The Tap Inn Pty Ltd v Matthews - [2015] SASCFC 188

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court)
THE TAP INN PTY LTD v MATTHEWS
[2015] SASCFC 188
Judgment of The Full Court
(The Honourable Justice Gray, The Honourable Justice Sulan and The Honourable Justice Peek)
10 December 2015
CORPORATIONS - WINDING UP - CONDUCT AND INCIDENTS OF WINDING UP - EFFECT OF WINDING UP ON OTHER TRANSACTIONS - PREFERENCES AND VOIDABLE TRANSACTIONS - UNFAIR PREFERENCES
PROCEDURE - MISCELLANEOUS PROCEDURAL MATTERS - DECLARATIONS - REQUIREMENT THAT ALL MATTERS IN CONTROVERSY BE DETERMINED
Appeal from the answer to a preliminary question given by a District Court Judge in proceedings relating to the winding up of the appellant. The Judge made an order, by consent, that a point of law in relation section 588FA(2) of the Corporations Act 2001 (Cth) be heard and determined as a preliminary issue prior to the trial of the action commencing. In answer to the preliminary question, the Judge held that for the purposes of section 588FA(2), the time to assess the value of the security is the date of the winding up of the debtor company. On appeal, the appellant contended that the Judge erred and that the date to assess the value of the security is the date of the creation of the security.
Held per Gray J (Sulan and Peek JJ agreeing)(allowing the appeal):
1.       A review of the pleadings discloses that there is a considerable dispute of fact.
2.       The preliminary question of law determined by the District Court Judge is properly characterised as a hypothetical question.
3.       The Judge should not have proceeded to determine the preliminary question.
4.       The appropriate course is to allow the appeal, set aside the Judge’s answer and give directions as to the trial.
Corporations Act 2001 (Cth) s 588FA(1), s 588FA(2), s 588FB(1) and s 588FE(3), referred to.
Rogers v Baillieu Bullock Wilkinson Pty Ltd (1981) 28 SASR 594; Walsh v Natra Pty Ltd (2000) 1 VR 523; Williams v Peters (2009) 232 FLR 98, considered.

THE TAP INN PTY LTD v MATTHEWS
[2015] SASCFC 188
Full Court: Gray, Sulan and Peek JJ
GRAY J.

This is an appeal from the answer to a preliminary question given by a District Court Judge in proceedings relating to the winding up of the defendant and appellant, The Tap Inn Pty Ltd.
Proceedings were issued by Anthony Christopher Matthews, the liquidator of Pub Tap Investments Pty Ltd (in liquidation), seeking orders that The Tap Inn pay to the liquidator the amount of $374,772.22 together with interest, being uncommercial transactions under section 588FB(1) of the Corporations Act 2001 (Cth). By his second statement of claim, the liquidator asserts that 24 “Payments” were made between 30 June 2008 and 27 April 2010. It was said that those payments were voidable as uncommercial and insolvent transactions pursuant to section 588FE(3) of the Corporations Act. The following particulars were provided:
14.1 The Defendant, as vendor of a Hotel Business, extended finance to the Company, as purchaser of that business in…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2015] SASCFC 188
Decision Date: 10 December 2015

CaseChat Overview and Summary

The appeal concerned a dispute between The Tap Inn Pty Ltd (in liquidation) and Mr Matthews. The District Court Judge had determined a preliminary question of law, but the appellate court found that this determination was based on hypothetical facts rather than established facts.

The legal issue before the court was whether the District Court Judge had erred in determining a preliminary question of law when significant factual disputes remained unresolved. The court was required to consider whether such a determination could definitively resolve the controversy between the parties or if it risked being advisory.

The court reasoned that a decision on a preliminary question of law is only useful if the facts determinative of that issue have been established. In this instance, the pleadings revealed considerable factual disputes, which were confirmed by counsel. Consequently, the Judge should not have proceeded to determine the preliminary question as it was hypothetical and would not finally resolve the dispute. The court noted that while neither party had challenged the process, it was flawed.

The appeal was allowed, the District Court Judge's answer was set aside, and directions were given for the trial. The proceedings were to be referred to the appellate court for hearing as a complex commercial cause, and the costs of the District Court hearing and the appeal were to be costs in the cause.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

GRAY J SULAN J PEEK J

The answers given by the Judge were not based on facts found or agreed; they were hypothetical. The answers will only dictate a result if certain facts raised on the pleadings are established. As pointed out in Bass, when facts determinative of the legal issue involved in the question asked are left open, any answer cannot assist the efficient administration of justice. The dispute between the parties will not be finally resolved. To decide the point raised without the facts first being resolved raises the real prospect that the decision will be made hypothetically. Conclusion In my view, the preliminary question of law determined by the District Court Judge is properly characterised as a hypothetical question. A review of the pleadings discloses that there is a considerable dispute of fact. This was confirmed by counsel on the hearing of the appeal. For the reasons discussed above, the Judge should not have proceeded to determine the preliminary question. Although neither party challenged the process followed by the Judge, the process was flawed. I am not prepared to entertain an appeal to further consider a hypothetical question. The appropriate course is to allow the appeal, set aside the Judge’s answer and give directions as to the trial. As discussed above, the defendant seeks to have this Court depart from the decision in Walsh v Natra in the present proceedings. In these circumstances, the proceeding should be referred to this Court for hearing as a complex commercial cause. As both parties consented to the course followed in the District Court, it would, in my view, be appropriate that the costs of that hearing and of this appeal be costs in the cause. I agree with the reasons of Gray J and the orders he proposes. I agree with the orders proposed by Gray J and with his reasons.

Ratio Decidendi

Legal Principle Established

Established by: GRAY J, SULAN J, PEEK J

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