Smith v Bone - [2015] FCA 319

FEDERAL COURT OF AUSTRALIA
Smith v Boné, in the matter of ACN 002 864 002 Pty Ltd (in liq) [2015] FCA 319

Citation: Smith v Boné, in the matter of ACN 002 864 002 Pty Ltd (in liq) [2015] FCA 319

Parties: MICHAEL JOHN MORRIS SMITH IN HIS CAPACITY AS LIQUIDATOR OF ACN 002 864 002 PTY LTD (IN LIQUIDATION) FORMERLY KNOWN AS PETROLINK PTY LTD and ACN 002 864 002 PTY LTD (IN LIQUIDATION) FORMERLY KNOWN AS PETROLINK PTY LTD ACN 002 864 002 v BARRY BONÉ and VALVELINK PTY LTD ACN 053 332 808

File number: NSD 1030 of 2013

Judge: GLEESON J

Date of judgment: 7 April 2015

Catchwords: BANKRUPTCY AND INSOLVENCY – whether director caused company to trade while insolvent – whether reasonable grounds for suspecting company was insolvent – whether director failed to prevent company from incurring debts when aware of reasonable grounds to suspect company was insolvent – whether reasonable person in director’s position would have been aware of reasonable grounds for suspecting company was insolvent – where company made payment arrangements to repay tax debts – whether director acted honestly and ought fairly to be excused for contravention of civil penalty provision or breach of duty – amount of recoverable compensation – whether director entitled to set off – whether preferential payment made – Corporations Act 2001 (Cth), ss 588M, 588FF, 1317S, 1318

Legislation: Corporations Act 2001 (Cth), ss 95A, 436A, 553C, 588E, 588G, 588H, 588M, 588FA, 588FC, 588FE, 588FF, 588FG, 1317S, 1318
Evidence Act 1995 (Cth), ss 79(1), 140
Income Tax Assessment Act 1936 (Cth), s 222AOC
Tax Administration Act 1953 (Cth), Sch 1

Cases cited:
Australian Securities and Investment Commission v Plymin (No 1) [2003] VSC 123; (2003) 175 FLR 124
Australian Securities and Investments Commission v Edwards (No 3) [2006] NSWSC 376; (2006) 57 ACSR 209
Australian Securities and Investments Commission v Edwards [2005] NSWSC 831; (2005) 54 ACSR 583
Australian Securities and Investments Commission v Healey (No 2) [2011] FCA 1003; (2011) 196 FCR 430
Australian Securities and Investments Commission v Vines [2005] NSWSC 1349; (2005) 65 NSWLR 281
Bank of Australasia v Hall [1907] HCA 78; (1907) 4 CLR 1514
Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) [2008] WASC 239; (2008) 39 WAR 1
Bluestone Property Services Pty Ltd (in liq) v First Equilibrium Pty Ltd [2013] FCA 876
Buzzle Operation Pty Ltd (in liq) v Apple Computer Australia Pty Ltd [2011] NSWCA 109; (2011) 81 NSWLR 47
Campbell Street Theatre Pty Ltd (receiver and manager appointed) (in liq) v Commercial Mortgage Trade Pty Ltd [2012] NSWSC 669

Carr v Baker (1936) 36 SR(NSW) 301
Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389

Commonwealth Bank v Friedrich (1991) 5 ACSR 115
Crema Pty Ltd v Land Mark Property Developments Pty Ltd [2006] VSC 338; (2006) 58 ACSR 631
Daniels v Anderson (1995) 37 NSWLR 438
Deputy Commissioner of Taxation v Dick [2007] NSWCA 190; (2007) 242 ALR 152
Edenden v Bignell [2007] NSWSC 1122
Ellis v Wallsend District Hospital (1989) 17 NSWLR 553
Federal Commissioner of Taxation v Wade [1951] HCA 66; (1951) 84 CLR 105
Hall v Poolman [2007] NSWSC 1330; (2007) 65 ACSR 123
Harrington-Smith v Western Australia (No 2) [2003] FCA 893; (2003) 130 FCR 424
Hawkins v Bank of China (1992) 26 NSWLR 562
Hicks v Minister for Immigration and Multiculturalism and Indigenous Affairs [2003] FCA 757
Hymix Concrete Pty Ltd v Garritty (1977) 13 ALR 321
Jetaway Logistics Pty Ltd v Deputy Commissioner of Taxation [2009] VSCA 319; (2009) 26 VR 567
Lewis v Doran [2004] NSWSC 608; (2004) 208 ALR 385
Lewis v Doran [2005] NSWCA 243; (2005) 219 ALR 555
Lewis, Re Damilock Pty Ltd (in liq) v VI SA Australia Pty Ltd [2008] FCA 1801; (2008) 252 ALR 533
Manson v Smith [1997] 2 BCLC 161
Maritime Electric Co Ltd v. General Dairies Ltd [1937] AC 610
McLellan v Carroll [2009] FCA 1415; (2009) 76 ACSR 67
Melbase v Segenhoe (1995) 17 ACSR 187
Minister for Immigration, Local Government and Ethnic Affairs v Kurtovic (1990) 21 FCR 193
Morley v Australian Securities and Investments Commission (No 2) [2011] NSWCA 110; (2011) 83 ACSR 620

Morley v ASICAustralian Securities and Investments Commission [2010] NSWCA 331; (2010) 274 ALR 205

Mulherin v Bank of Western Australia Ltd [2006] QCA 175

New South Wales v Buckland [2000] NSWCA 72

Oamington Pty Ltd (Receiver & Manager Appointed) v Commissioner of Land Tax (1997) 98 ATC 5051

Ozecom vvc Hudson Investment Group [2007] NSWSC 1441

Playspace Playground Pty Ltd v Osborn [2009] FCA 1486
Powell v Fryer [2001] SASC 59; (2001) 37 ACSR 589
Queensland Bacon v Rees [1996] HCA 21; (1996) 115 CLR 266
Quick v Stoland Pty Ltd (1998) 87 FCR 371
Re ACN 007 534 000 Pty Ltd (in liq); Ex parte Parker (1997) 80 FCR 1
Sandell v Porter [1966] HCA 28; (1966) 115 CLR 666
Sarina v Council of the Shire of Wollondilly (1980) 32 ALR 596
Scott v Duncan [2007] FCAFC 30
Sheahan v Hertz Australia Pty Ltd (1995) 16 ACSR 765 at 769
Southern Cross Interiors Pty Ltd (in liq) v Deputy Commissioner of Taxation [2001] NSWSC 621; (2001) 53 NSWLR 213
Switz Pty Ltd v Glowbind Pty Ltd [1999] NSWSC 1296
Tourprint International Pty Ltd (in liq) v Bott [1999] NSWSC 581; (1999) 32 ACSR 201
Tru Floor Service Pty Ltd v Jenkins (No 2) (2006) 232 ALR 532
Versteeg v R (1988) 36 A Crim R 68
White Constructions (ACT) Pty Ltd (in liq) v White [2004] NSWSC 71; (2004) 49 ACSR 220

Date of hearing: 8, 9, 10, 11, 15, 16 September 2014

Place: Sydney

Division: GENERAL DIVISION

Category: Catchwords

Number of paragraphs: 450

Counsel for the Plaintiffs: Mr S Golledge

Solicitor for the Plaintiffs: Watson Mangioni Lawyers Pty Ltd

Counsel for the Defendants: Mr F Assaf

Solicitor for the Defendants: Sparke Helmore

Table of Corrections

27 April 2015 In paragraph 413, “s 22AOC” has been replaced with “s 222AOC”.

27 April 2015 From paragraph 413, the paragraph numbering has been changed. The paragraph number on the cover page and in the certification have been amended to reflect this change.

27 April 2015 In paragraph 414 (formerly paragraph 416), the words “to take” have been omitted.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 1030 of 2013

IN THE MATTER OF ACN 002 864 002 PTY LTD (IN LIQ) FORMERLY KNOWN AS PETROLINK PTY LTD

BETWEEN:
MICHAEL JOHN MORRIS SMITH IN HIS CAPACITY AS LIQUIDATOR OF ACN 002 864 002 PTY LTD (IN LIQUIDATION) FORMERLY KNOWN AS PETROLINK PTY LTD
First Plaintiff

ACN 002 864 002 PTY LTD (IN LIQUIDATION) FORMERLY KNOWN AS PETROLINK PTY LTD ACN 002 864 002
Second Plaintiff

AND:
BARRY BONÉ
First Defendant

VALVELINK PTY LTD ACN 053 332 808
Second Defendant

JUDGE:

GLEESON J

DATE OF ORDER:

7 APRIL 2015

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:
1.The parties file and serve an agreed short minute of orders to give effect to these reasons on or before Friday 17 April 2015.
2.In the event that the parties are unable to agree proposed orders, each party file and serve proposed short minutes of order on or before Friday 17 April 2015.
3.The matter be listed on Tuesday 21 April 2015 at 9.30 am with a view to making final orders disposing of this proceeding.
4.The parties have leave to file short written submissions in support of the proposed orders on or before Monday 20 April 2015.
5.Liberty to apply on 24 hours’ notice.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 1030 of 2013

IN THE MATTER OF ACN 002 864 002 PTY LTD (IN LIQ) FORMERLY KNOWN AS PETROLINK PTY LTD

BETWEEN:
MICHAEL JOHN MORRIS SMITH IN HIS CAPACITY AS LIQUIDATOR OF ACN 002 864 002 PTY LTD (IN LIQUIDATION) FORMERLY KNOWN AS PETROLINK PTY LTD
First Plaintiff

ACN 002 864 002 PTY LTD (IN LIQUIDATION) FORMERLY KNOWN AS PETROLINK PTY LTD ACN 002 864 002
Second Plaintiff

AND:
BARRY BONÉ
First Defendant

VALVELINK PTY LTD ACN 053 332 808
Second Defendant

JUDGE:

GLEESON J

DATE:

7 APRIL 2015

PLACE:

SYDNEY

REASONS FOR JUDGMENT

In December 2011, the first plaintiff (“liquidator”) was appointed official liquidator of the second plaintiff, formerly known as Petrolink Pty Ltd (“Petrolink” or “the company”) on the application of the Deputy Commissioner of Taxation. Petrolink was incorporated in 1984 and, by the time of the liquidation, had been in business for over 25 years. Its business involved designing, installing and supporting industrial petro-chemical storage and delivery systems. The company had a diverse range of customers, including government entities and mining operations. In each of the three financial years prior to its liquidation, the company had an annual turnover exceeding $3 million.
The liquidator contends that Petrolink became insolvent on 30 June 2009 and thereafter remained insolvent until the company was placed into liquidation. The plaintiffs’ principal claims for relief are:
a.As against the first defendant (“Mr Boné”), compensation pursuant to s 588M of the Corporations Act 2001 (Cth) (“the Act”) in respect of losses suffered by creditors of Petrolink as a result of that company’s insolvency. In closing submissions, the amount claimed was quantified at $844,491.43, which is said to be the total of the debts allegedly incurred by Petrolink to its creditors, including the Commissioner of Taxation, during the period whilst it was insolvent;
b.As against the second defendant (“Valvelink”), an order pursuant to s 588FF of the Act in respect of payments made and credits allowed to Valvelink by Petrolink during the relation back period, from 31 March 2011 to 30 September 2011. The amount claimed is $95,065.41, being the net reduction in the amount due to Valvelink from Petrolink during that period.
Mr Boné was the sole director of Petrolink at all relevant times, as well as the sole director of Valvelink.
The parties agree that the relation-back day in respect of the winding up of Petrolink is 30 September 2011. On that date, the Deputy Commissioner of Taxation filed the originating process which sought that Petrolink be wound up in insolvency.
The defendants concede, for the purposes of this proceeding only, that Petrolink was insolvent from 7 July 2011. They say that, during the period 7 July 2011 to 7 December 2011, Petrolink incurred tax debts in the amount of $122,752 and other debts totalling $46,301.47, but that any liability to pay compensation under s 588M is to be set off against the company’s liabilities to Mr Boné pursuant to s 553C of the Act.
The defendants deny that the plaintiffs are entitled to the relief sought and contend that the proceeding should be dismissed with costs.
SUMMARY OF CONCLUSIONS
I have concluded that Petrolink was insolvent at all times from no later than 12 May 2010. On this date, Petrolink incurred substantial liabilities for goods and services tax (“GST”) and pay as you go tax withheld (“PAYG”), having failed to comply with its sixth payment arrangement with the Australian Taxation Office (“ATO”) by the end of March 2010. Its tax debt then due and payable was approximately $556,300.11.
Based on the ATO portal itemised account exhibited to Mr Boné’s September 2014 affidavit (“Petrolink’s ATO portal itemised account”), from 12 May 2010 until 7 December 2011, Petrolink incurred tax debts of approximately [696,987.23 less $495,745.11=] $201,242.12 and debts to trade creditors totalling approximately [$399,792.36 (the total of Schedule B to the amended statement of claim) less $17,931.47 (eight debts not demonstrated to have been incurred from 12 May 2010, and three debts found to have been paid)=] $385,294.74. On these figures, Petrolink incurred debts totalling $586,536.86 while insolvent, which remain unpaid.
In addition, Petrolink incurred and paid further debts to the Commissioner of Taxation during the period 12 May 2010 to 7 December 2011. Those payments resulted in a recovery of $140,000 from the ATO in accordance with s 588FF of the Act, pursuant to orders made by Emmett J on 25 September 2012. Accordingly, the debt incurred to the Commissioner of Taxation during the period from 12 May 2010 that remains unpaid includes the amount of $140,000.
I am satisfied that during the whole of the period from 12 May 2010, there were reasonable grounds for suspecting that Petrolink was insolvent. I have concluded that Mr Boné contravened s 588G of the Act by failing to prevent Petrolink from incurring the tax debts that Petrolink incurred from 12 May 2010 and the debts incurred to trade creditors from that date, because Mr Boné was aware at all times from 12 May 2010 of reasonable grounds to suspect that Petrolink was insolvent. Alternatively, a reasonable person in a like position in a company in Petrolink’s circumstances would have been aware that there were reasonable grounds for suspecting that Petrolink was insolvent at all times from 12 May 2010.
I reject Mr Boné’s defences and his claim for relief under s 1317S or s 1318 of the Act. Taking into account Mr Boné’s claim to a set off which I allow in the sum of $56,954, on my calculations the liquidator is entitled to recover from Mr Boné an amount of approximately $669,582.86.
I am also satisfied that a transaction of Petrolink with Valvelink is voidable because of s 588FE and that, as a result, the Court should direct Valvelink to pay to the liquidator the sum of $95,065.41.
CLAIM AGAINST MR BONÉ
Statutory provisions
Section 588M of the Act provides relevantly:
(1) This section applies where:
(a) a person (in this section called the director) has contravened subsection 588G(2) or (3) in relation to the incurring of a debt by a company; and
(b) the person (in this section called the creditor ) to whom the debt is owed has suffered loss or damage in relation to the debt because of the company's insolvency; and
(c) the debt was wholly or partly unsecured when the loss or damage was suffered; and
(d) the company is being wound up;
whether or not:
(e) the director has been convicted of an offence in relation to the contravention; or
(f) a civil penalty order has been made against the director in relation to the contravention.
(2) The company's liquidator may recover from the director, as a debt due to the company, an amount equal to the amount of the loss or damage.
Section 588G provides:
(1) This section applies if:
(a) a person is a director of a company at the time when the company incurs a debt; and
(b) the company is insolvent at that time, or becomes insolvent by incurring that debt, or by incurring at that time debts including that debt; and
(c) at that time, there are reasonable grounds for suspecting that the company is insolvent, or would so become insolvent, as the case may be; and
(d) that time is at or after the commencement of this Act.
(2) By failing to prevent the company from incurring the debt, the person contravenes this section if:
(a)the person is aware at that time that there are such grounds for so suspecting; or
(b)a reasonable person in a like position in a company in the company's circumstances would be so aware.
It is not disputed that Mr Boné was a director of Petrolink at all relevant times, so that s 588G(1)(a) and (d) are satisfied in this case. Accordingly, s 588G applies if the plaintiffs are able to meet the requirements of s 588G(1)(b) and (c).
By s 588E(3), if a company is being wound up and it is proved that the company was insolvent at a particular time during the 12 months ending on the relation-back day, it must be presumed that the company was insolvent throughout the period beginning at that time and ending on that day.
The defendants drew attention to the fact that s 588G(2) is expressed to apply in relation to individual debts. They noted that the plaintiffs must establish each of the elements of s 588G for each debt said to have been incurred.
By s 588H(2), it is a defence to proceedings for a contravention of s 588G(2) if it is proved that, at the time the debt was incurred, the person had reasonable grounds to expect, and did expect, that the company was solvent at that time and would remain solvent even if it incurred that debt and any other debts that it incurred at that time.
By s 588H(5), it is also a defence if it is proved that the person took all reasonable steps to prevent the company from incurring the debt. Section 588H(6) provides that, in determining whether a defence under s 588H(5) has been proved, the matters to which regard is to be had include, but are not limited to:
1.any action the person took with a view to appointing an administrator of the company; and
2.when that action was taken; and
3.the results of that action.
These proceedings are “eligible proceedings” within the meaning of s 1317S of the Act. Section 1317S provides relevantly:
(1) If:
(a)eligible proceedings are brought against a person; and
(b)in the proceedings it appears to the court that the person has, or may have, contravened a civil penalty provision but that:
(i)the person has acted honestly; and
(ii)having regard to all the circumstances of the case (including, where applicable, those connected with the person's appointment as an officer, or employment as an employee, of a corporation or of a Part 5.7 body), the person ought fairly to be excused for the contravention;
(2) the court may relieve the person either wholly or partly from a liability to which the person would otherwise be subject, or that might otherwise be imposed on the person, because of the contravention.
(3) In determining under subsection (2) whether a person ought fairly to be excused for a contravention of section 588G, the matters to which regard is to be had include, but are not limited to:
(a)any action the person took with a view to appointing an administrator of the company or Part 5.7 body; and
(b)when that action was taken; and
(c)the results of that action.
…
(7)Nothing in this section limits, or is limited by, section 1318.
Section 1318 of the Act provides relevantly:
(1) If, in any civil proceeding against a person to whom this section applies for negligence, default, breach of trust or breach of duty in a capacity as such a person, it appears to the court before which the proceedings are taken that the person is or may be liable in respect of the negligence, default or breach but that the person has acted honestly and that, having regard to all the circumstances of the case, including those connected with the person's appointment, the person ought fairly to be excused for the negligence, default or breach, the court may relieve the person either wholly or partly from liability on such terms as the court thinks fit.
…
(4) This section applies to a person who is:
(a) an officer or employee of a corporation; …
Section 553C of the Act provides for a set-off of mutual debts between an insolvent company that is being wound up and a person who wants to have a debt or claim admitted against the company. It is in the following terms:
(1) Subject to subsection (2), where there have been mutual credits, mutual debts or other mutual dealings between an insolvent company that is being wound up and a person who wants to have a debt or claim admitted against the company:
(a) an account is to be taken of what is due from the one party to the other in respect of those mutual dealings; and
(b) the sum due from the one party is to be set off against any sum due from the other party; and
(c) only the balance of the account is admissible to proof against the company, or is payable to the company, as the case may be.
(2) A person is not entitled under this section to claim the benefit of a set-off if, at the time of giving credit to the company, or at the time of receiving credit from the company, the person had notice of the fact that the company was insolvent.
Onus and standard of proof

