Queensland Quarry Group Pty Ltd (in liq) & Anor v Cosgrove [2019] QCA 220

SUPREME COURT OF QUEENSLAND

CITATION: Queensland Quarry Group Pty Ltd (in liq) & Anor v Cosgrove [2019] QCA 220

PARTIES: QUEENSLAND QUARRY GROUP PTY LTD / (in liquidation) / ACN 160 549 388 / (first applicant) / NICK JIM COMBIS AS LIQUIDATOR OF QUEENSLAND QUARRY GROUP PTY LTD / (in liquidation) / ACN 160 549 388 / (second applicant) / v / HELEN LOUISE COSGROVE / (respondent)

FILE NO/S: Appeal No 3847 of 2019 / DC No 1027 of 2017

DIVISION: Court of Appeal

PROCEEDING: Application for Leave s 118 DCA (Civil)

ORIGINATING COURT: District Court at Brisbane – [2019] QDC 26 (Rosengren DCJ)

DELIVERED ON: 18 October 2019

DELIVERED AT: Brisbane

HEARING DATE: 23 August 2019

JUDGES: Morrison and Philippides JJA and Flanagan J

ORDERS: Grant the application for leave to appeal.Allow the appeal.Set aside the orders made on 13 March 2019.Pursuant to s 588FF(1)(a), or alternatively s 588FF(1)(c) the respondent pay $95,000 to Queensland Quarry Group Pty Ltd ACN 160 549 388 (In Liquidation), plus interest thereon pursuant to s 58 of the Civil Proceedings Act 2001 (Qld), from 21 March 2017.The respondent pay the plaintiffs’ costs of the proceedings in the District Court, including reserved costs if any, to be assessed on the standard basis.The respondent pay the appellants’ costs of the application for leave to appeal and the appeal, to be assessed on the standard basis.

CATCHWORDS: APPEAL AND NEW TRIAL – APPEAL – GENERAL PRINCIPLES – INTERFERENCE WITH DISCRETION OF COURT BELOW – IN GENERAL – JUDGE MISTAKEN OR MISLED – where the first applicant operated a quarry on land owned by the respondent – where the relationship between the first applicant and the respondent broke down and a dispute arose – where following a mediation, a compromise was reached which resulted in a sales contract being entered into by the first applicant and the respondent – where the first respondent subsequently requested an extension for the completion date of the sales contract – where the first applicant offered to pay the respondent $45,000 in consideration of the extension – where the first respondent did not complete the contract or pay the $45,000 or other agreed amounts – where the respondent filed an application to wind up the first applicant – where the respondent was assuming that the first applicant was insolvent – where three debts, $45,000; $16,250 and $50,000, were paid by the first applicant to the respondent – where the second applicant sought in the first instance to recover the three debts as voidable transactions under s 588FF(1) of the Corporations Act 2001 (Cth) – where the respondent admitted that the payments were voidable transactions but successfully raised a defence under s 588FG(2) of the Corporations Act 2001 (Cth) – where the learned trial judge dismissed the proceedings and ordered the second applicant to pay costs – where it is contended that there was an error in law on the part of the learned trial judge – whether there has been a mistake on the part of the learned trial judge resulting in a substantial injustice / Corporations Act 2001 (Cth), s 588FF(1), s 588FG / White v ACN 153 152 731 Pty Ltd (in liq) (2018) 53 WAR 234; [2018] WASCA 119, cited / Williams (as liquidator of Scholz Motor Group Pty Ltd (in liq)) v Peters [2010] 1 Qd R 475; [2009] QCA 180, cited

COUNSEL: C A Wilkins for the applicants / G W Dietz for the respondent

SOLICITORS: ClarkeKann for the applicants / Sciacca & Associates for the respondent

1. MORRISON JA: On 4 September 2014 the respondent (Mrs Cosgrove) issued a statutory demand to the first applicant (Queensland Quarry), seeking payment of a $45,000 debt. The demand was not met and on 3 October 2014 Mrs Cosgrove filed an application to wind up Queensland Quarry on the grounds of insolvency.

2. The solicitors for each side subsequently negotiated about the outstanding debt of $45,000, as well as an existing contract under which Queensland Quarry then owed other sums to Mrs Cosgrove.

