FARRELL AND ROGAN AS LIQUIDATORS OF CONTRACT ENGINEERING LIMITED (IN RECEIVERSHIP AND IN LIQUIDATION) v FENCES & KERBS LIMITED CA773/2012 [2013] NZCA 329

FARRELL AND ROGAN AS LIQUIDATORS OF CONTRACT ENGINEERING LIMITED (IN RECEIVERSHIP AND IN LIQUIDATION) v FENCES & KERBS LIMITED CA773/2012 [2013] NZCA 329 [25 July 2013]IN THE COURT OF APPEAL OF NEW ZEALANDCA773/2012[2013] NZCA 329BETWEEN PETER ESMOND FARRELL ANDSIMON PAUL ROGAN ASLIQUIDATORS OF CONTRACTENGINEERING LIMITED (INRECEIVERSHIP AND INLIQUIDATION)AppellantsAND FENCES & KERBS LIMITEDRespondentCA783/2012BETWEEN PETER ESMOND FARRELL ANDSIMON PAUL ROGAN ASLIQUIDATORS OF CONTRACTENGINEERING LIMITED (INRECEIVERSHIP AND INLIQUIDATION)AppellantsAND ACME ENGINEERING LIMITEDRespondentCA864/2012BETWEEN JEFFREY PHILIP MELTZER ANDLLOYD JAMES HAYWARD ASLIQUIDATORS OF WINDOWHOLDINGS LIMITED (INLIQUIDATION)AppellantsAND HIWAY STABILIZERS NEW ZEALANDLIMITEDRespondentCourt: O'Regan P, Randerson and French JJCounsel: M D Branch, K I Bond and K F Shaw for Appellants inCA773/2012 and CA783/2012B P Keene QC and J F Anderson for Appellants in CA864/2012J P Temm and S A Hickman for Respondent in CA773/2012S A Barker and E M Ritchie for Respondent in CA783/2012G M Harrison and C Hunt for Respondent in CA864/2012Judgment:(On the papers)25 July 2013 at 10:00amFINAL JUDGMENT OF THE COURTA All three appeals are allowed.B The appellants in CA773/2012 are entitled to judgment against the respondent for $57,944.16 together with interest thereon pursuant to the Judicature Act 1908 from the date on which the appellants' notice to setaside was served on the respondent in CA773/2012 until the date of payment.C The appellants in CA783/2012 are entitled to judgment against the respondent in the sum of $105,484.50 together with interest pursuant to the Judicature Act from the date on which the appellants' notice to setaside was served on the respondent in CA783/2012 until the date of payment.D The appellants in CA864/2012 are entitled to judgment against the respondent for $13,021.55 together with interest pursuant to the Judicature Act from the date on which the appellants' notice to set asidewas served on the respondent in CA864/2012 until the date of payment.E No awards of costs are made in CA773/2012 and CA864/2012.F The appellants in CA783/2012 are entitled to costs against the respondent in this Court for a standard appeal and cross-appeal on a Band A basis together with usual disbursements.G The costs orders made in the High Court in all three appeals are set aside. Any remaining issues as to costs in the High Court are to be determined by that Court.____________________________________________________________________REASONS OF THE COURT(Given by Randerson J)Introduction[1] In our interim judgment delivered on 27 March 2013,1 we determined that the giving of value under s 296(3)(c) of the Companies Act 1993 (the Act) must be proved to have occurred at the time the payment or other company property is received and does not include value given at the time the antecedent debt is created.[2] We reserved all remaining issues including issues raised on the cross-appeal by ACME in CA783/2012. The remaining issues are:(a) Whether the requirement for value to be given when the payment is made by the insolvent company to the creditor may be satisfied by the creditor receiving the payment in satisfaction of the antecedent debt.(b) Whether the requirement for value to be given when the payment is made to the creditor can be satisfied by the creditor forbearing to sue at the time of payment.(c) Whether the High Court was wrong to find that Contract Engineering Ltd was unable to pay its debts as they fell due at the time the relevant payments were made to ACME.1 Farrell v Fences & Kerbs Ltd [2013] NZCA 91 [Interim judgment].(d) Whether the High Court was wrong not to award indemnity costs in favour of ACME.First issue: Whether the requirement for value to be given when the payment is made by the insolvent company to the creditor may be satisfied by the creditor receiving the payment in satisfaction of the antecedent debt[3] The respondents in all three appeals submitted on the basis of Australian authorities that value may be given at the time the creditor receives payment from the insolvent company by its receipt in satisfaction of the antecedent debt. Particular reliance was placed on the decision of the Court of Appeal of New South Wales inBuzzle Operations Pty Ltd (in liq) v Apple Computer Australia Pty Ltd.2 We discussed this decision in our interim judgment.3 We accepted that Buzzle supports the proposition that valuable consideration under the equivalent Australian legislation may be given by the satisfaction and release of the antecedent debt. We also noted that it appears to be accepted in Australia that it will not generally be difficult to establish that valuable consideration has been given, referring to passages from McPherson's Law of Company Liquidation.4[4] In our interim judgment we found, however, that there were material differences between s 296(3) of the Act and its Australian equivalent, s 588FG(2) of the Corporations Act 2001 (Cth).