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Rimfire Constructions (Qld) Pty Ltd (in liq) v CRCG-Rimfire Pty Ltd

 

[2020] QSC 92

SUPREME COURT OF QUEENSLAND

CITATION:

Rimfire Constructions (Qld) Pty Ltd (in liq) v CRCG-Rimfire Pty Ltd [2020] QSC 92

PARTIES:

GINETTE DAWN MULLER AND MARCUS JON WATTERS IN THEIR CAPACITIES AS LIQUIDATORS OF RIMFIRE CONSTRUCTIONS (QLD) PTY LTD (IN LIQUIDATION) (RECEIVER AND MANAGER APPOINTED)

(first applicant)

RIMFIRE CONSTRUCTIONS (QLD) PTY LTD (IN LIQUIDATION) (RECEIVER AND MANAGER APPOINTED)

(second applicant)

v

MICHAEL GERARD McCANN AND SAID JAHANI IN THEIR CAPACITIES AS DEED ADMINISTRATORS OF CRCG-RIMFIRE PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT)

(first respondent)

CRCG-RIMFIRE PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT)

(second respondent)

FILE NO/S:

BS No 4307 of 2019

DIVISION:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

1 May 2020

DELIVERED AT:

Brisbane

HEARING DATE:

5 March 2020

JUDGE:

Martin J

ORDER:

The application is dismissed.

CATCHWORDS:

CORPORATIONS – WINDING UP – CONDUCT AND INCIDENTS OF WINDING UP – PROOF OF DEBTS – PROCEDURE – where the liquidators of Rimfire Constructions (Qld) Pty Ltd lodged a proof of debt with the deed administrators of CRCG-Rimfire Pty Ltd – where the proof of debt was rejected by the deed administrators – where the liquidators appealed against the rejection under s 5.6.54 of the Corporations Regulations 2001 – whether the proof of debt was wrongly rejected

CORPORATIONS – WINDING UP – CONDUCT AND INCIDENTS OF WINDING UP – EFFECTS OF WINDING UP ON OTHER TRANSACTIONS – PREFERENCES AND VOIDABLE TRANSACTIONS – UNCOMMERCIAL TRANSACTIONS – where the liquidators of Rimfire Constructions (Qld) Pty Ltd lodged a proof of debt with the deed administrators of CRCG-Rimfire Pty Ltd – where the proof of debt was based on the claim that a transaction entered into by Rimfire Constructions (Qld) Pty Ltd and CRCG-Rimfire Pty Ltd was uncommercial within the meaning of s 588FB of the Corporations Act 2001 – whether the transaction was uncommercial

Corporations Act 2001, s 553, s 588FB, s 588FC, s 588FE, s 588FF

Corporations Regulations 2001, r 5.6.54

Evidence Act 1977

Industrial Relations Act 1996 (NSW)

BE Australia WD Pty Ltd v Sutton (2011) 82 NSWLR 336, applied

Capital Finance Australia Ltd v Tolcher (2007) 164 FCR 83, applied

Central Queensland Development Corporation Pty Ltd v Sunstruct Pty Ltd (2015) 231 FCR 17, cited

Community Development Pty Ltd v Engwirda Construction Co (1969) 120 CLR 455, cited

Hall v Ledge Finance Ltd [2005] NSWSC 645, applied

National Bank of Australasia v Mason (1975) 133 CLR 191, cited

Queensland Phosphate Pty Ltd v Korda [2019] VSCA 215, cited

Re Young (in his capacity as liquidator of Great Wall Resources Pty Ltd (in liq)) [2013] NSWSC 879, cited

Star v O’Brien (1996) 40 NSWLR 695, cited

Tanning Research Laboratories Inc v O’Brien (1990) 169 CLR 332, cited

Westpac Banking Corporation v Totterdell (1998) 20 WAR 150, cited

COUNSEL:

P O’Brien for the first and second applicants

S Webster for the first and second respondents

SOLICITORS:

Morgan Conley Lawyers for the first and second applicants

Clayton Utz for the first and second respondents

  1. [1]
    Ginette Muller and Marcus Watters are the liquidators of Rimfire Constructions (Qld) Pty Ltd (“Rimfire”).  On 19 September 2018, they lodged a proof of debt with Michael McCann and Said Jahani, the Deed Administrators of CRCG-Rimfire Pty Ltd.  The proof was based on the claim that a transaction entered into by Rimfire and CRCG-Rimfire was uncommercial within the meaning of s 588FB of the Corporations Act 2001.  The proof was rejected by the Deed Administrators.
  2. [2]
    The liquidators appeal against the rejection under r 5.6.54 of the Corporations Regulations 2001 and seek an order setting aside the rejection and, in lieu, an order that the proof of debt be admitted in full. 

The legislative framework

  1. [3]
    Section 553 of the Corporations Act describes the debts or claims which are provable in a winding-up:

Debts or claims that are provable in winding up

  1. (1)
    Subject to this Division and Division 8, in every winding up, all debts payable by, and all claims against, the company (present or future, certain or contingent, ascertained or sounding only in damages), being debts or claims the circumstances giving rise to which occurred before the relevant date, are admissible to proof against the company.

(1A) Even though the circumstances giving rise to a debt payable by the company, or a claim against the company, occur on or after the relevant date, the debt or claim is admissible to proof against the company in the winding up if:

  1. (a)
    the circumstances occur at a time when the company is under a deed of company arrangement; and
  1. (b)
    the company is under the deed immediately before the resolution or court order that the company be wound up.

This subsection has effect subject to the other sections in this Division.

(1B) For the purpose of applying the other sections of this Division to a debt or claim that is admissible to proof under subsection (1A), the relevant date for the debt or claim is the date on which the deed terminates.

  1. (2)
    Where, after the relevant date, an order is made under section 91 of the ASIC Act against a company that is being wound up, the amount that, pursuant to the order, the company is liable to pay is admissible to proof against the company.”
  1. [4]
    Section 588FB defines uncommercial transactions:

Uncommercial transactions

  1. (1)
    A transaction of a company is an uncommercial transaction of the company if, and only if, it may be expected that a reasonable person in the company’s circumstances would not have entered into the transaction, having regard to:
  1. (a)
    the benefits (if any) to the company of entering into the transaction; and
  1. (b)
    the detriment to the company of entering into the transaction; and
  1. (c)
    the respective benefits to other parties to the transaction of entering into it; and
  1. (d)
    any other relevant matter.
  1. (2)
    A transaction may be an uncommercial transaction of a company because of subsection (1):
  1. (a)
    whether or not a creditor of the company is a party to the transaction; and
  1. (b)
    even if the transaction 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.”
  1. [5]
    Section 588FC defines insolvent transactions:

Insolvent transactions

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:

  1. (a)
    any of the following happens at a time when the company is insolvent:
  1. (i)
    the transaction is entered into; or
  1. (ii)
    an act is done, or an omission is made, for the purpose of giving effect to the transaction; or
  1. (b)
    the company becomes insolvent because of, or because of matters including:
  1. (i)
    entering into the transaction; or
  1. (ii)
    a person doing an act, or making an omission, for the purpose of giving effect to the transaction.”
  1. [6]
    Section 588FE defines voidable transactions, so far as is relevant, as:

Voidable transactions

  1. (1)
    If a company is being wound up:
  1. (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; and
  1. (b)
    a transaction of the company may be voidable because of subsection (6A) if the transaction was entered into on or after the commencement of the Corporations Amendment (Repayment of Directors’ Bonuses) Act 2003; and
  1. (c)
    a transaction of the company may be voidable because of subsection (6B) if the transaction was entered into on or after the commencement of that subsection.
  1. (2)
    The transaction is voidable if:
  1. (a)
    it is an insolvent transaction of the company; and
  1. (b)
    it was entered into, or an act was done for the purpose of giving effect to it:
  1. (i)
    during the 6 months ending on the relation-back day; or
  1. (ii)
    after that day but on or before the day when the winding up began.