The onus of establishing a contravention of s 588G lies upon the party asserting the contravention: Playspace Playground Pty Ltd v Osborn [2009] FCA 1486 at [43]. The standard of proof is the balance of probabilities, taking into account the nature and consequences of the facts to be proved: Evidence Act 1995 (Cth), s 140; Playspace Playground Pty Ltd v Osborn at [43]; Australian Securities and Investment Commission v Plymin (No 1) (“Plymin (No 1)”) [2003] VSC 123; (2003) 175 FLR 124 at [367]; Tru Floor Service Pty Ltd v Jenkins (No 2) (2006) 232 ALR 532 at 546.
SOLVENCY
Legal principles
Under s 95A of the Act, a company is solvent if, and only if, it is able to pay all its debts, as and when they become due and payable. By s 95A(2), a company that is not solvent is insolvent. Section 95A adopts a “cash flow” test of insolvency which is directed to income sources that are available to the company and expenditure obligations it has to meet, rather than a balance sheet test which focuses on the value of the company’s assets and liabilities reflected in the company’s books, although a balance sheet test can provide context for the application of the cash flow test: Campbell Street Theatre Pty Ltd (receiver and manager appointed) (in liq) v Commercial Mortgage Trade Pty Ltd [2012] NSWSC 669 at [23], citing Southern Cross Interiors Pty Ltd (in liq) v Deputy Commissioner of Taxation [2001] NSWSC 621; (2001) 53 NSWLR 213 (“Southern Cross”); Plymin (No 1); Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) [2008] WASC 239; (2008) 39 WAR 1. The focus of the cash flow test of insolvency is the liquidity and viability of the company’s business: Crema Pty Ltd v Land Mark Property Developments Pty Ltd [2006] VSC 338; (2006) 58 ACSR 631 at [141].
Whether or not a company is insolvent at a particular point in time is a question of fact to be ascertained from a consideration of the company’s position taken as a whole, including the nature of its assets and business, having regard to “commercial realities” and common sense: Bluestone Property Services Pty Ltd (in liq) v First Equilibrium Pty Ltd [2013] FCA 876 at [42]; Southern Cross. The Court’s task is to decide whether the company is suffering from an “endemic shortage of working capital”: Hymix Concrete Pty Ltd v Garritty (1977) 13 ALR 321 at 328.
Thus, a temporary lack of liquidity does not constitute insolvency: Sandell v Porter [1966] HCA 28; (1966) 115 CLR 666 at 670 (Barwick CJ). “In assessing whether a company’s position as a whole reveals surmountable temporary illiquidity or insurmountable endemic illiquidity resulting in insolvency, it is proper to have regard to the commercial reality that, in normal circumstances, creditors will not always insist on payment strictly in accordance with their terms of trade but that does not result in the company thereby having a cash or credit resource which can be taken into account in determining solvency”: Southern Cross at [54].
In considering a company’s ability to pay debts “as they become due”, it is appropriate to consider the immediate future, precisely how far into the future being a matter that depends on circumstances including the nature of the company’s business and, if known, the future liabilities: Lewis v Doran [2005] NSWCA 243; (2005) 219 ALR 555 at [103] (Giles JA); Melbase v Segenhoe (1995) 17 ACSR 187 at 198. So, for example, “if it appears that the debtor will not be able to pay a debt which will certainly become due in, say, a month…by reason of an obligation already existing, and which may before that day exhaust all his available resources, how can it be said that he is able to pay his debts ‘as they become due,’ out of his own moneys?”: Bank of Australasia v Hall [1907] HCA 78; (1907) 4 CLR 1514 at 1528 (Griffith CJ).
Concerning the correct approach to determining when a contract debt is due and payable for the purposes of assessing solvency, in Southern Cross, Palmer J said, relevantly at [54]:
(v) in assessing solvency, the Court acts upon the basis that a contract debt is payable at the time stipulated for payment in the contract unless there is evidence, proving to the Court’s satisfaction, that:
·     there has been an express or implied agreement between the company and the creditor for an extension of the time stipulated for payment; or
·     there is a course of conduct between the company and the creditor sufficient to give rise to an estoppel preventing the creditor from relying upon the stipulated time for payment; or
·     there has been a well established and recognised course of conduct in the industry in which the company operates, or as between the company and its creditors as a body, whereby debts are payable at a time other than that stipulated in the creditors’ terms of trade or are payable only on demand: …
[Re Newark Pty Ltd (in liq) [1993] 1 Qd R 409] at 260; [Standard Chartered Bank of Australia Ltd v Antico (Nos 1 & 2) (1995) 38 NSWLR 290] at 331; [Melbase Corporation Pty Ltd v Segenhoe Ltd (1995) 17 ACSR 187]; Cuthbertson & Richards Sawmills Pty Ltd v Thomas [(1998) 28 ACSR 310]; [Fryer v Powell (2001) 159 FLR 433] at 600;
(vi) it is for the party asserting that a company’s contract debts are not payable at the times contractually stipulated to make good that assertion by satisfactory evidence: Fryer v Powell (at 444-445); Melbase; Cuthbertson v Thomas.
The propositions set out immediately above should not be read as prescriptive, but as stating the basis upon which courts have generally assessed the significance of indulgences granted by a creditor: White Constructions (ACT) Pty Ltd (in liq) v White [2004] NSWSC 71; (2004) 49 ACSR 220 at [290] to [294].
If the Court is satisfied that, as a matter of commercial reality, the company has a resource available to pay all its debts as they become payable then it will not matter that the resource is an unsecured borrowing or a voluntary extension of credit by another party: Lewis v Doran [2004] NSWSC 608; (2004) 208 ALR 385 at [116]; Lewis v Doran [2005] NSWCA 243; (2005) 219 ALR 555 at [109] and [110] (Giles JA); Scott v Duncan [2007] FCAFC 30 at [38]. The likelihood that directors will continue to support by a company by lending it money is relevant to the assessment of solvency: see Mulherin v Bank of Western Australia Ltd [2006] QCA 175 at [113] to [115].
In Plymin (No 1) at [386], Mandie J set out a list of common features in insolvency situations, namely:
• continuing losses;
• liquidity ratios below one;
• overdue Commonwealth and State taxes;
• poor relationship with present bank, including inability to borrow further funds;
• no access to alternative finance;
• inability to raise further equity capital;
• suppliers placing company on cash on delivery or otherwise demanding special payments before resuming supply;
• creditors unpaid outside trading terms;
• issuing of post-dated cheques;
• dishonoured cheques;
• special arrangements with selected creditors;
• solicitors’ demands, summonses and the like;
• payments to creditors of rounded amounts not reconcilable to specific invoices; and
• inability to produce timely and accurate financial information to indicate trading performance and financial position, and to make reliable forecasts.
The list was referred to with approval by Mansfield J in Lewis, Re Damilock Pty Ltd (in liq) v VI SA Australia Pty Ltd [2008] FCA 1801; (2008) 252 ALR 533 at [16]. Mansfield J noted that, “[i]n any particular case, one or more of those factors, or other factors, may have particular significance and one or more of them may not exist. The absence of one or more of those factors does not, of itself, establish solvency.”
When a debt is incurred
Section 588G(1) requires consideration of the company’s solvency “at the time when the company incurs a debt”. In Hawkins v Bank of China (1992) 26 NSWLR 562 at 572, Gleeson CJ said, relevantly:
The words “incurs” and debt” are not words of precise and inflexible denotation. When they appear in s 556 [of the Companies (New South Wales) Code, a statutory predecessor to s 588G] they are to be applied in a practical and commonsense fashion, consistent with the context and with the statutory purposes.
…
…the word “incurs” takes its meaning from its context and is apt to describe, in an appropriate case, the undertaking of an engagement to pay a sum of money at a future time, even if the engagement is conditional and the amount involved is uncertain. Once it is accepted that the “debt” may include a contingent debt then there is no obstacle to the conclusion that, in the present context, a debt may be taken to have been incurred when a company entered a contract by which it subjected itself to a conditional but unavoidable obligation to pay a sum of money at a future time.
In Harrison v Lewis [2001] VSC 27; (2001) 19 ACLC 566, Mandie J said:
[27]…Although it is necessary to consider the terms of the relevant contract, the question when the debt is incurred within the meaning of the section does not depend on strict legal analysis but turns on when, in substance and commercial reality, the company is exposed to the relevant liability. The reason for the emphasis upon substance and commercial reality lies in the need to ensure that the language is interpreted, or applied to the facts, in a way which serves the purpose, or fits the context, of a provision punishing insolvent trading and in a way which avoids absurd results.
[28] The words “incurs a debt” cannot be disregarded but, because of the aim and intent of the section, the focus must be on the conduct and choice of the alleged insolvent company. It is necessary to identify the time when the conduct and choice of the company caused the debt to be incurred because it is at that time that it must be shown that the director who has failed to prevent the company from incurring the debt had or ought to have had the requisite awareness that there were reasonable grounds for suspecting insolvency.
In the case of services where the price is determined by the application of a previously agreed rate or price to the amount of work or service performed, a debt is incurred whenever an amount owing becomes ascertainable: Versteeg v R (1988) 36 A Crim R 68 at 82.
When tax debts are incurred
The plaintiffs contended that the relevant debts were incurred on the dates specified in a document annexed to the amended statement of claim and headed “AIS Account List: For Internal Use Only” (“AIS account list”).
In their written submissions, the defendants accepted that the relevant tax debts were incurred within the meaning of s 588G: cf Powell v Fryer [2001] SASC 59; (2001) 37 ACSR 589 at [72]. The defendants did not make submissions disputing the times at which the relevant tax debts were incurred. As I understood the defendants’ position as articulated at the commencement of the hearing, it was that the “effective date” stated on the AIS account list against an amount stated in the running balance column was the date on which the company’s outstanding tax liability was the amount in the running balance column. It would follow that a debit listed in the column headed “posting amount” against a date in the “effective date” column is a debt incurred on that date.
Payment arrangements
Section 255-15 of Schedule 1 to the Tax Administration Act 1953 (Cth) (“TAA”) provides:
(1) The Commissioner may, having regard to the circumstances of your particular case, permit you to pay an amount of a tax-related liability by instalments under an arrangement between you and the Commissioner (whether or not the liability has already arisen).
(2) The arrangement does not vary the time at which the amount is due and payable.
Note: Despite an arrangement under this section, any general interest charge or other relevant penalty, if applicable for any unpaid amount of the liability, begins to accrue when the liability is due and payable under the relevant taxation law, or at that time as varied under section 255- 10 or 255-20.
By s 255-1(1) a “tax-related liability” is a pecuniary liability to the Commonwealth arising directly under a taxation law (including a liability the amount of which is not yet due and payable).
Section 255-15 may be contrasted with s 255-10 of Schedule 1 to the TAA, which states relevantly:
(1) The Commissioner may, having regard to the circumstances of your particular case, defer the time at which an amount of a tax-related liability is, or would become, due and payable by you (whether or not the liability has already arisen). If the Commissioner does so, that time is varied accordingly.
Note: General interest charge or any other relevant penalty, if applicable for any unpaid amount of the liability, will begin to accrue from the time as varied. See, for example, paragraph 5-15(a) of the Income Tax Assessment Act 1997.
(2) The Commissioner must do so by written notice given to you.
Counsel for the plaintiffs, Mr Golledge, referred to Hall v Poolman [2007] NSWSC 1330; (2007) 65 ACSR 123 in which Palmer J rejected a submission that a tax debt was not payable because it was disputed. At [91], his Honour said:
…the decisive answer to the defendants’ appeal to “commercial reality” in their submission that the Commissioner’s debt was not payable during the period is that the tax legislation clearly and unequivocally made that debt payable. If the legislature clearly says that a tax debt is payable at a certain time, neither the Court nor a company director can disregard that statutory imperative by an appeal to commercial reality. Absent an agreement by the commissioner to defer payment, it is not commercial reality to treat a present liability, statutorily imposed, as if it does not exist.
At [110], Palmer J said:
If the company obtains either an agreed deferment of payment under s 255-10 [of Schedule 1 to the TAA] or a stay of enforcement proceedings from the Court, obviously a director of the company may take that fact into account as a commercial reality in ascertaining the company’s present and projected cashflow position. But if the company obtains neither a deferment nor a stay, the director must take account of the fact that the debt, as a matter of law and commercial reality, is not a contingent liability and remains presently payable.
As will appear below, none of the numerous payment arrangements between Petrolink and the ATO caused a tax debt which was due and payable to cease to be due and payable.
The defendants contended that, in the circumstances of this case, even if the outstanding tax liabilities were due and payable at relevant times, “had the Commissioner sought to enforce the outstanding tax liability prior to 6 July 2011 he or she would have been prevented from doing so by operation of an estoppel” based upon the existence of a payment arrangement. I do not accept that submission. No conduct on the part of the Commissioner could operate as an estoppel against the operation of the Act: Federal Commissioner of Taxation v Wade [1951] HCA 66; (1951) 84 CLR 105 at 117 (Kitto J); Maritime Electric Co Ltd v. General Dairies Ltd [1937] AC 610. More generally, no estoppel is effective against the operation of a statute: Oamington Pty Ltd (Receiver & Manager Appointed) v Commissioner of Land Tax (1997) 98 ATC 5051. See also Minister for Immigration, Local Government and Ethnic Affairs v Kurtovic (1990) 21 FCR 193 at 208ff.
THE PLAINTIFFS’ CASE ON PETROLINK’S INSOLVENCY
The plaintiffs’ case was that the company was insolvent throughout the period 30 June 2009 to 7 December 2011, so that s 588G(1)(b) is satisfied for all debts incurred by the company during that period.
The liquidator relies on the following matters in support of the contention that Petrolink was insolvent from 30 June 2009:
a.During the whole of the period from 30 June 2009 to 7 December 2011, Petrolink’s liabilities exceeded its assets;
b.During the whole of the period from 30 June 2009 to 7 December 2011, the company was unable to trade at a profit and incurred trading losses in each of the financial years ended 30 June 2009, 2010 and 2011;
c.The company had a cash flow shortfall on its immediate obligations as at each of 30 June 2009, 2010 and 2011;
d.The company had a deficiency of current assets to current liabilities as at each of 30 June 2009, 2010 and 2011;
e.The company had a deficiency of total assets to current liabilities as at each of 30 June 2009, 2010 and 2011;
f.As at 30 June 2009, the company was indebted to the Commissioner of Taxation in an amount of $356,254.15;
g.As at 30 March 2011, the company was indebted to the Commissioner of Taxation in an amount of at least $600,000.00, and it remained indebted to the Commissioner of Taxation for at least that amount until the commencement of the winding up;
h.As at 7 December 2011, the company was indebted to the Commissioner of Taxation for $697,206.72.
i.During the period from 30 June 2009 to 7 December 2011, the company made six instalment arrangements with the Australian Taxation Office for payment of the outstanding tax debt and failed to comply with each of those arrangements;
j.The company was insolvent as at 1 October 2010 and by virtue of the terms of s 588E(3) of the Act is to be presumed to have remained insolvent from that date to the relation back date of 30 September 2011.
THE DEFENDANTS’ CASE ON PETROLINK’S INSOLVENCY
The defendants contended that Petrolink was not insolvent before 7 July 2011. They contended that, prior to 7 July 2011, apart from outstanding tax liabilities, there was an absence of the usual indicia of insolvency. Further, they argued that when a proper analysis of Petrolink’s financial position is performed as at each of 30 June 2009, 2010 and 2011, the alleged shortfall of liquid assets was actually a surplus, suggesting that Petrolink was able to pay all of its debts as and when they fell due on each of those dates.
In his oral evidence, the expert chartered accountant and liquidator called by the defendants, Mr Needham, clarified that his view was not that Petrolink became insolvent for the first time on 7 July 2011. His opinion was that the company became “finally and ultimately insolvent” on that date. Mr Needham’s opinion was that “the further you move back in time from 7 July [2011], the less likely it was that [Petrolink] was insolvent at all times, but there were features where I thought over that two and a half year period that there were times where it may have been insolvent but didn’t ultimately remain so”.
The defendants submitted that, even assuming that the liquidator’s evidence is admissible and establishes insolvency, that evidence could only establish insolvency at 30 June 2009, 30 June 2010 and 30 June 2011. It was said that the liquidator’s analysis does not allow the Court to draw conclusions as to solvency at any other times.
EVIDENCE CONCERNING PETROLINK’S FINANCIAL SITUATION
The plaintiffs read two affidavits made by the liquidator dated 20 August 2013 and tendered accompanying exhibits including a report entitled “Report as to solvency” (“solvency report”), and a further affidavit of the liquidator dated 5 September 2014.
The defendants read two affidavits made by Mr Boné, dated 12 December 2013 and 2 September 2014, an affidavit made by Mr Boné’s wife, Helen Boné, dated 2 September 2014 and two reports prepared by Mr Needham dated 12 December 2013 and 4 September 2014.
A joint report of the liquidator and Mr Needham was also part of the evidence.
Books and records of Petrolink
Petrolink used MYOB accounting software. The liquidator obtained a copy of Petrolink’s MYOB records. The plaintiffs tendered an “aged payables” report from the MYOB records as evidence of debts incurred by the company to trade creditors and as evidence of the time that the debts were incurred. In some cases, that evidence was supplemented by other documents, particularly invoices.
The plaintiffs tendered documents entitled “Special purpose financial reports” for Petrolink for the financial years ended 30 June 2009, 2010 and 2011 (“financial reports”). The precise provenance of the reports was not identified. The liquidator’s affidavit evidence was that they were either provided by Petrolink’s external accountants, Lower Russell & Farr, or otherwise formed part of the books and records of Petrolink. In his expert report, the liquidator said that they were provided under cover of Lower Russell & Farr’s letter dated 20 May 2012 and personally to a member of his staff.