[5] We are not persuaded that the Australian approach should be adopted in New Zealand. Our reasons are broadly in line with those canvassed in the interim judgment in support of our conclusion that value had to be given at the time of the payment. We do no more than summarise those reasons but we provide additional reasons where appropriate to address the specific issues identified.[6] First, the objective and effect of the voidable transaction regime is not to do justice or achieve fairness between a particular creditor and the debtor company. It is to achieve fairness amongst all creditors inter se. As a general rule, the2 Buzzle Operations Pty Ltd (in liq) v Apple Computer Australia Pty Ltd [2011] NSWCA 109, (2011) 277 ALR 189.3 Interim judgment at [59]–[61] and [79].4 Interim judgment at [79], citing M Gronow and R Mason (eds) McPherson's Law of CompanyLiquidation (looseleaf ed, Thomson Reuters) at [11.1650].well-established pari passu principle requires that creditors of a company who are inthe same class share on a pro rata basis in the company's funds available fordistribution.[7] Second, the voidable transaction provisions of the Act attempt to strike a balance between the interests of all creditors in being able to share the assets of the company and the interests of particular creditors who believe that payments made to them have been validly received and that they ought not to be required to pay them back.[8] Third, the object of the avoidance provisions under the Act is to swell the pool of funds available to the company to be shared rateably amongst all creditors of the same class in accordance with the pari passu principle. The mere receipt of payment in satisfaction of a debt due to a creditor does nothing to swell the pool ofavailable funds for creditors. Rather, it has the effect of diminishing the company's creditors to the extent of the payment while reducing the company's assets by thesame amount.[9] Fourth, for the reasons given in our interim judgment, the proposition advanced by the respondent creditors would seriously undermine the policy rationale for the avoidance provisions and would render s 296(3)(c) practically redundant.[10] Fifth, the proposition advanced by the creditors would amount to a significant change in policy direction from the approach adopted prior to the 2006 amendments to the Act in a way that was not signalled by Parliament.[11] Sixth, we consider that the use of the term "value" rather than "valuable consideration" in s 296(3)(c) is not purely semantic. The New Zealand legislaturespecifically adopted the different concept of "value" in s 296(3) in contrast to the words "valuable consideration" used in the preceding parts of the same section.5"Valuable consideration" is also the term used in the Australian section.5 See s 296(1)(b) and (2)(b), and also s 293 where the expressions "value" and "valuableconsideration" are used in apparent contradistinction in s 293(1A)(a), (3)(b) and (5)(b) and (c).[12] Seventh, the Australian authorities relied upon by the creditors are distinguishable and, in any event, the New Zealand legislation has not followed the Australian legislation in material respects. In Buzzle the Court of Appeal of New South Wales accepted without discussion, the proposition that the satisfaction and release of an antecedent debt is valuable consideration for the purposes of s 588FG(2)(c) of the Corporations Act.6 The Court accepted that valuable consideration did not require full consideration. However, for reasons already noted, we are satisfied that the requirement to give value at the time of the payment under s 296(3)(c) was intended to have a different meaning from the phrase"valuable consideration" used in the Australian legislation.[13] Finally, the fact that the creditor must pay back the amount received in satisfaction of the antecedent debt does not by itself establish relevant detriment to the creditor as discussed in previous New Zealand authorities.