Hosking v Extend N Build Pty Ltd

The appeal in *Hosking v Extend N Build Pty Ltd* concerned a liquidator's claim to recover payments made by a company, Extend N Build Pty Ltd (in liquidation), to certain creditors during the relation-back period. The liquidator argued these payments constituted unfair preferences under section 588FA(1) of the *Corporations Act 2001* (Cth). The primary judge had dismissed the claim against the first to fifth respondents but found in favour of the liquidator against the sixth respondent. The appeal was heard by Bathurst CJ, Beazley P, and Gleeson JA of the Court of Appeal of New South Wales.

The central legal issues before the Court of Appeal were whether the payments made by the company to the creditors constituted "transactions" to which the company was a party, and whether these payments were received "from" the company for the purposes of section 588FA(1). Additionally, the court considered whether the sixth respondent had reasonable grounds to suspect the company's insolvency, which would be a defence under section 588FG(2) of the *Corporations Act 2001* (Cth).

The Court of Appeal reasoned that for a payment to be an unfair preference, it must be a transaction to which the company was a party and from which the creditor received the payment. In relation to the first to fifth respondents, the court found that the payments were not made directly by the company but rather by a third party in response to industrial pressure exerted on the company. Therefore, these payments were not received "from" the company in the relevant sense. However, regarding the sixth respondent, the court determined that the primary judge had erred in finding that the sixth respondent had reasonable grounds to suspect insolvency. The court concluded that the evidence did not support such a finding, and thus the statutory defence under section 588FG(2) was not established.

Consequently, the appeal was dismissed in relation to the first to fifth respondents, with the appellants ordered to pay their costs. The appeal was allowed in relation to the sixth respondent, the primary judge's orders were set aside, and the matter was remitted for short minutes of order to be brought in. The sixth respondent was ordered to pay the appellants' costs of the appeal against it, with a certificate under the *Suitors Fund Act 1951* (NSW) available if eligible.