In the matter of Alsafe Security Products Pty Ltd atf the Alsafe Trust (in liquidation) [2016] NSWSC 428

In the matter of Alsafe Security Products Pty Ltd atf the Alsafe Trust (in liquidation) [2016] NSWSC 428

Darley failed to establish the s 588FG(2) defence because, despite good faith and valuable consideration being accepted or satisfied, the evidence showed that it had reasonable grounds to suspect the Company was insolvent and that a reasonable person in Darley's circumstances would also have had such grounds. The Company had been on credit hold for about two years, had failed to pay substantial amounts within terms, made rounded lump sum payments not linked to invoices, was generally supplied on a cash before delivery basis, and was asked for payment arrangements. Matters said to indicate business success did not displace the reasonable suspicion that the Company could not pay its debts...

Jurisdiction
Australia
Judgment Date
14 April 2016
Procedural Posture
Application for Orders Under S 588 FF of the Corporations Act 2001 (cth) Concerning Alleged Unfair Preference Payments / Principal Judgment After Hearing
Outcome
Judgment for the First and Second Plaintiffs; Darley's s 588FG(2) defence failed.
Legal Topics
['voidable Transactions' 'unfair Preferences' 'running Account' 'good Faith Defence Under S 588 Fg(2)' 'insolvency']
['corporations' 'insolvency'] ['voidable Transactions' 'unfair Preferences' 'running Account' 'good Faith Defence Under S 588 Fg(2)' 'insolvency']

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Procedural Posture

Application for Orders Under S 588 FF of the Corporations Act 2001 (cth) Concerning Alleged Unfair Preference Payments / Principal Judgment After Hearing

Legal Issues

  1. 1 ['Whether payments totalling $97,628.58 to Darley constituted an unfair preference under s 588FA of the Corporations Act 2001 (Cth) and voidable transactions under s 588FE(2).' "Whether Darley established the defence under s 588FG(2) of the Corporations Act 2001 (Cth), including that it had no reasonable grounds for suspecting the Company's insolvency and that a reasonable person in its circumstances would have had no such grounds."]

Ratio Decidendi

Darley failed to establish the s 588FG(2) defence because, despite good faith and valuable consideration being accepted or satisfied, the evidence showed that it had reasonable grounds to suspect the Company was insolvent and that a reasonable person in Darley's circumstances would also have had such grounds. The Company had been on credit hold for about two years, had failed to pay substantial amounts within terms, made rounded lump sum payments not linked to invoices, was generally supplied on a cash before delivery basis, and was asked for payment arrangements. Matters said to indicate business success did not displace the reasonable suspicion that the Company could not pay its debts...

Court Disposition

Judgment for the First and Second Plaintiffs; Darley's s 588FG(2) defence failed.

Orders

  • ['Order that judgment be entered in favour of the First and Second Plaintiff in the amount of $97,628.58 and interest.' "Order that Defendant pay the First and Second Plaintiff's costs of the proceedings as agreed or as assessed."]