[14] Mr Harrison for Hiway Stabilizers and Mr Barker for ACME placed particular reliance on the decision of the Full Court of the Federal Court of Australia in PT Garuda Indonesia v Grellman7 in which it was held that, for the purposes of ss 120 and 121 of the Bankruptcy Act 1966 (Cth), a transfer of property in satisfaction of an antecedent debt constituted valuable consideration for a payment in discharge of that debt.8[15] However, the statutory context was quite different from s 296(3) of the Act. Sections 120 and 121 are concerned with the transfer of property at an undervalue or dispositions with intent to defraud creditors. The Court in Garuda was concerned with the payment of money combined with a transfer of a house from the bankrupt to his employer in satisfaction of a debt owed to the employer. The legislation required the trustee in bankruptcy to show that the transfer was not made for valuable consideration. There was no question as to the adequacy of the consideration (the payment of cash and the transfer of the house). That is a wholly different situation from the present where the creditors merely received payments from the company and gave no value in return at the time the payments were received.6 See the discussion at [59] and [60] of the interim judgment.7 PT Garuda Indonesia v Grellman [1992] FCAFC 188, (1992) 107 ALR 199.8 At 213–215.[16] We accept that the Federal Court went on to find that payment by a debtor in discharge of an antecedent debt may be regarded as the provision of valuable consideration under the Bankruptcy Act. But even then, there will only be valuable consideration sufficient to bring the transaction within the protective provisions of the legislation if the consideration is adequate in the sense that its relationship to the value of the payment or transfer is real and substantial and not merely nominal, trivial or colourable.9[17] Mr Barker for ACME urged us to consider the use of the expression "value"in other statutory contexts. He referred to the Personal Property Securities Act 1999 and to s 2 of the Bills of Exchange Act 1908. We have already determined in our interim judgment10 that the Personal Property Securities Act does not provide any useful guidance given its different statutory context and we are of the same view with regard to the Bills of Exchange Act provision relied upon.[18] Nor do we consider that any assistance may be gained from Tapsell v Murray11 in which Allan J found that there is no reason to suppose that the terms"value" and "valuable consideration" in ss 63 and 183 of the Land Transfer Act 1952were intended to have different meanings. Again, context is everything and we are not persuaded that the terms "value" and "valuable consideration" should be treatedas equivalent in the context of s 296(3) of the Act.Is full value required for the payment in order to gain protection under s 296(3)(c)?[19] We were referred to dictionary definitions of the term "value". For example,the Shorter Oxford Dictionary:121a. That amount of a commodity, medium of exchange, etc, considered to be an equivalent for something else; a fair or satisfactory equivalent or return.[20] And, in Webster's Third New International Dictionary:139 At [63], citing Barton v Official Receiver [1986] HCA 44, (1986) 161 CLR 75 at 86.10 Footnote required.11 Tapsell v Murray (2008) 9 NZCPR 184 (HC).12 A Stevenson (ed) Shorter Oxford English Dictionary (6th ed, Oxford University Press, Oxford, 2007).13 Philip Babcock Grove (ed) Webster's Third New International Dictionary (G & C Merriam Co, Springfield, MA, 1976).the amount of a commodity, service, or medium of exchange that is the equivalent of something else: a fair return in goods, services, or money.[21] Mr Keene QC submitted for the liquidators of Window Holdings Ltd, that if the creditor provides value at the time of the impugned payment which is broadly equivalent to the payment, it is fair between creditors inter se since the creditor hasprovided value replenishing the company's insolvent estate. He further submittedthat the purpose of the defence available under s 296(3) by the giving of value at the time of payment was to encourage creditors to continue doing business with, and to extend credit to, companies in financial distress. Creditors were protected where they provided value that was reasonably equivalent to the payment or propertyremoved from the company's assets by the voidable transactions.[22] On its face, s 296(3)(c) does not stipulate that full value equivalent to the amount of the antecedent debt need be given at the time the payment or transfer of property by the company occurs. In contrast to its statutory predecessors, the presentversion of s 296(3) does not refer to recovery by the liquidator being denied "wholly or in part" if the conditions of the protective measure are established.14Section 296(3) now forbids the court from ordering the recovery of property if the statutory conditions are met. Section 296(3) may also be contrasted with s 297 (dealing with transactions at an undervalue). Under s 297, a liquidator is entitled to recover from a person the difference between the value of the property received by that person from the company and the value the company received. Thus, if a company transfers property at an undervalue, a comparison is required between the actual value of the property and what value was received in return.