Stone v Melrose Cranes & Rigging Pty Ltd (in Liq) (No 2)

Cardinal Project Services Pty Ltd, through its liquidators, brought an action against Melrose Cranes & Rigging Pty Ltd (in liquidation) in the Federal Court of Australia, seeking to recover payments made by the company to the defendant prior to its liquidation. The liquidators argued that the payments constituted unfair preferences under s 588FA of the Corporations Act 2001 (Cth) and were voidable. The court had to determine whether the company was insolvent at the time each payment was made, whether the payments were unfair preferences, and whether the defendant had a good faith defence under s 588FG(2) of the Act. Additionally, the court had to consider whether a set-off under s 553C of the Act was available if the defendants were required to repay the unfair preference amount.

The court found that the company was insolvent at the time of the payments, as evidenced by its inability to meet its financial obligations, its heavy reliance on debt funding, and its cash flow difficulties. The payments were found to be unfair preferences because they resulted in the defendant receiving more than it would have in a winding up of the company. The court also found that the defendant did not have a good faith defence, as it was aware of the company's inability to pay its debts as and when they fell due. Consequently, the defendant was not entitled to a set-off under s 553C of the Act.

The court ordered that the defendant pay the liquidators the sum of $197,068.38, plus interest. The parties were required to provide written submissions on the calculation of interest, the period for which interest should be paid, and the costs of the proceeding, and to indicate whether those issues could be dealt with on the papers. If an oral hearing was necessary, the matter would be listed on a date convenient to the parties and the Court.