Keith Smith East West Transport Pty Ltd (in liq) v Australian Taxation Office

The appeal concerned the insolvency of Keith Smith East West Transport Pty Ltd (in liq) and whether payments made to the Australian Taxation Office (ATO) constituted unfair preferences. The primary legal issue before the Court of Appeal of New South Wales was whether the company was insolvent at the time of the payments to the ATO, or if it became insolvent as a result of those payments, thereby rendering them unfair preferences under Part 5.7B of the *Corporations Act 2001* (Cth).

The court was required to determine whether the company's financial position at the relevant times indicated insolvency, considering the statutory presumption of insolvency and the evidence presented. This involved assessing the company's financial records and the credibility of witnesses to establish the company's true financial state. A key aspect of the determination was whether the court should consider a creditor's willingness to defer enforcement action, provided satisfactory arrangements for debt reduction were in place, when assessing the company's overall financial position.

The court reasoned that a conclusion as to solvency or insolvency must be made by reference to the company's total financial position at the specific time in question. The court found that the evidence did not establish that the company was solvent at the time of the payments, nor that the payments themselves did not contribute to its insolvency. Consequently, the payments were deemed to be unfair preferences. The appeal was dismissed with costs.