[23] On the other hand, we are satisfied that real and substantial value is required to be given by the creditor. A nominal or trivial value such as might provide consideration for a contract15 is not sufficient to bring the creditor within the protection of the legislation.[24] The assessment of whether real and substantial value has been given by the creditor must be made with reference to the value of the money or other company14 See the discussion of the statutory history at [36]–[43] of the interim judgment.15 See the discussion in John Burrows, Jeremy Finn and Stephen Todd Law of Contract in New Zealand (4th ed, LexisNexis, Wellington, 2012) at [4.5].property received by the creditor from the debtor company. The closer the amount of the value given by the creditor is to the value of the money or property received, the more likely it is that the court will find that real and substantial value has been given. Obviously the converse also applies.[25] In our interim judgment we instanced a creditor who agrees to undertake further work for the company in return for payment in whole or in part of the existing debt due to the creditor. It will not always be easy to establish that real and substantial value is thereby given, particularly if the company merely becomes more deeply indebted and ultimately collapses. But the legislation contemplates the availability of a defence in such circumstances if the creditor shows that real and substantial value is given at the time of the payment. Alternatively, a creditor may be able to rely on alteration of position within the second limb of s 296(3)(c).[26] Even if the creditor is not able to show real and substantial value has been given, the court retains a discretion under s 295(a) as to the amount the creditor is ordered to repay.Conclusions on first issue[27] We conclude that the mere receipt of a payment by a creditor in satisfaction of an antecedent debt does not constitute the giving of value for the purposes of s 296(3) of the Act. New value which is real and substantial must be given. Whether and, if so, to what extent, new value is given at the time of receipt of the payment will be a question of fact in each case.[28] Once a creditor has established that real and substantial value is given (whether or not it represents full value) the creditor is entitled to protection under s 296(3)(c), assuming the other elements of s 296(3) are also established. If the creditor does not establish an entitlement to protection under s 296(3), a discretion remains under s 295 as to the extent to which the creditor must repay the payment or other property or benefits received.Second issue: Whether the requirement for value to be given when the payment is made to the creditor can be satisfied by the creditor forbearing to sue at the time of payment[29] Mr Barker submitted on behalf of ACME that forbearance by a creditor to sue the company from whom the payment has been received could constitute the giving of value at the time of receipt of the payment for the purpose of s 296(3)(c) of the Act. That proposition was not advanced on behalf of Fences & Kerbs or Hiway Stabilizers in the High Court and they do not pursue it in this Court.[30] Mr Barker acknowledged that the New Zealand courts have been reluctant to find that forbearance to sue constitutes valuable consideration. He referred us to the decision of Miller J in Re Seafresh New Zealand Ltd (in liq): Ju v Vance16 in which the Judge was considering an application brought by the mortgagees under two mortgages over ships which were granted by Seafresh within the specified period under s 293 of the Act. The mortgagees were seeking orders under ss 293 and 294 of the Act that the two mortgages not be set aside by liquidators. Section 293 of the Act then provided that a charge over any property or undertaking of a company was voidable on the application of the liquidator if it was given within the specified period unless:(a) The charge secures money actually advanced or paid, or the actual price or value of property sold or supplied to the company, or any other valuable consideration given in good faith by the grantee of the charge at the time of, or at any time after, the giving of the charge;17[31] The grantee acknowledged that apart from a relatively small advance made at the time the mortgages were executed, the sums secured by the mortgages were for past advances. However, counsel for the grantee submitted that valuable consideration was given by the grantee agreeing to defer payment of the amount due for one year. Miller J discussed authorities18 to the effect that a merely nominal consideration, even though it would suffice to support a simple contract in law, wasnot sufficient to meet the requirement for "other valuable consideration" to be given16 Re Seafresh New Zealand Ltd (in liq): Ju v Vance (2004) 2 NZCCLR 79 (HC).17 The equivalent is now s 293(1A).18 Barton v Official Receiver, above n 9; Re Abbott (A Bankrupt) [1983] Ch 45 at 57; Re Austin (A Bankrupt) [1982] 2 NZLR 524 (HC); and Meo v Official Assignee [1987] 2 NZLR 1 (CA).at the time the mortgages were granted. Those authorities held that real and substantial value was required, not consideration which was merely nominal or trivial or colourable.