors mentioned above. Moreover, in my view, his evidence, which is the only evidence put forward by Playspace to prove that Toy Shed was insolvent at the relevant time, does not meet the level of satisfaction required under the Briginshaw approach.

Conclusion 52 For these reasons, I have concluded that Playspace has failed to discharge its onus to establish by admissible evidence that Toy Shed was insolvent as at 26 July 2004.

conclusion and orders 53 Because of the conclusion I have reached, that Playspace has not discharged its onus to show that Toy Shed was insolvent at the time the debt was incurred, it is not necessary for me to consider the remaining two agreed issues. 54 In summary, for the reasons set out above, I have concluded that: · the debt to Playspace was incurred on or about 26 July 2004; · Playspace has failed to discharge its onus to show by admissible evidence that Toy Shed was insolvent at that time. 55 I therefore order that the plaintiff's application filed on 28 May 2009 be dismissed. I will hear the parties on the question of costs. I certify that the preceding fifty-five (55) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Reeves.

Associate: Dated: 11 December 2009 Counsel for the Plaintiff: S Lee Solicitor for the Plaintiff: Lewis Holdway Lawyers Counsel for the Defendant: W Roger Solicitor for the Defendant: Clayton Utz Date of Hearing: 18 September 2009 Date of Judgment: 11 December 2009

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