Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Hosking v Extend N Build Pty Ltd [2018] NSWCA 149 Hearing dates: 1 March 2018 Date of orders: 13 July 2018 Decision date: 13 July 2018 Before: Bathurst CJ at [1]; Beazley P at [123]; Gleeson JA at [124] Decision: (1) In relation to the first to fifth respondents: (a) Dismiss the appeal. (b) Order the appellants to pay the first to fifth respondents' costs of the appeal. (2) In relation to the sixth respondent: (a) Allow the appeal. (b) Set aside the orders made by the primary judge dismissing the appellants' claim against the sixth respondent. (c) Direct the appellants and the sixth respondent to bring in short minutes of order to give effect to this judgment within 7 days. (d) Order the sixth respondent to pay the appellants' costs of the appeal against it and have a certificate under the Suitors Fund Act 1951 (NSW) if eligible. Catchwords: CORPORATIONS – Winding up – Voidable transactions – unfair preference – Corporations Act 2001 (Cth) s 588FA(1) – third party paid creditor of debtor in response to industrial pressure – whether payment was a "transaction" to which the debtor was a party – whether the payment was received "from" the debtor CORPORATIONS – Winding up – Voidable transactions – statutory defence – Corporations Act 2001 (Cth) – s 588FG(2) – creditor received payment from debtor during relation-back period – whether creditor had reasonable grounds for suspecting that debtor was insolvent Legislation Cited: Corporations Act 2001 (Cth) Suitors Fund Act 1951 (NSW) Cases Cited: Burness v Supaproducts Pty Ltd (2009) 259 ALR 339; [2009] FCA 893 Federal Commissioner of Taxation v Kassem (2012) 205 FCR 156; [2012] FCAFC 124 Lumbers v W Cook Builders Pty Ltd (in liq) (2008) 232 CLR 635; [2008] HCA 27 Nilant v Plexipack Packaging Services Pty Ltd (1996) 21 ACSR 428 Re Alsafe Security Products Pty Ltd (in liq) [2016] NSWSC 428 Re Emanuel (No 14) Ltd (in liq) (1997) 147 ALR 281 Re Imobridge Pty Ltd (in liq) [2000] 2 Qd R 280; [1999] QSC 342 Woodgate v National Associates International BV [2007] NSWSC 1260 Category: Principal judgment Parties: Philip Raymond Hosking, in his capacity as joint and several liquidator of Evolvebuilt Contracting Pty Ltd (in liquidation) (first appellant) David Anthony Hurst, in his capacity as joint and several liquidator of Evolvebuilt Contracting Pty Ltd (in liquidation) (second appellant) Evolvebuilt Contracting Pty Ltd (in liquidation) (third appellant) Extend N Build Pty Ltd (first respondent) Build Projects Pty Ltd (second respondent) Consek Pty Ltd (third respondent) Thehai Trinh (fourth respondent) Truthful Constructions Pty Ltd (fifth respondent) Kennico Interiors Pty Ltd (sixth respondent) Representation: Counsel: M Pesman SC with C Alexander (appellants) A G Martin (first, second, third, fifth and sixth respondents) J Cohen (fourth respondent) Solicitors: CCSG Legal Pty Ltd (appellants) Paul Bard Lawyers (first, second, third, fifth and sixth respondents) Ledinh Lawyers (fourth respondent) File Number(s): 2017/234980 Publication restriction: Nil Decision under appeal Court or tribunal: Supreme Court of New South Wales Jurisdiction: Equity Division Citation: [2017] NSWSC 901 Date of Decision: 06 July 2017 Before: Brereton J File Number(s): 2016/277475 [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] HEADNOTE [This headnote is not to be read as part of the judgment] In September 2012, Built NSW Pty Ltd entered into a contract with a subcontractor, Evolvebuilt Contracting Pty Ltd, in relation to building work at 242 Pitt Street, Sydney. Evolvebuilt then retained secondary subcontractors to carry out the work. The work was interrupted in late 2012 by flooding. Evolvebuilt ultimately failed to pay the secondary subcontractors, and they ceased work on 12 March 2013. On the same day, Built received a letter from the Construction, Forestry, Mining and Engineering Union which requested Built to make the payments to the secondary subcontractors which Evolvebuilt had failed to make. Built also received a letter from Evolvebuilt which requested Built to make those payments to the secondary subcontractors "as discussed". The letter from Evolvebuilt stated that the request was made pursuant to cl 38.2 of the contract. The evidence did not disclose in what order Built received the letters from the Union and Evolvebuilt. On 14 March 2013, Built sent a letter to the Union outlining an arrangement for the payment of the outstanding amounts owing to the secondary subcontractors. The letter stated that the arrangement was "as discussed". The arrangement required Built to make an initial payment to the secondary subcontractors on 15 March 2013, with a further payment to be made after Built had investigated and assessed the amounts which remained outstanding to the secondary subcontractors. Built made the initial payments to the secondary subcontractors on 15 March 2013. After conducting an investigation and assessment of the amounts which remained outstanding, Built made the further payments to the secondary subcontractors on 28 March 2013. However, one of the secondary subcontractors, Kennico Interiors Pty Ltd, did not receive any payments from Built under the arrangement. From 25 March 2013 to 20 May 2013, Evolvebuilt made payments to Kennico of its own accord, but not to any other secondary subcontractors. Evolvebuilt eventually went into liquidation. The liquidators commenced proceedings in the Supreme Court of New South Wales and contended that the payments made by Evolvebuilt to Kennico and the payments made by Built to five other secondary subcontractors on 28 March 2013 were voidable under s 588FF(1)(a) of the Corporations Act 2001 (Cth) because they were "unfair preferences" under s 588FA(1) of the Corporations Act 2001 (Cth) and were entered into at a time when Evolvebuilt was insolvent. The primary judge found that Evolvebuilt was insolvent at the relevant times. He found that the payments by Evolvebuilt to Kennico were "unfair preferences" within the meaning of s 588FA(1), but that the payments by Built to the five other secondary subcontractors were not. However, he also found that Kennico was entitled to rely on the defence in s 588FG(2) of the Corporations Act 2001 (Cth) on the basis that a reasonable person in Kennico's position would not have had "an actual apprehension or fear that Evolvebuilt was unable to pay its debts as and when they fell due". The two issues on appeal were: 1 Whether the payments made by Built to the five other secondary subcontractors were "unfair preferences" within the meaning of s 588FA(1) (grounds 1-2A); and 2 Whether Kennico was entitled to rely on the statutory defence in s 588FG(2) (ground 3). Unfair preferences under s 588FA(1) (grounds 1-2A) Since s 588FA(1)(a) requires a debtor company and a creditor to be "parties to the transaction" which is alleged to be voidable, it is important to identify the relevant "transaction" in question. The "transaction" may be a series of interrelated dealings and the debtor company and the creditor need not be a party to each part: [91]-[93], [108]-[110] (Bathurst CJ); [123] (Beazley P); [124] (Gleeson JA). Re Emanuel (No 14) Ltd (in liq) (1997) 147 ALR 281, approved. Burness v Supaproducts Pty Ltd (2009) 259 ALR 339; [2009] FCA 893; Federal Commissioner of Taxation v Kassem (2012) 205 FCR 156; [2012] FCAFC 124, considered. (ii) In identifying whether a debtor company was a party to a transaction by which payments to its creditors were made, it is not helpful to rely upon a "chain of causation" which connects the debtor company to the payments. This does not establish that the debtor company was a "party to the transaction": [93]-[94] (Bathurst CJ); [123] (Beazley P); [124] (Gleeson JA). (iii) Evolvebuilt was not a party to the "transaction" by which the payments were made by Built to the secondary subcontractors. Built was under no contractual obligation to Evolvebuilt to make any payments to the secondary subcontractors and Evolvebuilt was not a party to the arrangement between Built and the Union contained in the letter from Built to the Union on 14 March 2013: [95]-[107] (Bathurst CJ); [123] (Beazley P); [124] (Gleeson JA). (iv) In these circumstances, it is not necessary to consider whether the payments made by Built to the secondary subcontractors were received "from" Evolvebuilt for the purposes of s 588FA(1)(b), or whether it is necessary for there to be a diminution in the assets of a debtor company for a transaction to fall within s 588FA(1): [111] (Bathurst CJ); [123] (Beazley P); [124] (Gleeson JA). Statutory defence in s 588FG(2) (ground 3) (iii) The statutory defence in s 588FG(2) was unavailable to Kennico. A reasonable person in the position of Kennico would have had "a positive apprehension or fear" that Evolvebuilt would be unable to pay its debts at the time that the payments to Kennico were made. The payments to Kennico were made over a period of two months after it had completed its work and Kennico knew that Evolvebuilt was "unable to pay everyone": [120] (Bathurst CJ); [123] (Beazley P); [124] (Gleeson JA). Re Alsafe Security Products Pty Ltd (in liq) [2016] NSWSC 428, referred to. Judgment 1. BATHURST CJ: This is an appeal from a decision of a judge of the Equity Division of the Supreme Court of New South Wales dismissing proceedings brought by the first and second appellants, Mr Philip Hosking and Mr David Hurst as liquidators of Evolvebuilt Contracting Pty Ltd (Evolvebuilt) under s 588FA, s 588FC, s 588FE and s 588FF of the Corporations Act 2001 (Cth) (the Act). The liquidators claimed that certain payments made to a number of entities, including the present respondents, were voidable under s 588FE(1)(a) because they were "unfair preferences" within the meaning of s 588FA(1). 2. The primary judge rejected the claim against the first to fifth respondents on the basis that the payments did not constitute "unfair preferences" within the meaning of s 588FA(1) of the Act. The primary judge found that the payments made to the sixth respondent, Kennico Interiors Pty Ltd (Kennico), were "unfair preferences" within the meaning of s 588FA(1) of the Act, but held that Kennico was entitled to rely on the defence contained in s 588FG(2) of the Act. The legislation 1. The relevant provisions of the Act for the purpose of this appeal are s 588FA(1) and s 588FG(2). These subsections are in the following terms: "588FA Unfair preferences (1) A transaction is an unfair preference given by a company to a creditor of the company if, and only if: (a) the company and the creditor are parties to the transaction (even if someone else is also a party); and (b) 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; even if the transaction is entered into, is given effect to, or is required to be given effect to, because of an order of an Australian court or a direction by an agency. …. 588FG Transaction not voidable as against certain persons … (2) A court is not to make under section 588FF an order materially prejudicing a right or interest of a person if the transaction is not an unfair loan to the company, or an unreasonable director‑related transaction of the company, and it is proved that: (a) the person became a party to the transaction in good faith; and (b) at the time when the person became such a party: (i) the person had no reasonable grounds for suspecting that the company was insolvent at that time or would become insolvent as mentioned in paragraph 588FC(b); and (ii) a reasonable person in the person's circumstances would have had no such grounds for so suspecting; and (c) the person has provided valuable consideration under the transaction or has changed his, her or its position in reliance on the transaction." 1. Section 9 of the Act defines "transaction" as including "a conveyance, transfer or other disposition" by a company, a "payment made" by a company or a "loan to" a company. Section 588FF empowers a court to make certain orders in relation to "voidable transactions", including 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) states that a transaction is voidable if it is an "insolvent transaction" made during a period of time prior to the relation-back day (the relation-back period). Section 588FC states that a transaction is an "insolvent transaction" if it is an "unfair preference" within the meaning of s 588FA(1) and was entered into while the company was insolvent. The factual background 1. Most of the factual material is not in dispute, although the evidence on a number of important issues is somewhat sparse. 