[32] Miller J observed:[43] Forbearance introduces no new asset. Section 293 comes intoplay only if liquidation commences within a year. In the typical case where the company proves to have been insolvent, or nearly so, at the time the security was given, it will usually be evident that the company received littleif any value from the creditor's agreement to delay repayment of an existingunsecured debt. I accept that management may attach substantial value to a forbearance at the time, but on analysis such value may prove to be afunction of the company's inability to pay its debts. A solvent companyshould be able to raise money to pay its creditors using the same security. That being so, the only value legitimately associated with a forbearance is likely to be any saving in transactions costs associated with refinancing.[33] The Judge concluded:[47] In summary, the authorities show that a mortgagee who seeks to rely on a forbearance to sue as valuable consideration for the mortgage faces three formidable obstacles in proving consideration. The first is the need to show that the forbearance has a real worth to the debtor in the circumstances. Inability to refinance is not enough. The second is quantifying that worth. Because it is not enough to show that the mortgagee gave a horse or a hawk or a robe, or any other consideration that is sufficient in law to support a contract, the mortgagee must show that the forbearance has a value that corresponds approximately to the value of the security. The third is that the mortgage must secure the new consideration – the forbearance – and not merely the existing debt. For these reasons, it is doubtful whether a forbearance to sue, without more, could survive a challenge under s 293.[34] We accept that the statutory context of s 293 of the Act differs from s 296(3) since the former focuses specifically on money actually advanced or paid, the actual price or value of the property sold or supplied to the company or any other valuable consideration. But it is helpful to the extent that it focuses on the need to show that real worth must be given by the forbearance. Miller J also highlighted that where forbearance to sue is relied upon there are formidable obstacles in establishing that the forbearance has a real or substantial value.[35] However, Mr Barker submitted that it was settled law in Australia that forbearance to sue may constitute valuable consideration in the context of s 120 of the Bankruptcy Act.[36] Section 120(1) in its current form provides:(1) A transfer of property by a person who later becomes a bankrupt (the transferor) to another person (the transferee) is void against thetrustee in the transferor's bankruptcy if:(a) the transfer took place in the period beginning 5 years before the commencement of the bankruptcy and ending on the date of the bankruptcy; and(b) the transferee gave no consideration for the transfer or gave consideration of less value than the market value of the property.[37] This section was amended in 1996 to this form in order to overcome theeffect of the High Court of Australia's decision in Barton19 by making it clear that the creditor had to establish that full value was given by the creditor for the transfer of the property.[38] Mr Barker relied on two Australian decisions to support his submission that forbearance to sue has been regarded as good consideration under s 120 of the Bankruptcy Act: Victorian Producers' Co-operative Co Ltd v Kenneth20 and Combis, Trustee of the Property of Peter Jensen (Bankrupt) v Jensen (No 2).21 Reference was also made to Re Zampatti ex parte RJ Levack Ltd22 which was concerned with the granting of a charge over a motor vehicle by Mr Zampatti who was subsequentlyadjudicated bankrupt. The Court was satisfied that the creditor's forbearance to suewas sufficient to satisfy the requirement of valuable consideration.23[39] Mr Branch submitted on behalf of the liquidators of Contract Engineering that in relation to s 296(3)(c), different considerations applied. If forbearance could amount to the giving of value under s 296(3)(c) it was essential that real or substantial value be given. He relied particularly on the decision of this Court in19 Barton v Official Receiver, above n 9.20 Victorian Producers' Co-operative Co Ltd v Kenneth [1999] FCA 1488 at [13] and [14].21 Combis, Trustee of the Property of Peter