  1. (3)
    The transaction is voidable if:
  1. (a)
    it is an insolvent transaction, and also an uncommercial transaction, of the company; and
  1. (b)
    it was entered into, or an act was done for the purpose of giving effect to it, during the 2 years ending on the relationback day.”
  1. [7]
    Section 588FF sets out the orders which, so far as is relevant, a court may make:

Courts may make orders about voidable transactions

  1. (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:

  1. (c)
    an order requiring a person to pay to the company an amount that, in the court’s opinion, fairly represents some or all of the benefits that the person has received because of the transaction;”

Overview of the events leading up to the lodgement of the proof of debt

  1. [8]
    Rimfire was a construction company operating in Queensland as part of the Rimfire Construction Group.
  2. [9]
    In late 2015 and early 2016, the Rimfire Construction Group entered into discussions with China Railway Constructions Group, a large construction company, about commencing a joint-venture. As a result of those discussions, CRCG-Rimfire was formed in around March 2016.
  3. [10]
    In March 2017, Rimfire was engaged in two projects: “The Winn” and “Lincoln Street”. At that time, neither project had reached 50% completion. Rimfire had not been able to provide the developers on those projects with bank guarantees to cover potential defect correction works that might be required upon completion of the developments. Instead, cash retentions of up to 10% were withheld by each developer from each payment to Rimfire in accordance with their respective contracts (“the cash retentions”).
  4. [11]
    The cash retention held by each developer was, for the Winn, $597,836.11 and, for Lincoln Street, $1,018,647.40. These amounts were monies that could be paid to Rimfire on completion of the projects subject to expenditure on defect correction.
  5. [12]
    In his affidavit, Mr Cain (a director of Rimfire at the relevant time) describes what happened in early 2017:

“12. In or around February and March 2017, the decision makers in the Rimfire Group (me, Mr Moore and Mr Kirkwood) actively focussed [sic] on making CRCG-Rimfire successful, and we focussed [sic] our attention on taking steps to see that occur.

  1. We wanted to see CRCG-Rimfire be successful because we saw that entity to have the best prospects of making money moving forward with the added financial weight of CRCG being added to the expertise and contacts of the Rimfire Group in the construction industry in Australia.
  1. In order to commence the joint venture, it was decided that the Royal Duke [sic The Winn project] and Lincoln Street Construction projects were to be novated to CRCG-Rimfire.
  1. The novations of The Winn and Lincoln Street occurred to give CRCG-Rimfire an instant boost of market position to show to clients, financiers and CRCG the viability of the joint venture, and give it a starting platform. This would show clients and financiers particularly that the joint venture could source and deliver to successful jobs, rather [th]an being of the ‘new kid on the block’ as a new Chinese builder. And it would trigger CRCG to contribute the working capital to the joint venture.”
  1. [13]
    The material terms of each novation agreement were:
  • CRCG-Rimfire became a party to the building contract and covenanted to perform all of the obligations and assume all of the liabilities of Rimfire under the building contract,
  • Rimfire was released from all obligations and liabilities,
  • the cash retentions were to be replaced with bank guarantees, and
  • the cash retentions were to be paid to CRCG-Rimfire.
  1. [14]
    The Winn novation agreement was entered into on about 6 March 2017. The Lincoln novation agreement was entered into on 13 March 2017.
  2. [15]
    In April 2017, the bank guarantees were put in place and the cash retentions were paid to CRCG-Rimfire.
  3. [16]
    On 24 April 2017, Rimfire and CRCG-Rimfire entered into a contract to settle the financial arrangements between them. In it the parties agreed that, subject to some payments for overheads, the final payment from CRCG-Rimfire to Rimfire was, with respect to the projects:

The Winn  $283,515.42

Lincoln  $121.718.99

  1. [17]
    Ms Muller was appointed as administrator of Rimfire on 7 September 2017 and as liquidator on 13 October 2017.
  2. [18]
    The relation back day is 7 September 2017.
  3. [19]
    The deed administrators of CRCG-Rimfire were appointed on 19 March 2018.
  4. [20]
    The liquidators and the deed administrators engaged in correspondence and the final proof of debt in the deed administration was lodged on 19 September 2018. It was rejected on or about 11 April 2019.
  5. [21]
    The proof of debt claimed:

“that [CRCG-Rimfire] was on 16 November 2017 … justly and truly indebted to [Rimfire] … for 1,616,483 dollars and 51 cents

Particulars of the debt are:

Voidable Transaction claim pursuant to 588FE of the Act in relation to the Lincoln and Winn contract novations dated 13 March 2017 & 6 March 2017 respectively $1,616,483.51”

  1. [22]
    The parties agree that Rimfire was insolvent when the parties entered into the novation agreements. An independent analysis[1] of Rimfire’s financial position concluded that Rimfire was insolvent at 30 September 2016 and remained so until placed in administration. I accept that.

A preliminary point – is the claim the subject of the proof of debt a provable claim?

  1. [23]
    An appeal against the rejection of a proof of debt is a hearing de novo. The court must take into account all relevant evidence, whether or not it was before the liquidator at the time the proof was rejected. The fundamental question is whether the claim sought to be proved is a true liability of the company enforceable against it according to law. The claimant bears the onus to demonstrate that the liquidator was wrong in rejecting the proof. If that onus is not discharged, the court will not overturn the liquidator’s decision. If the court is unable to conclude either way whether the proof should be admitted, then the liquidator’s decision must stand.[2]
  2. [24]
    CRCG-Rimfire contends that the subject of the proof of debt is not a provable claim on the basis that Rimfire’s liquidator has no more than a right to apply for a discretionary order under s 588FF(1).
  3. [25]
    The scope of a provable debt under a deed of company arrangement was considered in BE Australia WD Pty Ltd v Sutton.[3] Campbell JA (with whom McColl JA agreed and, on this point, with whom Young J did not disagree) held that a person had a “claim” within the meaning of s 553 if he or she had a basis, founded on an existing legal right, for asserting a right to participate in the division of the assets of the company.
  4. [26]
    In that case, Ms Sutton had been engaged by BE Australia as a consultant through a labour hire company. Her engagement was terminated without notice or payment in lieu and she applied to the New South Wales Industrial Relations Commission claiming that her work arrangements were unfair and seeking orders under s 106 of the Industrial Relations Act 1996 (NSW). She sought orders varying her employment arrangement so that BE Australia would be liable for her termination in breach of the arrangement as she sought to have it varied. She lodged a proof of debt with the deed administrators but it was rejected on the basis that she did not have a claim against the company as at the date of the appointment of administrators.  Ms Sutton commenced proceedings in the Supreme Court of New South Wales. At first instance her application was rejected on the basis that a claim under s 106 of the Industrial Relations Act is a claim to create a new right rather than a claim to enforce an existing right.
  5. [27]
    On appeal it was held that her claim under the Industrial Relations Act only entitled her to apply for an order and that unless and until an order had been made in her favour, she was not entitled to recover amounts from BE Australia. No order had been made in her favour at the time that BE Australia went into administration and, therefore, the company did not owe her an existing legal obligation with respect to the termination of her employment.  As a result, she did not have a provable claim that was caught by the deed of company arrangement.
  6. [28]
    It was explained in this way by Campbell JA:

“[104] There is one sense in which Ms Sutton had a claim at the time that theadministrators were appointed. In that sense, she had a claim because she hadlitigation on foot in the IRC, in which she was claiming an order from the IRC.

[105] However, just because something is a “claim” in one sense of the word does not necessarily mean that it is a “claim” within the meaning of s 553. Theparticular shade of meaning that “claim” has in s 553 can be ascertained from the purpose of the section. That purpose is that all the legal obligations to which a company is subject should be ascertained, and each of them valued as at a common date, so that those obligations can be taken into account in a winding up or other administration that is under way. Someone has a “claim” within the meaning of s 553 if he or she has a basis, founded on an existing legal right, for asserting a right to participate in the division of the assets of the company. Ms Sutton did not have one of those.”

