13 There is a question as to which of MR and Quadtel made the payments. Mr Woodgate has put into evidence banking records which show the source of each payment. In relation to all but two of the items, it is, to my mind, clear from these records (and I find) that the relevant payment was made by MR to the defendant through National Australia Bank. The exceptions are the payment of $11,200.00 on 8 January 2003 and the payment of $12,000.00 on 6 February 2003. In those two cases, it appears that the payment was made by Quadtel to the defendant through National Australia Bank.
14 On this basis, I conclude that a total of $104,000.00 was paid by MR to the defendant by means of all but the second and sixth payments listed; and that a total of $23,200.00 was paid by Quadtel to the defendant by means of the second and sixth payments.
15 The next question is whether either of MR and Quadtel was, at the time of the making of the payments, indebted to the defendant. The first point of significance, in that respect, is that there appears to have existed a distribution agreement of 5 June 1997 between MR and the defendant under which MR was to distribute the defendant's products. Not surprisingly, therefore, MR was considered by the defendant to be indebted to the defendant. The indebtedness was regarded by the defendant as being $159,819.23 on 12 December 2002, being the date of a statutory demand served by the defendant on MR. Internal correspondence between employees of Quadtel Limited (the holding company of both MR and Quadtel) referring to the statutory demand did not suggest that MR was not indebted to the defendant - merely that, because of stock returns, the debt "should be closer to A$143,909.58". On 6 January 2003, it was agreed that the balance outstanding was $134,8l9.23. It is clear that this related to the indebtedness of MR the subject of the statutory demand of 12 December 2002 and the later internal correspondence. Following the agreement of 6 January 2003, a payment plan was negotiated, involving payment of $11,200.00 on 8 January 2003, $18,000.00 on each of 15 and 29 January 2003 and 5, 12, 19 and 26 February 2003 and $15,619.23 on 5 March 2003.
16 On the basis of this evidence, I conclude that MR was indebted to the defendant to the extent of at least $134,819.23 (the aggregate of the agreed instalments) as at 6 January 2003.
17 In the case of Quadtel, there is really no evidence of indebtedness to the defendant. Nothing in the way of correspondence about the state of any account is in evidence. The list of creditors lodging proofs of debt in the winding up of Quadtel does not include the defendant.
18 There is evidence showing that the affairs and finances of MR and Quadtel were intermingled. Each was a wholly owned subsidiary of Quadtel Limited. While each company had its own bank account, it appears that payments were sometimes made from a particular company's account without regard for whether the debt being paid was a debt of that company or of the other company. This was the basis for a submission that the two payments made by Quadtel might properly be regarded instead as payments made by MR. The submission was based on the following passage in the judgment of the Full Federal Court in Re Emanuel (No 14) Pty Ltd; Macks v Blacklaw & Shadforth Pty Ltd (1997) 24 ACSR 292 at pp.298, 299:
"Before a payment made by B to C can be effective to discharge A's debt to C, ordinarily it must be made with A's authorisation or ratification: see Mason and Carter, Restitution Law in Australia , para 846, (Butterworths, Sydney, 1995); Goff and Jones, The Law of Restitution , p 17, (4th ed, Sweet and Maxwell, London, 1993); and see generally on payment of another's debt, Beatson, The Use and Abuse of Unjust Enrichment , ch 7, (Clarendon Press, Oxford, 1991). Where a payment is so made it can properly be said that it is A's act that makes B's payment efficacious at law to discharge the debt to C. This, of itself, does not provide reason for saying that the payment itself is made by A. Nonetheless where that payment constitutes part of the consideration B furnished and A required in the A-B contract and where (inter alia) that consideration is in the final settlement of the obligations inter se of A and B, then we see no compelling reason for not concluding that A has made the payment to C albeit by using B as its instrument for the purpose."
19 It is not possible to draw any inference that, on this or any other basis, money paid by Quadtel to the defendant in truth represented payment by MR to the defendant. The evidence shows that MR was indebted to the defendant and that an agreed payment plan envisaged payments by MR corresponding with those actually made by Quadtel. But there is no way of concluding what the consideration was, as between MR and Quadtel, and therefore no basis for reaching conclusions of the kind to which the Full Federal Court referred.
20 I proceed, therefore, on the basis that payments totalling $104,000.00 were made by MR to the defendant in the period 2 January 2003 to 21 February 2003; that each such payment was made in reduction of indebtedness owing, due and payable by MR to the defendant at the date of the payment; and that the two payments made by Quadtel to the defendant ($11,200.00 on 8 January 2003 and $12,000.00 on 6 February 2003) were not referable to MR's indebtedness to the defendant (nor did they, on the evidence, relate to any indebtedness of Quadtel to the defendant). The two Quadtel payments therefore do not need to be considered further.
21 The next question to be addressed in relation to each of the six payments made by MR to the defendant is whether it resulted in the defendant's receiving from MR, in respect of an unsecured debt of MR owed to the defendant, more than the defendant would receive from MR in respect of the debt if the payment were set aside and the defendant were to prove for the debt in the winding up of MR. This is the question posed by s.588FA(1)(b).