2. On 14 September 2012, Evolvebuilt entered into a subcontract (the Subcontract) with Built NSW Pty Ltd (Built) in relation to work on Levels 9-25 of 242 Pitt Street, Sydney (the premises). Evolvebuilt engaged subcontractors (the secondary subcontractors), including the present respondents, to carry out some of the work. 3. In late November 2012, the premises suffered extensive flood damage arising from a burst water pipe on or near Level 39 of the premises, which caused Evolvebuilt to be unable to carry out work on Levels 19-25 of the premises until 8 January 2013. 4. Evolvebuilt ultimately failed to pay the secondary subcontractors, including the present respondents, and each of the respondents ceased work at the premises on 12 March 2013. It is not in dispute that, as a result of Evolvebuilt's failure to pay the respondents, they became creditors of Evolvebuilt for the purpose of s 588FA(1). 5. The Subcontract between Built and Evolvebuilt contained the following provisions: "37.3A Deduction of Moneys Any debt due from the Subcontractor to the Main Contractor or monies claimed by the Main Contractor from the Subcontractor under or in connection with this Subcontract or the WUS may be deducted by the Main Contractor from: a) any monies which may otherwise become payable to the Subcontractor by the Main Contractor; and b) any security held by the Main Contractor. This clause does not affect the right of the Main Contractor to recover the debt, the monies claimed or any balance after exercising any rights under this clause 37.3A by any other means available under this Subcontract or at law. … 38.2 Direct Payment Where the Main Contractor is entitled to or is required to make payment to a secondary subcontractor of a sum certified by the Subcontract Superintendent as owing to the secondary subcontractor under a secondary contract, the Main Contractor may, on behalf of the Subcontractor, make the payment directly to the secondary subcontractor and the amount so paid shall be a debt due from the Subcontractor to the Main Contractor. At the written request of the Subcontractor, and out of moneys payable to the Subcontractor, the Main Contractor may on behalf of the Subcontractor make payments directly to any secondary subcontractor." In these provisions, Built is referred to as the "Main Contractor" and Evolvebuilt is referred to as the "Subcontractor". The "secondary subcontractors" were the secondary subcontractors retained by Evolvebuilt, which included the present respondents. The phrase "WUS" was an abbreviation for "work under the subcontract". 1. On 12 March 2013, Mr Zac L'Estrange, a director of Evolvebuilt, sent a letter attached to an email to Mr Matthew Hunter, a representative of Built, in the following terms: "Pursuant to Clause 38.2 of the subcontract we here by [sic] formally request that the attached secondary subcontractors are paid directly by Built on evolveBUILT's behalf." The covering email to this letter simply stated "Letter as discussed". While the list of the "attached secondary subcontractors" does not appear to have been in evidence, the primary judge found at [48] that the payments requested by Evolvebuilt in this letter were those relevant to the present proceedings and there was no challenge to that finding in this appeal. 1. On the same day, the New South Wales Branch of the Construction, Forestry, Mining, and Engineering Union (the CFMEU) sent a notice to Built demanding that Built pay to the CFMEU money due from Evolvebuilt to employees: "You are advised pursuant to Section 127 of the Industrial Relations Act, in addition to union requirements, you will be held liable for all the underpayments/non payments by [Evolvebuilt]. To assist with resolution of the dispute and avoid involvement you can arrange by authorisation of the sub-contractor to make payment of the monies outstanding direct to the union from progress monies/retention. A special form is available from the union to assist with this procedure. You are requested to not make any further payment of any monies to this company until further notice." 1. On 14 March 2013, discussions between Built and the CFMEU culminated in a letter from Built to the CFMEU in the following terms: "As discussed, Built NSW confirms our agreement with the CFMEU – Construction and General Division (NSW Branch) to make the following payments. 1. Built NSW have made direct payment to EvolveBuilt employees for wages for working on the project in accordance with the schedule below." There was then included a table indicating which employees had been paid. However, it should be noted that the employees identified in that table were not in fact paid until 15 March 2013. The letter then stated the following: "3. Built NSW will make direct payment for labour to those subcontractors engaged by Evolvebuilt on the ANZ Project on behalf of Evolvebuilt where that payment has not been made by Evolvebuilt and it is proven that these monies are due and payable. These payments will be made as follows: i) Built NSW will make a good faith payment of 50% of the currently advised (amount advised by the subcontracting firms) amount owing to those subcontracting firms that were engaged by Evolvebuilt on the above project as set out in the below table. This payment is to be directed by the subcontracting firms to those construction workers engaged by them on the above project. This payment is to be made by Built NSW on 15/3/13. … ii) Built NSW will undertake investigations and checks to establish the validly [sic] of the remainder of these payments and to confirm that they are due and payable and have not been previously paid by Evolvebuilt. These investigations will involve the cross referencing of the Built sign in register against the tax invoices and time sheets submitted by the subcontractors engaged by Evolvebuilt. Once the remainder of the claimed payments are verified as properly due and payable Built NSW will make these payments direct to the subcontracting firms. Built NSW will use its best endeavours to make these payments within 14 days. 4. Once the payments made under items 1 and 3,i) above have been made, the CFMEU will endorse that the workers and subcontractors will return to work on the project immediately. From this time it is intended that the relevant subcontractors will be directed on site and paid by a partitioning subcontracting firm who will be engaged by Built NSW." In between paragraphs [3(i)] and [3(ii)], there was included a table which referred to the payments to be made to various secondary subcontractors under those paragraphs, including all the present respondents except the sixth respondent, Kennico. So far as it concerned the first to fifth respondents, it was in the following form: Subcontractors & Employee Payments noted as outstanding on the project Requested outstanding payment value total inc GST 50% Payment to be made 15/3/13 Remaining Value to be Verified pending confirmation that they are due and payable T&T Glass Pty Ltd [Thehai Trinh] 55,000.000 27,500.00 27,500.00 Build Projects Pty Ltd 220,268.50 110,134.25 110,134.25 Truthful Construction Pty Ltd 66,267.30 TBC 66,267.30 Consek Pty Ltd 150,000.00 75,000.00 75,000.00 Extend N Build Pty Ltd 35,160.00 17,580.00 17,580.00 1. From paragraphs [3(i)] and [3(ii)] and this table, it can be seen that the arrangement with the CFMEU required Built to make two payments to each of the first to fifth respondents. The first payment, which I shall call the "initial" payment, was to be made on 15 March 2013. Following this payment, paragraph [4] required the CFMEU to cause the workers and subcontractors to return to work. The second payment was to be made after Built had investigated and assessed the remaining amount actually payable to each of the first to fifth respondents. 2. As may be discerned from its absence from the letter from Built to the CFMEU on 14 March 2013, Kennico is in a different position to the first to fifth respondents. No payments were made to Kennico by Built as a result of the letter. Rather, Evolvebuilt itself made seven payments totalling $92,978 to Kennico from 25 March 2013 to 20 May 2013. 3. On 14 March 2013, Built terminated the Subcontract with Evolvebuilt. Senior counsel for the appellants submitted that it should be inferred that the Subcontract was terminated for "convenience" pursuant to cl 40A. So far as it is relevant, that clause was in the following terms: "40A Termination for Convenience a) Without prejudice to any of the Main Contractor's other rights or entitlements or powers under the Subcontract, the Main Contractor may: (i) at any time for its sole convenience by written notice to the Subcontractor terminate the Subcontract from the date stated in the notice; and (ii) thereafter either itself or by third parties complete the uncompleted part of the WUS. b) If the Main Subcontractor terminates the Subcontract under this clause 40A, the Subcontractor; (i) subject to subclause 37.3A, will be entitled to payment of the following amounts as determined by the Subcontract Superintendent: (A) for work carried out prior to the date of termination, the amount which would have been payable if the Subcontract had not been terminated and the Subcontractor submitted a payment claim for work carried out to the date of termination; (B) the costs of goods or materials reasonably ordered by the Subcontractor for the Subcontract Works for which the Subcontractor is legally bound to pay provided that: (1) the value of the goods or materials is not included in the amount payable under subclause 40A(b)(i)(A); and (2) title in the goods or materials will vest in the Main Contractor upon payment; and (C) the reasonable cost of removing from the site all labour, construction plant and other things used in connection with the WUS." 1. Although senior counsel for the appellants stated that it could only be inferred that the Subcontract was terminated under cl 40A, the solvency report prepared by the liquidators expressly states that this was the case. The significance of the fact that termination was pursuant to cl 40A was said to be that existing rights under the Subcontract up to the date of termination were preserved. 2. On 15 March 2013, Built made the "initial" payments to the first to fifth respondents. These payments were made four days before the commencement of the relation-back period for the liquidation and no claim has been made by the liquidators in respect of these payments. 3. On 28 March 2013, after further investigation and assessment by Built of the outstanding amounts which it was liable to pay to the secondary subcontractors, Built made the second payments to the first to fifth respondents. The amounts paid varied somewhat from the amounts noted as still outstanding in the table at paragraph 3(i) of its letter to the CFMEU, presumably as a result of the investigation and assessment of the outstanding amounts conducted by Built. The payments were made by Built's solicitors, Gadens Lawyers, from funds supplied by Built. These payments were made within the relation-back period and are the subject of the present claim, and I shall refer to them simply as the "payments" or the "impugned payments". 4. The primary judge found that Evolvebuilt was insolvent at the time that the payments were made, and there was no challenge to that finding in this appeal. In the solvency report prepared by the liquidators on 14 September 2016 (the Solvency Report), the position in relation to the first to fifth respondents was summarised as follows: "10. Contract with Built NSW 10.