3. An agreement was reached and a settlement deed was entered into on 14 October 2014. The Deed provided that the $45,000 debt and $16,250 in costs would be paid to Mrs Cosgrove on 14 October 2014. For that payment Mrs Cosgrove agreed to “use best endeavours to withdraw the Winding Up Application”. It also provided that arrears of rent totalling $50,000 would be paid on a date calculated by reference to the deposit paid by Queensland Quarry under a new contract with Mrs Cosgrove.

4. The two debts of $45,000 and $16,250 were paid on 14 October 2014. The $50,000 arrears were paid on 3 November 2014, the same day as the deposit under the new contract.

5. Queensland Quarry breached the new contract with Mrs Cosgrove. She was then substituted as applicant in a second winding up application against Queensland Quarry, in the place of the creditor which had filed it. Queensland Quarry was wound up in insolvency.

6. In the proceedings below¹ the Liquidator of Queensland Quarry sought to recover the three debts ($45,000, $16,250 and $50,000)² as voidable transactions under s 588FF(1) of the Corporations Act 2001 (Cth). Mrs Cosgrove admitted that the payments were voidable transactions but successfully raised a defence under s 588FG(2) of the Act. As a consequence the learned trial judge dismissed the proceedings and ordered the Liquidator to pay costs.

7. The Liquidator seeks to challenge those orders and applies for leave to appeal for that purpose.

Leave to appeal

8. Leave to appeal under s 118(3) of the District Court of Queensland Act 1967 (Qld) will be granted if it is demonstrated that there is a reasonable argument of an error by the trial judge, and it is necessary to appeal to correct a substantial injustice to the applicant.³

9. As will become apparent, Mrs Cosgrove concedes that leave should be granted if the substantive grounds of the appeal are made out.

The statutory provision

10. Section 588FG(2) of the Corporations Act 2001 (Cth) enables a defence to be raised against a claim for a voidable transaction. It relevantly provides:

“588FG Transaction not voidable against certain persons

A court is not to make under section 588FF an order materially prejudicing a right or interest of a person if …. it is proved that:

the person became a party to the transaction in good faith; and

at the time when the person became such a party:

the person had no reasonable grounds for suspecting that the company was insolvent at that time or would become insolvent as mentioned in paragraph 588FC(b); and

a reasonable person in the person's circumstances would have had no such grounds for so suspecting; and

the person has provided valuable consideration under the transaction or has changed his, her or its position in reliance on the transaction.”

11. To succeed on the defence the onus is on the creditor, Mrs Cosgrove, to prove both elements of subsections (b)(i) and (ii). The two subsections impose different tests. Section 588FG(2)(b)(i) imposes a hybrid test, which necessitates consideration of whether the particular creditor had grounds for suspecting insolvency. That is a subjective test, but the requirement that the grounds be “reasonable grounds” means that the question whether the grounds are reasonable is determined objectively.⁴

12. By contrast, s 588FG(2)(b)(ii) imposes an objective test, to be determined by reference to the knowledge and experience of an average person in the circumstances of the particular creditor.⁵

13. The difference in the tests was succinctly expressed in White v ACN 153 152 731 Pty Ltd (in liq):⁶

“Accordingly, the question raised by the first limb is whether the facts and matters actually appreciated by 'the person', ie, the particular creditor, were sufficient to induce a suspicion as to insolvency in the mind of a reasonable person. The question raised by the second limb is whether the facts and matters which would have been appreciated by a hypothetical person with the knowledge and experience of the average business person in the creditor's circumstances, were sufficient to induce a suspicion as to insolvency in such a hypothetical person. In each case, the negative must be proved by the creditor.”

14. Ultimately what is required to be shown to establish the defence under s 588FG(2) is that there were “no reasonable grounds for suspecting” insolvency. That means that the creditor has to establish a negative, recognised by authority as a substantial task, namely that the matters appreciated by that creditor were insufficient to induce a suspicion of insolvency.⁷

Uncontentious facts

15. Before this Court it was accepted that the Reasons below set out a series of uncontentious facts in paragraphs [4]-[31]. What follows is largely drawn from those paragraphs, with some additions from unchallenged evidence.