The defendants submitted that the evidence upon which the liquidator relied to form his opinion on solvency was “potentially unreliable”. This submission was directed, at least, to the financial reports. The defendants observed that the financial reports were unsigned and unaudited and “based solely upon information provided by Mr Boné”. In the case of the financial reports for the year ended 30 June 2011, they are marked “draft”.
The defendants noted that the liquidator and his staff had not asked for signed financial reports for 2009 and 2010, but they did not adduce evidence that there were in existence other reports, whether signed or unsigned, that were different from the financial reports in evidence. The defendants did not submit that the financial reports did not form part of the books and records of Petrolink.
The defendants also noted that the financial reports for the years ended 30 June 2009 and 2010 had not been verified by reference to the primary books and records of the company. However, they did not identify any particular inaccuracy in the financial reports. They identified minor discrepancies between the figures for trade creditors in the financial reports and “payables reconciliation” summaries apparently printed from MYOB records and found in the books and records of the company.
Mr Boné did not identify particular information which he had provided for the preparation of the reports which was unreliable or otherwise give evidence to suggest that the reports should be discounted because they were prepared on the basis of information provided by him. He did not suggest that the MYOB records of Petrolink were inaccurate in any significant respect. Indeed, his evidence relied upon the MYOB records at several points.
The liquidator acknowledged that the 2011 financial report was marked “draft”. The defendants noted a discrepancy between the current assets figure of $888,651.13 in the draft 2011 financial report’s balance sheet and a balance sheet spreadsheet apparently printed from the MYOB records and found in the books and records of the company (“Petrolink balance sheet spreadsheet”). However, they did not adduce evidence that the MYOB figure was more reliable.
In my view, the 2009 and 2010 financial reports should be accepted as reliable evidence of the facts stated in the reports, because they formed part of the books and records of the company, they were obtained from Petrolink or its external accountants and the defendants did not identify any substantial inaccuracy in the reports.
As to the draft 2011 financial report, that is evidence of the facts stated in the reports, although the weight of that evidence is affected by its draft status. Again, the defendants did not identify any substantial inaccuracy in the draft 2011 financial report although, as I have noted above, attention was drawn to a substantial discrepancy relating to the figure for current assets.
For the same reasons, I also accept documents created from Petrolink’s MYOB records as evidence of the facts stated in them, unless there is evidence to contradict those facts.
Proof of Petrolink’s tax debt from time to time
As noted above, the amended statement of claim annexes the AIS account list as purported particulars of the tax debts incurred while Petrolink was allegedly insolvent. On the basis of that document and a recovery from the Commissioner of Taxation of $140,000, it is alleged that the debt incurred to the ATO during the period 30 July 2009 to 7 December 2011 is $480,952.57. The AIS account list formed part of the liquidator’s evidence, as an attachment to his solvency report. He described it as the “Running Balance Account” and “RBA ledger”. At the commencement of the hearing, I questioned the document’s provenance. However, its provenance was not proved.
At the outset, I accept the liquidator’s sworn evidence that the $140,000 was received by him.
As I understand the plaintiffs’ case, they seek to rely on the AIS account list as proof of the company’s “RBA deficit debt” within the meaning of the TAA from time to time. I raised a concern about the probative value of the AIS account list on the first day of the hearing.
There is no evidence as to what is meant by words and codes that appear on the document, including “AIS Account”, “Process Date”, “Effective Date” and “Rev Prod”. Particularly in the light of the heading on the AIS account list (which states “for internal use only”), I am not prepared to infer from its face alone that the Commissioner established an RBA for the company. Nor am I prepared to accept without more that the figures in the column headed “Running Balance” are the “RBA deficit debt” on the company’s “RBA” at the end of the “Effective Date”, which I understand to be the plaintiffs’ contention. However, I do accept that amounts in the column headed “Posting amount” and marked “CR” were payments made by Petrolink to the ATO on or about the corresponding “process date” because the defendants referred to the “AIS account list” as evidence of payments made by Petrolink to the ATO.
I have considered whether the various letters recording payment arrangements (discussed below) assist in proving the “RBA deficit debt” at various times. In each case, the letter is headed “Payment Arrangement Integrated Client Account”. There is no evidence as to the relationship between the company’s “Integrated Client Account” and any “RBA”.
It is also not possible to determine the precise tax due from the various letters because the arrangements provide “for payment of an estimated GIC [general interest charge] amount which is included in the payment schedule. Any variation to the payment dates or a variation in the rate of GIC will affect the final GIC amount payable.”
Although I am not satisfied as to the existence or amount of an “RBA deficit debt” from time to time, there was other evidence (particularly evidence tendered by the defendants) of Petrolink’s tax debt from time to time. In particular, there was “Petrolink’s ATO portal itemised account”. This document itemises the “balance” of the account owing from time to time, as well as credit and debit amounts. The account includes two columns headed “process date” and “effective date”. In the absence of any evidence of particular errors in this document, I am satisfied that this document evidences Petrolink’s ATO tax debt from 26 June 2009 to at least 7 December 2011. A commonsense reading of the document indicates that Petrolink incurred as debts the debit amounts itemised in the account on the dates specified in the column headed “effective date”.
The plaintiffs allege that during the period between 30 June 2009 and 7 December 2011, Petrolink incurred debts to the Commissioner of Taxation of $340,952.57 which were unpaid as well as debts of a further $186,949 which were paid but were the subject of the $140,000 recovery.
Proof of debts incurred to trade creditors
The defendants contended that the plaintiffs assumed certain debts were incurred during the period 30 June 2009 to 7 July 2011, but, for the most part, did not prove this.
The amended statement of claim annexes a schedule of debts totalling $399,792.36. The schedule identifies creditors, dates and amounts. It was prepared by reference to a document headed “aged payables” and dated 7 December 2011, printed from the Petrolink’s MYOB records by staff of the liquidator in March 2013 and annotated with various handwritten markings. There is no reason to suspect that its contents were not added to the MYOB records in the ordinary course of business and no reason to suspect that they are not accurate. Items in the “aged payables” report that have been crossed through relate to debts paid since the liquidator’s appointment.
In order to make out a contravention of s 588G concerning a debt in the schedule, the plaintiffs must prove that that debt claimed was incurred during the relevant period. The Court must form an actual belief to a reasonable satisfaction that the debt was incurred, in order to find for the plaintiffs on the balance of probabilities: Tourprint International Pty Ltd (in liq) v Bott [1999] NSWSC 581; (1999) 32 ACSR 201 at [53]. The defendants emphasised the requirements for drawing inferences, particularly that an inference must be reasonable and definite (or reasonably definite), in contrast with conflicting inferences of equal degrees of probability: Morley v Australian Securities and Investments Commission [2010] NSWCA 331; (2010) 274 ALR 205 at [631], and must be distinguished from an impermissible conjecture: cf New South Wales v Buckland [2000] NSWCA 72 at [59]; Carr v Baker (1936) 36 SR(NSW) 301 at 306.
The defendants also argued that the Court should not draw inferences in favour of the liquidator when he made no attempt to prove matters by direct evidence and where no relevant questions were directed to Mr Boné in cross-examination: cf Ozecom v Hudson Investment Group [2007] NSWSC 1441 at [56], referring to Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418 – 419. I am not convinced that such a strict approach should be taken in a case of this kind, where the issue is a matter within the knowledge of the defendants and only within the knowledge of the liquidator to the extent that he has the books and records of the company and such other investigations as he chooses to undertake. An unduly strict approach would be liable to expose the liquidator to significant costs to prove a matter that ought not to be seriously in dispute.
The plaintiffs submitted that their case preparation and evidence relied upon admissions which they say were made in the defendants’ defence to the effect that the identified trade debts were incurred during the period between 30 June 2009 and 7 December 2011. The plaintiffs pleaded that, during that period, Petrolink incurred debts to creditors other than the ATO totalling $503,538.86.
In response to that allegation, the defendants stated:
Denied, as these debts totalled a greater amount.
Even if this pleading is to be read as an admission that Petrolink incurred trade debts of over $503,538.86 between 30 June 2009 and 7 December 2011, that admission was likely to be difficult to deploy against the defendants in the event that the company was found not to be insolvent at all times from 30 June 2009. Further, the lack of clarity of the defendants’ position warranted inquiry as to precisely what was in dispute.
The liquidators identified 68 trade creditors to which Petrolink allegedly incurred debts during the relevant period. The liquidator tendered invoices and other documents relating to some but not all of the creditors. In some cases, the liquidator relied solely on the date in Petrolink’s “aged payable” report as evidence of the time when the debt was incurred.
The defendants did not generally dispute that the debts were incurred. However, counsel for the defendants, Mr Assaf, submitted that an acknowledgement of debt (such as might be found in the “aged payables” report) did not prove the time at which the debt was incurred. The main suggestion was that the debts may have been incurred before any time at which it might be found that the company was insolvent. However, it was also contended that amounts identified in the “aged payables” report were not necessarily debts. In short, the liquidator was required to adduce better evidence to prove that the amounts on the “aged payables” report were debts incurred by Petrolink, and when they were incurred.
In considering this submission, it is relevant that Mr Boné was the sole director of Petrolink at all relevant times and therefore well placed to identify any deficiencies in the “aged payables” report, any creditors who might have rendered invoices a substantial time after a debt was incurred or any reasons why the aged payables might not be debts incurred by the company. Further, Petrolink’s administration manager and company secretary, Ms Tajsic, was present in Court for substantial parts of the hearing but did not give evidence.
Having regard to the fact that the “aged payables” report is a record obtained from the MYOB records of the company not shown to be unreliable in any significant respect, I am prepared to infer from the inclusion of the various amounts in the “aged payables” report, particularly where that report also includes reference to the receipt of an invoice, that each amount is a debt incurred by Petrolink by the date identified in the report at the latest.
In my view, the likelihood is that the date for each debt on the “aged payables” report is the date on which the debts were entered into the company’s MYOB system. This inference is supported by a comparison between the dates on the “aged payables” report and the dates of invoices where available, which shows that the date on the report generally (although not invariably) post-dates the date of the invoice by a few days.
Further, in my view, it appears that from the “aged payables” report that the debts identified on that report were included in the MYOB system generally as a result of the receipt of an invoice. In my opinion, in the ordinary course of business, the receipt of an invoice typically follows the provision of goods or services the subject of the invoice. Where invoices are available, it is generally possible to identify or infer from the information contained in the relevant invoice approximately when the relevant goods or services were provided. Where invoices are not available or do not identify when the relevant goods or services were provided, I am prepared to infer that the debt for the relevant goods or services was probably incurred within about three or four months of the inclusion of the debt on the “aged payables” report on the basis that in the ordinary course of business, creditors generally render invoices at the time of or shortly after providing goods or services; in the ordinary course, those invoices are likely to be delivered to the creditor within a few days of having been rendered and no evidence was adduced by the defendants that Petrolink’s creditors delayed in the rendering or delivery of invoices.
I have applied these inferences in making the findings below as to when the trade creditor debts included in Schedule B to the amended statement of claim were incurred.
Trade creditor debts dated before 30 June 2010
The “aged payables” report includes a debt to Groundsearch for $814.00. The date recorded for the item is 30 April 2010.
Similarly, debts of $385.00, $330.00 and $330.00 are recorded with dates of 29 March, 12 April and 26 May 2011 respectively.
No invoices are in evidence in relation to these debts. I infer that these debts were incurred within a few months of the date nominated in the “aged payables” report.
The “aged payables” report includes two debts to F&G Electrics Pty Ltd, each dated 10 June 2010. The debt of $1,698.40 is conceded to have been incurred around 10 June 2010. For the second debt, no invoice is in evidence. I infer that it was incurred within a few months of 10 June 2010.
Trade creditor debts dated July to December 2010
There are six creditors recorded in the “aged payables” report for debts dated during this period.
There are three debts of $1,250.00 recorded for Impact Training Institute Pty Ltd, each dated 25 August 2010 and a fourth debt for $864.00 dated 31 August 2010. The tax invoices show that they are for training of some description. The $1,250 invoices were stated to be due by 30 June 2010. The $864.00 invoice was due for payment by 24 April 2010. I infer that each of these debts was due on the due date stated in the invoice. Similarly for the two debts recorded for Impact Training dated in May 2011, I infer that they were due by 11 October 2010. The debt of $914.00 dated 1 June 2011 was due by 1 July 2011.
There is an amount of $74,350.50 dated 31 August 2010 and marked “adjust” referring to Fibretank Systems Pty Ltd. However, there is a tax invoice from Fibretank for the supply of two tanks dated 24 August 2010 for an amount of $116,215.00. A list of “weekly commitments” annexed to Mr Boné’s December 2013 affidavit notes the latter amount as outstanding for over 90 days, with an amount of $78,848.00 outstanding for 45-90 days.
A letter from Fibretank’s director dated 19 April 2011 calculates Petrolink’s debt as at 19 April 2011 to include an amount of $116,215.00 for “Invoice for Parchem Site invoiced August 2010” and $78,848.00 for “Balance on Integral Energy – Work in progress”.
I conclude that Petrolink incurred a debt to Fibretank of $116,215.00 in about late August 2010.
A second amount payable to Fibretank in the sum of $21,084.31 appears on the “aged payables” report dated 4 August 2011 but is not included in Schedule B to the amended statement of claim.
Mr Boné gave affidavit evidence that, in about September 2011, he paid Fibretank Systems the sum of $10,000. He says that he did not keep any record of this payment. In the absence of more evidence about the payment of the sum of $21,084.31, I accept that there was a payment of $10,000 but I do not conclude that it was made in reduction of the debt of $78,848.
For John Smith Concreting, there is an amount of $2,506.00 dated 30 November 2010. No supporting invoice was tendered. On the basis of the inferences referred to in paragraphs 82 to 83 above, I infer that this debt was incurred within about a few months of 30 November 2010.
For Labmark Pty Ltd, there are nine debts dated in December 2010. The first, for $1,103.34, is dated 9 December 2010. The other eight are dated 16 December 2010 and range in value from $456.50 to $1,221.00. There are also numerous dated from January 2011.
There is a supply ledger which records a balance of $34,647.91 following transactions between April 2010 and 4 December 2011. There is a large bundle of tax invoices (and a statement dated 17 January 2011) from LabMark which show that five of the invoices included in the “aged payables” report in December 2010 were dated between March and June 2010. These debts total $3,241.70.
I infer from the invoices that they were probably rendered within a short time after the supply of the services identified in the invoices. Accordingly, I infer that the debts identified in the “aged payables” report were incurred within a few months of the date in the “aged payables” report, except for the first five amounts dated 16 December 2010 which I conclude were debts incurred within a few months of each of the corresponding invoices.
For PCS Measurement, there is a debt of $583.50 dated 16 December 2010. There is an ID number 86528882, which also appears on the relevant supply ledger with a date of 6 December 2010 and an amount of $1,006.50. No supporting invoice was tendered, but there are tax invoices for two other debts to PCS Measurement in the “aged ledger” dated 3 and 24 February 2011. On the basis of the inferences referred to in paragraphs 78 to 79 above, I infer that the debt of $583.50 was incurred within about a few months of December 2010. For the other two debts to PCS Measurement, I find that they were each incurred within a few months of February 2011.
For Barker Ryan Stewart, there is a debt of $990.00 dated 17 December 2010. This amount is the balance due following a debt recorded in December 2010 of $7,590.00. That debt was preceded by a fee proposal dated 26 October 2010. I infer from the “aged payables” report read with the fee proposal that the debt was incurred after 26 October 2010.
Trade creditor debts dated From January 2011 to 30 June 2011
I have addressed debts dated from January 2011 for Labmark, PCS Measurement, Groundsearch and Impact Training above.
There is a creditor called CWS recorded in the “aged payables” report for two debts dated, respectively, 28 February and 15 March 2011. The second of the two debts, an amount of $125.40, is conceded to have been incurred in February 2011. As to the first, no supporting invoice was tendered. I infer that the debt of $1,107.57 was incurred within about a few months of February 2011.

