All Type Timber Pty Ltd v BGC Fibre Cement

CITATION:	All Type Timber Pty Ltd v BGC Fibre Cement [2007] NSWDC 90
HEARING DATE(S):	13, 14 and 15 February 2007
JUDGMENT DATE:	28 March 2007
JURISDICTION:	Civil Jurisdiction
JUDGMENT OF:	Johnstone DCJ at 1
DECISION:	Judgment for the Defendant
CATCHWORDS:	CORPORATIONS ACT - Insolvent corporation - Action by liquidator for recovery of alleged preferences - Continuing business relationship between corporation and defendant - Peak indebtedness on the running account - Defence as to no reasonable grounds for suspicion of insolvency: subjective and objective tests satisfied
LEGISLATION CITED:	Corporations Act 2001: ss 588E, 588FC, 588FA, and 588FG(2)(b)
CASES CITED:	Airservices Australia v Ferrier (1996) 185 CLR 483 at 503 Dean-Willcocks v Commissioner of Taxation [2004] NSWSC 1058 at [30] Sutherland v Eurolinx Pty Ltd [2001] NSWSC 230 at [43], [140] and [148] Whitton v Konemann Australia Pty Ltd [2002] NSWSC 1137 at [59]
PARTIES:	All Type Timber Pty Ltd (In Liquidation) (First Plaintiff) Adrian Duncan (Second Plaintiff) BGC (Australia) Pty Limited trading as BGC Fibre Cement (Defendant)
FILE NUMBER(S):	615/05
COUNSEL:	Mr C Locke for the Plaintiffs Mr J Johnson for the Defendant
SOLICITORS:	Smith Partners - Sydney (Plaintiffs) Hotchkin Hanly - Perth (Defendant)

JUDGMENT
Introduction

1. All Type Timber Pty Limited was placed under administration on 22 March 2002 (“the relation-back day”). Subsequently, it was placed into a creditors voluntary winding-up and Mr Duncan (the second plaintiff) became the liquidator.

2. Between 22 September 2001 and 22 March 2002 (‘the relation back period”) BGC Fibre Cement supplied fibre cement to All Type Timber Pty Limited pursuant to various orders, for which it received a number of payments: (“the payments”).

3. The liquidator claimed that each of the payments was an unfair preference and seeks repayment from BGC Fibre Cement of $78,768.97, together with interest.

4. BGC Fibre Cement denied that any payment was an unfair preference because:

(a) All Type Timber was not insolvent at the time that any transaction to which the payments

related was entered into or given effect: s 588FC(a) of the Corporations Act 2001(the

Act), or

(b) The payments constituted a single transaction that did not result in it receiving more than it

would have if the transaction were set aside: s 588FA of the Act.

5. Alternatively, BGC Fibre Cement said that it is not liable because it became a party to the transactions in good faith when it had no reasonable grounds for suspecting All Type Timber was insolvent, and a reasonable person in its circumstances would have had no such grounds for so suspecting: s 588FG(2).

6. The principal issues for determination are:

(a) Was All Type Timber insolvent at any time during the 12 months ending on 22 March 2002:

s 588E(3)?

(b) Were the payments a transaction that, for commercial purposes, was an integral part of a

continuing business relationship between them: s 588FA(3)?

(c) If so, did BGC Fibre Cement receive more than it would have if the transaction were set

aside and it were to prove for…