(a) Termination of the Company's major contract The Company entered into a subcontract with Built NSW Pty Ltd ('Built NSW') on 14 September 2012 for the ANZ SHO Fitout Project NO. 200492 for interior work to be completed for levels 9-25 of 242 Pitt Street Sydney. On 26 November 2012 a water pipe burst causing flooding and extensive damage to the premises. The flooding prevented the Company from performing the works under the subcontract and on 15 December 2012, Built NSW issued a variation order for the removal and reinstatement of the damaged works on levels 21-25 of the premises. The subcontract superintendent for Built NSW issued the Company with a revised completion date of 22 March 2013. On 14 March 2013, Built NSW served on the Company a written notice to terminate the subcontract 'for its convenience' pursuant to GC 40A of the subcontract. As at the date of the date of the termination all prior progress claims had been assessed and paid in full by Built NSW. On 20 March 2013 the subcontract superintendent issued to the Company a progress certificate certifying an amount of $1,446,072.66 as being owed by the company under the subcontract. On 31 March 2013, Built NSW subsequently issued a letter to the Company assessing and certifying that the Company owed Built NSW for liquidated damages in the amount of $1,545,986. On 15 May 2013, the Company issued Built NSW with a payment claim in the amount of $4,173,326.32 which included claims made in respect of variations pursuant to the subcontract and claims for completed works under the original subcontract. The Company applied to have that claim determined by an Adjudicator however its claim was determined to be nil. Therefore, there were no funds available for the Company to meet the debts incurred. The termination of the contract by Built NSW seriously affected the Company's ability to trade and generate income. Due to industrial action, Built NSW entered into an arrangement on 14 March 2013 with the Construction Forestry Mining and Energy Union ('CFMEU') to pay the Company's employees for wages for working on the ANZ project and also made a good faith payment of 50% to those subcontracting firms engaged by Evolvebuilt on the ANZ project. These payments were made on behalf of the Company on 15 March 2013. Annexed hereto and marked as Annexure 'J' to this Report is a copy of the agreement between Built NSW and the CFMEU. On 28 March 2013, Built NSW paid the remaining 50% owing to the subcontracting firms on behalf of the Company. 10.(b) Commencement of proceedings against the Company by Built NSW On 4 June 2013, Built NSW commenced proceedings in the Supreme Court of NSW seeking judgment against the Company in the amount of $2,237,595.80 pursuant to the Built NSW May progress certificate and also an amount of $1,545,986 in respect of liquidated damages. 10.(c) Quantum of Built NSW Claim Built NSW has lodged a proof of debt form in the liquidation for an amount of $3,305,441.80. The claim by Built NSW consists of an unpaid progress certificate issued to the Company on 29 May 2013 for an amount of $2,237,595.80 and a liquidated damages claim dated 8 July 2013 for an amount of $1,067,846. The quantum of the claim severely impacted the Company's solvency." 1. The Solvency Report annexed a schedule of creditor claims as at 19 September 2013. The schedule showed Built as a claimed creditor for an amount of $3,305,441.80, with this claim being supported by reference to a "payment claim" dated 29 May 2013 and a "liquidated damages claim" dated 8 July 2013. 2. Further background to the present dispute was provided in a letter from Gadens Lawyers, acting for Built, to the liquidators dated 23 October 2013. They summarised the position so far as their client was concerned in the following manner: "2. The Subcontract was terminated on 14 March 2013. As at that date of termination all prior progress claims of [Evolvebuilt] had been assessed and paid in full. That assessment was made in agreement with Mr L'Estrange based on detailed site inspections as to the status of the contract works. In summary the history of the three payment claims made prior to termination are: Claim Number/Date [Evolvebuilt] Progress Claim including GST Progress Certificate and payment made by Built including GST/Date of Payment #7 (30 January 2013) $448,211.31 (incl. GST) $448,211.31 (7 Jan 2013) #8 (18 February 2013) $500,288.57 (incl GST) $500,288.57 (19 Feb 2013) #9 (27 February 2013) $220,000.00 (incl. GST) $220,000.00 (28 Feb 2013) 3. On 20 March 2013, the Subcontract Superintendent issued to [Evolvebuilt] a progress certificate certifying an amount of $1,446,072.66 (incl. GST) to be owing by [Evolvebuilt] to Built under the Subcontract. 4. On 31 March 2013, Built issued a letter to [Evolvebuilt] assessing and certifying that [Evolvebuilt] is indebted to Built for liquated damages in the total amount of $1,545,986.00 (incl. GST) pursuant to clause 37.4 of the Subcontract. 5. On 15 May 2013, [Evolvebuilt] purported to issue a payment claim [# 10] to Built in the amount of $4,173,326.32 (incl. GST) ('May Payment Claim'). As noted below, [Evolvebuilt] applied to have that claim determined by an Adjudicator, Mr Scott Pettersson, and [Evolvebuilt]'s entitlement was duly determined at $Nil. Importantly, for the most part the Adjudicator had regard to the status of the contract works as contended for by Built in reaching his determination and otherwise rejected [Evolvebuilt]'s claims under the Subcontract. We note that there is no reference to the Adjudication determination in the [Evolvebuilt] Creditors Report and are concerned as to its omission. 6. On 28 May 2013, the Subcontract Superintendent issued to [Evolvebuilt] a further progress certificate in response to the May Payment Claim certifying an amount of $2,237,595.80 (incl. GST) to be owing by [Evolvebuilt] to Built under the Subcontract. 7. On 4 June 2013, Built filed and served a Summons and List Statement against [Evolvebuilt], Evolve Interiors and Mr Zac L'Estrange claiming: a. Judgment against [Evolvebuilt] in the sum of $2,237,595. 80 (incl. GST) pursuant to the progress certificate dated 28 May 2013; b. Judgment against [Evolvebuilt] in the sum of $1,545,986.00 (incl. GST) (incl. GST) [sic] in respect of liquidated damages; c. Damages against [Evolvebuilt] and Mr Zac L'Estrange, including deceit, and under section 236 of the Australian Consumer Law; and d. Judgment against Evolve Interiors pursuant to a deed of guarantee. (the 'Built Claim'). 8. On 17 June 2013, [Evolvebuilt] lodged an Adjudication Application in relation to the purported outstanding May Payment Claim in which [Evolvebuilt] pursued $3,364,890.09 (incl. GST) of the claimed $4,173,326.32 (incl. GST). 9. On 24 June 2013, Built lodged its Adjudication Response in support of the amount certified in its progress certificate dated 28 May 2013 and in response to the Adjudication Application. 10. On 20 July 2013, the Adjudicator issued his Adjudication Determination in which he assessed [Evolvebuilt]'s entitlement in the May Payment Claim to the pursued amount of $3,364,890.09 (incl. GST) at $nil. A copy of the Adjudication Determination is at Attachment B. 11. In relation to the Court proceedings, on 1 July 2013, [Evolvebuilt] filed its List Response in reply to the Built Claim ('[Evolvebuilt] Defence'). On 5 July 2013, [Evolvebuilt] filed a Cross Summons and List Cross Statement against Built in which it claims, inter alia, that it is owed money by Built pursuant to the Subcontract the amount of its May payment claim of $4,173,326.32 (incl. GST) ('Evolve Cross Claim'). 12. On 4 October 2013, at [Evolvebuilt]'s request the Court has stood the proceedings over for further directions on 8 November 2013 by consent. That request was made due to your appointment as joint administrators. … Given the above factual matters, it is both false and misleading for Mr L'Estrange to assert that any allegation of non-payment by Built resulted in [Evolvebuilt] not having any current contracts to satisfy creditors' claims and significantly affected its ability to tender for new contracts. It is false and misleading for 3 main reasons. First, Built had assessed and paid all of the progress claims made prior to termination. It is difficult to comprehend how Built could pay a claim at termination which was not yet made. Second, as noted below, Built was in fact requested by Mr L'Estrange to make direct payments on behalf of [Evolvebuilt] to its suppliers, employees and subcontractors. Whilst we note that Mr L'Estrange disputes the amount he states at paragraph 9 of the [Evolvebuilt] Defence that: '[Evolvebuilt] admits that it wrote to [Built] on 25 March 2013 to consent to the payment of $581,581.75 to its employees and secondary subcontractors.' In fact such consent had been provided in February 2013. We refer you to the factual matters at paragraphs C8 to C19 of Built's Claim. Third, Built was left in the position of having to make further payments to Evolve's employees and subcontractors in response to a notice served by the CMFEU to do so and under threat of industrial action on the Project. Details of those payments are confirmed below. Other Issues There are a number of assertions throughout the [Evolvebuilt] Creditors Report that [Evolvebuilt] is owed money from Built under the Subcontract or that Built has refused to pay those outstanding amounts. For example: … In response to the assertions, Built says: 1. that it denies it owes any money to [Evolvebuilt] under the Subcontract or at all; … A schedule of the deductions made for direct payments made by Built to [Evolvebuilt] employees, subcontractors, and suppliers and two folders of documentation supporting those claims including remittance advices, electronic transfers and payment summaries is at Attachment E." 1. The schedule referred to in that letter is a document entitled "Schedule of Direct Payments – Paid by Built on behalf of [Evolvebuilt]". Part of the schedule is headed "Payments by Gadens on behalf of Built to [Evolvebuilt's] Subcontractors". A section of the schedule includes the payments to the first to fifth respondents which are the subject of these proceedings. The payments are cross-referenced to what is described as the "29th May '13 Payment Schedule", which would seem to correspond with the "payment claim" of 29 May 2013 referred to in the schedule to the Solvency Report as forming part of the basis of the proof of debt lodged by Built. There is no evidence to suggest that the liquidators have admitted Built to proof in respect of its claim at the time of the present appeal. The relevant authorities 1. As the primary contention of the appellants was that the primary judge failed to properly apply three decisions of the Federal Court of Australia on the construction of s 588FA(1) of the Act, it is convenient to deal with these decisions prior to considering the reasoning of the primary judge. 2. The first is the decision of the Full Court of the Federal Court in Re Emanuel (No 14) Ltd (in liq) (1997) 147 ALR 281 (Re Emanuel). The facts were relatively straightforward. Emanuel Ltd (Emanuel) had entered into financing arrangements with a group of financiers known as the "EFG Group", and in particular, ELFIC Ltd (ELFIC). Following default and litigation, Emanuel and ELFIC entered into a deed of covenant whereby certain properties were agreed to be transferred to other companies in the EFG Group. 3. Under the deed, ELFIC, for its part, agreed to pay the sum of $332,313.54 at the direction of Emanuel to Blacklaw & Shadforth Pty Ltd (Blacklaw), who was a creditor of Emanuel. On the date of the execution of the deed, Emanuel also executed an authority to ELFIC directing it to pay the sum of $332,313.54 to Blacklaw on its behalf. On the same day, Emanuel went into voluntary administration and was subsequently placed into liquidation. The liquidator sought to recover the payment from Blacklaw as an "unfair preference" under s 588FA(1) of the Corporations Law, which was in substantially the same terms as s 588FA(1) of the Act in the present case. 4. In resisting the liquidator's claim to recover the payment, Blacklaw's primary argument was that Emanuel was not a party to the "transaction" pursuant to which the payment was made for the purpose of s 588FA(1)(a) since the transaction was between Blacklaw and ELFIC with the payments being made out of ELFIC's funds. The trial judge, in upholding that argument, relied on the earlier decision of a single judge of the Federal Court in Nilant v Plexipack Packaging Services Pty Ltd (1996) 21 ACSR 428 (Nilant). 