Sutherland v Eurolinx Pty Ltd

The dispute in Sutherland v Eurolinx Pty Ltd involved the plaintiffs, who were creditors of Eurolinx Pty Ltd, a company that had made preferential payments to them before it became insolvent. The plaintiffs sought to recover these payments under section 588FG(2)(a) of the Corporations Law, arguing that the payments were made without good faith. Eurolinx contended that the payments were made in good faith and that they were protected by the running account defence under section 588FA(3) of the Corporations Law. The court was required to determine whether Eurolinx's actions constituted good faith and whether the running account defence applied.

The court examined the concept of good faith in the context of preferential payments made by a company that was already insolvent. It considered the relevance of post-dated cheques and the arrangements not to bank them without telephone confirmation. The court also explored the subjective and objective tests for suspicion of insolvency and how they relate to the good faith defence. Furthermore, the court assessed the running account defence, including the significance of the lack of good faith in the subjective sense and other factors that could affect the defence. The court concluded that Eurolinx had acted in good faith and that the running account defence was applicable.

In determining how the unfair preference was calculated, the court focused on the nature of the running account. It found that the preferential payments were part of an ongoing business relationship, which supported the running account defence. The court held that the plaintiffs were unable to recover the preferential payments as Eurolinx had acted in good faith and the running account defence was applicable. Consequently, the plaintiffs' claims were dismissed. The court's decision provides clarity on the application of the good faith defence and the running account defence in cases involving preferential payments made by insolvent companies.