Jensen (Bankrupt) v Jensen (No 2) [2009] FCA 1383, (2009) 181 FCR 178.22 Re Zampatti ex parte RJ Levack Ltd [1993] FCA 170.23 Mr Barker also cited a number of cases in support of the proposition that a forbearance to sue can be sufficient consideration to support a simple contract, for example Attorney-General for England and Wales v R [2002] 2 NZLR 91 (CA). However, in the context of this case it is important to remember that s 296(3)(c) requires real or substantial value to be given, which requires more than the nominal consideration that is capable of supporting a contract.Meo v Official Assignee24 and noted that the Full Court in Garuda25 had reached the same conclusion.26Conclusions on second issue[40] We accept that forbearance to sue may constitute the giving of value for the purposes of s 296(3)(c) but that acceptance must be heavily qualified. While acknowledging the different contexts of voidable charges under s 293 of the Act, we consider it is appropriate to adopt a similar approach to the giving of value under s 296(3)(c) of the Act. As already discussed, the New Zealand legislature has chosen to adopt a requirement for the giving of value rather than valuable consideration. We consider that choice was deliberate. It follows that something more than the consideration necessary to support a contract is required under s 296(3).[41] To require real or substantial value would be consistent with the policy rationale we have identified. Unless real or substantial value is given by the creditor at the time of receipt of the payment or other company property, there will be no corresponding benefit for creditors by swelling the pool of assets available to meet the company creditors.[42] For the reasons given by Miller J in Re Seafresh, it will often be difficult to establish that the giving of time for payment or a forbearance to sue has any quantifiable value. As Mr Branch pointed out, the giving of time or forbearing to sue may not provide any tangible benefit for the company. In many cases, the company will simply descend further into debt.[43] There is a useful discussion of this topic by Merkel J in the Victorian Producers case.27 The Judge observed that the value of an agreement to forbearfrom recovering a debtor's indebtedness will be closely linked to the value of thechose in action (the ability successfully to recover the debt). Where the debtor is in a poor financial position, the value of the chose in action may be minimal or even24 Meo v Official Assignee, above n 18.25 PT Garuda Indonesia v Grellman, above n 7.26 At 215.27 See Victorian Producers' Co-operative Co Ltd v Kenneth, above n 20, at [13]–[17].non-existent. It may therefore be difficult to establish that the agreement to forbear has any real and substantial value.[44] We also agree with Mr Branch that, in order to establish forbearance to sue, the creditor must show more than the absence of steps taken to enforce the debt. There must be evidence of an implied promise to forbear or a forbearance to sue at the express or implied request of the opposite party.28This caseFences & Kerbs[45] Mr Temm submitted on behalf of Fences & Kerbs that value had been given by Fences & Kerbs at the time Contract Engineering made the payments totalling $56,256.66 (including GST) over the period 4 August 2010 to 30 September 2010.29Mr Temm's submission was that the agreement by Fences & Kerbs made on or about 26 July 2010 to undertake additional work amounting to $1,687.50 (including GST) was sufficient to show that value had been given by Fences & Kerbs at or about that time.[46] In response, Mr Branch submitted that the "new value" argument had notbeen raised either in the High Court or in this Court at the time of the hearing leading to the interim judgment. In any event, he submitted that the argument was not available to Fences & Kerbs on the facts.[47] The additional work was agreed to on or about 26 July 2010, just prior to six instalment payments made to Fences & Kerbs over the period 4 August 2010 to 30 September 2010. According to the evidence, the additional work was carried out in August 2010. An invoice was rendered for the additional work on 28 September 2010 and paid in full on 29 October 2010.[48] Mr Michael Field, director of Fences & Kerbs, swore an affidavit on behalf of Fences & Kerbs in which he specifically denied that any deferred repayment28 Official Trustee in Bankruptcy v Lopatinsky [2003] FCAFC 109, (2003) 129 FCR 234 at [103].29 See the facts set out at [12]–[14] of our interim judgment.arrangement had been made with Contract Engineering. He did not suggest that the additional work was undertaken in return for the instalment payments made in respect of the prior invoice rendered by Fences & Kerbs on 21 June 2010 for $56,256.66. His assumption was that the payments were made by instalments under payment terms agreed between Contract Engineering and the principal, Contact Energy Ltd.