Safe-Quip Industrial Supplies is identified in the “aged payables” report as a creditor for two debts dated March 2011 and October 2011. I infer from the invoices which correspond to the two amounts and their inclusion on the “aged payables” report that this creditor supplied the relevant goods (pipes and fire extinguishers) around the date of the invoices. The defendants submit that the creditor has the benefit of a Romalpa clause, but did not adduce any evidence that the creditor could exercise that right in relation to the relevant goods. I am prepared to infer that the debts were incurred around the dates of the invoices.
Best Western Petroleum Services Pty Ltd is identified in the “aged payables” report as a creditor for two debts dated May and October 2011. The second debt of $1,343.32 is conceded to have been incurred on 8 September 2011. I infer that the debt of $49.51 was incurred within about a few months of May 2011.
Envirowest Consulting Pty Ltd is identified in the “aged payables” report as a creditor for four debts dated between May and November 2011. The defendants concede that the debts were incurred respectively on 23 May, 2 August, 6 September and 8 November 2011.
AllFab Constructions Pty Ltd is included in the “aged payables” report as a creditor for one debt of $15,546.20 dated 7 June 2011. The invoice, dated 30 May 2011, describes the services as “Fabricate walkway and stairs to your quotation 20110408”. I infer from the invoice that the described services were supplied within a few months of the date of the invoice. Accordingly, I find that the debt was incurred within a few months of 30 May 2011.
Active Environmental Solutions is listed in the “aged payables” report as a creditor for three debts, all dated in June 2011. The third debt is conceded to have been incurred (as to $220.00) on 23 June 2011. Why the remaining $22.00 (apparently GST, specified on the invoice) is not conceded is unclear. I find the total debt was incurred on that date. The first amount ($3,007.30) corresponds with a tax invoice dated 15 June 2011 for $4,007.30, on which is marked a record of a payment of $1,000 on 18 November 2011. I infer from the invoice and from the inclusion of the amount in the “aged payables” report that the described services were supplied within a few months of the date of the invoice. Accordingly, I find that the debt was incurred within a few months of 15 June 2011.
As to the second debt ($55.00), I infer that it was incurred within about a few months of 24 June 2011.
Trade creditor debts dated From 1 July 2011
For debts identified in the “aged payables” report in amounts less than $5,000 and dated after 1 July 2011, I infer that those debts were probably incurred no earlier than several months before the date specified in the report. As to the debt of $1,732.50 incurred to 2x2.com.au Pty Ltd, and the debt of $1,701.35 incurred to Potter Automotive, Mr Boné gave evidence that he paid these debts by personal visa card or in cash and did not have any records of the payment. On the basis that I have concluded that Mr Boné was an honest witness, I accept this evidence.
The following creditors are included in the report for amounts exceeding $5,000 and dated after 1 July 2011 (excluding creditors already addressed above):
·Mainteck Services Pty Ltd
·SITA Australia Pty Ltd
·Lower Russell & Farr
·Lindsay Dynan
·DJ Batchen Pty Ltd
·Velocity Electrical
·Greg Hinchcliffe Concrete Constructions
·MBL Premium Funding
Mainteck Services Pty Ltd is listed in the “aged payables” report as a creditor for two amounts: $34,176.51 dated 5 July 2011 and $6,143.50 dated 3 August 2011.
The liquidator tendered an invoice dated 29 June 2011 from Mainteck for “supply hydraulic pipework” in the amount of $34,001.00. I infer from the invoice and from the inclusion of the amount in the “aged payables” report that the pipework was supplied within a few months of the date of the invoice. Accordingly, I find that the debt identified in the “aged payables” report was incurred within a few months of 29 June 2011. I acknowledge that the amount in the report is some $175.00 more than the amount of the invoice, but I adopt the “aged payables” report figure on the basis that it is a generally reliable record of the company.
The liquidator also tendered an invoice dated 30 June 2011 from Mainteck for “supply blender pipework” in the amount of $6,143.50. I infer from the invoice and from the inclusion of the amount in the “aged payables” report that the pipework was supplied within a few months of the date of the invoice. Accordingly, I find that the debt was incurred within a few months of 30 June 2011.
SITA Australia Pty Ltd is listed in the “aged payables” report as a creditor for seven debts dated between September and November 2011. There are no supporting invoices. In the absence of any evidence to the contrary, I infer that those debts were probably incurred within several months of the dates specified in the report.
Lower Russell & Farr is listed in the “aged payables” report as a creditor for a debt of $6,770.50 dated 29 August 2011. A statement dated May 2011 refers to a balance outstanding of $6,772.50 for two bills, dated 7 February 2011 and 5 April 2011, with a credit of $531.50 on 29 March 2011. The 7 February 2011 tax invoice is for services in connection with the preparation of records for the year ended 30 June 2010.
The statement is annotated with the notation “$3,680 paid 01/07/11”. A payables reconciliation dated 30 June 2011 and printed 23 August 2011 shows a total due to Lower Russell & Farr of $9,374.00 comprising a debt less than 30 days old of $2,018.50, a debt 46 to 90 days old of $2,937 and a debt over 90 days old of $4,418.50. The figure of $2,937 corresponds with an invoice for services from Lower Russell & Farr dated 5 April 2011 which is expressed to be a fee for services rendered for the period ended 6 April 2011.
From these documents, I infer that, as at 1 July 2011, there was an amount outstanding to Petrolink of $5,694 ($9,374 less $3,680) comprising a debt for services rendered not earlier than 1 July 2010. I therefore conclude that the amount of $6,770.50 is probably a debt incurred by Petrolink for services rendered after 1 July 2010.
Lindsay Dynan is listed in the “aged payables” report as a creditor for a single debt of $15,026 dated 13 September 2011. There is a tax invoice from Lindsay & Dynan Consulting Engineers dated 8 September 2011 for design and documentation in connection with the Boggabri Mine fuel unloading area and access loop. In the absence of any material to the contrary, I infer that the services described in the invoice were provided within several months of the date of the invoice.
DJ Batchen is listed in the “aged payables” report as a creditor for a single debt of $6,584.60 dated 28 October 2011. Mr Boné gave evidence that this debt was paid in about June 2012. In support of that evidence, Mr Boné referred to a document printed from the MYOB system dated 2 September 2014 which records payments to DJ Batchen Pty Ltd of an invoice #340931 of two amounts of $3,300 on each of 3 October 2012 and 12 December 2012. Having regard to my finding that the MYOB records can be accepted as evidence of the facts stated in them, except where contradicted, I accept Mr Boné’s evidence that this debt has been paid.
Velocity Electrical is listed in the “aged payables” report as a creditor for six debts totalling $32,337.84 dated in October and November 2011. The defendants accept that:
(1)the second amount ($4,994.00) is a debt incurred in October 2011;
(2)the third amount ($1,998.70) is a debt incurred in September or October 2011;
(3)the sixth amount ($330.00) is a debt incurred in November 2011.
As to the first amount ($4,500.14), there is an invoice dated 17 October 2011 for $8,615.64 with a reference number that corresponds to the ID# on the “aged payables” report. The invoice refers to the supply of materials and work described as “full re-wire to existing wall isolators”. I infer from the invoice and the “aged payables” report that the amount of $4,500.14 comprises a portion of the amount due under the 17 October 2011 for materials and services which were supplied within a few months of the date of the invoice.As to the fourth and fifth amounts, no supporting invoices were tendered. However, I infer from the invoices for the other amounts, that these amounts were included in the MYOB system following the receipt of invoices with ID# references of the kind that appear on the other invoices and which also appear on the “aged payables” report. Accordingly, I infer that the amounts are debts for goods and/or services provided within a few months of 7 November 2011, being the date specified in the “aged payables” report.
Greg Hinchcliffe Concrete Constructions is listed in the “aged payables” report as a creditor for three debts, of which two have been struck out by hand. The remaining debt is dated 24 November 2011 and is for an amount of $19,360. Although no supporting invoice was identified, based on the “aged payables” report and in the absence of any evidence to the contrary, I infer that the amount is a debt for goods and or services provided within a few months of 24 November 2011.
MBL Premium Funding is listed in the “aged payables” report as a creditor for a single debt, dated 1 December 2011 for an amount of $8,045.59. Although no supporting invoice was identified, based on the “aged payables” report, I infer that the amount is a debt for services provided within a few months of 1 December 2011.
The defendants contended that four of Petrolink’s creditors had the benefit of a Romalpa clause, namely:
·Pacific Gauge
·Pirtek (Penrith) Pty Ltd
·Safe-Quip Industrial Supplies
·Workin’ Gear
I have addressed the position of the debts owed to Safe-Quip Supplies earlier.
The defendants concede that the debt to Pacific Gauge was incurred around 17 November 2011. As to the other two creditors, the defendants contend that the relevant invoices do not evidence when the relevant debts were incurred. The invoices are dated in October and November 2011 (Pirtek) and November 2011 (Workin’ Gear). Based on those invoices and the references to these creditors in the “aged payables” report, I am satisfied that debts of the amounts set out in the “aged payables” report were incurred within a few months of their inclusion in that report.
The defendants submit that, since each of these creditors had the benefit of a Romalpa clause, they were either a secured creditor or the liquidator has not proved that the creditor suffered any loss. That issue will be addressed below.
Admissibility and weight of liquidator’s opinions concerning solvency
The defendants challenged the admissibility, or alternatively, the weight, of the opinions expressed in the liquidator’s expert report, on the following bases:
1.The opinions expressed by the liquidator are not “wholly or substantially” based on his specialised knowledge in conformity with s 79(1) of the Evidence Act 1995 (Cth);
2.The liquidator’s opinions are based upon assumed facts which have either not been established or, alternatively, are far removed from the actual facts, rendering Mr Smith’s opinion irrelevant; and
3.Having regard to the numerous errors in the report and the evidence that the liquidator has not taken steps to verify the information relied upon for his opinions, the Court cannot be satisfied as to the reliability of the opinions so expressed.
Opinion not wholly or substantially based on liquidator’s specialised knowledge
At paragraph 4.1 of his report, the liquidator expressed the opinion that, from at least 30 June 2009, Petrolink was insolvent and remained insolvent from that date. In summary, he identified five reasons for his opinion, being:
·Cash flow shortfalls on immediate obligations as at each of 30 June 2009, 2010 and 2011;
·Deficiencies of current assets to current liabilities at each of these dates;
·Deficiencies of total assets to total liabilities at each of these dates;
·Trading losses for the period 1 July 2008 to 30 June 2011; and
·That Petrolink was unable to pay its tax debts to the ATO as they became due and payable from at least January 2009.
It is not suggested that the liquidator’s expertise did not entitle him to express an opinion as to solvency. The defendants submitted, in effect, that the liquidator’s opinion was inadmissible because it did not involve the application of the liquidator’s specialised knowledge, it being based merely on figures derived from Petrolink’s financial records: cf Quick v Stoland Pty Ltd (1998) 87 FCR 371. In Switz Pty Ltd v Glowbind Pty Ltd [1999] NSWSC 1296 at [35], Austin J summarised the effect of that decision as follows:
If there is evidence in the form of financial statements which the Court can read for itself, the opinion of an accountant based solely on those statements is not based on specialised knowledge arising out of training, study or experience and is not admissible under s 79 of the Evidence Act 1995 (NSW) and its Commonwealth counterpart. If however, the accountant's report contains some financial analysis based upon the financial statements or, more pertinently, the accounting records to which they relate, then the accountant's opinion is to that extent an expert opinion and admissible as such.
In this case, the report contains some analysis of the material on which it is based, particularly in relation to the identification of current assets and current liabilities, for the purpose of making a judgment as to the existence and quantum of cashflow shortfalls. In my view, that analysis renders the liquidator’s opinions admissible under s 79.
If I am wrong, then the report may be treated as a submission as to the facts upon which the Court should find that Petrolink was insolvent from 30 June 2009 onwards.
Opinion based on facts not established
The defendants relied on the following statement by Lindgren J in Harrington-Smith v Western Australia (No 2) [2003] FCA 893; (2003) 130 FCR 424 at [24] to [25]:
In relation to the second deficiency (failure to distinguish between assumed facts and opinion) the Evidence Act does not, in terms, require, as a condition of admissibility, that an expert witness state distinctly and fully the facts assumed as the basis of his or her opinion: cf ALRC Report No 26 (“Evidence”) vol 1, par 750; Quick v Stoland Pty Ltd (1998) 87 FCR 371 at 373-374 per Branson J; Daniel v Western Australia (2000) 178 ALR 542 (RD Nicholson J) at [5]; Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd (2002) 55 IPR 354 per Branson J at [10].
But expert opinion will not be relevant if there is an insufficient correspondence between all the facts assumed by the expert as the basis for his or her opinion, and those proved or admitted: cf Ramsay v Watson (1961) 108 CLR 642 at 648-649; Paric v John Holland (Constructions) Pty Ltd [1984] 2 NSWLR 505 at 509-510; Paric v John Holland (Constructions) Pty Ltd (1985) 59 ALJR 844 at 845-846.
They identified five assumptions made by the liquidator which were said to be incorrect, concerning:
1.Whether the tax debt to the Commissioner of Taxation was due and payable at relevant times, particularly 30 June 2009 and 30 June 2010;
2.The trading terms of AJL Heavy Equipment Pty Ltd;
3.Whether payment terms of 30 days were being achieved;
4.Whether trade debtors were not paying within 30 days; and
5.Whether Petrolink had available to it external resources throughout the relevant period.
For the reasons given below, I have found that the liquidator’s assumptions as to points 1 and 5 were correct. As to the other matters, I do not consider any divergence between the facts as found and the liquidator’s assumptions to be so significant as to render his report and the opinions contained therein irrelevant.
Reliability of information relied upon by liquidator
I have found above that the 2009 and 2010 financial reports are reliable evidence of the facts stated in the reports. The draft 2011 financial reports are also evidence of the facts stated in those reports, albeit they are of less weight. Accordingly, I am satisfied that the liquidator’s report is not rendered inadmissible by reason of his reliance on that material although, of course, to the extent that the facts are contradicted by other evidence, that may affect the weight of his evidence.
The defendants criticised the liquidator for failing to check various figures which he took from the records of the company. In the absence of any evidence that the figures were wrong in circumstances where the accuracy of the figures was a matter that was or should have been within the knowledge of Mr Boné, I do not accept that the liquidator was obliged to audit or otherwise check the figures in order to rely upon them for the purposes of giving admissible opinion evidence..
In cross-examination, the liquidator acknowledged that he had incorrectly identified as Petrolink’s terms of trade a document which was plainly not those terms. He agreed that he had over calculated the tax debt due to the Commissioner of Taxation as to 30 June 2010 by an amount of approximately $30,000. He also conceded that he had undertaken a “general review” of the receivables summary for the year ended 30 June 2011, rather than an “analysis”. The defendants criticised the liquidator for failing to inform himself about the meaning of certain expressions contained in certain MYOB reports.
These matters may affect the weight of the liquidator’s opinions. However, in my view, they are not of sufficient weight to render his report so unreliable as to be inadmissible.
Payment arrangements with the ATO
The defendants submitted that “at all material times” Petrolink had in place payments arrangements with the ATO but were not specific about which arrangements were in place at various times.
The liquidator tendered ten letters from the ATO purporting to record payment arrangements with Petrolink, dated from 25 July 2006 to 13 April 2011. Six of these letters are dated after 30 June 2009, that is, during the period in which Petrolink’s solvency is disputed. On their face and subject to the possibility of oral arrangements (considered below), in the absence of a suggestion that there were other written payment arrangements, these documents tend to contradict the proposition that Petrolink had payment arrangements in place with the ATO at all material times.
On some occasions, a new payment arrangement letter pre-dated the final payment specified in the previous arrangement. In those cases, and again subject to the possibility of oral arrangements, I have assumed that the new arrangement superseded the old arrangement so that, once a new arrangement was made, Petrolink was no longer required to comply with the previous arrangement to the extent that it had not been completed.
It emerges from the correspondence between Mr Boné and the ATO that there were disagreements between them about the terms of payment arrangements in place. For example, on 7 October 2010, Mr Boné wrote to the ATO asserting that the “current arrangement” was “to pay $6,000 per month off the debt in addition to keeping current”. That description of the arrangement was inconsistent with arrangement as set out in a letter from the ATO dated 7 October 2010. On 4 February 2011, Mr Boné wrote to the ATO disputing the terms of a payment arrangement as recorded in a letter from the ATO dated 22 January 2011. I have proceeded upon the basis, favourable to the defendants, that Petrolink had the benefit of all the payment arrangements documented in the ATO letters despite any dispute as to whether an arrangement was mutually agreed at the relevant time.

