Hutson v Allzinc Pty Ltd[2010] QDC 527

[2010] QDC 527

DISTRICT COURT

CIVIL JURISDICTION

JUDGE ROBIN QC

No 3268 of 2010

RE: ALLZINC PTY LTD

and

ALLZINC PTY LTD (ACN 076 576 120)Company

BRISBANE

DATE 30/11/2010

ORDER

HIS HONOUR:  The court makes an order in terms of the initialled draft which adjourns to a date to be fixed the applicants' originating application returnable today. It seeks a declaration that some 13 (or thereabouts) payments aggregating slightly more than $68,000 made by Allzinc Pty Ltd to the respondent Commissioner of Taxation were unfair preferences and void under section 588FE of the Corporations Act 2001 of the Commonwealth.  Orders are sought for the payment of that amount to the applicant/liquidators under section 588FF plus interest and costs.

The order for adjournment is made on what amounts to an oral application supported by an unsigned form of application made by Ms Muir, the respondent's counsel today.  She has successfully sought an order under rule 14 of the UCPR that the originating application continue as if started by claim and directions for steps by way of pleading and disclosure. 

The respondent agreed to submit to a further direction which the applicants, who are essentially ready with their material, understandably sought that evidence-in-chief in the originating application be given on affidavit.

What is to be tried is the defence potentially available to the respondent under section 588FG(1)(b) of the Act. That requires the respondent to prove in relation to each benefit that is shown to have been received because of a particular "transaction" that,(i), the person received the benefit in good faith and (ii), at the time when the person received it, A “the person had no reasonable grounds for suspecting that the company was insolvent at that time or would become insolvent as mentioned in paragraph 588FC(b),” and B “a reasonable person and the person's circumstances would have had no such grounds for so suspecting."

The respondent's position is set out in a letter of the 22nd of June 2010, which is Exhibit 15, to Mr Hutson's affidavit.  That letter appears to me to helpfully set out the Commissioner's position which involves some of constraints in so far as the only way of resolving claims of the present kind, that exceed $25,000, is by a court order, which of course the respondent may consent to.

Mr Hutson's affidavit shows that the Commissioner has indeed done that in respect of the affairs of an associated company of Allzinc and in a far greater sum than that which is in issue here.

The Commissioner's attitude as set out in that letter, which is a compilation of the earlier contacts with the applicants, was that they became obliged to bring this proceeding.

One of the options which the letter identifies the Commissioner as having available is seeking in a proceeding such as the present indemnity against directors.  That appears inappropriate now as Mr Richard has, it seems, already been made bankrupt on the respondent's petition.

The other consideration for the Commissioner, who has indicated that only some of the issues on which the liquidators bear the burden of proof would be contested, is the defence, the terms of which have been read out above.

A solicitor's affidavit subject to leave to read and file today has indicated on hearsay but in a way sufficient to make it inappropriate for the court to make final orders that the good faith defence, as I shall call it, is being run.

Mr Copley strenuously submitted that the issues are extremely confined, that it ought to be possible for the respondent to get the material ready within days for hearing on a confined issue this year.

I don't think the situation is necessarily so straight forward.  I'm not satisfied that the relevant issues can or ought to be taken as exhaustively identified in Mr Hutson's affidavit, which unsurprisingly draws attention to correspondence from the Australian Taxation Office regarding particular failures of the company to make payments according to a schedule that had been settled after earlier trouble.

Ms Muir, for the respondent, has referred the court to some well-known authorities which indicate that circumstances that might be indicative of insolvency do not necessarily amount to that.  She referred to Queensland Bacon Pty Ltd v. Rees [1966] 115 CLR 266, and, very recently, Williams v. Peters [2010], 1QR 475.

There is no suggestion that the respondent stands in any different situation from other creditors. Nonetheless it is of some comfort to me to find that there is jurisprudence involving the Commissioner such as Cussen v. Commissioner of Taxation [2004] 51 ASCR 530, in which the New South Wales Court of Appeal dismissed an appeal against the primary Judge's determination that the defence had been established. There again, the issue appeared to be a narrow one as the appellant liquidators had conceded some elements of what the Commissioner had to show.

I think these issues are ones that would ordinarily be examined at a trial with cross-examination at least of deponents on the assumption (borne out here) that evidence in chief ought to be given on affidavit.  The applicants certainly ought not to be at risk of surprise at a trial should they not know in advance what witnesses are likely to be called by the respondent and what they're likely to contribute.

I don't regard the task of preparing pleadings as likely to be onerous here and it seems to be convenient to require that the applicant's case is already proliferating.  There are now at least three affidavits on the merits: Mr Hutson's, Mr Nixon's, and now Mr Richie's.  It seems to me useful to require the case to be organised in a concise way in pleadings. Those are the reasons for the order that the Court has made.

Thanks very much.  The order is as per initialled draft.