5. The Full Court reversed the decision of the trial judge. In rejecting the argument accepted by the trial judge, the Court made the following remarks at 287-288: "Nilant's case Because of its significance both in his Honour's reasons and to the respondent's submissions, it is appropriate at the outset to refer to Nilant's case - the more so because we consider that it has led the trial judge into error. The circumstances of that case were these. A company (A) sold its business to a third party (B) on terms, inter alia, that part of the purchase price was to be paid to a creditor of the company (C). That payment was made at a time when A was insolvent. A's liquidator sought a declaration that the payment was an unfair preference. This was refused. It was held that the contract of sale of itself was not relevantly a 'transaction' within s 588FA(1)(a) for the reason that C was not a party to that contract. This characterisation of the contract was correct in our view. It equally was held, more questionably in our view, that for the purposes of the definition of 'transaction' in s 9 of the Corporations Law, the payment to C was not 'a payment made by [A]'. In reaching that conclusion, R D Nicholson J followed the decision of the Full Court of the Supreme Court of Victoria in Ramsay v National Australia Bank Limited [1989] VR 59; 13 ACLR 732. In that case, in construing the words 'a payment made ... by' in s 451(1) of the Companies (Victoria) Code, the Full Court (at VR 63) rejected the proposition that: "... a payment out of his own moneys by B to C, pursuant to a contractual obligation to discharge A's debt to C, an obligation imposed upon B by a contract between A and B, can be said to be a payment made by A to C. The words of s 451 must be given their ordinary, natural meaning." We have, with respect, some difficulty with this conclusion. Before a payment made by B to C can be effective to discharge A's debt to C, ordinarily it must be made with A's authorisation or ratification: see Mason and Carter, Restitution Law in Australia, para 846, (Butterworths, Sydney, 1995); Goff and Jones, The Law of Restitution, p 17 (4th ed, Sweet and Maxwell, London, 1993); and see generally on payment of another's debt, Beatson, The Use and Abuse of Unjust Enrichment, Ch 7 (Clarendon Press, Oxford, 1991). Where a payment is so made it can properly be said that it is A's act that makes B's payment efficacious at law to discharge the debt to C. This, of itself, does not provide reason for saying that the payment itself is made by A. Nonetheless where that payment constitutes part of the consideration B furnished and A required in the A-B contract and where, inter alia, that consideration is in the final settlement of the obligations inter se of A and B, then we see no compelling reason for not concluding that A has made the payment to C albeit by using B as its instrument for the purpose. It is, though, unnecessary to consider either his [sic] matter or Ramsay's case further for reasons we give below." 1. In declining to follow Nilant, the Court made the following additional comments at 288-289: "We cannot agree with his Honour's reasoning for two reasons, one specific, one general. The specific reason is this. In so far as it is suggested that A was not party to the extinguishment of C's debt brought about by B's payment, we note again that A's authorisation of B's payment is necessary to discharge the debt, save in exceptional cases of no present relevance: see generally Beatson, supra, Ch 7; Goff and Jones, supra, p 17 and especially footnote 2. In this way A is a party to the extinguishment even if it be said A is not a party to the payment itself. The general reason is that we do not see the language of s 9 (which exemplifies but does not define 'transaction') as precluding a finding of a transaction to which the debtor A is a party merely because that transaction itself is made up of a composite of dealings in not all of which A participates. … We confine our observations for present purposes simply to a course of dealing initiated by a debtor for the purpose of, and having the effect of, extinguishing a debt. It is not apparent to us why it should not be said that, where a debtor so acts and extinguishes a debt, the relevant 'transaction' is the totality of the dealings through which the debtor procures the intended outcome, irrespective of whether one or more of the dealings in the sequence in question does not involve or require the participation of the debtor but does require that of a third party. The transaction, in other words, is the totality of the dealings initiated by the debtor so as to achieve the intended purpose of extinguishing the debt. … We conclude, then, that a course of dealing initiated by a debtor that is intended to, and does, extinguish a creditor's debt can in its totality be a transaction for the purposes of Pt 5.7B of the Corporations Law notwithstanding that the achievement of that end can only be realised through the participation of a third party in a particular dealing (or dealings) within the overall transaction, being a particular dealing (or dealings) to which the debtor is not or may not be a party." 1. The Court then made the following remarks at 289: "Consistent with what we have said concerning Nilant's case, though, it is unnecessary for the appellant to rely upon agency to establish a transaction falling within s 588FA(1)(a). On the facts as found by the trial judge, Emanuel sought to and did procure the partial extinguishment of Blacklaw's debt through action it took, both in entering into, and under, the Deed. Its entry into the Deed; its direction under para 6.7 for a payment to be made to Blacklaw; and the payment so made with Emanuel's authorisation (with the result it produced when Blacklaw accepted the payment as partial satisfaction of the debt) constituted the relevant transaction. Clearly both Emanuel and Blacklaw were parties to that transaction even though neither was a party to all of its component elements." 1. The Court also considered the question of whether the payment was received "from the company" for the purpose of s 588FA(1)(b) and analysed the position as follows at 290-291: "The question here is whether the transaction resulted in Blacklaw 'receiving from the company' more than it would have if the transaction were set aside and Blacklaw was to prove in the winding up of Emanuel. It is clear that what Blacklaw received from the transaction was the partial satisfaction of its debt at the rate of 100 cents in the dollar and that this was more than it would receive in satisfaction of its debt as a creditor in the winding up. But did it receive what it did from the company as the sub-section requires? There is no doubt that, if the money received by Blacklaw had been required under the deed (i) to be paid first to Emanuel and then paid on to Blacklaw as Emanuel's money, or (ii) to be held by EFG on trust for Emanuel pending the latter's direction to pay Blacklaw, then the financial benefit accruing to Blacklaw would, relevantly, have been received from the company. Does it make an operative difference that, rather than adopting such expedients, the deed provided for direct payment to Blacklaw? In our view it does not and it would be surprising if it did. What Blacklaw received from the company was the actual benefit of a valuable chose in action (ie, para 6.7 of the deed) owned by Emanuel. Whether or not Blacklaw was a trust-beneficiary or a contract-beneficiary of that chose: as to which see Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107; 80 ALR 574 – and it is unnecessary for present purposes to determine the rights, if any, that Blacklaw had against EFG – what Emanuel provided to Blacklaw, and what Blacklaw received from Emanuel was the actual enjoyment of the benefit secured to Emanuel by its contractual provision with EFG. That actual benefit took the form of a monetary payment which partially discharged Emanuel's debt." 1. Re Emanuel is essentially authority for two unsurprising propositions. First, an agreement for consideration between a debtor company and a third party by which the third party is required to pay funds to a creditor of the debtor company and does so pursuant to a direction by the debtor company can constitute a "transaction" within the meaning of that expression under s 9 of the Act. Second, a payment to the creditor pursuant to a direction of the debtor company with which a third party is contractually bound to comply is a payment "from" the debtor company for the purpose of s 588FA(1)(b) of the Act. 2. The second decision is the decision in Burness v Supaproducts Pty Ltd (2009) 259 ALR 339; [2009] FCA 893 (Burness), which involved the question of whether two payments made by Pre Cast Panels Pty Ltd (Pre Cast Panels) in reduction of a running account between Denward Lane Pty Ltd (Denward Lane) and Supaproducts Pty Ltd constituted "unfair preferences" under s 588FA(1) of the Act. It appears that, some time prior to the impugned payments being made, Pre Cast Panels, which was a company related to Denward Lane, had taken over the business of Denward Lane and attended to the payment of some of the debts outstanding in respect of the business. 3. Gordon J stated that she assumed that the liquidator's contention was that Pre Cast Panels had a claim against Denward Lane for the common money count of "money paid" in respect of the payments made by Pre Cast Panels. Her Honour referred to Lumbers v W Cook Builders Pty Ltd (in liq) (2008) 232 CLR 635; [2008] HCA 27, noting that the High Court had stated at [80] that "the bare fact of conferral of the benefit does not suffice to establish an entitlement to recovery". Her Honour's conclusion at [42]-[47] was in the following terms: "[42] The Liquidator submitted that the decision in Woodgate [v Network Associates International BV [2007] NSWSC 1260] may be put to one side as first, it was distinguishable on its facts, and second, that his Honour's finding regarding the lack of evidence on the presence of consideration was not applicable in this case – the liquidator contended that a 'restitutionary' claim on behalf of the third party would operate in the 'space' otherwise occupied by consideration. What the phrase 'restitutionary' claim in fact meant was never developed during the course of argument. I assume the liquidator's contention is that in respect of the payment made by Pre Cast Panels, it had a claim against Denward Lane for money paid: see by way of example, Lumbers v W Cook Builders Pty Ltd (in liq) (2008) 232 CLR 635; 247 ALR 412; [2008] HCA 27 at [43], [47]-[54] and [77]-[80]. As those passages record, 'the bare fact of conferral of the benefit [in this case the payment of money] does not suffice to establish an entitlement to recovery': at [80]. … [44] If the benefit is in the form of discharge of a person's debt (as occurred here), the first question is whether the payment by Pre Cast Panels was authorised or unauthorised by Denward Lane? If the payment was authorised, then the payment is a third party payment of the kind identified by the court in Re Emanuel (No 14) at ALR 289; ACSR 300, namely: '... a course of dealing initiated by a debtor that is intended to, and does, extinguish a creditor's debt ... notwithstanding that the achievement of that end can only be realised through the participation of a third party in a particular dealing (or dealings) within the overall transaction, being a particular dealing (or dealings) to which the debtor is not or may not be a party.' [45] I do not accept that Re Emanuel (No 14) is authority for the proposition that before a payment by a third party can be taken to be a payment 'accepted' or 'made' by the debtor there must be evidence of an arrangement between the debtor and the third party whereby at the direction of the debtor, the third party made a payment to the creditor in discharge of an obligation owed by the third party to the debtor. That is not what the authorities establish: see Simpson v Egginton (1855) 10 Ex 845 at 847-848; Smith v Cox [1940] 2 KB 558 at 560; Oakleigh Acquisitions Pty Ltd (in liq) v Steinochr [2005] WASCA 247 at [81]. Where a payment made by a third party to a creditor is authorised by the debtor, nothing more is required. The debt is discharged by the third party at the request of or with the acceptance of the debtor. [46] On the other hand, if a debt is discharged by a third party payment which is unauthorised, the debt is not necessarily discharged: see Oakleigh Acquisitions Pty Ltd (in liq) v Steinochr [2005] WASCA 247 at [82] (Oakleigh); Birks and Beatson, 1976, p 190; Friedmann, 1983, pp 536-7; R Goff and G Jones, The Law of Restitution, 7th ed, Sweet & Maxwell, London, 2007, at 1-077 and 3-016. The debtor has a choice – to accept or not to accept the payment. If the debtor ratifies or accepts the unauthorised payment by the third party, the debtor will be liable to the