16. In early 2013 there were a number of oral discussions between Mrs Cosgrove, and a Mr Stevens (and others) in relation to a proposed joint venture to own and operate a quarry and develop land. The quarry was to be operated on land which was owned by Mrs Cosgrove as the trustee of The Sutton Grange Trust. At this time the land was being used by Mrs Cosgrove and her husband for grazing cattle. As an additional source of income, they were selling gravel removed from the land.

17. In about April 2013, with the consent of Mrs Cosgrove, Mr Stevens entered into possession of the land for the purpose of operating the quarry. The joint venture arrangement had not yet been properly documented. As events transpired, Mr Stevens was unable to perform his obligations under the joint venture arrangement.

18. A lease of the land was executed between the parties on 8 October 2013. The commencement date was 1 July 2013. Pursuant to the lease, Queensland Quarry was permitted to use the land for the extraction of quarry product. Item 4 of the lease provided for royalty fees and rent to be paid to Mrs Cosgrove.⁸

19. In December 2013, a person from a neighbouring property telephoned Mrs Cosgrove to complain about the dust being generated from the quarry and the adverse health consequences it was causing.⁹

20. On 13 December 2013, Mrs Cosgrove applied to be substituted in a winding-up application in respect of Queensland Quarry. The original creditor, Carlswood Pty Ltd, had issued a statutory demand which had not been met, but subsequently reached an agreement with Queensland Quarry. Mrs Cosgrove also reached an agreement with Queensland Quarry, which involved it paying her $10,201.67.¹⁰

21. In early January 2014, Mrs Cosgrove commissioned a report from an environmental management company as to Queensland Quarry’s compliance in the operation of the quarry. The report identified a number of issues and Mrs Cosgrove instructed her solicitors to send two notices to remedy the breach of the lease.¹¹

22. On 3 February 2014, Mrs Cosgrove filed proceedings in the Supreme Court of Queensland against Queensland Quarry. The principal claim was for $249,150 in unpaid royalty fees due under the lease (the February 2014 court proceedings).

“OPERATIVE PROVISIONS

Winding Up Proceedings

1.1 QQG will pay Cosgrove the sum of $45,000.00 plus Cosgrove’s costs of $16,250 on 14 October 2014.

1.2 Upon payment of the said sum Cosgrove will use best endeavours to withdraw the Winding Up Application.

Contract of Sale

2.1 Contemporaneously with this Deed:

the parties shall enter into the Second Contract of Sale;

QQG shall provide to Cosgrove a document which will be capable of immediate registration with the Qld Titles Office which surrenders the Lease (“the Surrender”) which will be held in Escrow by Cosgrove and be dealt with in accordance with the terms of this Deed;

2.1.2 On or before the date for payment of the deposit under the Contract QQG shall pay in cleared funds to Cosgrove an amount of $50,000 for rent under the Lease which QQG acknowledges is due and payable as such and shall not be refundable except in the event of default by Cosgrove.

…

Release & Discharge

3.1 On completion of the Second Contract of Sale or surrender of the Lease as provided for in clause 2.2 the parties shall be deemed to have released and discharged each other from all claims, causes of action, obligations and liabilities or whatsoever nature (including rental, royalties, liquidated damages costs and expenses), past or present, including but not limited to those in relation or incidental to:

the Lease;

the Property;

the Dispute;

the Settlement Agreement;

the First Contract of Sale;

the First Contract of Sale Variation;

the Winding Up Proceedings. …”

45. The new contract was entered into on the same day, being 14 October 2014.³¹ The date for completion was 30 January 2015. The purchase price was $2,500,000. The deposit was $250,000 and was payable within 21 days. It was a special condition that the deposit would become non-refundable and immediately forfeited to Mrs Cosgrove except in the event of her default.³²

46. In accordance with the Deed, Queensland Quarry paid Mrs Cosgrove the sums of $45,000 (the Demand Debt Payment) and $16,250 (the Costs Payment) on 14 October 2014. The surrender of Lease was executed by Queensland Quarry on 16 October 2014. Queensland Quarry paid Mrs Cosgrove the further sums of $250,000 for the deposit for the October 2014 Contract (the Deposit Payment) and $50,000 for rent arrears (the Rent Debt Payment) on 3 November 2014.

