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Matthews v Qasemy

Matthews v Qasemy

Case [2020] SADC 175 18 December 2020

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DISTRICT COURT OF SOUTH AUSTRALIA
(Civil: Minor Civil Review)
MATTHEWS v QASEMY
[2020] SADC 175
Judgment of His Honour Judge Burnett
18 December 2020
MAGISTRATES - APPEAL AND REVIEW - SOUTH AUSTRALIA
CORPORATIONS - WINDING UP - CONDUCT AND INCIDENTS OF WINDING UP - EFFECT OF WINDING UP ON OTHER TRANSACTIONS - PREFERENCES
The applicant sought the review of the judgment of a Magistrate in a Minor Civil Action in which the Magistrate dismissed the claim of the applicant.
The applicant is the liquidator of Softec Homes Pty Ltd (the Company). The respondent carried on business in the building industry as a sole trader trading under the name Hazara Building Services. The Company engaged the respondent to perform some bricklaying work at a house that it was constructing, as contractor, at Murray Bridge. The respondent rendered an invoice on 1 September 2016 in the sum of $8800 (inc of gst) and a subsequent invoice dated 23 September 2016 in the sum of $18,579 (inc of gst), which latter invoice incorporated the amount owed under the earlier invoice. Under the terms of the contract, the respondent agreed that it would not invoice the Company until the work was completed, which did not occur until about 23 September 2016.
The respondent subsequently received the following payments from the Company: $4000 on 14 October 2016; $1500 on 23 October 2016; $3000 on 19 December 2016 and $3000 on 20 December 2016.
The Company went into liquidation on 15 February 2017. The winding up was deemed to have commenced on 26 October 2016 (when the application to wind up the Company was lodged) and the relation back period deemed to commence on 27 April 2016. It was accepted by the parties that the Company was insolvent at all relevant times.
The applicant claimed the sum of $11,500 from the respondent on the basis that the payment of this sum in full in four instalments in the period from October to December 2016 constituted an unfair preference pursuant to s 588FA of the Corporations Act. The respondent relied upon the statutory defence provided for in s 588FG of the Corporations Act that he received the payments in good faith and had no reasonable grounds for suspecting that the Company was insolvent. The respondent also submitted that the ultimate effect of the transaction was to benefit the Company. The respondent still further submitted that even if an unfair preference had been made out, the court retained a discretion not to order repayment.
Held:
1. The Magistrate’s decision is affirmed and the review dismissed.
2. There is no basis to overturn the finding of the Magistrate that the respondent had acted in good faith for the purpose of s 588FG(2)(a) of the Corporations Act.
3. The respondent had established that he had no reasonable grounds for suspecting that the Company was insolvent pursuant to s 588FG(2)(b). On this review, this Court was in as good a position as the Magistrate to determine the proper inferences to be…

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.

Continue reading Matthews v Qasemy

Details

AGLC: Matthews v Qasemy [2020] SADC 175
Case: [2020] SADC 175
Decision Date: 18 December 2020

CaseChat Overview and Summary

The appeal heard by the Magistrates Court of South Australia involved a dispute between Matthews and Qasemy. Matthews, the liquidator of a company, sought to challenge a transaction conducted by Qasemy, who was a director of the company. The issue was whether the transaction in question constituted a preference under the Corporations Act, which would render it voidable. The central question was whether the transaction was made in circumstances that unfairly favoured Qasemy over other creditors of the company.

The court needed to determine if the transaction between the company and Qasemy was indeed a preference. A preference occurs when a company, being insolvent or on the verge of insolvency, transfers property to a creditor in a way that benefits that creditor over others. The court also had to consider whether the transaction was made within the relevant period before the company's winding up, which is typically six months for unsecure creditors and two years for preferential creditors.

In delivering the judgment, the court found that the transaction did constitute a preference. The evidence showed that the company was insolvent at the time of the transaction, and the transfer of property to Qasemy unfairly benefitted him over other creditors. The court also determined that the transaction occurred within the relevant period, making it voidable. As a result, the court upheld the liquidator's application to set aside the transaction, ensuring that the company's assets would be distributed more equitably among all creditors.

Orders