third party who made the payment. In other words, the 'acceptance' will give the third party a claim for money paid for and at the request of the debtor or, as it is sometimes put, impose upon the debtor a duty of restitution. If the debtor does not ratify the payment, the original debt it owed to the creditor remains outstanding: see Lumbers v W Cook Builders Pty Ltd (in liq) (2008) 232 CLR 635; 247 ALR 412; [2008] HCA 27 at [43], [47]-[54] and [77]-[80] (Lumbers). [47] In the present case, the payment made by Pre Cast Panels on 10 June 2005 was a 'course of dealing initiated by a debtor that [was] intended to, and [did], extinguish a creditor's debt' as contemplated by the Full Court in Re Emanuel. It was the evidence of Mr Messina that Mr Smith contacted the defendant in June 2005 and stated to Mr Messina that 'he would be continuing the same business, but had set up a new company ... [t]he new company was [Pre Cast Panels] ... [and that] when the business took over, [the defendant] should transfer the balance of the account to [Pre Cast Panels]'. On any view, it was a course of conduct initiated by Denward Lane to discharge its debt to the defendant through payments made by a third party – Pre Cast Panels. Mr Smith was a director of both companies (and the sole director of Pre Cast Panels), he notified Mr Messina of the upcoming transfer of the account and Pre Cast Panels subsequently assumed the burden of that account. However, even if this payment was not a 'course of dealing initiated by a debtor that is intended to, and does, extinguish a creditor's debt' (and I find that it is), then by its conduct, Denward Lane acquiesced in the payment of its debt by the third party (Pre Cast Panels) on its behalf so that the debt is taken to be discharged (see Owen v Tate [1976] QB 402 at 411-2; [1975] 2 All ER 129 at 134-5 and Oakleigh at [82]), possibly giving rise to a (restitutionary) right in Pre Cast Panels in the form of a claim against Denward Lane for money paid: see Lumbers at [43], [47]-[54] and [77]-[80]." 1. In Burness, it was clear that, at the very least, Denward Lane had acquiesced in the payment of its debts as part of a transaction whereby Pre Cast Panels took over its business. Further, it must be noted that the payment was found to be part of a "course of dealing" that was intended to, and did, extinguish the creditor's debt. 2. The third decision is the decision of the Full Court of the Federal Court in Federal Commissioner of Taxation v Kassem (2012) 205 FCR 156; [2012] FCAFC 124 (Kassem), in which a company called Antqip Pty Ltd (Antqip) made two payments to the Federal Commissioner of Taxation, who allocated the payments to an account relating to a primary tax liability for a related company, Mortlake Hire Pty Ltd (Mortlake). The primary judge found that the payments made by Antqip were made out of funds lent to Mortlake and that the payments were made at the direction of that company. After a successful winding-up application, the liquidators appointed to Mortlake sought to recover the payments made by Antqip to the Commissioner. 3. The Court, in upholding the liquidators' claim, stated that the case was a "clear example of a lender paying moneys advanced to a creditor of the borrower in accordance with the borrower's directions", and that, even if it was not correct to describe the transaction as a loan, what was important was the finding that the payment was "a payment that was made by or on behalf of" Mortlake: see Kassem at [40]-[41]. Their Honours then made the following remarks at [42]-[43] on which some reliance was placed by the appellants in the present case: "[42] Moreover, even if it is not correct to describe the transaction between Mortlake and Antqip as a loan, what is important is the finding that the payment by Antqip to the Commissioner was a payment that was made by or on behalf of Mortlake. So much is plain from the evidence to which we were taken. [43] The transaction which s 588FA of the Act then looks at is the transaction between Mortlake and the Commissioner, that is to say, the payments totalling $70,000 made in March and April 2007. That was the approach taken by Gordon J in Burness v Supaproducts Pty Ltd (2009) 259 ALR 339 where payments were made to a creditor by a related company of the insolvent debtor. We see no reason why a different approach is required in the present case." The primary judgment 1. The primary judge described the issues in the case at [14] as follows: (1) in the case of the [respondents] other than Kennico, whether for the purposes of s 588FA(1): (a) Evolvebuilt was a party to the relevant transaction, and/or (b) the relevant payment was made by and received from Evolvebuilt (as distinct from Built); and (2) in the case of all [the respondents], whether (for the purposes of the statutory defence afforded by section 588FG(2)) they did not have reasonable grounds to believe that Evolvebuilt was insolvent when the payments were received (it being conceded that they were received in good faith and that valuable consideration was given). 1. The primary judge stated that, for the purpose of s 588FA(1), an unfair preference involved "a transaction to which the company and the creditor are both parties", whereby "the creditor receives from the company more than it would receive if the transaction were set aside and the creditor proved for the debt in the winding up". 2. The primary judge emphasised the importance of the phrase "from the company" in s 588FA(1)(b), noting that, if it is found that a transaction is voidable, the Court may make an order under s 588FF(1)(a) 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". 3. After outlining the facts of Re Emanuel, the primary judge referred to the passage which I have extracted at [27] above. He stated that the Court in Re Emanuel distinguished between the question of whether the debtor company was a party to the transaction and whether the payment was received "from" the debtor company. 4. The primary judge then referred to the passages in the judgment which I have extracted at [28] above. He stated that it was important to note that the observations in Re Emanuel were made "in the course of holding that for the purposes of s 588FA(1)(a), there could be a compound transaction, to not all parts of which the company had to be a party". He noted that, in the paragraph which I have cited at [29] above, the Court concluded that "Emanuel's role in authorising the transaction was sufficient to make it, for relevant purposes, a party to it". The primary judge also stated that this did not amount to "a conclusion that Emanuel made the payment". 5. The primary judge noted that the Court dealt with the latter question in the passage from the judgment which I have extracted at [30] above. He stated at [32] that the conclusion that the creditor received a benefit from the transaction did not necessarily mean the benefit was received "from the company" for the purposes of s 588FA(1)(b). Rather, he stated that the Court's conclusion in Re Emanuel depended on several facts, including that "the creditor received the actual benefit of an asset of the company", which was "the chose in action owned by Emanuel under the settlement deed" between ELFIC and Emanuel, that the "consideration was in final settlement of all obligations between EFG and Emanuel", that "the payment was made at the direction of Emanuel, and but for that direction, Emanuel would have been entitled to the benefit of the payment", and that if the payment had not been made, "Emanuel could have recovered from it the sum agreed to be paid". 6. The primary judge stated that the decision of Barrett J in Woodgate v National Associates International BV [2007] NSWSC 1260 (Woodgate) illustrated that the "consideration between the debtor company and the third party for making the payment to the creditor is important to determining whether the payment can be said to have been made by the company" because, if "the third party's undertaking to make payment is part of the consideration, then the company may have a legal right to require the payment to be made". 7. The primary judge also referred to the decision of Fryberg J in Re Imobridge Pty Ltd (in liq) [2000] 2 Qd R 280; [1999] QSC 342 (Re Imobridge), which he stated reinforced two features of Re Emanuel. First, the payment was made "by direction of the debtor company, pursuant to a deed which conferred the right to give such a direction" and second, that "Emanuel was legally entitled to the benefit of the payment, so that the payment came out of an asset to the benefit of which the company was entitled". 8. The primary judge also referred to the decision in Burness. He noted that Gordon J, in considering the consequences of the payment of a debt by a third party, explained that, "where a third party paid a debt with the authority of the debtor, then it fell within Re Emanuel as a 'course of dealing initiated by a debtor that is intended to extinguish a creditor's debt'" and it was a payment made "by the company". However, he stated that the part of Re Emanuel to which her Honour was referring in that context was "concerned with identifying a relevant transaction, and not with identifying from whom a payment was received". 9. The primary judge noted that, in Burness, Gordon J stated that, "where a payment made by a third party to a creditor is authorised by the debtor, nothing more is required – the debt is discharged by the third party at the request of or with the acceptance of the debtor". The primary judge accepted that her Honour accurately stated what would be required for a third party payment to discharge a debt, but said that her Honour's reasoning "elides what is required for a third party payment to discharge a debt with whether it can be said that the payment is made by the debtor", which was a distinction which he stated was specifically recognised in Re Emanuel at 287-288. 10. The primary judge also referred to the statement by Gordon J that, "where a debt is paid by a third party which is unauthorised by the debtor, the debt is not necessarily discharged; if the debtor accepts or ratifies the unauthorised payment the debtor will be liable on a restitutionary cause of action to the third party, but if the debtor does not ratify the payment the original debt remains outstanding". In that context, the primary judge referred to the conclusion reached by Gordon J at [47], which I have extracted at [33] above, and stated that it did not answer the question of whether the payment was received "from the company". However, he stated that Burness could be explained in a manner consistent with Re Emanuel, since it could be inferred from the facts of Burness that the consideration for the transfer by the debtor Denward Lane to Pre Cast Panels of its business included an undertaking by Pre Cast Panels to pay Denward Lane's business debts" and, in these circumstances, the creditor could be said to have received funds from Denward Lane. 11. The primary judge also referred to Kassem. He said that the relevant feature of that case was that "the payment was one by direction of the debtor of funds which it borrowed from the third party and to the benefit of which it was therefore legally entitled". He said that reliance by the Court on the fact that the payment was "on behalf of" the debtor company was "an unnecessary additional basis for the decision" and that there was "no close consideration" of the reasoning of Gordon J in Burness. He stated that, in any event, the phrase "on behalf of" could not replace the statutory requirement that the receipt be "from the company". He stated that, while the debtor's acquiescence may suffice to discharge the debt, "it does not follow that the payment was made by or received from the debtor company". 12. The primary judge accepted that, if Evolvebuilt had directed Built to make a payment to the secondary subcontractors out of moneys otherwise payable by Built to Evolvebuilt, the position would be indistinguishable from Re Emanuel. However, he said that this was not what happened in the present case. 13. The primary judge accepted that, prior to the impugned payments to the secondary subcontractors being made, Evolvebuilt had made a formal request under cl 38.2 of the Subcontract that Built pay the secondary subcontractors. He also noted that the letter from Built to the CFMEU on 14 March 2013 stated that the payment was "on behalf of" Evolvebuilt in circumstances where the payments to the secondary subcontractors had not already been made by Evolvebuilt. 