[49] While some of the impugned payments (totalling $31,500.00) were received on 4, 11 and 27 August 2010 respectively, soon after the agreement to undertake the extra work, there is no apparent link to the agreement to undertake the extra work and those payments. The additional work agreed was effectively a minor extra to the principal work and formed part of the overall contractual arrangements between the parties. It added nothing of real and substantial value to the assets of the company.[50] We conclude that Fences & Kerbs has not established that value was given at the time the impugned payments were received.ACME[51] It is not suggested that ACME provided value at the time its debt was paidother than through ACME's agreement with Contract Engineering to be paid ininstalments.30[52] The evidence falls well short of establishing that any real or substantial value was given by ACME by agreeing to the deferred payment arrangement. There is no evidence to support the assertions made by Mr Barker that, by withholding its right to enforce the debt, ACME enabled the company to continue to trade and to hold out until it received further assets to pay off its creditors. Such evidence as there wassuggests that Contract Engineering's financial position deteriorated as we discussbelow. The evidence also suggests that there was little likelihood of ACME being able to recover the debt due to it if it had sued the company. It follows that the value of any forbearance would be purely nominal.30 Refer to the facts set out at [15]–[16] of the interim judgment.[53] We are satisfied that ACME has not established that it provided value at the time the relevant payments were received.Hiway Stabilizers[54] Our conclusion that the receipt of payment in satisfaction of the antecedent debt does not constitute value for the purposes of s 296(3)(c) means that Hiway Stabilizers is not entitled to the protection of that provision. No other basis was advanced to satisfy s 296(3)(c).Third issue: Whether the High Court was wrong to find that Contract Engineering was unable to pay its debts as they fell due at the time the relevant payments were made to ACME[55] It was submitted on behalf of ACME on its cross-appeal that there was no proper evidential foundation for the finding by Associate Judge Christiansen that the applicants had proved that Contract Engineering was insolvent31 at the time the relevant payment was made by the company to ACME.32[56] There is no challenge to the principles adopted by the Associate Judge in order to assess solvency:33[24] For the purpose of its enquiry the Court focuses upon that time during which the payment or payments are made and in respect of which regard may be had to the recent past to see if the debtor was able to pay debts as they became due. A consideration of the outstanding debts at the time is required. An ability to pay involves a substantial element of immediacy to provide payment from cash and non cash resources. An excess of assets over liabilities will not itself satisfy the test if there is no ability to pay. What will satisfy the test is inability to procure sufficient funds to pay debts within a relatively short period of time. Therefore theCompany's financial position needs to be considered in its entirety because a temporary lack of liquidity does not necessarily evidence insolvency and it isfor that reason a consideration of a debtor's position over a period of time isrequired.[57] Associate Judge Christiansen accepted evidence by the liquidator Mr Farrell that Contract Engineering was not able to pay its debts as they fell due when ACME31 In terms of s 292(2)(a) of the Companies Act 1993.32 Farrell v ACME Engineering Ltd [2012] NZHC 2874 at [29].33 Citing Blanchett v Joinery Direct Ltd HC Hamilton CIV-2007-419-1690, 23 December 2008 at [27].received the ten instalment payments of its debt between 13 August 2010 and 22 October 2010. In particular, the Judge noted that at the time of their appointment on 17 December 2010, the receivers of Contract Engineering reported that the liabilities of the company exceeded its assets by $5,489,886.[58] Of course, as Mr Barker pointed out, a deficit of assets over liabilities does not necessarily signify an inability of a company to pay its debts as they fall due. Mr Barker also pointed out that when the receivers were appointed for the company, they carried on the business of the company and eventually sold it as a going concern.