Australian Guarantee Corporation Limited v Starkey

This matter concerned an application for special leave to appeal to the High Court of Australia, brought by Australian Guarantee Corporation Limited (the applicant) against Graham Lindsay Starkey (the respondent). The dispute arose from a decision of the Full Court of the Supreme Court of Queensland concerning the validation of payments made by a company after the commencement of its winding up.

The central legal issue before the High Court was whether the Full Court of Queensland had erred in refusing to validate payments made by the company pursuant to section 368(2) of the Queensland Companies Code. Specifically, the applicant contended that the Full Court's majority judgment, which refused validation, had misapplied principles relating to preferential payments and good faith in exercising the discretion granted by section 368(2).

The applicant argued that the Full Court's majority had wrongly concluded that the payments, which aggregated $130,000, constituted a preference over other creditors, thereby precluding validation. The majority had reasoned that the payments were made to satisfy pre-existing debts under threat of repossession, and that the respondent had gained an advantage over other unsecured creditors. Furthermore, the majority had found the payments were not made in good faith, although it was unclear whether this finding was based solely on the preference issue or as a separate ground for refusing validation. The applicant submitted that the discretion under section 368(2) should be exercised according to established principles, and that the Full Court's approach was flawed.