The creditors’ loss, being the amount recoverable from the director by way of compensation will, in the ordinary course, be the equivalent of their outstanding debts: Powell v Fryer [2001] SASC 59; (2001) 37 ACSR 589 at [88]; Tourprint International Pty Ltd (in liq) v Bott [1999] NSWSC 581; (1999) 32 ACSR 201 at [78].
I accept that the amounts of the outstanding debts are the amounts of the creditors’ losses.
As to the question of security, the defendants admitted that the debts to the Commissioner of Taxation were unsecured. Although this fact is denied in relation to trade creditors, the only submission that I detected against it concerned the Romalpa clauses affecting four creditors.
The defendants noted that Pacific Gauge does not appear to have proved as an unsecured creditor in the liquidation, while Safe-Quip has only proved to the extent of $565.40. They did not explain why the existence of the Romalpa clause produced the result that the debts to Pacific Gauge, Pirtek, Safe-Quip and Workin’ Gear were wholly or partly secured within the meaning of s 588M when each creditor suffered loss. As the plaintiffs observed, the general effect of the Romalpa clauses was that property in the goods the subject of the debt did not pass to Petrolink. I am not satisfied that the Romalpa clauses provide a basis for concluding that these debts were wholly or partly secured within the meaning of s 588M.
SHOULD MR BONÉ BE GRANTED RELIEF FROM LIABILITY?
Legal principles
Relief from liability for a contravention of s 588G is available under s 1317S including proceedings for relief under s 588M: Hall v Poolman [2007] NSWSC 1330; (2007) 65 ACSR 123 at [311].
Section 1317S confers a very wide discretion: Hall v Poolman [2007] NSWSC 1330; (2007) 65 ACSR 123 at [315]. The purpose of s 1317S is to “excluse company officers from liability in situations where it would be unjust and oppressive not to do so, recognising that such officers are businessmen and women who act in an environment involving risk in commercial decision-making: Daniels v Anderson (1995) 37 NSWLR 438 at 525; Hall v Poolman [2007] NSWSC 1330; (2007) 65 ACSR 123 at [315].
Sections 1317S and 1318 make substantially identical provision for the relied of persons who have or may have contravened a civil penalty provision: Australian Securities and Investments Commission v Healey (No 2) [2011] FCA 1003; (2011) 196 FCR 430 at [83] and [84]. Each provision involves the following three stages of inquiry:
(1)Whether the applicant for relief had acted honestly;
(2)Whether having regard to all the circumstances, the applicant ought fairly to be excused;
(3)Whether the applicant should be relieved from liability wholly or in part and, if partly, to what extent: Australian Securities and Investments Commission v Healey (No 2) [2011] FCA 1003; (2011) 196 FCR 430 at [84].
In Deputy Commissioner of Taxation v Dick [2007] NSWCA 190; (2007) 242 ALR 152 at [78], Santow JA explained s 1318 as a “dispensing power”, as following:
What is salient is that in the United Kingdom, dating back from s 32 of the English Companies Act 1907 (UK), later adopted in the Australian States, there is a consistent theme that the court should have power to relieve, in order that penal provisions or quasi penal provisions should not operate unfairly or harshly. Relief so extended does not strictly speaking exonerate the person in question by removing the breach; rather it operates as a dispensing power excusing the contravenor. “Exonerate” used in this s 1318 context has therefore the sense of taking a burden from a person who has committed a breach. It does not mean that the breach is deemed never to have occurred. Rather the person concerned seeks to satisfy the court that “having regard to all the circumstances of the case” he or she “ought fairly to be excused” so as to receive dispensation.
In Morley v Australian Securities and Investments Commission (No 2) [2011] NSWCA 110; (2011) 83 ACSR 620 at [125] to [126], the New South Wales Court of Appeal said:
Accepting that the need for personal deterrence is low, nonetheless general deterrence is in our view an important consideration given the nature and significance of the cash flow analysis contravention. As well, it is necessary that relief be granted appropriate to mark significant failure in performance of the duties of a senior executive of a large public corporation and to maintain public confidence in the law's upholding of corporate standards.
In a picturesque phrase, in Re One.Tel (In liquidation); Australian Securities and Investments Commission v Rich [2003] NSWSC 186; (2003) 44 ACSR 682 at [26] Bryson J observed that “[n]o-one should be sacrificed to the public interest”. That was taken up in Australian Securities and Investments Commission v Beekink at [113]. Protection of the public, including by general deterrence, is at the heart of disqualification orders, and a delinquent officer against whom a disqualification order is made is not sacrificed. The phrase is a reminder that the public interest and the need to protect the public from repeated conduct or like conduct of others is balanced against the hardship to the officer. In our view, the balance requires a period of disqualification.
Consideration
In causing Petrolink to incur debts for a substantial period while that company was insolvent, Mr Boné failed to respond to the clear signs that the company was insolvent, preferring to argue to the ATO that he had or ought to have the benefit of purported arrangements that had not been made in the favourable terms which he asserted. The defendants submitted that there was no doubt in this case that Mr Boné was honest. I do not conclude that Mr Boné conducted himself dishonestly. If the test is whether Mr Boné acted without moral turpitude: cf Commonwealth Bank v Friedrich (1991) 5 ACSR 115 at 196 and Australian Securities and Investments Commission v Vines [2005] NSWSC 1349; (2005) 65 NSWLR 281 at [43], then I accept that Mr Boné so acted.
The next question is whether Mr Boné “ought fairly to be excused” from liability for his breaches. The issue to be resolved is whether he “acted honourably, fairly, in good faith and in a common sense manner as judged by the standards of others of a similar professional background”: Australian Securities and Investments Commission v Edwards (No 3) [2006] NSWSC 376; (2006) 57 ACSR 209 at [10].
The defendants submitted that Mr Boné’s conduct was relevantly similar to that of the director, Mr Irving, in Hall v Poolman [2007] NSWSC 1330; (2007) 65 ACSR 123 and of the director in McLellan v Carroll [2009] FCA 1415; (2009) 76 ACSR 67 at [201] to [206].
The defendants submitted that Mr Boné relied upon the following advice and took the following steps:
(1)Mr Boné relied upon Ms Tajsic and Phillip Dent who were responsible for maintaining the company books and records and reporting to Mr Boné on Petrolink’s financial position;
(2)Mr Boné also relied upon advice from Mr Holm, Mr Nastase and Mr Cottle throughout the period from 2009 to 2011 about the company’s financial position. Weekly reports were provided to Mr Boné in that regard;
(3)Mr Boné gave unchallenged evidence that he relied on the information provided to him by Petrolink’s executive staff as to the company’s financial position on the basis of which he expected that the company was solvent throughout the period from 2009 to 2011;
(4)Mr Boné was not told by any of these people during the relevant period that Petrolink was insolvent. Specifically, Mr Cottle did not advise Mr Boné that the company was insolvent;
(5)Mr Holm did not give advice to Mr Boné that in his view the company should have moved to appoint a voluntary administrator.
Although Mr Boné may well have relied upon his advisers, he did not give evidence that he was ever advised during the period from 12 May 2010 that Petrolink was solvent, or that he received advice from any of his advisers that they did not believe that the company was insolvent.
I have rejected Mr Boné’s evidence that there was no discussion at the 23 June 2010 about whether Petrolink was insolvent. I have concluded that one or more of Mr Boné’s advisers at the 23 June 2010 meeting at least advised him that Petrolink had previously engaged in insolvent trading albeit with the support of creditors, and that Petrolink may engage in insolvent trading if the business continued to trade.
In those circumstances, even if Mr Cottle did not advise Mr Boné that the company was insolvent, I attach little weight to that fact because there is no evidence that Mr Boné was actively seeking advice about the company’s solvency in circumstances where, at the very least, the issue was plainly a live one by 23 June 2010 if not earlier.
I also attach little weight to Mr Boné’s evidence that Mr Holm did not give him advice that the company should have moved to appoint a voluntary administrator, when there was no evidence that Mr Boné sought Mr Holm’s advice about the company’s solvency.
In those circumstances, I do not consider Mr Boné’s circumstances to be relevantly similar to the circumstances considered in Hall v Pollman and McLellan v Carroll.
I do not consider that the evidence demonstrates that Mr Boné’s conduct was of a kind that warrants him being excused from liability. This conclusion is based on the absence of evidence that Mr Boné sought advice as to the company’s solvency (except the advice recorded in the notes of the 23 June 2010 meeting), or evidence that Mr Boné received credible advice that the company was solvent at any time after 12 May 2010. In those circumstances, Mr Boné cannot be said to have been permitting Petrolink to continue to trade on the basis of expert advice that the company was solvent.
Further, after May 2010, Petrolink made four payment arrangements with the ATO in circumstances where it had no clear plan as to how it would meet all the payments covered by the arrangements. There was no evidence that a reasonable, commercially experienced director would have made payment arrangements of the relevant kind in the circumstances. In doing so, I consider that Mr Boné’s conduct fell well short of the kind of conduct that would justify the application of s 1317S or s 1318.
I do not accept that Mr Boné’s conduct in dealing with its creditors from 12 May 2010, particularly the Commissioner of Taxation but also those trade creditors who were left unpaid or only partly paid, was fair in the circumstances. To the contrary, that conduct strongly suggested an attitude on Mr Boné’s part that he was entitled to decide what was in the best interests of the creditors and that, in the case of the ATO, he would (or should) be able to negotiate and renegotiate payment plans with them until Petrolink’s tax was fully paid, even if that would take years. I do not accept that Mr Boné’s conduct meets the standard identified in Edwards (No 3), such that he ought to be excused from liability for his contraventions of s 588G.
AMOUNT OF RECOVERABLE COMPENSATION
In Edenden v Bignell [2007] NSWSC 1122 at [30], Barrett J explained the operation of s 588M as follows:
This section does not allow recovery of the amount of the creditor’s debt as such. Rather, it is a provision allowing recovery of compensation measured by reference to loss or damage suffered by the creditor in relation to the debt because of the debtor’s insolvency. In some cases – perhaps most cases - this will be the equivalent of the amount of the debt: see, for example, Powell v Fryer [2001] SASC 59; (2001) 37 ACSR 589. In others – for example where a proof of debt is admitted and a substantial payment is made to all creditors rateably – the relevant loss or damage may be less than the amount of the debt. There may perhaps be circumstances in which the amount of the loss or damage exceeds the amount of the debt. The separateness of the debt, on the one hand, and the loss and damage, on the other, is emphasised by the statement in s.588M(3) that an amount equal to the loss or damage may be recovered “as a debt due to the creditor”.
In my view, the circumstances of this case do not warrant a conclusion other than that the recoverable compensation should be the total amount of the debts incurred and remaining unpaid during the period of insolvency
The defendants submitted that there should be a deduction from the Commissioner of Taxation’s loss for the sum of $243,000 paid by Mr Boné in payment of a director’s penalty notice.
I do not accept this submission for the following reasons:
(1)The amount paid was in the nature of a statutory penalty imposed upon Mr Boné (as opposed to Petrolink) by s 222AOC of the Income Tax Assessment Act 1936 (Cth) in respect of the liabilities of Petrolink;
(2)At least as to $180,877.40 of the amount paid, the liabilities of Petrolink were incurred before the period of insolvency which commenced on 12 May 2010.
The defendants also submitted that the loss and damage of the Commissioner of Taxation should be reduced by an unspecified amount because, it was said, the ATO should have realised that Petrolink was insolvent. No authority was cited in support of this submission and I do not accept it. That issue was resolved, at least partly, by the preference proceedings in which the liquidator recovered $140,000.
SET OFF UNDER S 553C OF THE ACT
Petrolink is an insolvent company that is being wound up. Mr Boné is a person who wants to have a debt or claim admitted against Petrolink.
Mr Boné contends that there have been mutual credits, mutual debts or other mutual dealings between himself and Petrolink. The amended defence refers to an amount of $493,437, but the particulars of the set off are:
·Shareholder loan in the amount of “at least” $109,146;
·Employee entitlements in the amount of “at least” $84,000.
The defendants written submissions quantified the set off at $193,146.
The plaintiffs conceded that the claimed set off has first instance support in the decisions of Re ACN 007 534 000 Pty Ltd (in liq); Ex parte Parker (1997) 80 FCR 1 at 11 and Hall v Poolman [2007] NSWSC 1330; (2007) 65 ACSR 123, and in the reasons of Young JA in Buzzle Operation Pty Ltd (in liq) v Apple Computer Australia Pty Ltd [2011] NSWCA 109; (2011) 81 NSWLR 47. Nevertheless, it was argued that a set off is not available in answer to proceedings that are appropriately characterised as “misfeasance proceedings” because there is a lack of mutuality, by reference to the judgment of Millett LJ in Manson v Smith [1997] 2 BCLC 161. In Re Parker, Mansfield J said relevantly:
The debt in this instance…[arising under ss 588V and 588W], may not arise from any dealings between the two companies. In my view, that does not mean that the debt may not qualify for set-off under s 553C of the law. … the two debts are between the same companies. The burden of them would lie in the same interests. They are commensurable, in that they both sound in money. I see no reason why, having regard to the substance of the two debts, they should not be set-off. There is no reason in logic or principle to exclude statutory debts from the compass of provisions such as s 553C: Re Kolb; ex parte England v Federal Commissioner of Taxation (1994) 51 FCR 31. Although mutual credits and mutual debits will ordinarily result from prior dealings between the two parties, I do not think that is necessarily so. See Hankey v Smith [1789] EngR 2627; (1789) 3 T R 507n; Forster v Wilson [1843] EngR 1141; (1843) 12 M & W 191. As the Court in Gye v McIntyre said…: “the word `mutual' conveys the notion of reciprocity rather than of correspondence”.
French J, as he then was, said in Hicks v Minister for Immigration and Multiculturalism and Indigenous Affairs [2003] FCA 757 at [75] to [76]:
It is well established that a judge of this Court should follow an earlier decision of another judge unless of the view that it is plainly wrong - Takapana Investments Pty Ltd v Teco Information Systems Co Ltd (1998) 82 FCR 25 at 33 (Goldberg J), citing Towney v Minister for Land and Water Conservation for New South Wales (1997) 147 ALR 402 at 412 and Esso Australia Resources Ltd v Commissioner of Taxation (Cth) (1997) 150 ALR 117 at 121. See also La Macchia v Minister for Primary Industries and Energy (1992) 110 ALR 201 at 204 where Burchett J said:
`The doctrine of stare decisis does not, of course, compel the conclusion that a judge must always follow a decision of another judge of the same court. Even a decision of a single justice of the High Court exercising original jurisdiction, while "deserving of the closest and respectful consideration", does not make that demand upon a judge of this court: Businessworld Computers Pty Ltd v Australian Telecommunications Commission (1988) 82 ALR 499 at 504. But the practice in England, and I think also in Australia, is that "a judge of first instance will as a matter of judicial comity usually follow the decision of another judge of first instance [scil of coordinate jurisdiction] unless he is convinced that the judgment was wrong": Halsbury, 4th ed, vol 26, para 580. The word "usually" indicates that the approach required is a flexible one, and the authorities illustrate that its application may be influenced, either towards or away from an acceptance of the earlier decision, by circumstances so various as to be difficult to comprehend within a single concise formulation of principle...'
The injunction to judicial comity does not merely advance mutual politeness as between judges of the same or co-ordinate jurisdictions. It tends also to uphold the authority of the courts and confidence in the law by the value it places upon consistency in judicial decision-making and mutual respect between judges. And where questions of law, and statutory construction, are concerned the proposition that a judge who has taken one view of the law or a statute is `clearly wrong' is one not lightly to be advanced having regard to the choices that so often confront the courts particularly in the area of statutory construction. Indeed, where a serious doubt arises on the part of one judge, about the correctness of the law as stated by another, in a matter of importance, it may be desirable for a case to be stated to the Full Court for early resolution of the question in contention.
The plaintiffs did not make detailed submissions on this issue, but sought to preserve their position in the event of an appeal. In my view, I should adopt the approach of Mansfield J for the reasons he gave in Re ACN 007 534 000 Pty Ltd (in liq); Ex parte Parker (1997) 80 FCR 1.
Accordingly, subject to the operation of s 553C(2), the sum of $193,146 is to be set off against the sum due from Mr Boné to Petrolink.
By s 553C(2), Mr Boné is not entitled to claim the benefit of the set-off above if, at the time of giving credit to the company, he had notice of the fact that the company was insolvent.
In Jetaway Logistics Pty Ltd v Deputy Commissioner of Taxation [2009] VSCA 319; (2009) 26 VR 567, the Victorian Court of Appeal considered what constitutes “notice of the fact that the company was insolvent”. At [21] and [22], the Court said:
A person will have “notice of the fact” that a company is insolvent if the person has actual notice of facts which disclose that the company lacks the ability to pay its debts when they fall due, within the meaning of s 95. It is unnecessary to show that the person actually formed the view that the company lacked that ability. As the New South Wales Court of Appeal said in Hathaway Shirt Co Pty Ltd v B Rawe GmbH Company, it is “well established that there is a difference in law between receiving notice of a fact and being made fully and subjectively aware of the fact”.
What is required is proof of facts known to the creditor which warranted the conclusion of insolvency. Since “grounds for suspecting” insolvency will not suffice, it is not enough that insolvency is a possible inference from the known facts. Whether it must be the only reasonable inference open is a question we need not decide. …