[59] However, there was ample evidence to support the finding by the Associate Judge that Contract Engineering was unable to pay its debts at the time the payments were made to ACME:The financial statements of the company for the 15 months ended 30 June 2010 showed that the company traded at a loss for the period of $2,125,529; there was negative shareholder equity of $1,332,877; and current liabilities exceeded current assets by $2,361,246.The receivers also reported that, as at the date of their appointment, there were unsecured creditors amounting to $3,235,740. After payment of secured creditors, it was unlikely there would be any funds available for distribution to unsecured creditors.Mr Farrell's evidence was that the company had overdue tax debts inAustralia and New Zealand totalling $729,808. These had increased substantially since 30 June 2010.The deferred payment arrangement relating to the ACME debt was itself evidence that the company was unable to pay its debts as they fell due.The debt due to Fences & Kerbs was also paid by instalments over the period 4 August 2010 to 30 September 2010.The company went into receivership only eight weeks after the last of the impugned payments.Mr Farrell was not cross-examined on his evidence as to insolvency and no expert evidence disputing his evidence was adduced.[60] Mr Barker raised a number of other points but these were mainly by way of assertion, not backed by evidence. He speculated, for example, that there might have been a dispute about the tax liabilities; there might have been a substantial credit held to the account of the company or a current account facility to meet liabilities; there was no evidence that creditors were demanding payment from the company at the time of the transaction; and that, although ACME's invoice stated that paymentwas due on the 20th of the month the contract between ACME and the company (as detailed in the quotation), stipulated that payment terms were to be agreed.[61] We are satisfied there was more than enough evidence to support theconclusion of the Associate Judge in relation to Contract Engineering's solvency.The points raised by Mr Barker cannot stand in the face of the evidence produced by the liquidators which the Judge rightly found showed overwhelmingly that Contract Engineering was not able to meet its debts as they fell due at the time the impugned payments were made.Fourth issue: Whether the High Court was wrong not to award indemnity costs in favour of ACME[62] Mr Barker accepted that the cross-appeal relating to the failure to award indemnity costs to ACME in the High Court would not need to be considered if the appeals were successful. Since we intend to allow the appeals, it is no longer necessary to consider this issue.Costs[63] We were informed that the appellants in CA773/2012 and CA864/2012 do not seek costs in this Court. However, the appellants do seek costs against ACME in CA783/2012 on the appeal and cross-appeal. Mr Barker resisted an order for costs on the basis it was unfair for the appellants in that appeal to seek costs against ACME when costs had not been sought against the other respondents. In the absence of any agreement between the parties in CA783/2012 not to seek costs, we see no reason why costs should not follow the event on both the appeal and cross-appeal.Conclusions[64] For the reasons given, all three appeals are allowed. The appellants are entitled to recover the amounts of the transactions that have been set aside and interest. We consider that interest should run from the date on which the notice to set aside was served on the relevant respondent.[65] In CA773/2012, the liquidators are entitled to judgment against Fences & Kerbs for $57,944.16 together with interest thereon pursuant to the Judicature Act from the date on which the notice to set aside was served on Fences & Kerbs until the date of payment.[66] In CA783/2012, the liquidators are entitled to judgment against ACME in the sum of $105,484.50 together with interest pursuant to the Judicature Act from the date on which the notice to set aside was served on ACME until the date of payment.[67] In CA864/2012, the liquidators are entitled to judgment against Hiway Stabilizers for $13,021.55 together with interest pursuant to the Judicature Act from the date on which the notice to set aside was served on Hiway Stabilizers until the date of payment.[68] We make no order for costs in relation to CA773/2012 and CA864/2012.[69] In CA783/2012, the liquidators are entitled to costs against ACME in this Court for a standard appeal and cross-appeal on a Band A basis together with usual disbursements.[70] The costs orders made in the High Court in all three appeals are set aside. Any remaining issues as to costs in the High Court are to be determined by that Court.Solicitors:Harkness Henry, Hamilton for Appellants in CA773/2012 and CA783/2012Hucker & Associates, Auckland for Appellants in CA864/2012Cargill Stent Law, Taupo for Respondent in CA773/2012Buddle Findlay, Wellington for Respondent in CA783/2012North Harbour Law, Auckland for Respondent in CA864/2012