Southern Cross Interiors Pty Ltd and Anor v. Deputy Commissioner of Taxation and Ors. [2001] NSWSC 621

(2001) 39 ACSR 305 Reported Decision : (2001) 19 ACLC 1513 [2001] ACL Rep 120 NSW 113 53 NSWLR 213

New South Wales Supreme Court

CITATION : Southern Cross Interiors Pty Ltd and Anor v. Deputy Commissioner of Taxation and Ors. [2001] NSWSC 621 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 3501/00 HEARING DATE(S) : 5-6 July, 2001 JUDGMENT DATE : 31 August 2001

Christopher John Palmer (First Plaintiff) Southern Cross Interiors Pty Limited [In Liquidation] (Second Plaintiff) PARTIES : Deputy Commissioner of Taxation (Defendant/Applicant) Robert Paul Clark (First Respondent) Carole Ellyn Martin (Second Respondent) JUDGMENT OF : Palmer J

Anthony Lo Surdo (Plaintiffs) COUNSEL : Lee Aitken (Defendant/Applicant) Todd A. Alexis (Respondents) Peter M. Wayne Associates (Plaintiffs) SOLICITORS : Australian Government Solicitor (Defendant/Applicant) Whittens (Respondents) CATCHWORDS : CORPORATIONS - UNFAIR PREFERENCE - Whether evidence that creditors have not strictly enforced terms for payment produces result that debts are not payable until such time as enforced by statutory demand - whether there is a distinction between a "debt due" and a "debt payable" for purposes of test of insolvency in s.95A(1) Corporations Act - whether, and to what extent, Court may have regard to normal indulgences granted by creditors in requiring payment - principles discussed. - INSOLVENT TRADING - DEFENCES - Cross claim by defendant against first and second respondents for indemnity - insolvent trading - first and second respondents, husband and wife, sole directors of company - wife accepts appointment as director at husband's request - wife told appointment a formality - wife unaware of duties of a company director - wife does not participate in management of company - whether, because of trust and confidence placed in husband, wife has a "good reason" for non-participation so as to afford defence to insolvent trading claim - principles discussed. - SEXUALLY TRANSMITTED DEBT - Legal recognition of phenomenon - whether liability for insolvent trading a species of sexually transmitted debt - whether ignorance of duties of director induced by trust and confidence of marital relationship should excuse spouse from legal consequences of accepting company directorship - competing policy considerations - discussion of principles. Bankruptcy Act 1924 - s.95 Bankruptcy Act (Cth) 1924-1965 - s.95(1) Bankruptcy Act 1966 - s.122(1) LEGISLATION CITED : Companies Act, 1961 - s.293 Companies (NSW) Code - s.556(1), s.556(2)(b) Corporations Act 2001 - s.95A, s.459B, s.459E, s.588FC, s.588FE, s.588FF, s.588FGA, s.588FGB, s.588G, s.588H, s.588M, s.588R, s.592 Income Tax Assessment Act, 1936 - s.221F(5), s.221YHDC(2) Uniform Companies Acts - s.303 - Bank of Australasia v. Hall (1907) 4 CLR 1514 - Brooks v Heritage Hotel Adelaide Pty Ltd (1996) 20 ACSR 61 - Calzaturificio Zenith Pty Ltd (In liq) v. NSW Leather & Trading Co Pty Ltd [1970] VR 605 - Capricorn Society Ltd v Linke (1996) 14 ACLC 431 - Carrier Airconditioning Pty Ltd v. Kurda (1993) 11 ACSR 247 - Commonwealth Bank of Australia v. Friedrich (1991) 5 ACSR 115 - Constantinidis v JGL Trading Pty Ltd (1995) 17 ACSR 625 - Credit Corporation Australia Pty Ltd v Atkins (1999) 30 ACSR 727 - Cuthbertson