Shaw v KPR Recruitment Australia Pty Ltd (No 2)

The case of Shaw v KPR Recruitment Australia Pty Ltd (No 2) involved a liquidator's attempt to recover an alleged unfair preference from a creditor of a company that had entered liquidation. The dispute was heard in the Federal Circuit Court of Australia. The liquidator sought to reopen the case on the issue of insolvency, as counsel had mistakenly relied on the presumption of insolvency under the Corporations Act, s 588E(4) when this presumption was unavailable due to s 588E(7). The liquidator's solicitor was unaware that all evidence relating to the company's insolvency was not before the court at trial.

The primary legal issues the court needed to decide were whether it was appropriate to allow the liquidator to reopen the case on the issue of insolvency and whether the company was insolvent under the Corporations Act. The court examined the evidence of insolvency, including a substantial deficiency between the company's debts and its liquid resources, dishonoured cheques, and the passing of cheques between the company's bank accounts. The court also considered whether the company's situation constituted a temporary lack of liquidity or an endemic shortage of working capital.

The court concluded that it was appropriate to allow the liquidator to reopen the case on the issue of insolvency, as the creditor would suffer no prejudice. The court found that the company was insolvent, based on the substantial deficiency in liquid resources, dishonoured cheques, and the passing of cheques between bank accounts. The court held that these factors indicated an endemic shortage of working capital rather than a temporary lack of liquidity.

The court ordered that the liquidator be allowed to reopen the case on the issue of insolvency, and it directed further evidence be presented on this matter.