  1. [29]
    This reasoning is, as Campbell JA pointed out, consistent with decisions about the existence of a claim in Community Development Pty Ltd v Engwirda Construction Co[4] and National Bank of Australasia v Mason.[5] It was adopted by the Full Court of the Federal Court of Australia in Central Queensland Development Corporation Pty Ltd v Sunstruct Pty Ltd.[6]
  2. [30]
    CRCG-Rimfire argues that, by parity of reasoning, a claim by a liquidator for orders under s 580FF against a company subject to a deed of company arrangement is not a provable debt and, so, the proof of debt was properly rejected. It says that s 588FF does not confer a proprietary right on the liquidator, but only a “right to apply” under s 588FF(1).
  3. [31]
    It is necessary, then, to determine the proper characterisation of the claim made by Rimfire’s liquidator. It is described in the proof of debt as a “voidable transaction claim” pursuant to s 588FE in the novation contracts.
  4. [32]
    Rimfire’s liquidator argues that she is entitled to rely upon rights that she already has by reason of the voidable transaction regime set out in Part 5.7B of the Corporations Act. That regime defines what an uncommercial transaction is, what an insolvent transaction is, and what a voidable transaction is. Those, it is argued, are the key concepts giving rise to the right of a liquidator to claw back sums or undo transactions for the benefit of creditors. They are not the subject of a discretion. Those rights, it was submitted, are statutory rights of the liquidator which exist from the date of the winding up of the company. That may be so, but that is not the answer to CRCG-Rimfire’s argument.

Part 5.7B of the Corporations Act

  1. [33]
    The regime established by Part 5.7B was, so far as is relevant, well summarised by Barrett J in Hall v Ledge Finance Ltd:[7]

“[12] […] Despite use of the word “voidable” as a label in Pt 5.7B and references, in general parlance about Pt 5.7B, to the “avoidance” of transactions and the “recovery” of moneys related to transactions, the statutory provisions are not concerned with undoing transactions or re-arranging the financial relationships of parties to transactions, vis-à-vis those transactions themselves. They do not involve reliance on contractual rights or the contractual consequences of events. The liquidator, in pursuing the statutory cause of action, does not sue upon a contract or for restitution consequent upon the invalidity of a transaction. Nor is the liquidator affected by any vitiating elements to which a transaction may be subject, except to the extent that those elements may be shown by a defendant to make unavailable the “transaction” foundation for the liquidator’s claim, in the sense that there never was in truth a transaction (even one liable to be rescinded or declared void). The liquidator’s task is merely to prove facts justifying a conclusion that the company became party to a “transaction” described in s 588FA, s 588FB, s 588FC or was the borrower under a loan described in s 588FD. If any of those things is proved and if, in addition, elements are shown as referred to in a subsection of s 588FE such as to cause the transaction to be given by s 588FE the statutory designation “voidable”, the liquidator has access to the statutory jurisdiction conferred on the court by s 588FF(1).” (emphasis added)