47. Queensland Quarry did not complete the October 2014 Contract as required by 30 January 2015. By letter dated 3 February 2015, Mrs Cosgrove terminated the contract and took possession of the land.³³ WZL Haulage Pty Ltd had issued a creditor’s statutory demand and then instituted winding up proceedings against Queensland Quarry for payment of a debt. Mrs Cosgrove substituted into the winding up proceedings and wound up Queensland Quarry.

Proceedings below

48. In the proceedings below it was admitted that the Demand Debt Payment and the Rent Debt Payment were unfair preferences and voidable transactions, but Mrs Cosgrove relied on the defence under s 588FG(2) of the Act. As the learned trial judge said, the test is a demanding one.³⁴ To succeed, Mrs Cosgrove had to establish all the following elements:³⁵

(a)she became a party to each of the transactions in good faith;

(b)she subjectively did not then have reasonable grounds for suspecting that the Company was insolvent or would become insolvent by making each of the payments;

(c)when considered objectively, no reasonable person in her circumstances would have suspected insolvency; and

(d)valuable consideration was provided under each of the transactions.

49. Having made various findings as to the evidence, her Honour found that Mrs Cosgrove had established the defence under s 588FG(2)(b):³⁶

“[82] Therefore, having had regard to the accumulation of all relevant events as they unfolded at the time, I am not satisfied that the defendant using the information reasonably available to her and making the analysis of that information which a reasonable person would have made, would have had reasonable grounds to suspect the Company’s insolvency.

[83] Further, there is nothing about the evidence of the defendant that would have given a reasonable business person in her circumstances any cause to have believed, understood or interpreted any of the circumstances surrounding the making of the Demand Debt Payment any differently than she did. There was nothing to give rise to a positive feeling or apprehension of distrust.

[84] The second transaction that needs to be considered is the Rent Debt Payment on 4 November 2014. The only additional circumstances to those prevailing at the time of the Demand Debt Payment approximately three weeks earlier, were that it and the Costs Payment had each been paid by the Company in full and on time. Further, the Deposit Payment and the Rent Debt Payment were paid by the Company a day earlier than had been agreed. The position is if anything, less suggestive of insolvency at this later time.”

Submissions

50. Mr Wilkins of Counsel, appearing for the Liquidator, submitted that error on the part of the learned trial judge was apparent on several grounds.

51. Grounds 2 and 3 concerned a misapplication of s 588FG(2)(b) of the Act. It was submitted that what is required by s 588FG(2)(b) is that there be “no reasonable grounds for suspecting” insolvency, not that that there were reasonable grounds so to suspect. It requires the creditor to prove a negative, namely that the matters appreciated by the creditor were insufficient to induce the suspicion of insolvency.³⁷ The learned trial judge made a finding that she was not satisfied that Mrs Cosgrove had reasonable grounds to suspect Queensland Quarry’s insolvency.³⁸ That approach, it was submitted, incorrectly directed the enquiry as to whether there were grounds for supposing insolvency, or alternatively, placing the burden on the Liquidator to demonstrate why the circumstances should have caused Mrs Cosgrove to suspect insolvency.³⁹

52. Ground 5 concerned the learned trial judge’s approach to the evidence of the service of the statutory demand and the application to wind up Queensland Quarry. The submission was that the correct approach was to ask if those matters, in addition to others, would create a suspicion of insolvency in Mrs Cosgrove or a reasonable business person in her position. The learned trial judge gave too much weight to the fact that the debt was paid in full, with the costs.⁴⁰ The combined effect of the statutory demand and the application to wind up created, it was said, an insurmountable obstacle for the defence.⁴¹

53. Ground 6 contended that undue weight was given to Mrs Cosgrove’s subjective beliefs.⁴² It was submitted that whilst she believed that her relations with Queensland Quarry were acrimonious, she also knew that other creditors were not being paid. Mrs Cosgrove’s belief that non-payment of Queensland Quarry’s debts was a common business practice was not to the point. Commercial reality is considered in making a determination under s 588FG(2)(b). It was submitted that where payment is made in the face of an application to wind up, and therefore under threat of being wound up, that payment is not something that an average business person would consider as being “common business practice”.

