Whitton v Konemann Australia [2002] NSWSC 1137

Whitton v Konemann Australia [2002] NSWSC 1137

The magistrate made an error of law in applying the objective limb of s 588FG(2) because, on the evidence of the credit relationship, account history and dishonoured cheques, the facts were incapable of justifying a conclusion that a reasonable person in Konemann's circumstances would have had no reasonable grounds for suspecting Chittagong's insolvency during March to August 1998. The s 588FG(2) defence was therefore unavailable. However, there was evidence supporting a running account under s 588FA(3), so the recoverable preference was the difference between the highest balance in the running account and the closing balance, being $26,010.20.

Jurisdiction
Australia
Judgment Date
28 November 2002
Procedural Posture
Appeal Under S 69 of the Local Courts (civil Claims) Act 1970 (nsw) From Dismissal of a Liquidator's Claim to Recover Alleged Unfair Preferences and Uncommercial Transactions Under the Corporations Act 2001 (cth). / Appeal in the Supreme Court of New South Wales From a Local Court Decision.
Outcome
Appeal allowed to the extent that the magistrate's finding that the s 588FG(2) defence was made out was set aside; judgment to be entered for the appellant for the amount of the unfair preference calculated under the running account provision.
Legal Topics
['winding Up' 'unfair Preferences' 'voidable Transactions' 'statutory Defence Under S 588 Fg(2)' 'running Account Under S 588 Fa(3)' 'appeal on Error of Law']
['corporations' 'insolvency' 'civil Procedure'] ['winding Up' 'unfair Preferences' 'voidable Transactions' 'statutory Defence Under S 588 Fg(2)' 'running Account Under S 588 Fa(3)' 'appeal on Error of Law']

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Procedural Posture

Appeal Under S 69 of the Local Courts (civil Claims) Act 1970 (nsw) From Dismissal of a Liquidator's Claim to Recover Alleged Unfair Preferences and Uncommercial Transactions Under the Corporations Act 2001 (cth). / Appeal in the Supreme Court of New South Wales From a Local Court Decision.

Legal Issues

  1. 1 ['Whether the Local Court decision was erroneous in point of law for the purposes of s 69(2) of the Local Courts (Civil Claims) Act 1970 (NSW).' 'Whether Konemann established the statutory defence in s 588FG(2) of the Corporations Act 2001 (Cth), in particular the subjective and objective suspicion of insolvency elements.' 'Whether the payments formed part of a continuing business relationship or running account under s 588FA(3) of the Corporations Act 2001 (Cth).' 'What amount was recoverable as the unfair preference if the running account provision applied.']

Ratio Decidendi

The magistrate made an error of law in applying the objective limb of s 588FG(2) because, on the evidence of the credit relationship, account history and dishonoured cheques, the facts were incapable of justifying a conclusion that a reasonable person in Konemann's circumstances would have had no reasonable grounds for suspecting Chittagong's insolvency during March to August 1998. The s 588FG(2) defence was therefore unavailable. However, there was evidence supporting a running account under s 588FA(3), so the recoverable preference was the difference between the highest balance in the running account and the closing balance, being $26,010.20.

Court Disposition

Appeal allowed to the extent that the magistrate's finding that the s 588FG(2) defence was made out was set aside; judgment to be entered for the appellant for the amount of the unfair preference calculated under the running account provision.

Orders

  • ['The Local Court judgment should be set aside.' 'An order should be made under s 588FF(1) directing the defendant to pay the plaintiff $26,010.20.' 'The appellant is entitled to the costs of the appeal and the costs of the hearing.' 'The appellant is entitled to interest on the amount of the unfair preference at...