22 The evidence of Mr Woodgate is that, after allowing for the claims of a secured creditor and the preferred unsecured claims of employees, there is, in the winding up of MR, a deficit of $94,881.00. If the payments to the defendant now under discussion were added back, the deficit of $94,881.00 would become a surplus of $9,119.00. But as Mr Woodgate's evidence shows, preferred costs and expenses of the winding up, in the form of approved remuneration, are outstanding and unpaid to an extent greatly in excess of $9,119.00. Even with the payments in question reversed, there would therefore be no return to unsecured creditors in the winding up of MR.
23 It follows that the result of the making of the six payments by MR to the defendant was such that the defendant received in respect of its debt $104,000.00 more than it would have received if the payments had been set aside and the defendant had proved in the winding up of MR.
24 This conclusion means that, in terms of s.588FA(1), each of the six payments was an "unfair preference" given by MR to the defendant. The next question, therefore, as whether it is an "insolvent transaction" of MR. The answer, by virtue of s.588FC, depends on certain findings regarding MR's solvency. Having regard to s.588FC(a)(i), a positive answer will be given if MR was insolvent when each of the six payments was made.
25 In this particular case as regards MR, I am relieved of the need to make an assessment of the company's solvency at the several relevant dates. This is because, in the absence of proof to the contrary, I must presume that MR was insolvent at each such date. The presumption arises in this way. Section 588E(2) says that ss.588E(3) to (9) inclusive have effect for the purposes of a "recovery proceeding" in relation to a company. The present proceeding is a "recovery proceeding" in relation to MR, being, as referred to in paragraph (a) of the definition of "recovery proceeding" in s.588E(1), "an application under section 588FF by the company's liquidator". Section 588E(4)(8)(a) applies where, "for the purposes of another recovery proceeding in relation to the company", a matter of the kind referred to in s.588FC has been proved - which matters include insolvency at a particular time or times. The effect of s.588E(8) is then to require that it be presumed, in the recovery proceeding at hand, "that that matter was the case". It follows that if the question of solvency material to determination of this present proceeding was "proved" in some earlier "recovery proceeding", I must now accept that result in this proceeding, there being no suggestion, in the circumstances of absence of the defendant, that, in terms of s.588E(9), "the contrary" has been "proved for the purposes of the proceeding concerned", that is, this proceeding.
26 The earlier "recovery proceeding" to which I must have regard is a proceeding in the District Court of New South Wales (which is "a court", without a capital "C", as referred to in s.588FF(1)). On 13 July 2006, His Honour Judge Rein delivered judgment in Woodgate v Scansoft Belgium BVBA (District Court proceedings 5189 of 2004). That was an application by Mr Woodgate as liquidator of MR under s.588FF in which it was sought to recover money for MR on the basis of unfair preferences constituted by payments made by MR to Scansoft Belgium BVBA in the period 1 January 2003 to 30 April 2003. Scansoft put in issue the question of MR's insolvency during that period. Rein DCJ was therefore required to determine that question by reference to the evidence placed before the court. His Honour's conclusion was stated at paragraph 8 of the judgment as follows:
"Mr Woodgate, the liquidator, has prepared a report (Exhibit 'GGW 10'), in which he expresses the view that as from 31 December 2002, the Company was insolvent. The Company, on liquidation, was established as having unsecured assets of approximately $400,000 and unsecured debts in excess of $4 million. There was an extensive attack on Mr Woodgate's credit, which included reference to his failure to clearly state who had been involved in the preparation of the report, and his having spoken to a member of his staff whilst he was under cross examination and having given, it was alleged, a deliberately false answer in relation to that aspect. The problem with the attack is that it did not focus upon any of his material conclusions in his report. It was never put to him that he was in error or that his assertion that he had himself checked the entire contents of the report was false. I am satisfied on the basis of his opinion and the documentary material attached to it including the statutory demand for $159,819.23 made on 12 December 2002 (p A92 Exhibit 'C') by another creditor and not met within 21 days, that the Company was at least from 31 December 2002 insolvent, that is unable to pay out of its own money all of its debts as and when they became due and payable: Sandell v Porter (1966) 115 CLR 666, and see s 95A of the Corporations Act 2001 and the discussion at pp 434-8 of McPherson, 'The Law of Company Liquidation', LBC Information Services."
27 It is clear from this passage that insolvency of MR during the period January to April 2003 was positively "proved" in the earlier District Court proceedings and that it was not established by concession or presumption: compare Dwyer v R-Jay Pty Ltd [2007] SASC 115. Accordingly and by virtue of s.588E(8), it must be presumed in this present proceeding that MR was insolvent during the period January to April 2003.
28 The conclusion just stated leads on to a finding that each of the six relevant payments by MR to the defendant was made at a time when MR was insolvent. Each such payment was made in January or February 2003, that is, within the period to which Rein DCJ's finding of insolvency relates. Each payment was therefore an "insolvent transaction" within s.588FC.
29 The final question is that posed by s.588FF(2)(b), namely, whether each "insolvent transaction" was entered into within a period made relevant by that section. One such relevant period is the period of six months ending on the "relation-back day" which, as I have said, is 12 May 2003. The period of six months to which regard is thus to be had began on 12 December 2002. Each of the six payments was made in January or February 2003. The transactions were therefore entered into within the period of six months to which s.588FE(2)(b)(i) refers.