(a)an inference can arise that a creditor who uses a statutory demand would face difficulties discharging the onus under a s 588FG(2) defence; but that can be displaced;

(b)there was no evidence that the impugned payments were made under pressure; the negotiation of the October Deed suggested the contrary;

(c)Mrs Cosgrove’s knowledge that other creditors went unpaid was as to February and March 2014; the Deed and the impugned payments were many months later;

(d)Mrs Cosgrove gave evidence that: she was aware of Queensland Quarry having major contracts, and that it was being paid; she did not make enquiries as to whether other creditors were still unpaid; the outstanding $120,000 to Graham Earthmoving was unrelated to the quarry; and she had no knowledge of the other creditors at the relevant period;

(e)there was no evidence that Mrs Cosgrove knew she was not being singled out by Queensland Quarry; and

(f)there was no evidence as why Queensland Quarry did not complete the June 2014 Contract, on time or later; therefore the court and Mrs Cosgrove could only speculate about the reasons; an open possibility was that it was not acting commercially or finance was affected by some extraneous matter or it was a case of temporary lack of liquidity.

Discussion – grounds 5-9

59. It is convenient to deal with grounds 5-9 first.

60. The objective facts concerning the ability of Queensland Quarry to be able to meet it debts as and when they fell due, as known by Mrs Cosgrove, are:

(a)in December 2013 Mrs Cosgrove applied to be substituted in a winding up application against Queensland Quarry; this, of itself, revealed that another creditor had not been paid, and had proceeded past the statutory demand point to an application to wind up;

(b)on 3 February 2014 she started court proceedings to recover $249,150 in unpaid royalty fees;

(c)in late February 2014 she was told that another creditor, Onsite Rental Group Operations Pty Ltd, was owed a substantial sum by Queensland Quarry;

(d)by early March 2014 she knew that three other creditors, service providers, were owed money by Queensland Quarry, and one was owed a debt in the order of $120,000;

(e)on 10 March 2014 she had urged a court to find that Queensland Quarry’s undertaking as to damages was worthless; the basis for that submission was that Queensland Quarry was likely insolvent; support for that conclusion was drawn from the fact that it was “insolvent according to its balance sheet”, and Queensland Quarry had predicted its own entry into liquidation if it was not able to resume quarry operations; it was also submitted that Queensland Quarry’s operation was in violation of the conditions of its environmental licence;⁴⁵

(f)on 1 April 2014 a settlement agreement was reached under which Queensland Quarry and Defwom Property Management Pty Ltd agreed to pay $75,000 of the arrears of royalty fees then owed by Queensland Quarry, within 30 days, and as a non-refundable payment;⁴⁶ Queensland Quarry failed to pay the agreed debt;⁴⁷

(g)on 2 July 2014 Queensland Quarry promised to pay $45,000 for arrears of royalties by 31 August 2014, and did not do so;

(h)on 4 September 2014 Mrs Cosgrove issued a statutory demand for $45,000, which set a 21 day period for payment, failing which there would be a presumption of insolvency, albeit rebuttable;

(i)on 29 September 2014 Queensland Quarry failed to complete the contract to buy the land for $1.75m, thus triggering a liquidated debt of $200,000 to Mrs Cosgrove, even though the quarry had increased in value due to Queensland Quarry being granted a new permit; as her Honour found,⁴⁸ the failure to complete the contract made no commercial sense because: (i) it triggered the liquidated debt of $200,000 in addition to forfeiture of the $150,000 deposit; and (ii) the price was even better as the value of the land had likely gone up due to the new permit;

(j)on 3 October 2014 Mrs Cosgrove filed her application to wind up Queensland Quarry; and

(k)as at 14 October 2014 Queensland Quarry was presumed to be insolvent.⁴⁹

61. In my respectful view, those factors plainly supported a reasonable suspicion that Queensland Quarry was actually insolvent as at 14 October 2014.⁵⁰ They go beyond the situation in Chicago Boot Co Pty Ltd v Davies & McIntosh (as joint and several liquidators of Harris Scarfe Ltd)⁵¹ and Muller & McIntosh (as joint and several liquidators of Arafura Equities Pty Ltd (in liq)) v Academic Systems Pty Ltd,⁵² where the creditors issued a statutory demand and did not go the further step of applying to wind up. They therefore support a finding that as at 14 October 2014 there was a reasonable suspicion that Queensland Quarry was actually insolvent.

