FEDERAL COURT OF AUSTRALIA Hutchison v MS Wulguru Steel Pty Limited [2012] FCA 272 Citation: Hutchison v MS Wulguru Steel Pty Limited [2012] FCA 272 Parties: KEIRAN WILLIAM HUTCHISON, JOHN RAYMOND GIBBONS and TAMAYA RESOURCES LIMITED (IN LIQUIDATION) ACN 071 349 249 v MS WULGURU STEEL PTY LIMITED ACN 120 628 953 File number: NSD 1880 of 2011 Judge: EMMETT J Date of judgment: 17 February 2012 Legislation: Corporations Act 2001 (Cth) ss 588FA, 588FC, 588FE, 588FF Federal Court Rules 2011 rr 5.02, 5.22, 5.23 Date of hearing: 17 February 2012 Place: Sydney Division: GENERAL DIVISION Category: No catchwords Number of paragraphs: 10 Solicitor for the plaintiffs: A Vadasz of Piper Alderman Counsel for the defendant: The defendant did not appear IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1880 of 2011 BETWEEN: KEIRAN WILLIAM HUTCHISON IN HIS CAPACITY AS JOINT AND SEVERAL LIQUIDATOR OF TAMAYA RESOURCES LIMITED (IN LIQUIDATION) ACN 071 349 249 First Plaintiff JOHN RAYMOND GIBBONS IN HIS CAPACITY AS JOINT AND SEVERAL LIQUIDATOR OF TAMAYA RESOURCES LIMITED (IN LIQUIDATION) ACN 071 349 249 Second Plaintiff TAMAYA RESOURCES LIMITED (IN LIQUIDATION) ACN 071 349 249 Third Plaintiff AND: MS WULGURU STEEL PTY LIMITED ACN 120 628 953 Defendant JUDGE: EMMETT J DATE OF ORDER: 17 FEBRUARY 2012 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Judgment be entered in favour of the plaintiffs against the defendant in the sum of $185,888.01, being the amount of $171,162.20, together with interest on that sum in the amount of $14,725.81, calculated as follows: 1.1 8.75% from 18 February 2011 to 2 November 2011; 1.2 8.5% from 2 November 2011 to 7 December 2011; and 1.3 8.25% from 7 December 2011 to 16 February 2012. 2. The defendant pay the plaintiffs' costs in the sum of $4,855. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1880 of 2011 BETWEEN: KEIRAN WILLIAM HUTCHISON IN HIS CAPACITY AS JOINT AND SEVERAL LIQUIDATOR OF TAMAYA RESOURCES LIMITED (IN LIQUIDATION) ACN 071 349 249 First Plaintiff JOHN RAYMOND GIBBONS IN HIS CAPACITY AS JOINT AND SEVERAL LIQUIDATOR OF TAMAYA RESOURCES LIMITED (IN LIQUIDATION) ACN 071 349 249 Second Plaintiff TAMAYA RESOURCES LIMITED (IN LIQUIDATION) ACN 071 349 249 Third Plaintiff AND: MS WULGURU STEEL PTY LIMITED ACN 120 628 953 Defendant JUDGE: EMMETT J DATE: 17 FEBRUARY 2012 PLACE: SYDNEY REASONS FOR JUDGMENT 1 The first and second plaintiffs (the Liquidators) are the joint and several liquidators of the third plaintiff, Tamaya Resources Limited (the Company). The plaintiffs claim the sum of $171,162.20 from the defendant, MS Wulguru Steel Pty Limited (the Creditor). 2 The plaintiffs' claim is made under s 588FF(1)(a) of the Corporations Act 2001 (Cth) (the Corporations Act). They claim that that sum was paid by the Company to the Creditor within six months of the relevant relation-back day, and that that payment had the effect of giving the Creditor an unfair preference. The originating process and the affidavit of Mr Kieran Hutchison, one of the Liquidators, was served at the registered office of the Creditor on 24 November 2011. At no stage has the Creditor entered an appearance. 3 Rule 5.02 of the Federal Court Rules 2011 (the Rules) provides that a respondent who has been served with an originating application must file a notice of address for service before the return date fixed in the originating application. Under Rule 5.22, a party is in default if the party fails to do an act required to be done by the Rules. Rule 5.23(2)(b) provides that, if a respondent is in default, an applicant may apply to the Court, if the claim against the respondent is for a debt or liquidated damages, for an order giving judgment against the respondent for the debt, and if appropriate, interest and costs in a sum fixed by the Court. While there has apparently been some communication between the Creditor and the Liquidators indicating that the Creditor intended to dispute the claim, there has been no appearance and nothing advanced in opposition to the claim. 4 Section 588FF(1) of the Corporations Act provides that where, on the application of a company's liquidator, the Court is satisfied that a transaction of the company is voidable because of s 588FE, the Court may make an order directing a person to pay to the company an amount equal to some or all of the money that the company has paid under the transaction. Section 588FE(2) provides that a transaction is voidable if it is an insolvent transaction of the company, and was entered into during the six months ending on the relation back day. 5 Under s 588FC, a transaction of a company is an insolvent transaction if it is an unfair preference given by the company, and the transaction is entered into when the company is insolvent. Under s 588FA, a transaction is an unfair preference if and only if the company and the creditor are parties to the transaction, and the transaction results in the creditor receiving from the company, in respect of an unsecured debt that the company owes to the creditor, more than the creditor would receive from the company in respect of the debt if the transaction were set aside and the creditor were to prove for the debt in a winding-up of the company. 6 The Creditor was an unsecured creditor of the Company in the sum of $171,162.20, in respect of work described as the removal of a crushing plant, an invoice for which, dated 21 April 2008, was sent to the Company by the Creditor. On 7 October 2008, the Company paid the sum of $100,000 to the Creditor, and on 8 October 2008 the Company made a further payment of $71,162.20 to the Creditor. 7 As at 30 June 2008, the Company's current assets amounted to $35,789,000 and its current liabilities amounted to $36,406,000. Of the current assets, some $11,619,000 worth were described as non-current assets classified as being held for sale. The Company recorded a consolidated loss after tax of $141.2 million in the half-year period ended 30 June 2008, and incurred a net cash outflow from operations for that period of approximately $1 million. The Company had insufficient cash at bank at that time to extinguish its liabilities and to continue to trade in the months prior to the appointment of the Liquidators as administrators. 8 I am satisfied, on the material before me, and in the absence of any evidence to the contrary from the Creditor, that the Company was insolvent at the time when the payments were made. The evidence indicates that Creditors will not be paid in full. It follows that there has been an unfair preference. In the circumstances, I consider that it is appropriate to accede to the Liquidators' application that orders be made by reason of the default of the Creditor in failing to enter an appearance. 9 I will order that judgment be entered in favour of the Company against the Creditor in the sum of $185,888.01, being the amount of $171,162.20, together with interest on that sum in the amount of $14,725.81, calculated at the rate of 8.75 per cent from 18 February 2011 to 2 November 2011, 8.5 per cent from 2 November 2011 to 7 December 2011, and 8.25 per cent from 7 December 2011 to 16 February 2012. 10 The plaintiffs have provided a schedule of work carried out by their solicitors in connection with the conduct of the proceeding, indicating that the costs that would be allowable on taxation, in accordance with the scale, would be $4,855. In the circumstances, it is appropriate to order that the Creditor pay the plaintiffs' costs in that sum. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. Associate: Dated: 22 March 2012