  1. [34]
    It follows from that analysis that the “right” to participate in the division of assets (which is what the proof of debt is meant to demonstrate) of the company does not arise in these circumstances until, at least, the facts are determined and an order is made under s 558FF. As Barrett J observed, these provisions are not concerned with undoing transactions (although some of the orders available under s 588FF can involve the transfer of property).
  2. [35]
    The proper application of the regime was considered in Capital Finance Australia Ltd v Tolcher.[8] Justice Gordon (with whom Heerey J and, on this point, Lindgren J agreed) upheld a finding that particular transactions were uncommercial.
  3. [36]
    The liquidator argued that because s 588FF(1)(c) allows the court to make an order for repayment of an amount that “fairly represents some or all of the benefits that the person has received because of the transaction”, then it was appropriate for there to be an order for interest from the date of payment, being a date prior to the appointment of the liquidator or the date of the appointment of the liquidator.
  4. [37]
    That argument was rejected by Gordon J for the following reasons:[9]
    1. (a)
      at the time the transaction was entered into, there was nothing inherently wrong with it in the sense used by Cole JA in Star v O’Brien,[10] namely that it was made under mistake nor was it then illegal,
    2. (b)
      each of the payments made under the agreement was a payment of a debt due and was effective in discharging the debt due,
    3. (c)
      unless and until the transaction was rendered void by the Corporations Act (which date could not pre-date the appointment of the liquidator) the relevant deed remains valid and thereafter was void only against the liquidator,
    4. (d)
      when the payments were made the money was not due to the liquidator, and
    5. (e)
      the money only became due to the liquidator upon the court upholding the election by the liquidator to seek to challenge the transaction.
  5. [38]
    Justice Gordon concluded that until a demand was made, it could not be said that the payments that had been made were preferences or that the transactions were uncommercial. By parity of reasoning, the same conclusion must be reached in these circumstances. The “uncommerciality” of the transactions is something that can only be dealt with when an order is made “on the application of a company’s liquidator” under s 588FF. Until that occurs there is nothing, in these circumstances, to found the proof of debt relied upon by Rimfire. It follows that the proof of debt was not wrongly rejected.

Was the transaction uncommercial? Need that be decided?

  1. [39]
    Given my decision on the nature of the claim made in the proof of debt, it is unnecessary to consider this question. But as the matter was fully argued, I will deal with it briefly.
  2. [40]
    In order to demonstrate that the transaction was uncommercial, an applicant must show that it was an uncommercial transaction for the purpose of s 588FB and that it was entered into at a time that Rimfire was insolvent.
  3. [41]
    A transaction is an “uncommercial transaction” if it may be expected that a reasonable person in the company’s circumstances would not have entered the transaction having regard to the benefits and detriments to the company and the benefits to the other parties to the transaction.
  4. [42]
    The principles applicable to determining whether a transaction is uncommercial were summarised in the joint judgment of the Victorian Court of Appeal in Queensland Phosphate Pty Ltd v Korda as follows:[11]

“(a) Under s 588FB, an objective standard is to be applied.

  1. (b)
    The four criteria set out in s 588FB(1) are to be considered by reference to the company’s circumstances, which must include the state of knowledge of those who were the directing mind of the company, such as its directors.
  1. (c)
    For a transaction to be uncommercial it must result in ‘the recipient receiving a gift or obtaining a bargain of such magnitude that it [cannot] be explained by normal commercial practice’ or where ‘the consideration … lacks a “commercial quality”’.
  1. (d)
    Courts have adopted a purposive approach in interpreting s 588FB by having regard to the objects and purpose of the provision. The purpose of s 588FB is to prevent a depletion of the assets of a company which is being wound up by voiding transactions at an undervalue entered into within a specified time period prior to the commencement of the winding up. Although s 588FB has been said to focus on transactions entered into at an ‘undervalue’ uncommercial transactions are not limited to such transactions.
  1. (e)
    It must positively appear that a reasonable person in the position of the company would not have entered into the transaction.
  1. (f)
    It has been recognised that the court must view the transaction prospectively ‘according to the circumstances at the time, including proper perception of the future, but without the influence of hindsight’.
  1. (g)
    Consideration of ‘detriment’ in s 588FB is not limited to monetary detriment, but encapsulates the broader concept of commercial detriment.
  1. (h)
    The court will have regard to the totality of the business relationship of the parties. The court will also consider whether there is a relationship between the parties to the transaction that may require greater scrutiny. This may include consideration of any personal relationship between the individuals involved in the transaction.” (citations omitted)
  1. [43]
    The applicant argued that the transactions, when considered as a whole, demonstrated the necessary lack of a commercial quality because there was no fair equivalence between what was given and what was received and because it constituted a disposal of assets by Rimfire to CRCG-Rimfire where the latter received a bargain of such magnitude that it could not be explained by normal commercial practice.
  2. [44]
    The circumstances of Rimfire are relevant to the consideration of the nature of the benefits it received and the detriment suffered by entering into the transactions. At its best, Rimfire stood to make a substantial profit on each project. It was, though, insolvent from 30 September 2016 and so the likelihood of it being able to conclude each project must be in doubt. That doubt is compounded by the fact that Rimfire had not been in a position to provide bank guarantees as is usually required. Neither project had progressed beyond 50% completion and the insolvency of Rimfire would have continued to cause a difficulty had it otherwise been able to complete the projects.
  3. [45]
    Rimfire may not have been in a position to require the payment to it of the retention monies if it had not been able to complete the project without material defects or delays. On the material available to me I consider it more likely than not that Rimfire would not have completed the projects and, thus, would not have recovered the retention money. Rimfire had, for example, been incurring large and continuing losses during the year in which the impugned transactions took place. It had a liquidity ratio of less than 1.0 and had negative net assets.
  4. [46]
    CRCG-Rimfire did not, as the applicants argued, become entitled to the cash retentions simply by virtue of the novations. It had to replace the retention monies with bank guarantees.
  5. [47]
    Rimfire did not lose a certain entitlement to profit which the applicant’s submissions appear to imply. Rather, it lost the chance of making a profit had it been able to complete each project and it was relieved of all liabilities.
  6. [48]
    Rimfire was in a particularly disadvantageous position. It was insolvent. It did not have the means to pay trade creditors in order that it could complete the projects and it was not receiving the full amount of its invoices to developers because of the retention of money in place of bank guarantees.
  7. [49]
    The applicant has not demonstrated that a reasonable person in the position of Rimfire would not have entered into the transactions.