and Richards Sawmills Pty Ltd v Thomas (1998) 28 ACSR 310 - Re Elgar Heights Pty Ltd (1985) 9 ACLR 846 - Emwest Products Pty Ltd v Olifent (1996) 22 ACSR 202 - Re Fastnedge, ex parte Kemp (1874) LR 9 Ch App 383 - Garcia v. National Australia Bank Ltd (1998) 194 CLR 395 - John Graham Reprographics Pty Ltd v. Steffens (1987) 12 ACLR 779 - Grant v John Grant & Sons Pty Ltd (1954) 91 CLR 112 - Group Four Industries v. Brosnan (1992) 59 SASR 22 - Guthrie v Radio Frequency Systems Pty Ltd (2000) 34 ACSR 572 - Hall v Aust-Amec Pty Ltd (unrep., FCA Lindgren J, 20 September 1994) - Hamilton v BHP Steel (JLA) Ltd (1995) 13 ACLC 1548 - Heide Pty Ltd v Lester (1990) 3 ACSR 159 - Lee Kong v Pilkington (Australia) Ltd (1997) 25 ACSR 103 - London & Southwestern Railway Co v Blackmore (1870) LR 4 HL 610 - Melbase Corporation Pty Ltd v. Segenhoe Ltd (1995) 17 ACSR 187 - Metal Manufacturers Ltd v. Lewis (1986) 11 ACLR 122; 13 ACLR 315 - Morley v. Statewide Tobacco Services Ltd [1993] 1 VR 423 - Re New World Alliance Pty Ltd; Sycotex Pty Ltd v. Baseler (1994) 51 FCR 425 CASES CITED : - Re Newark Pty Ltd (In liq); Taylor v. Carroll (1991) 6 ACSR 255 - Norfolk Plumbing Supplies Pty Ltd v. Commonwealth Bank of Australia (1992) 6 ACSR 601 - Opera House Investments Pty Ltd v. Devon Buildings Pty Ltd (1936) 55 CLR 110 - Pegulan Floor Coverings Pty Ltd v Carter (1997) 24 ACSR 651 - Pioneer Concrete Pty Ltd v. Ellston (1985) 10 ACLR 289 - Pioneer Concrete (Vic) Pty Ltd v. Stule (No.2) (1996) 20 ACSR 480 - Powell v. Fryer (2001) 37 ACSR 589 - Qantas Airways Ltd v Gubbins (1992) 28 NSWLR 26 - Rema Industries & Services Pty Ltd v. Coad (1992) 7 ACSR 251 - Sandell v Porter (1966) 115 CLR 666 - Sheahan v Hertz Australia Pty Ltd (1995) 16 ACSR 765 - Shapowloff v. Dunn (1981) 148 CLR 72 - Standard Chartered Bank of Australia Ltd v Antico (No 2) (1995) 38 NSWLR 290 - Taylor v ANZ Banking Group Ltd (1988) 6 ACLC 808 - 3M Australia Pty Ltd v. Kemish (1986) 10 ACLR 371 - Re Toowong Trading Pty Ltd (In liq) (1988) 13 ACLR 121 - Tourprint International Pty Ltd (In liq) v. Bott (1999) 32 ACSR 201 - Yerkey v. Jones (1939) 63 CLR 649 --- - G.J. Hamilton "An Insolvency Riddle: When is a Debt which is Due Not a Debt which is Due and Payable", (1997), 5 Insolvency Law Journal 78. - Australian Law Reform Commission's Report Equality Before the Law: Women's Equality (1994) Report No.69 Pt II - Bailey "Sexually transmitted debts: Criticisms and Prospects for Reform" (Auckland University Law Review, 8(4) 1999: p.1001 - Baron "The Free Exercise of Her Will: Women and Emotionally Transmitted Debt" (Law in Context 13(1) 1995: 23) - Fehlberg "Money and Marriage: Sexually Transmitted Debt in England" International Journal of Law, Policy and the Family, Vol 11 No 3, December 1997: p.320 - Fehlberg "Sexually Transmitted Debt" (1997 Clarendon Press) - Howell "Sexually Transmitted Debt: a Feminist Analysis of Laws Regulating Guarantors and Co-borrowers", Australian Feminist Law Journal (4) March 1995: 93 - Kaye "Equity's Treatment of Sexually Transmitted Debt" (1997, 5(1) Feminist Legal Studies 35) DECISION : Judgment for plaintiff against defendant in respect of preference claim; declaration that first respondent liable to indemnify defendant in respect of judgment obtained against it by plaintiff; judgment for second respondent on defendant's claim against her.