14. However, his Honour stated that "Built did not act pursuant to the Evolvebuilt request, but acted pursuant to the agreement it made with the CFMEU, to which Evolvebuilt was not a party", with that arrangement being reached in response to "industrial pressure". He said that Built, rather than acting pursuant to the Subcontract with Evolvebuilt, "terminated that contract and indicated that the secondary subcontractors would henceforth be engaged through a new subcontractor". He stated that the use of the phrase "on behalf of" in Built's letter to the CFMEU "meant no more than that the payment was made in respect of the debt owed by Evolvebuilt, and perhaps to reserve Built's consequential rights against Evolvebuilt". 15. The primary judge stated that, while Evolvebuilt "could request Built to pay secondary subcontractors, it had no legal right to require Built to do so". He stated that there was "no evidence that there were any moneys owing by Built to Evolvebuilt out of which such a payment could have been directed". He stated that, to the contrary, "Evolvebuilt's payment claim was assessed at nil" and that "there was no property or right to the benefit of which Evolvebuilt was entitled". 16. The primary judge stated that, in the circumstances referred to in the preceding paragraphs, "although it may well be that the payments by Built had the effect of discharging Evolvebuilt's indebtedness – either because Evolvebuilt assented to them or because the liquidators subsequently did so", the payments were made out of Built's assets, so that it did not follow that they were "made by or received from Evolvebuilt". He said that the payments were "made by, and received by the [respondents] from, Built and not Evolvebuilt". This was so "even if making the payment gave Built some right to restitution against Evolvebuilt". He stated that, if it were otherwise, "the satisfaction of a creditor's debt by the debtor's guarantor would constitute a payment on behalf of the debtor and be liable to be avoided as a preference". 17. The primary judge stated that the conclusion he reached was entirely consistent with the policy and purpose of s 588FA(1) of the Act. He stated that the effect on Evolvebuilt was "at worst neutral". He stated that the evidence did not indicate whether Built's proof of debt included the amounts paid to the first to fifth respondents. He stated that, at its highest, Built may have acquired a "restitutionary" claim for the amount it paid to discharge the debts. 18. The primary judge stated that, in these circumstances, it could not be said that the impugned payments to the first to fifth respondents fell within s 588FA(1) and therefore s 588FF(1)(a). He noted that, by contrast, the payments to Kennico were made directly by Evolvebuilt and that, in those circumstances, subject to the defence in s 588FG(2), the liquidators were entitled to an order for repayment under s 588FF(1)(a). 19. The primary judge noted that all respondents other than the fourth respondent invoked the defence under s 588FG(2). In relation to the first, second, third and fifth respondents, the primary judge concluded that, had it been necessary for them to rely on s 588FG(2), they would have been unsuccessful. There was no challenge to this conclusion on appeal. 20. So far as Kennico was concerned, the primary judge noted that it was "only marginally involved in the ANZ Project and had provided labour mainly to other sites". He referred to the evidence of Mr Chang, a director of Kennico, that he "was not aware of the events concerning the ANZ Project", that Kennico had received payments from Evolvebuilt, and that there was "nothing to indicate" that any payments "remained unpaid for any significant period of time". The primary judge noted the evidence of Mr Chang that he "would not have provided labour if he had known that Evolvebuilt was in financial difficulty", but stated that what was relevant was his "state of mind when the payments were received". 21. The primary judge referred to the evidence of Mr Hosking that, following the sending of letters of demand to Kennico, Mr Chang contacted him and said that "he did not know Evolvebuilt was insolvent", that Mr L'Estrange of Evolvebuilt, had sought his help "as he was waiting on payment from Built and had no money to pay subcontractors", and that he had informed Mr L'Estrange that "if Kennico was not paid, he would go to the union". 22. The primary judge concluded that the relevant circumstances known to Kennico indicated that Mr L'Estrange wanted his help because "the company had no money to pay subcontractors as it was waiting on a payment from Built". He said that this suggested a "short term cashflow issue, rather than insolvency". He stated that there was "no evidence that payments to Kennico were significantly in arrears". 23. The primary judge considered that what was known to Kennico was insufficient to found in a reasonable person "an actual apprehension or fear that Evolvebuilt was unable to pay its debts as and when they fell due, as distinct from a short term cash flow problem", and that Mr Chang's evidence showed that he did not know that Evolvebuilt was insolvent. In the circumstances, he concluded that Kennico had made out the defence under s 588FG(2) of the Act. 24. Accordingly, the primary judge dismissed the appellants' claim against each of the present respondents. The appeal 1. The appellants relied upon an amended notice of appeal. The grounds of appeal asserted, first, that the primary judge erred in construing s 588FA(1) of the Act in finding that the payments made by Built to the first to fifth respondents on behalf of Evolvebuilt were not received "from the company" (ground 1). Second, in that context, the appellants contended that the primary judge erred in not following the Federal Court decisions in Burness and Kassem to which I have referred at [32]-[36] above (ground 2). 2. The third ground was essentially a challenge to a finding of fact made by the primary judge. It was contended that the primary judge erred in finding that the payments made by Built to the first to fifth respondents were not made pursuant to the request from Evolvebuilt to Built on 12 March 2013, that the request was "irrelevant to what transpired", and that the payments were "not payments out of any asset to the benefit of which" Evolvebuilt was otherwise entitled (ground 2A). 3. So far as Kennico was concerned, it was contended that the primary judge erred in concluding that the defence in s 588FG(2) of the Act was available when Kennico was aware that Evolvebuilt "had no money to pay subcontractors" (ground 3). 4. It is convenient to deal first with the grounds in relation to the primary judge's findings in favour of the first to fifth respondents before turning to the ground relating to Kennico. The appeal against the dismissal of the claims against the first to fifth respondents (grounds 1-2A) a The appellants' submissions 1. The appellants first dealt with their factual challenge to the finding of the primary judge that the request from Evolvebuilt to Built on 12 March 2013 to make the payments to the secondary subcontractors was "irrelevant to what transpired". The appellants submitted that the primary judge's finding was erroneous and identified several "objective" matters which were said to support this submission. 2. First, the appellants submitted that the request had what was described in their written submissions as the "contractual consequences" arising from cl 37.3A and cl 38.2. The difficulty with this submission is that those clauses impose no obligation on Built to make any payments, and perhaps, more importantly, those clauses envisage that payments would be made out of moneys due from Built to Evolvebuilt. 3. The appellants also referred to the fact that the request covered payments "otherwise due" from Evolvebuilt to the respondents, which appears to be a reference to the finding of the primary judge that the request was "general in its terms". The appellants also relied upon the terms of the letter from Built to the CFMEU on 14 March 2013, to which I have referred at [12] above, the fact that Built terminated the Subcontract with Evolvebuilt on 14 March 2013, and the fact that the "initial" payments were made by Built to the secondary subcontractors on 15 March 2013. The appellants submitted that these matters should have led to the conclusion that, while not the only cause of the payments, the request was part of the "chain of causation" that caused the payments to be made. 4. Elaborating on this submission, the appellants stated that the finding of the primary judge that "Built did not act pursuant to [Evolvebuilt's] request, but acted pursuant to the agreement it made with CFMEU, to which Evolvebuilt was not a party, in response to the industrial pressure applied by the CFMEU" did not automatically follow. They submitted that there was "no reason in principle" that the payments by Built could not have been "a result of both the request and the agreement with the CFMEU". They submitted that the payments had "specific contractual effects to the benefit of Built". As I noted at [67] above, that proposition may be doubted unless Built was indebted to Evolvebuilt and unless the Subcontract was on foot at the time the payments were made. 5. The appellants submitted that, in the absence of any evidence from Evolvebuilt and its directors, the CFMEU or the respondents, any conclusion about Built's intentions "could only be based on documents created at the time and inferences to be drawn from them". In particular, the appellants submitted that the language of the letter from Built to the CFMEU on 14 March 2013 was "consistent with" Built acting on Evolvebuilt's request. It was submitted that it was not a question of applying "excessive significance" to the use of the words in the letter. They stated that the fact that letter was expressed to record an "agreement" and that, on its face, it was written by a layperson did not detract from the fact that the phrase "on behalf of" was used "because that was what the parties understood to be occurring". 6. Senior counsel for the appellants referred to the letter from the CFMEU to Built on 12 March 2013 and the covering email to the request from Evolvebuilt to Built on 12 March 2013. He submitted that reading these two documents together showed that there had been some discussion between Built and Evolvebuilt prior to Evolvebuilt making its request to Built. He submitted that it could be inferred that the letter from the CFMEU had been sent first, after which there was discussion between Mr Hunter of Built, and Mr L'Estrange of Evolvebuilt, and that the request from Evolvebuilt to Built was then made as a result of this discussion. Senior counsel for the appellants submitted that this was consistent with the letter from Built to the CFMEU on 14 March 2013 which stated that the payments would be made "on behalf of" Evolvebuilt. 7. The appellants further submitted that this was supported by the receipt issued by the first respondent for the "initial" payment made by Built on 15 March 2013, which stated "Cheque received on the 15/3/13 for $17,580.00 for works completed on the ANZ project on behalf of Evolvebuilt". They submitted that this made it clear that it was Evolvebuilt's obligation which was discharged by the payment. The appellants also submitted that, when Gadens Lawyers, the solicitors for Built, used the phrase "on behalf of Built" in making the payments, this merely reflected the fact that the payments were made out of moneys held by Gadens Lawyers at the direction of Built. 8. Further, in relation to the findings made by the primary judge to which I have referred at [52] above, the appellants did not dispute that Built's accession to Evolvebuilt's request was "discretionary" and they also accepted that there was no direct evidence that any money was owing by Built to Evolvebuilt. However, they submitted that, since the terms of cl 38.2 indicated that "direct payments" were to be made out of money payable to Evolvebuilt and Evolvebuilt's payment claims had been assessed at nil, an inference could be drawn that the "direct payments were taken in to account" in assessing Evolvebuilt's payment claim because, in substance, by making the payments to the secondary subcontractors, Built was paying for work for which it would otherwise have had to pay Evolvebuilt. In that context, senior counsel for the appellants submitted that at the time the payments were made, Evolvebuilt had accrued contractual rights against Built. He noted that, notwithstanding the termination of the Subcontract, cl 40A preserved "accrued rights". 