As is made clear in this passage, by s 588FG(2)(b) the onus is placed on the defendant to establish the negative propositions set out in the paragraph: see also in the Supreme Court of South Australia Pegulan Floor Coverings Pty Ltd v Carter (1997) 24 ACSR 651 at 658 per Doyle CJ and Re Ermayne Pty Ltd; Sims v Tech Holdings Pty Ltd (1999) 30 ACSR 330 at 332 per Wicks J. There is a useful survey of the process of evaluating the matters necessary to come to a conclusion about the defence in the judgment of Santow J in Sutherland v Eurolinx supra at [42] - [47].
23 In this case I shall not need to resolve whatever tension there may be between subparagraphs (i) and (ii). The conclusion that I have come to is that the defendant cannot establish the matter set out in subparagraph (ii) and that is the end of the matter. If I had to come to a conclusion about the matter in subparagraph (i) I should come to the conclusion that he could not satisfy that test either.
24 The reasons I have come to that conclusion in relation to subparagraph (ii) are as follows. The material known to Ms Macleod (and available to her superiors) at the time that she drew the agreement that was finally executed on 15 December 1999 included the following. The unpaid group tax went back as far as April 1998, more than 18 months previously. The Commissioner of Taxation had been a pressing creditor in the meantime and the debt had not been brought more up to date than that. The agreement come to in June 1999 had been defaulted. What was being offered in late 1999 was not immediate satisfaction of the debt but its progressive satisfaction over a period of months. The industry was having difficulties. Ms Macleod in effect conceded that she was aware that the company was not able to pay its debts as they fell due. A reasonable person would also recognise a likelihood that a debtor which was over a year in arrears would, faced by demands from the Commissioner of Taxation, be delaying other creditors to meet the Commissioner's demands, in effect robbing Peter to pay Paul.
25 These matters all applied as at the time the agreement for instalments was made in November/December 1999. From there on, according to the knowledge of the Commissioner's officers, the position did not improve. In December, a payment was three days late. This was despite the issue of directors' liability notices and the warning that the terms of the agreement must be stringently adhered to or the debt would be enforced in full against both the company and the directors. The reason given was that one particular cheque that was promised was not received on time. It was after that that the first impugned payment was made in January 2000. It is true that substantial payments of arrears were made over the months under consideration, but the debt was never caught up. By February, application was made to make payments weekly instead of monthly and it was revealed that trading during the summer months (which were conceded to be, not unnaturally, the best trading months for a coastal resort) had not been as good as expected.
26 One must be careful not to apply hindsight, but the facts that I have set out above were not matters of hindsight. A reasonable person in the Commissioner's circumstances possessed of these facts must in my view have had at least a suspicion, ie, an actual apprehension or mistrust, that the company was insolvent (as indeed it was) and had that suspicion from the time of the first payment to the last. It seems to me that the question on which the Commissioner, through his officers, focussed was whether the company was or was not likely to make the payments promised to him, in whole or in part. But that does not really matter. What does matter is that the propositions necessary to constitute a defence under s 588FG(2) have not been established in respect of any of the payments. In those circumstances, each of the 16 payments by the defendant to the plaintiffs was a voidable transaction and appropriate orders should be made.
27 The making of those orders will enliven the cross claim. The cross claimant seeks pursuant to s 588FGA indemnity from four directors of the company who are named as respondents to the cross claim, namely, Frances Fittler, Carmen Tester, Veronica Bryant and Margaret Brookes.
28 The only matters necessary to establish to render each of them liable in respect of a payment are:
(a) that an order in respect of the payment has been made against the Commissioner under s 588FGA; and
(b) that she was a director at the time the payment was made.
See s 588FGA(2), (3) and (4). It has been established that each of them was a director of the company at the time each payment was made. I have determined that an order will be made under s 588FGA against the defendant in respect of each payment. Each of them has been served with process but has not appeared to defend the cross claim. In particular, no material has been led which would substantiate any defence under s 588FGB.
29 The only problem in relation to the cross claim which Mr Aldridge, of Senior Counsel for the Commissioner, has drawn to my attention is whether the payments in respect of which orders are to be made are within the class of payments to which s 588FGA applies. The class is defined by reference to the provisions of the ITAA under which the payments were received by the defendant. One of the payments in this case was received under s 221F of the ITAA (see s 588FGA(1)(a) of the CA) and the rest were received under s 220AAM of the ITAA (see s 588FGA(1)(aa)). The difficulty is that par (aa) was inserted in the section with effect from 15 July 2001. The present interlocutory process was filed on 5 June 2001. Those payments were therefore not in terms specified as payments within s 588FGA at the time the cross claim for their recovery was instituted. Two submissions are put on the defendant's behalf as overcoming this difficulty.
30 First, it is submitted that s 588FGA of the CA only takes effect if and when the Court makes an order against the Commissioner under s 588FF and no cause of action arises until the order is made. That being so, the relevant form of s 588FGA is that which is in force at the time the order is made against the Commissioner, which is yet to occur, and not the time of the commencement of the cross claim. On that basis, the difficulty evaporates. Given that the claim is in the nature of an indemnity, actual liability to pay will not arise until and to the extent that the Commissioner has repaid the moneys: Browne v Commissioner of Taxation (1998) 82 FCR 1.
31 Secondly, s 220AAM of the ITAA is in substantially the same form as s 221F and the provisions of the Interpretation Acts dealing with re-enacted sections apply: see s 10 of the Acts Interpretation Act 1901 (Cth) and s 68 of the Interpretation Act 1987. White J in the Supreme Court of Queensland held that the interpretation provisions solved a similar problem: see Hillig v Commissioner of Taxation [2001] 2 Qd R 147 at [8].
32 In my view, both these submissions are correct. These proceedings are by way of cross claim for an indemnity. It is not necessary that the cause of action be complete at the institution of the cross claim. The time for the statute to operate is at the time of the order in the principal proceedings against the Commissioner. It is at that date that the form of s 588 FGA is material. Equally, I agree with White J that the problem is resolved, if necessary, by the interpretation provisions.
33 The defendant is therefore entitled to orders against the directors named in [28] above. Short minutes may be brought in to give effect to the decisions contained in these reasons for judgment.