62. As against that consideration must be given to the factors, identified by the learned trial judge and known to Mrs Cosgrove, that might dispel the reasonable suspicion of insolvency. In considering this aspect it must be borne in mind that under s 588FG(2)(b)(i) the grounds for suspecting insolvency must be determined objectively to be “reasonable grounds”, and under s 588FG(2)(b)(ii) the test is a negative one, namely whether, objectively determined, a reasonable person in Mrs Cosgrove’s circumstances had no grounds for suspecting insolvency.

63. Under neither test can the creditor’s idiosyncratic views and beliefs as to the known circumstances overcome the objective signs of insolvency unless they are also reasonable and a reasonable person in that creditor’s position would hold them.

64. First, her Honour rejected the service of the statutory demand and the winding up application as “necessitating an inference of insolvency”.⁵³ Two reasons were given for that: (i) Mrs Cosgrove did not accept less than the full amount; and (ii) the “pattern of delayed payments had been broadly consistent during the course of the dealings between the parties”. In my respectful view, there are considerable difficulties confronting that conclusion.

65. This was the first time Mrs Cosgrove had issued a statutory demand. There was no pattern of her use of that procedure as a debt-collecting tool. Nor was there evidence that any other creditor had used a statutory demand as a mere debt-collecting device. Prior to October 2014 Carlswood was the only other creditor mentioned who had issued a statutory demand, and there is nothing in the evidence to show that was a device. Indeed, the Carlswood’s statutory demand had not been met and it had applied to wind up Queensland Quarry. Because it reached an agreement with Queensland Quarry Carlswood applied to dismiss its application.

(a)the creditor/debtor relationship was coloured by the proposed overarching joint venture relationship;⁶¹

(b)royalties paid under the lease were sporadic and plagued by inexact records;⁶²

(c)there was lack of information forthcoming within the joint venture;⁶³

(d)there were poor relations between creditor and debtor and self-help to retake possession of the land;⁶⁴

(e)there is no evidence that delays with other creditors were similar so as to say there was a pattern; apart from Carlswood’s actions the evidence as to debts to other creditors was anecdotal and hearsay only: see paragraph [27] above;

(f)Mrs Cosgrove urged the court to find in March 2014 that Queensland Quarry’s undertaking was then worthless, on the basis that it was likely insolvent;⁶⁵

(g)the resulting Settlement Agreement on 1 April 2014 was breached; Queensland Quarry had agreed to pay $75,000 as an additional arrears of royalties payment, but failed to do so; Queensland Quarry’s failure to provide documentation prevented a proper assessment of the overdue royalties;

(h)the new contract in June 2014 was breached by failure to complete; and

(i)the agreement to extend time under the contract was breached, by failure to pay arrears of royalties, arrears of rent, and an agreed liquidated debt of $200,000, leading to the statutory demand.

70. The delay was, therefore, a highly relevant factor, which added apparent delinquency to mere failure to pay or delayed payment.

71. Thirdly, the learned trial judge placed weight on the fact that from Mrs Cosgrove’s perspective the quarry operations appeared to be thriving.⁶⁶ Thus an uneducated and subjective perspective was given weight. I say “uneducated” as Mrs Cosgrove was never privy to the records of the quarry, and the belief was based on the fact that many trucks were seen to be coming and going, and estimates of truck numbers and tonnage estimated without records.⁶⁷

72. There are, in my respectful view, considerable difficulties in this aspect of the matter. One is that the volume of trucks and even tonnages, without more, tells little about the cash flow or profitability of the operation. Queensland Quarry may well have been conducting a loss-making business. As events turned out that was the case.

