• unfair preferences
• uncommercial transactions
• insolvent trading

It is intended to be an easy-access reference tool to keep you up to date with the current developments in this contentious and ever growing area of litigation across all of the Australian jurisdictions.

Melinda Stanley, Associate
Editor

Reasonable suspicion of Insolvency - It doesn't work to turn a Blind Eye ….

Sheldrake & Offermans -v- Paltoglou  (3 March 2006) 

Qld Court of Appeal: de Jersey CJ, McMurdo P and Muir J
UNFAIR PREFERENCES — Debtor tries to establish no reasonable suspicion of insolvency. Situation where in process of selling its sole income producing asset (a restaurant). Debtor provides evidence to assert that, if the sale of major asset was successful, Company would not be solvent. Court of Appeal dismiss argument and concludes Debtor was turning a blind eye in the face of reasonable suspicion of insolvency.

Click here to view the case:

http://www.austlii.edu.au/cgi-bin/disp.pl/au/cases/qld/QCA/2006/52.html?query=%5e+sheldrake+going+bananas

Cutting a deal with the Tax Office - Do you still need to prove insolvency on the evidence?…..

Young -v- Commissioner of Taxation  (15 February 2006)

Federal Court of Australia - NSW: Tamberlin J

PREFERENCE ACTIONS - The Liquidator and Tax Office agree to execute Consent Orders for repayment of $1.5 million unfair preference. Tax Office cross-claimed against directors for personal liability. Tamberlin J considers the conflicting authorities as to whether the Court can act on parties' admissions by making a finding of insolvency without any final determination on the evidence. Finding that Court can make such an order. To have it otherwise would deter parties coming to agreement to avoid costs of litigation, and would result in a waste of time, effort, resources and expense to the detriment of unsecured creditors.

Click here to view the case:

http://www.austlii.edu.au/cgi-bin/disp.pl/au/cases/cth/federal%5fct/2006/90.html?query=%5e+young+tamberlin

Liquidator runs into problems with uncommercial transaction claim….

Lifestyle Earls Court Pty Ltd (In Liq) v Melton Mansions Pty Ltd   (3 February 2006) 

Victorian Supreme Court: Mandie J
LIQUIDATORS - Uncommercial Transaction - Plaintiff seeks to allege that, in a group of land sales to the Defendant,  two of the sales were uncommercial transaction. All sales were entered into as one contract and were expressly interdependent. Held that, while the two sales were for less than full value, the "transaction" must be examined as a whole. In this instance, the "transaction" was the full three contracts of sale. The two sales could not be viewed as separate and independent transactions. As a whole, uncommercial transaction could not be established and claim must fail.

Click here to view the case:

http://www.austlii.edu.au/cgi-bin/disp.pl/au/cases/vic/VSC/2006/2.html?query=%5e+lifestyle+earls+court+mentone

For further information on one of the above topics or any other issue, please contact one of our Insolvency Team:

• Bruce Pasetti - 4030 0690
• Steven Mosch - 4722 0246
• Melinda Stanley - 3031 9723
• Ryan Ellis - 4030 0532
• Andrew Evans - 3031 9732

Insolvency Solutions is a newsletter intended only to provide general information about current legal issues and does not constitute, nor should it be used or treated as, professional or legal advice.  Readers should make their own enquiries or seek legal advice before making any decisions concerning their own interests.