County Construction Pty Ltd (In Liq) v Hart

County Construction Pty Ltd, a liquidated company, brought a case against Hart, the former director, seeking to set aside transactions they had engaged in prior to the company's liquidation. The Federal Court of Australia was tasked with determining whether Hart had engaged in unfair preferences and whether County Construction could successfully argue estoppel and novation in relation to certain contracts.

The primary legal issues before the court were whether Hart had acted in good faith and whether any transactions between Hart and County Construction could be considered voidable preferences under the Corporations Act 2001. The court was also required to assess if there was any valid novation of contracts and whether estoppel could be applied to prevent Hart from denying the existence of certain agreements.

In delivering the judgment, the court found that Hart had not acted in good faith, as several transactions appeared to be designed to benefit him personally at the expense of the company's creditors. The court ruled that certain payments made by County Construction to Hart were indeed unfair preferences. Furthermore, the court held that the novation of contracts was ineffective due to a lack of clear evidence, and any argument of estoppel was dismissed as County Construction had not demonstrated a reliance on any representation made by Hart that would warrant such an estoppel.

The court ordered that the transactions identified as unfair preferences be set aside, and Hart was required to return the amounts received to the liquidator of County Construction. Additionally, the court clarified that the novation of contracts was not recognised, and estoppel did not apply in this instance. The ruling aimed to protect the interests of the company's creditors and ensure that unfair preferences were rectified in accordance with the provisions of the Corporations Act.