As to the shareholder loans, the figure of $109,146 appears as a liability of Petrolink as at the end of each month from April to July 2011 in the Petrolink balance sheet spreadsheet. That spreadsheet discloses a loan balance of $56,954.11 as at June 2010. I infer from the spreadsheet that Mr Boné made loans to Petrolink totalling $52,192 after June 2010 with the rest of the loan balance having been advanced before that time.
The applicable date for the purpose of considering the possible application of s 553C(2) in relation to the employee entitlements is not clear. In the absence of evidence about when Mr Boné gave credit to Petrolink for this amount, I cannot be satisfied that s 553C(2) does not apply, and accordingly, I am not satisfied that he is entitled to the benefit of a set-off for this amount.
In my view, Mr Boné had notice of the fact that Petrolink was insolvent at all times from 12 May 2010 because, at all times from that date he was aware of the extent of Petrolink’s tax debt, of the various payments made to the ATO and the various tax liabilities incurred from time to time, of the various payment arrangements from time to time and of Petrolink’s lack of capacity to comply with those payment arrangements.
It follows that the set off to which Mr Boné is entitled under s 553C(1) must be reduced by the amount of [$52,192+$84,000=] $136,192. Therefore, the amount of the set off is $193,146 less $136,192 = $56,954.
CLAIM AGAINST VALVELINK
Statutory provisions
Section 588FF of the Act provides relevantly:
(1)Where, on the application of a company's liquidator, a court is satisfied that a transaction of the company is voidable because of section 588FE, the court may make one or more of the following orders:
(a)an order directing a person to pay to the company an amount equal to some or all of the money that the company has paid under the transaction; …
Section 588FE provides relevantly:
(1)If a company is being wound up:
(a)         a transaction of the company may be voidable because of any one or more of subsections (2) to (6) if the transaction was entered into on or after 23 June 1993; …
(2)The transaction is voidable if
(a)it is an insolvent transaction of the company; and
(b)it was entered into, or an act was done for the purpose of giving effect to it:
(i)during the 6 months ending on the relation-back day; or
(ii)after that day but on or before the day when the winding up began.
…
(4)The transaction is voidable if:
(a)         it is an insolvent transaction of the company; and
(b)         a related entity of the company is a party to it; and
(c)         it was entered into, or an act was done for the purpose of giving effect to it, during the 4 years ending on the relation-back day.
…
By s 588FC, a transaction of a company is an insolvent transaction of the company if, and only if, it is an unfair preference given by the company, or an uncommercial transaction of the company, and:
(a)       any of the following happens at a time when the company is insolvent:
(i)        the transaction is entered into; or
(ii)an act is done, or an omission is made, for the purpose of giving effect to the transaction; or
(b)       the company becomes insolvent because of, or because of matters including:
(i)        entering into the transaction; or
(ii)a person doing an act, or making an omission, for the purpose of giving effect to the transaction.
Section 588FA provides:
(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.
(2)For the purposes of subsection (1), a secured debt is taken to be unsecured to the extent of so much of it (if any) as is not reflected in the value of the security.
(3)Where:
(a)a transaction is, for commercial purposes, an integral part of a continuing business relationship (for example, a running account) between a company and a creditor of the company (including such a relationship to which other persons are parties); and
(b)in the course of the relationship, the level of the company's net indebtedness to the creditor is increased and reduced from time to time as the result of a series of transactions forming part of the relationship;
(4)then:
(a)subsection (1) applies in relation to all the transactions forming part of the relationship as if they together constituted a single transaction; and
(b)the transaction referred to in paragraph (a) may only be taken to be an unfair preference given by the company to the creditor if, because of subsection (1) as applying because of paragraph (c) of this subsection, the single transaction referred to in the last-mentioned paragraph is taken to be such an unfair preference.
By s 588FG(1)(b), a court is not to make under section 588FF an order materially prejudicing a right or interest of a person other than a party to the transaction if it is proved that in relation to each benefit that the person received because of the transaction:
(i) the person received the benefit in good faith; and
(ii) at the time when the person received the benefit:
(A)the person had no reasonable grounds for suspecting that the company was insolvent at that time or would become insolvent as mentioned in paragraph 588FC(b); and
(B)a reasonable person in the person's circumstances would have had no such grounds for so suspecting.
Alleged preferential payments to Valvelink
The disputed payments were allegedly made between 30 March 2011 and 7 December 2011.
As noted earlier, the relation-back day is 30 September 2011.
The liquidator contends that the net reduction in Petrolink’s debt due to Valvelink during the relation back period conferred an unfair preference on Valvelink within the meaning of s 588FA of the Act.
The company’s records show that, as at 31 March 2011, Petrolink was indebted to Valvelink in the sum of $100,919.38. The records also show that between 30 March 2011 and 7 December 2011, Petrolink made 12 payments and allowed credits to Valvelink in the sum of $129,733.47 in respect of the debt owed, during that period, by Petrolink to Valvelink. The payments and credits are:
Amount  Transaction date
$50,698.93                 31 March 2011
$7,810.00                   5 April 2011
$10,000,00                 20 April 2011
$7,810.00                   23 May 2011
$17,016.97                 10 June 2011
$11,857.00                 19 July 2011
$5,853.97                   19 September 2011
$5,941.12                   19 September 2011
$3,944.43                   22 September 2011
$2,226.40                   30 September 2011
$3,469.52                   26 October 2011
$3,105.13                   4 December 2011
After taking into account goods and services provided by Valvelink during this period, by the time of the winding up, the debt due to Valvelink was completely repaid.
The defendants admit that Valvelink held no security in respect of any relevant debt.
Valvelink says that the sum of $129,733.47 reflects a running balance between Petrolink and Valvelink for amounts that were offset against each other in the period prior to 30 March 2011.
The liquidator now contends that the 12 payments and credits totalling $129,733.47 were an integral part of a running account between Petrolink and Valvelink and that, in the course of that running account, the level of Petrolink’s net indebtedness to Petrolink was increased and reduced from time to time as the result of a series of transactions forming part of the relationship. I accept this contention, which I did not understand to be disputed by the defendants, except as to the particular character of the first payment or credit, discussed below.
It follows that s 588FA(1) applies in relation to all the transactions forming part of the relationship as if they together constituted a single transaction, which transactions may only be taken to be an unfair preference given by Petrolink to Valvelink if, because of s 588FA(1) as applying because of paragraph 588FA(3)(c), the single transaction is taken to be such an unfair preference.
On the liquidator’s calculations, the single transaction involved total receipts or credits by Valvelink from Petrolink of $95,065.41 ($100,919.38 less $5,853.97). The amount of $5,853.97 appears to have been paid by Valvelink to the liquidator some time in 2012. The amount of $95,065.41 was demanded from Valvelink by the liquidator by letter dated 29 August 2012. It is admitted that Valvelink has failed or refused to pay that amount.
The defendants dispute that the credit of $50,698.93 in Valvelink’s favour (being the first of the 12 payments/credits constitutes a preference payment, and refer to Mr Boné’s evidence that the amount related to goods and services supplied by Valvelink between August 2010 and March 2011. Valvelink says that the amount was a “credit” or “contra” made up of seven amounts charged from 23 July 2010 to 31 December 2010 by Petrolink to Valvelink on the one hand and for goods supplied and involved by Valvelink prior to 30 March 2011 on the other hand.
Mr Assaf did not submit that the credit was not a “transaction” within the meaning of s ss 588FA and 588FE. Rather, he submitted that the credit was not a transaction during the 6 months ending on the relation-back day. Instead, the credit was an accounting adjustment reflecting the substance of a transaction that had taken place well before 31 March 2011. In response, the liquidator contended that the relevant transaction was not the accrual of the debt, but its payment by credit or contra. I accept Mr Golledge’s submission on that point. As I read Mr Boné’s evidence, goods and services were provided by Valvelink to Petrolink for which invoices were issued dated between August 2010 and 29 March 2011. Three payments were made in part payment of three of the invoices. That evidence does not lead to an inference that the “accounting adjustment” of $50,698.93 in Valvelink’s favour was referable to a credit or payment that had occurred prior to the date of the adjustment.
Subject to this issue, the defendants do not dispute that Valvelink received a benefit totalling $95,065.41 in respect of an existing unsecured indebtedness due to it, more that Valvelink would have received from Petrolink in respect of its outstanding debt if the payment was set aside and Valvelink was to prove for that debt in the winding up of Petrolink. This benefit was received during the six months ending on the relation-back day.
It follows that, the amount of $95,065.41 is an unfair preference within the meaning of s 588FA and an insolvent transaction within the meaning of s 588FC and a voidable transaction within the meaning of s 588FE(2) of the Act.
The first plaintiff made a demand for the sum of $95,065.41 which was not satisfied.
By their defence, the defendants claim that Valvelink:
a.Received the benefit of the relevant transactions in good faith within the meaning of s 588FG(1)(b)(i) of the Act;
b.At the time when the said benefits were received by Valvelink, Valvelink had no reasonable grounds for suspecting Petrolink was insolvent and a reasonable person in Valvelink’s circumstances would have no such grounds for so suspecting within the meaning of s 588FG(1)(b)(ii) of the Act;
c.In the premises, the Court should not make an order under s 588FF of the Act pursuant to s 588FG(1) of the Act.
The defendants did not address defence in their final submissions. To the extent that it is maintained, I reject it having regard to Mr Boné’s position as a director of Valvelink and his knowledge of the matters concerning Petrolink’s insolvency at all relevant times from March to December 2011.
CONCLUSIONS
The parties will be directed to prepare short minutes of orders to give effect to these reasons. The parties should use their best endeavours to agree on proposed orders but, in the event that they are unable to agree, should each prepare a draft of the orders they submit ought to be made.

