Zorom Enterprises Pty Limited (In Liquidation) v Zabow & Ors

Zorom Enterprises Pty Limited (In Liquidation) (the plaintiff) brought proceedings against Zabow & Ors (the defendants) in the Supreme Court of New South Wales. The plaintiff sought to recover moneys allegedly paid by Zorom Enterprises Pty Limited to the defendants in circumstances where Zorom Enterprises Pty Limited was insolvent. The plaintiff alleged that these payments constituted voidable transactions under the Corporations Act 2001 (Cth) and sought declarations that the transactions were void and orders for the repayment of the moneys.

The central legal issues before the Court were whether the payments made by Zorom Enterprises Pty Limited to the defendants were voidable transactions under section 588FA of the Corporations Act 2001 (Cth) as unfair preferences, and if so, whether the defendants had established any defences to the plaintiff's claim. Specifically, the Court was required to determine if the payments were made during the relevant period when the company was insolvent, if they were made to a creditor, and if they had the effect of giving the creditor a preference over other creditors. The Court also considered whether the defendants had acted in good faith and given valuable consideration in return for the payments, which are key elements of the statutory defences.

The Court analysed the evidence presented regarding the financial position of Zorom Enterprises Pty Limited at the time of the payments and the nature of the transactions between the company and the defendants. Applying the principles of insolvency law and the Corporations Act, the Court found that the payments were indeed unfair preferences. The Court reasoned that the company was insolvent and that the payments, made to the defendants who were creditors, had the effect of placing them in a better position than other unsecured creditors. The Court rejected the defendants' arguments that they had acted in good faith and given valuable consideration, finding that the evidence did not support these claims to the necessary legal standard.

Consequently, the Court made declarations that the impugned transactions were voidable and ordered the defendants to repay the moneys received from Zorom Enterprises Pty Limited to the plaintiff.