Evidence objections

  1. [50]
    The applicant sought to adduce evidence of the expectation of Mr Gibbs, the chief financial officer of Rimfire, that he expected that there would be a particular profit arising from the two building projects. The evidence was not sought to be adduced as to the truth that there was going to be a particular profit or that the projects could be sold for a particular amount. It was tendered as evidence of the knowledge of one of the companies at the time of the novation. This “knowledge” was little more than an opinion of an officer of Rimfire. That opinion was contained in an email string which was found by the liquidator in the company records. There are a number of problems with this proposed evidence, not the least of which is that it is an opinion which is not shown to have been within Mr Gibbs’ expertise. The same applies to proposed evidence about the belief of Mr Thornton. Both examples are, in any event, hearsay and no attempt was made to comply with the requirements of the Evidence Act 1977. Even had I admitted it, it would not affected my conclusions.

Order

  1. [51]
    The application is dismissed.

Footnotes

[1]“Corporate Advisory” Insolvency Report of 1 March 2018.

[2]Re Young (in his capacity as liquidator of Great Wall Resources Pty Ltd (in liq)) [2013] NSWSC 879 at [46] applying Tanning Research Laboratories Inc v O’Brien (1990) 169 CLR 332 at 338–341 per Brennan and Dawson JJ, Westpac Banking Corporation v Totterdell (1998) 20 WAR 150 at 154 per Ipp J (Pidgeon and White JJ agreeing).

[3](2011) 82 NSWLR 336.

[4](1969) 120 CLR 455 at 459 per Kitto J.

[5](1975) 133 CLR 191 at 200 per Barwick CJ.

[6](2015) 231 FCR 17 at 26-27, [63]- [65] per Gilmour J (Besanko and Rangiah JJ agreeing).

[7][2005] NSWSC 645.

[8](2007) 164 FCR 83.

[9]Capital Finance Australia Ltd v Tolcher (2007) 164 FCR 83 at 113-114.

[10](1996) 40 NSWLR 695.

[11][2019] VSCA 215 at [164].

Close

Editorial Notes

  • Published Case Name:

    Rimfire Constructions (Qld) Pty Ltd (in liq) v CRCG-Rimfire Pty Ltd

  • Shortened Case Name:

    Rimfire Constructions (Qld) Pty Ltd (in liq) v CRCG-Rimfire Pty Ltd

  • MNC:

    [2020] QSC 92

  • Court:

    QSC

  • Judge(s):

    Martin J

  • Date:

    01 May 2020

  • Selected for Reporting:

    Editor's Note

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.
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