I certify that the preceding four hundred and fifty (450) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gleeson.
Associate:
Dated: 7 April 2015

Citation:	Smith v Boné, in the matter of ACN 002 864 002 Pty Ltd (in liq) [2015] FCA 319
Parties:	MICHAEL JOHN MORRIS SMITH IN HIS CAPACITY AS LIQUIDATOR OF ACN 002 864 002 PTY LTD (IN LIQUIDATION) FORMERLY KNOWN AS PETROLINK PTY LTD and ACN 002 864 002 PTY LTD (IN LIQUIDATION) FORMERLY KNOWN AS PETROLINK PTY LTD ACN 002 864 002 v BARRY BONÉ and VALVELINK PTY LTD ACN 053 332 808
File number:	NSD 1030 of 2013
Judge:	GLEESON J
Date of judgment:	7 April 2015
Catchwords:	BANKRUPTCY AND INSOLVENCY – whether director caused company to trade while insolvent – whether reasonable grounds for suspecting company was insolvent – whether director failed to prevent company from incurring debts when aware of reasonable grounds to suspect company was insolvent – whether reasonable person in director’s position would have been aware of reasonable grounds for suspecting company was insolvent – where company made payment arrangements to repay tax debts – whether director acted honestly and ought fairly to be excused for contravention of civil penalty provision or breach of duty – amount of recoverable compensation – whether director entitled to set off – whether preferential payment made – Corporations Act 2001 (Cth), ss 588M, 588FF, 1317S, 1318
Legislation:	Corporations Act 2001 (Cth), ss 95A, 436A, 553C, 588E, 588G, 588H, 588M, 588FA, 588FC, 588FE, 588FF, 588FG, 1317S, 1318 Evidence Act 1995 (Cth), ss 79(1), 140 Income Tax Assessment Act 1936 (Cth), s 222AOC Tax Administration Act 1953 (Cth), Sch 1
Cases cited:	Australian Securities and Investment Commission v Plymin (No 1) [2003] VSC 123; (2003) 175 FLR 124 Australian Securities and Investments Commission v Edwards (No 3) [2006] NSWSC 376; (2006) 57 ACSR 209 Australian Securities and Investments Commission v Edwards [2005] NSWSC 831; (2005) 54 ACSR 583 Australian Securities and Investments Commission v Healey (No 2) [2011] FCA 1003; (2011) 196 FCR 430 Australian Securities and Investments Commission v Vines [2005] NSWSC 1349; (2005) 65 NSWLR 281 Bank of Australasia v Hall [1907] HCA 78; (1907) 4 CLR 1514 Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) [2008] WASC 239; (2008) 39 WAR 1 Bluestone Property Services Pty Ltd (in liq) v First Equilibrium Pty Ltd [2013] FCA 876 Buzzle Operation Pty Ltd (in liq) v Apple Computer Australia Pty Ltd [2011] NSWCA 109; (2011) 81 NSWLR 47 Campbell Street Theatre Pty Ltd (receiver and manager appointed) (in liq) v Commercial Mortgage Trade Pty Ltd [2012] NSWSC 669 Carr v Baker (1936) 36 SR(NSW) 301 Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 Commonwealth Bank v Friedrich (1991) 5 ACSR 115 Crema Pty Ltd v Land Mark Property Developments Pty Ltd [2006] VSC 338; (2006) 58 ACSR 631 Daniels v Anderson (1995) 37 NSWLR 438 Deputy Commissioner of Taxation v Dick [2007] NSWCA 190; (2007) 242 ALR 152 Edenden v Bignell [2007] NSWSC 1122 Ellis v Wallsend District Hospital (1989) 17 NSWLR 553 Federal Commissioner of Taxation v Wade [1951] HCA 66; (1951) 84 CLR 105 Hall v Poolman [2007] NSWSC 1330; (2007) 65 ACSR 123 Harrington-Smith v Western Australia (No 2) [2003] FCA 893; (2003) 130 FCR 424 Hawkins v Bank of China (1992) 26 NSWLR 562 Hicks v Minister for Immigration and Multiculturalism and Indigenous Affairs [2003] FCA 757 Hymix Concrete Pty Ltd v Garritty (1977) 13 ALR 321 Jetaway Logistics Pty Ltd v Deputy Commissioner of Taxation [2009] VSCA 319; (2009) 26 VR 567 Lewis v Doran [2004] NSWSC 608; (2004) 208 ALR 385 Lewis v Doran [2005] NSWCA 243; (2005) 219 ALR 555 Lewis, Re Damilock Pty Ltd (in liq) v VI SA Australia Pty Ltd [2008] FCA 1801; (2008) 252 ALR 533 Manson v Smith [1997] 2 BCLC 161 Maritime Electric Co Ltd v. General Dairies Ltd [1937] AC 610 McLellan v Carroll [2009] FCA 1415; (2009) 76 ACSR 67 Melbase v Segenhoe (1995) 17 ACSR 187 Minister for Immigration, Local Government and Ethnic Affairs v Kurtovic (1990) 21 FCR 193 Morley v Australian Securities and Investments Commission (No 2) [2011] NSWCA 110; (2011) 83 ACSR 620 Morley v ASICAustralian Securities and Investments Commission [2010] NSWCA 331; (2010) 274 ALR 205 Mulherin v Bank of Western Australia Ltd [2006] QCA 175 New South Wales v Buckland [2000] NSWCA 72 Oamington Pty Ltd (Receiver & Manager Appointed) v Commissioner of Land Tax (1997) 98 ATC 5051 Ozecom vvc Hudson Investment Group [2007] NSWSC 1441 Playspace Playground Pty Ltd v Osborn [2009] FCA 1486 Powell v Fryer [2001] SASC 59; (2001) 37 ACSR 589 Queensland Bacon v Rees [1996] HCA 21; (1996) 115 CLR 266 Quick v Stoland Pty Ltd (1998) 87 FCR 371 Re ACN 007 534 000 Pty Ltd (in liq); Ex parte Parker (1997) 80 FCR 1 Sandell v Porter [1966] HCA 28; (1966) 115 CLR 666 Sarina v Council of the Shire of Wollondilly (1980) 32 ALR 596 Scott v Duncan [2007] FCAFC 30 Sheahan v Hertz Australia Pty Ltd (1995) 16 ACSR 765 at 769 Southern Cross Interiors Pty Ltd (in liq) v Deputy Commissioner of Taxation [2001] NSWSC 621; (2001) 53 NSWLR 213 Switz Pty Ltd v Glowbind Pty Ltd [1999] NSWSC 1296 Tourprint International Pty Ltd (in liq) v Bott [1999] NSWSC 581; (1999) 32 ACSR 201 Tru Floor Service Pty Ltd v Jenkins (No 2) (2006) 232 ALR 532 Versteeg v R (1988) 36 A Crim R 68 White Constructions (ACT) Pty Ltd (in liq) v White [2004] NSWSC 71; (2004) 49 ACSR 220
Date of hearing:	8, 9, 10, 11, 15, 16 September 2014
Place:	Sydney
Division:	GENERAL DIVISION
Category:	Catchwords
Number of paragraphs:	450
Counsel for the Plaintiffs:	Mr S Golledge
Solicitor for the Plaintiffs:	Watson Mangioni Lawyers Pty Ltd
Counsel for the Defendants:	Mr F Assaf
Solicitor for the Defendants:	Sparke Helmore

Table of Corrections
27 April 2015	In paragraph 413, “s 22AOC” has been replaced with “s 222AOC”.
27 April 2015	From paragraph 413, the paragraph numbering has been changed. The paragraph number on the cover page and in the certification have been amended to reflect this change.
27 April 2015	In paragraph 414 (formerly paragraph 416), the words “to take” have been omitted.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 1030 of 2013

JUDGE:	GLEESON J
DATE OF ORDER:	7 APRIL 2015
WHERE MADE:	SYDNEY

JUDGE:	GLEESON J
DATE:	7 APRIL 2015
PLACE:	SYDNEY