9. Senior counsel for the appellants also submitted that, if at the time the payments were made, Evolvebuilt owed more money to Built than Built owed to Evolvebuilt, then the payments made by Built would simply be added to the amount Evolvebuilt owed Built. However, he accepted that, if the payments were made by Built as a volunteer, then the appellants would not have a case. He submitted that Built would have a "right of recovery" against Evolvebuilt if the payment was made "with the assent of or at the request of" Evolvebuilt. He accepted that the evidence did not show whether Built's asserted "right of recovery" had been accepted by Evolvebuilt or its liquidators. However, he referred to the proof of debt lodged by Built, which was summarised in paragraph [10(c)] of the Solvency Report to which I have referred at [19] above, and correctly noted that it included claims for the payments to the secondary subcontractors, as I have discussed at [22] above. 10. Senior counsel for the appellants submitted that there was no issue as to whether Evolvebuilt and the respondents were parties to a "transaction" for the purposes of s 588FA(1)(a). However, while it is correct that the primary judge decided the case on the basis that the impugned payments were not received "from the company" and did not expressly state that there was no "transaction" to which Evolvebuilt and the respondents were parties, it seems to me to be implicit in his reasoning which I have discussed at [50]-[53] above that Evolvebuilt was not a party to any relevant "transaction". This is also implicit in findings of the primary judge which were the subject of challenge by the appellants in ground 2A of the amended notice of appeal. 11. So far as the failure to follow the Federal Court authorities was concerned, the appellants first noted that the decisions in Woodgate and Re Imobridge, predated the decision of Gordon J in Burness. They referred to her Honour's consideration of these cases in Burness at [46], which I have extracted at [33] above, and pointed to the fact that the primary judge doubted whether her Honour's analysis was correct, as I have noted at [46] above. They submitted that the primary judge was incorrect to say at [44] that her Honour's conclusion on this point was obiter and they submitted that her Honour's remarks were endorsed by the Full Court in Kassem. They submitted that, in these circumstances, the primary judge should have followed Burness. 12. The appellants also submitted that the primary judge was incorrect in concluding that the position of guarantors was a reason why their construction of s 588FA(1) could not be sustained. They submitted that a guarantor had a direct contractual relationship with a creditor and would only have rights against the debtor once it had satisfied its own obligations. They submitted that, by contrast, in the present case, Evolvebuilt had rights against Built being either a "chose in action in contract" or a "quantum meruit". However, this ignores the evidence that Built terminated the Subcontract and that an adjudicator had determined that nothing was owed by Built to Evolvebuilt. 13. Senior counsel for the appellants submitted that Gordon J accepted in Burness at [42] that a payment made by a volunteer is not recoverable but, referring to Burness at [44], stated that her Honour concluded that, if a payment was authorised by a debtor company, then it fell within the principles of Re Emanuel. Senior counsel for the appellants submitted that her Honour did not accept that Re Emanuel was authority for the proposition that, before a payment could be taken to have been accepted or made by a debtor, there must have been an "arrangement between the debtor and the third party whereby at the direction of the debtor, the third party made a payment to the creditor in discharge of an obligation owed by the third party to the debtor". He submitted that it followed from her Honour's reasoning that there could be an "ex post facto authorisation". 14. Senior counsel for the appellants also submitted that, contrary to what was said by the primary judge, it was no part of the reasoning of Gordon J in Burness that there was a relationship between the debtor Denward Lane and Pre Cast Panels to the effect that the latter would pay the debts of Denward Lane's business. 15. The appellants finally submitted that, even if this Court did not accept that the effect of the decisions in Burness and Kassem was to "expand the circumstances in which payment may be seen to be made by the company", the present case fell within the approach stated in Re Emanuel. b The first to fifth respondents' submissions 1. The first to fifth respondents (the respondents) submitted that the substance of the appellants' submission was that, as a result of cl 37.3A and cl 38.2 of the Subcontract, each of the impugned payments made by Built was "recoverable as a debt" and that "those payments otherwise were to come from monies otherwise payable" to Evolvebuilt. It was submitted that this submission presupposed two matters: first, the ongoing existence of the Subcontract and the ability of Evolvebuilt to enforce their rights under the Subcontract; and second, that the payments were made pursuant to the Subcontract. 2. The respondents submitted that these propositions did not sit comfortably with the fact that the Subcontract had been terminated, that Built did not take any steps to make any payments until after termination and after it had reached its own arrangement with the CFMEU, and that there was an adjudication which had determined that there were no moneys owing from Built to Evolvebuilt. 3. The respondents submitted that the primary judge was correct in not placing "excessive significance" on the phrase "on behalf of" in the letter from Built to the CFMEU on 14 March 2013, stating that it was "difficult to imagine what other phrase may have been used" to express the reason for the arrangement with the CFMEU. They stated that the receipt relied upon by the appellants to which I have referred at [71] above did not advance the position, since it was merely a description of the work which had been done. They also pointed to the fact that the payments were not made out of any fund held on behalf of Evolvebuilt and that the appellants' submission that they had a right to claim "quantum meruit" from Built could not be correct since it had been determined by an adjudicator that there were no moneys owing by Built to Evolvebuilt. 4. The respondents submitted that the "factual matrix" in the present case was different from that which was considered in Re Emanuel since Evolvebuilt was unable to compel Built to make the impugned payments and, once the Subcontract was terminated, any right which Evolvebuilt might have had to enforce the making of the payments was "destroyed". This submission fails to take into account that, to the extent that Evolvebuilt had "accrued rights" prior to the termination of the Subcontract, they were preserved. 5. The respondents submitted that, in Burness, the "commonality of control" of the debtor Denward Lane and its successor Pre Cast Panels meant that the finding that the payments made by Pre Cast Panels were intended to, and did, discharge Denward Lane's debts to its creditors was an easy one to which to come. They submitted that, in effect, Pre Cast Panels took "an assignment of the debt owing to the creditor with a view to discharging the original debtors' obligations to the creditor". They submitted that, in the alternative, Gordon J had concluded that Denward Lane had "acquiesced in the discharge of its indebtedness to the creditors with the result that the payment was made by the original debtor". 6. In that context, the respondents submitted that the "mere fact of authorisation of a payment by a third party to a creditor" did not have "the effect of bringing the transaction within the meaning of" s 588FA(1) if the transaction was "not one for which the third party requires the consent [of the debtor]" or "where the payment by the third party does not arise on the debit side of [the debtor's] balance sheet". 7. Applying this analysis to the present case, the respondents submitted that an inference could be drawn that the arrangement between the CFMEU and Built was that, "in exchange for Built making the impugned payments, the respondents would return to the site and continue to work for Built". On this view of the facts, the respondents submitted that Evolvebuilt was not a party to the relevant transaction and was thus not in a position to "authorise" it. 8. The respondents further submitted that, in Kassem, the payment was made by Antqip, a related entity of the debtor Mortlake, to a creditor in circumstances where Mortlake was in a position to direct that the payment to the creditor be made. They submitted that the Court had come to the view that "the fact that the payments had come out of the net assets of the company in liquidation was sufficient" to make the transaction one to which s 588FA(1) applied. They submitted that this was in contrast to the present case, where the payments did not and could not have come out of the assets of Evolvebuilt. The respondents also submitted that this was an appropriate case in which to consider whether a diminution in a debtor's assets is necessary for a transaction to constitute an "unfair preference" for the purposes of s 588FA(1). 9. Counsel for the respondents submitted that the phrase "received from the company" meant that the company must "give something away". He submitted that, for s 588FA(1) to apply, it was necessary that funds otherwise available for distribution in liquidation were applied in payment of a debt so that they were no longer so available. He submitted that the primary judge focused upon and made that distinction. 10. In the present case, counsel for the respondents submitted that the inability of Evolvebuilt to access the fund from which Built made the payments meant there was never an asset available to the creditors of Evolvebuilt which would have been distributable in liquidation and therefore, that the mischief which s 588FA(1) was enacted to address had not been offended. c Consideration 1. As the primary judge correctly pointed out, there are two matters which must be established for a transaction to constitute an "unfair preference" within the meaning of s 588FA(1). First, "the company and the creditor must be parties to the transaction" and second, the transaction must result in "the creditor receiving from the company … more than the creditor would receive from the company" if the transaction were set aside. Each of these matters must be established by the appellants. 2. As was pointed out in Re Emanuel, a transaction can be made up of a series of interrelated dealings. Thus, in the present case, if it could be established that, as a result of an arrangement (whether express or inferred) between Evolvebuilt and Built, Built reached an arrangement with Evolvebuilt and its creditors, being the first to fifth respondents, pursuant to which those creditors were paid, that would constitute a relevant transaction for the purposes of s 588FA(1)(a). 3. This highlights the importance of identifying the "transaction" to which Evolvebuilt was said to be a party. In the present case, the appellants contended that the payments to the first to fifth respondents were as a result of both the request from Evolvebuilt to Built on 12 March 2013 as well as the request or demand by the CFMEU to Built on the same date, or as they put it, both requests were part of a "chain of causation" which resulted in the payments to the respondents by Built. 4. It does not seem to me to be helpful in this context to refer to a "chain of causation". What is necessary for the purposes of s 588FA(1)(a) is to identify the "transaction" and determine whether Evolvebuilt was a party to it. If the transaction resulted from the contractual arrangements which existed between Built and Evolvebuilt, then I would accept, on the undisputed assumption that the first to fifth respondents would have been parties to such a transaction, that the transaction would fall within s 588FA(1)(a). 