73. Another is that at the same time as the estimates of trucks and tonnages was advanced, Mrs Cosgrove was urging a finding that Queensland Quarry’s undertaking was worthless on the basis that it was likely insolvent.⁶⁸ Part of the material relied upon for that submission was that the quarry was being operated illegally.⁶⁹ That is wholly inconsistent with a belief that the debtor’s business was thriving. Even taking the interim period between March and October 2014 into account, there was no reasonable basis to conclude the business was thriving or in a boom time. Accepting that environmental compliance issues were resolved and the extra permit secured, the non-payments and breaches of contracts remained a telling signal of financial ill-health that would prevent a rational belief to the contrary. Significantly, Queensland Quarry committed to the 2 July extension agreement in such a way that its breach meant it immediately incurred a liquidated debt of $200,000 to Mrs Cosgrove, and forfeited the deposit. And, it is significant that there is no suggestion that in the face of the contention that its undertaking was worthless, Queensland Quarry proffered no evidence to show it was.

74. Yet another difficulty is that, as mentioned above, a large turnover is not necessarily reflective of profitability. In my respectful view, the anecdotal hearsay information held by Mrs and Mr Cosgrove⁷⁰ goes nowhere to overcome the objective factors. The very reasons advanced on Mrs Cosgrove’s behalf in March 2014 to demonstrate that it was likely insolvent had not changed. There was nothing empirical to say that Queensland Quarry’s balance sheet had improved, its profit and loss position had improved or that its ability to pay its debts as and when they fell due was secure. Queensland Quarry had repeatedly refused to provide evidence of its earnings. And such a belief as was expressed by Mrs Cosgrove cannot stand with the fact that she issued the statutory demand and then followed that up with the application to wind up in insolvency.

Grant the application for leave to appeal.

Allow the appeal.

Set aside the orders made on 13 March 2019.

Pursuant to s 588FF(1)(a), or alternatively s 588FF(1)(c) the respondent pay $95,000 to Queensland Quarry Group Pty Ltd ACN 160 549 388 (In Liquidation), plus interest thereon pursuant to s 58 of the Civil Proceedings Act 2001 (Qld), from 21 March 2017.

The respondent pay the plaintiffs’ costs of the proceedings in the District Court, including reserved costs if any, to be assessed on the standard basis.

The respondent pay the appellants’ costs of the application for leave to appeal and the appeal, to be assessed on the standard basis.

84. PHILIPPIDES JA: I agree with Morrison JA.

85. FLANAGAN J: I agree with the reasons of Morrison JA and with the orders proposed.

Footnotes

1. Queensland Quarry Group Pty Ltd ACN 160 549 388 (In Liquidation) & Anor v Cosgrove [2019] QDC 26 (Reasons below). ↩

2. Referred to in the Reasons below as: $45,000, the Demand Debt payment; $16,250, the Costs payment; and $50,000, the Rent Debt Payment. ↩

3. McDonald v Queensland Police Service [2018] 2 Qd R 612, [2017] QCA 255 at [24]-[25]. ↩

4. Cook’s Constructions Pty Ltd v Brown (2004) 49 ACSR 62, [2004] NSWCA 105 at [45]; D’Aloia v Commissioner of Taxation (Cth) (2003) 203 ALR 609, [2003] FCA 1336 at [18]; Re Evolvebuilt Pty Ltd [2017] NSWSC 901 at [58]; Chicago Boot Co Pty Ltd v Davies & McIntosh (as joint & several liquidators of Harris Scarfe Ltd) (2011) 282 ALR 378, [2011] SASFC 92 at [21]. ↩

5. White v ACN 153 152 731 Pty Ltd (in liq) (2018) 53 WAR 234, [2018] WASCA 119 at [126]. ↩

6. (2018) 129 ACSR 182, [2018] WASCA 119 at [126]; internal citation omitted. ↩

7. Williams v Peters [2010] 1 Qd R 475, [2009] QCA 180 at [57]; White v ACN 153 152 731 Pty Ltd (in liq) (2018) 53 WAR 234, [2018] WASCA 119 at [126]. ↩

8. Royalty fees at $2.00 per tonne of product extracted from the land, and rent at $10 per month, each exclusive of GST. ↩

9. Affidavit of Mrs Cosgrove (Exhibit 26), para 46, Appeal Book (AB) 269-270. ↩