DAVIES v Chicago Boot Company Pty Ltd - [2007] SASC 170

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
DAVIES & ANOR v CHICAGO BOOT COMPANY PTY LTD
[2007] SASC 170
Reasons of Judge Burley a Master of the Supreme Court
18 May 2007
CORPORATIONS
Application by liquidators to recover allegedly preferential payments - plaintiffs seekk permission to file an amended statement of claim - opposed by the defendant - whether the proposed statement of claim adequately pleads all material facts relating to whether or not the payments were "transactions" - whether debtor company and the creditor were parties to the transaction.
Corporations Law s 588FF, 588FA, referred to.
re Emmanuel (No 14) Pty Ltd (in liq); Macks v Blacklaw & Shardforth Pty Ltd (1997) 24 ACSR 292., applied.

DAVIES & ANOR v CHICAGO BOOT COMPANY PTY LTD
[2007] SASC 170

JUDGE BURLEY: These proceedings now consist of 2 actions which have been consolidated whereby the respective plaintiffs, company liquidators, seek to recover from the defendant common to both actions, allegedly preferential payments. The companies in liquidation are Harris Scarfe Limited (“HSL”) and Harris Scarfe Wholesale Pty Ltd (“HSW”).
The proceedings have an extensive history which has been set out in the Judgment of Gray J in Davies & Anor v Chicago Boot Company Pty Ltd (No 2) [2007] SASC 12. I have taken it into account and I need not repeat what was there said.
The plaintiffs have applied for permission to file and serve a consolidated statement of claim to which the defendant has taken objection. The pleading is relatively short and it is worthwhile setting out in full the parts material to the application:
7Pursuant to a contract or contracts between HSW and the defendant for the supply of goods and/or services (“the HSW Contract”), the defendant provided goods and/or services to HSW in return for payment of the defendant’s invoices.
8Further or in the alternative to paragraph 7, pursuant to a contract or contracts between HSL and the defendant for the supply of goods and/or services (“the HSL Contract”), the defendant provided goods to HSL in return for payments of the defendant’s invoices.
The HSW Contract
9(a)     HSW made the following payments to the defendant for unsecured debts owed to it pursuant to the HSW Contract.
Cheque Number           Date Presented            Amount $
47834  04r/10/2000                 43,540.10
(b)HSL made the following payment to the defendant for and on behalf of HSW for unsecured debts owed to it pursuant to the HSW Contract.
Cheque Number          Date Presented            Amount $
45817322/02/2001                  16,064.68
(c)HSW made the following payment to the defendant for and on behalf of HSW for unsecured debts owed to it pursuant to the HSW Contract.
Cheque Number          Date Presented            Amount $
45476502/02/2001                  151,893.49
(d)HSW made the following payment to the defendant for and on behalf of HSW for unsecured debts owed to it pursuant to the HSW Contract.
Cheque Number          Date Presented            Amount $
45608619/01/2001                  100,779.13
(e)HSW made the following payment to the defendant for and on behalf of HSW for unsecured debts owed…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2007] SASC 170
Decision Date: 18 May 2007

CaseChat Overview and Summary

In the Supreme Court of South Australia, the liquidators of Harris Scarfe Limited (HSL) and Harris Scarfe Wholesale Pty Ltd (HSW) sought permission to file an amended statement of claim against the Chicago Boot Company Pty Ltd, seeking to recover allegedly preferential payments made by the companies prior to their liquidation. The Chicago Boot Company opposed the application, arguing that the proposed statement of claim did not adequately plead the facts necessary to establish that the payments constituted "transactions" within the meaning of the Corporations Law. The central issue before the court was whether the liquidators' proposed statement of claim sufficiently identified the factual and legal basis for the claim that the payments were preferential and constituted transactions as defined by the relevant statutory provisions.

The court considered the requirements of ss 588FF and 588FA of the Corporations Law, which pertain to the recovery of preferential payments by liquidators. The liquidators' claim was based on the premise that certain payments made by HSL and HSW to the Chicago Boot Company were preferential and could be recovered. The Full Court of the Federal Court had previously held in re Emmanuel (No 14) Pty Ltd (in liq); Macks v Blacklaw & Shadforth Pty Ltd that a transaction could be considered as the totality of dealings initiated by the debtor to extinguish a debt, without requiring the existence of an agency relationship. However, the court found that the liquidators' proposed statement of claim was insufficient because it did not clearly establish the basis on which the payments were made or received, nor did it demonstrate that the debtor companies and the creditor were parties to the transactions as required by s 588FA(1). The use of the phrase "for and on behalf of" did not adequately address the necessary legal and factual underpinnings of the claim.

The court concluded that the proposed statement of claim was defective and dismissed the liquidators' application to file and serve an amended statement of claim. The court noted that the liquidators would need to provide more detailed factual and legal allegations to support their claim that the payments constituted preferential transactions. The court directed that further submissions would be heard regarding the costs of the application.

Orders