Dwyer & Maxsted v Chicago Boot Co P/L - [2005] SASC 373

SUPREME COURT OF SOUTH AUSTRALIA
(Appeal from a Master: Civil)
DWYER & MAXSTED v CHICAGO BOOT CO P/L
Judgment of The Honourable Justice Duggan
29 September 2005
CORPORATIONS - WINDING UP - CONDUCT AND INCIDENTS OF LIQUIDATION - EFFECT OF WINDING UP ON OTHER TRANSACTIONS - PREFERENCES
Appeal from order of a master requiring appellants to provide further particulars by way of an amended statement of claim - appellants are liquidators who have issued proceedings to recover payments pursuant to the unfair preference provisions of the Corporations Law - payments allegedly made pursuant to a contract for the supply of goods - whether appellants required to plead facts to identify how the contract was formed and the relevant terms and conditions thereof - held that the appellants' claim did not require further particularisation - appeal allowed.
Supreme Court Rules 46A.03; Corporations Law s 588FA(1), 588FE, 588FF, referred to.
Robertson v Grigg (1932) 47 CLR 257, applied.

DWYER & MAXSTED v CHICAGO BOOT CO P/L
[2005] SASC 373
Appeal from a Master

DUGGAN J. The appellants are the liquidators of Harris Scarfe Ltd (in liquidation) (HSL) who have commenced proceedings to recover payments made by HSL to the respondent. The claim is made pursuant to the unfair preference provisions of the Corporations Law.
According to the amended statement of claim (the claim) five payments totalling $273,261.23 were made by HSL to the respondent in January and February 2001 during the relation-back period of six months fixed by s 588FE of the Corporations Law.
Paragraph 3 of the claim states:
Pursuant to a contract 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.
Paragraph 4 of the claim details the five payments which are said to have been made in payment of unsecured debts.
The respondent applied to a master for an order that the appellants plead further material facts concerning the contract referred to in para 3 of the claim. In the alternative, an order was sought striking out para 3. The making of these orders was opposed by the appellants.
On 27 June 2005 the master ordered that the appellants “file and serve a further amended statement of claim which pleads further material facts sufficient to identify how the contract is formed and which identifies any specific terms or conditions”.
The appellants have now appealed against the master’s order. The issue in contention between the parties is whether the material which the master has ordered to be included in the claim can be regarded as either material facts on which the appellants rely (r 46A.03(a)) or further material facts as are necessary to give the respondent prior notice of the claim they will have to answer (r 46A.03(b)).
In order to consider the appropriateness or otherwise of the order for further particularisation it is necessary to consider the nature of the proceedings.
Section 588FA(1) of the Corporations Law (now s 588FA(1) of the Corporations Act 2001) reads:
Unfair preferences
(1) A transaction is an unfair preference given by a company to a creditor of the company if, and only if:
(a) the company and the creditor are parties to the transaction (even if someone else is also a party); and
(b) the transaction results in the creditor receiving from the company, in respect of an unsecured debt that the company owes to the creditor, more than the creditor would receive from the company in respect of the debt if the transaction were set aside and the creditor were to prove for the debt in a winding up of the company;
even if the transaction is entered into, is given effect to, or is required to be given effect to, because of an order of an Australian court or a direction by an agency.
Section 588FE declares that certain transactions are voidable and s 588FF empowers the court to order the recovery of amounts paid pursuant to voidable transactions on an application for such an order by the company’s liquidator.
The requirements for the successful recovery of amounts under these provisions are summarised in McPherson, The Law of Company Liquidation (4 ed) at 441:
The liquidator bears the onus of proving the conditions that are set out for the existence of a preference in s 588FA. Therefore, to establish that an unfair preference was given by a company, it is incumbent on a liquidator to prove that:
·there has been a “transaction” within the meaning of that word as defined in s 9 to which the company and a creditor of the company were parties;
·the transaction results in the creditor receiving from the company, in relation to an unsecured debt owed by the company to the creditor, more than the creditor would receive if the transaction was set aside and the creditor proved in the winding up; and
·when the transaction was entered into, the company was insolvent or it became insolvent because of entering into the transaction.
Besides these elements, s 588FE(2) provides that the liquidator must prove that the transaction under attack was entered into during the six months immediately prior to the relation-back day or after that day but before the winding up began.
In proceedings for the recovery of preference payments, whether under bankruptcy law or winding up provisions such as those under consideration, there can be no preference unless the person or company preferred is a creditor: Robertson v Grigg (1932) 47 CLR 257 at 271. However, that is not to say that proof of the creditor-debtor relationship requires proof of the manner of formation and the terms of the contract which resulted in that relationship. The relationship is a consequence of such an agreement and may be proved by inference from evidence such as invoices and records of payment. It is obvious that, in many cases, evidence of a contract which led to the relationship of creditor and debtor will not be available to the liquidator. In any event, proof of the specific terms of such an agreement cannot be regarded as essential in every case.
Mr Hoffman, for the respondent, emphasised the fact that para 3 of the claim makes reference to a contract between HSL and the respondent. However, the mere allusion to a contract does not render proof of the terms of the contract essential. It would have been sufficient for the purposes of the claim for the pleading to state:
The defendant provided goods and/or services to HSL in return for payment of the defendant’s invoices.
Furthermore, I cannot accept the argument that further material facts are necessary to give the respondent fair notice of the case it has to answer. For the reasons which I have given, it is unnecessary for the appellants to establish the manner in which the contract was formed and its precise terms. That is not to say, of course, that the terms of the contract might not be relevant to a defence advanced by the appellants. Indeed, in its defence, the respondent has claimed that the effect of a retention of title clause printed on the reverse side of each invoice leads to the result that there was no unfair preference within the meaning of the legislation. In my view the manner in which the appellants’ case is pleaded does not give rise to any relevant prejudice to the respondent.
For these reasons I am of the view that the claim does not require further particularisation.
I allow the appeal for the purpose of setting aside the order of the master directing the appellants to file and serve a further amended statement of claim.