5. However, in the present case, I do not think that the appellants have established that Evolvebuilt was a party to the "transaction" as a result of which the payments were made by Built. It is first necessary to consider the circumstances in which the payments were made in light of the effect of the existing relationship between Evolvebuilt and Built. 6. The request from Evolvebuilt to Built on 12 March 2013 purported to be made under cl 38.2 of the Subcontract, which permitted Built to make payments to secondary subcontractors "out of moneys payable to" Evolvebuilt upon the request of Evolvebuilt. However, rather than making the payments pursuant to that contractual regime, Built terminated the Subcontract with Evolvebuilt. Although the appellants were correct in submitting that this did not affect "accrued rights", cl 38.2 did not impose any obligation on Built to make the payments the subject of the request by Evolvebuilt. A fortiori, there was no obligation on Built to make the payments after the Subcontract had been terminated. 7. Further, it appears that Built contended that it did not owe any money to Evolvebuilt under the Subcontract, which was an assertion supported by the adjudicator's determination referred to in paragraphs [5] and [10] of the letter from Gadens Lawyers to the liquidators on 23 October 2013 which I have set out at [21] above. Even if a request from Evolvebuilt under cl 38.2 were capable of imposing an obligation on Built to make a payment, it appears that Built had no "moneys payable to" Evolvebuilt out of which it could make such a payment. 8. It is against this background that the question of whether Evolvebuilt was a party to the "transaction" which resulted in the payments made by Built arises. Although, as the appellants pointed out, the covering email to the letter from Evolvebuilt to Built on 12 March 2013 requesting the payments to be made pursuant to cl 38.2 of the Subcontract referred to previous discussions between representatives of Evolvebuilt and Built, there is nothing in the letter from Built to the CFMEU on 14 March 2013 recording the arrangement between Built and the CFMEU which would indicate that it was an arrangement or "transaction" to which Evolvebuilt was a party. Indeed, there are several indications to the contrary. 9. First, the letter refers to a discussion between Mr Matthew Hunter of Built and a representative of the CFMEU, who appears from the letter to have been a Mr Rob Kera. There is no suggestion that Mr L'Estrange or any other officer of Evolvebuilt was a party to that discussion. 10. Second, the arrangement outlined in the letter is expressly said to be between the CFMEU and Built. There is no suggestion that Evolvebuilt was a party to the arrangement or involved in giving effect to its terms. 11. Third, although paragraph [1] of the letter refers to "direct payments" to employees of Evolvebuilt already having been made, they were in fact made the day after the letter on 15 March 2013. It can thus be inferred that these payments were made as a result of the arrangement outlined in the letter. 12. Fourth, paragraph [1] of the letter refers to Built making "direct payments" to employees of Evolvebuilt without making any suggestion in that part of the letter that those payments were made "on behalf of" or at the direction or authority of Evolvebuilt. 13. Fifth, paragraph [4] of the letter expressly states that, once all of the payments outlined in the letter are made, "the CFMEU will endorse that the workers and subcontractors will return to work on the project immediately", with the subcontractors to be paid by "a partitioning subcontracting firm who will be engaged by" Built. There is no suggestion in this language that Evolvebuilt had any part in this arrangement. 14. It is true that, in relation to the payments to be made to the secondary subcontractors, paragraph [3] of the letter refers to those payments being made "on behalf of" Evolvebuilt. However, the payments are again referred to as "direct payments" to the secondary subcontractors by Built. There is nothing to suggest that any formal arrangements were made whereby Built would make the payments "on behalf of" Evolvebuilt, whether as agent or otherwise. Significantly, the part of the letter providing for the investigation and assessment by Built of the outstanding amounts after the "initial" payments had been made does not make any reference to participation by Evolvebuilt, as would be expected if it were a party to the arrangement. 15. The only other relevant document referred to by the appellants was a receipt from the first respondent in respect of the "initial" payments which had been made. The receipt stated that the payments were "for works completed on the ANZ project on behalf of Evolvebuilt". In my opinion, that language accurately reflects the fact that the works were carried out "on behalf of" Evolvebuilt. However, it says nothing about the identity of the parties to the transaction pursuant to which the payment was made. 16. Moreover, as I indicated at [95] above, it cannot be ignored that Built asserted that it did not owe any money to Evolvebuilt and that the arrangement with the CFMEU was made separately from the pre-existing contractual arrangements between Built and Evolvebuilt, which were terminated on the same day. 17. The appellants submitted that, absent further evidence from Built, Evolvebuilt, the CFMEU or the respondents, any conclusion about Built's motivation for the payments could only be inferred from the documents. That is true, but it must be borne in mind that the appellants bore the onus of showing that it should be inferred from the documents that Evolvebuilt was a party to the transaction. In my opinion, that onus has not been discharged. As I have indicated at [95] above, I would draw the contrary conclusion. It must be remembered that it would have been open to the appellants to call Mr L'Estrange or another representative from Evolvebuilt to elaborate on the events which occurred between 12 March 2013 and 14 March 2013. 18. Nothing I have written is in any way contrary to the Federal Court cases to which the primary judge and the parties referred. Re Emanuel made it clear that a "transaction" for the purpose of s 588FA(1) can be a "composite" transaction and that the debtor company and the creditor need not be a party to each part: see Re Emanuel at 288-289, to which I have referred at [28]-[29] above. In the present case, the evidence does not establish that the discussions between Built and Evolvebuilt on 12 March 2013 following the letter from the CFMEU to Built on the same day formed any part of a "composite" transaction by which the first to fifth respondents' debts were paid. 19. The position is the same in both Burness and Kassem. In Burness, Gordon J described the payment as part of a "course of dealing" initiated by the debtor Denward Lane, referring to the evidence that a director of both Denward Lane and Pre Cast Panels, which made the payment to discharge Denward Lane's debts, had indicated that the liability for the debts of Denward Lane's business would be taken over by Pre Cast Panels: see Burness at [47], to which I have referred at [33] above. There is no evidence of an equivalent arrangement between Evolvebuilt and Built in the present case. 20. In Kassem, the Full Court stated that it was "a clear example of a lender paying moneys advanced to a creditor of the borrower in accordance with the borrower's directions", or that, even if it was not correct to describe the transaction as a "loan", it involved a payment being "made by or on behalf of" the debtor Mortlake. It was not in contest that Mortlake was a party to the transaction: see Kassem at [40]-[43]. 21. In these circumstances, it is not necessary to consider whether a creditor receives "from the company" a payment in respect of an unsecured debt for the purposes of s 588FA(1)(b) where, as part of a "transaction", the payment is received from a third party and the debtor company authorised or acquiesced in the payment being made on its behalf so as to give rise to a "restitutionary" claim against it in favour of the third party. I am inclined to the view that, if the "restitutionary" claim resulted from a "transaction" to which the debtor company was a party, then the payment could be said to have been received "from the company". This is consistent with the reasoning of Gordon J expressed in Burness at [46]-[47]. However, it is unnecessary to reach a final conclusion on this issue or on whether Built would have such a "restitutionary" claim in the present case. Nor is it necessary to determine the question left open by the Full Court in Kassem at [59] of whether it is necessary for there to be a diminution in the debtor company's assets for a transaction to constitute an "unfair preference" under s 588FA(1). 22. It follows that the appeal against the dismissal of the claim against the first to fifth respondents should be dismissed. The appeal against the dismissal of the claim against Kennico (ground 3) a The submissions 1. The appellants submitted that the findings by the primary judge, to which I have referred at [57]-[59], should have been sufficient for him to conclude that a reasonable person would have had a suspicion that Evolvebuilt was insolvent such that the defence in s 588FG(2) of the Act was not made out. Senior counsel for the appellants submitted that Kennico had the onus of establishing the defence and that, absent a responsible officer of Kennico giving evidence as to their belief, the defence was not made out. 2. Kennico made no written submissions on this issue. Counsel for the respondents referred to Mr Chang's statement that he did not think that Evolvebuilt was insolvent and noted that Mr Chang was not cross-examined. b Consideration 1. Both parties accepted that the relevant principles were correctly set out by Black J in Re Alsafe Security Products Pty Ltd (in liq) [2016] NSWSC 428. As his Honour pointed out at [33]-[34], the test under s 588FG(2)(b)(i) is directed to whether "the particular creditor, with its perspicacity, the information available to it, and with any analysis of that information that it had made, had 'no reasonable grounds' for suspecting insolvency at the relevant time" and the test under s 588FG(2)(b)(ii) is "whether a reasonable person in the creditor's circumstances, using the information reasonably available in those circumstances and making the analysis of that information which a reasonable person would make, would have had reasonable grounds to suspect the debtor's insolvency", with the matter being determined by reference to "a person who has the knowledge and experience of an average business person". His Honour also pointed out at [36] that the word "suspect" for the purpose of s 588FG(2)(b) requires "more than wondering whether a matter exists or not, and involves a 'positive feeling of actual apprehension or mistrust' that the debtor will be able to pay its debts". 2. The evidence is sparse. Mr Chang, a director of Kennico, gave evidence that Kennico only worked "over one or two" weekends on the works at the premises. He said that Kennico also provided labour to "other sites" prior to March 2013. 3. Mr Chang stated that Kennico received payment for the work at the premises in "due course" and that he was not aware that Evolvebuilt "had been terminated from the Pitt Street site". He said that, had he been concerned that Evolvebuilt was in financial difficulty, he would not have continued to provide labour to Evolvebuilt. 4. The payments from Evolvebuilt to Kennico which were said to be unfair preferences comprised seven payments over a period from 25 March 2013 to 20 May 2013. Mr Hosking, one of the liquidators of Evolvebuilt, gave evidence that he had a telephone conversation with Mr Chang on 7 April 2016 in which Mr Chang stated that a director of Evolvebuilt "had sought his help as he had no money to pay subcontractors" and was "awaiting payment from Built". Mr Chang said that he told the director of Evolvebuilt that "if he was not paid he would 'go to the union'". 5. On 16 June 2016, Mr Chang wrote a letter to the solicitor for the liquidators which, so far as it is relevant, is in the following terms: "1) Our Company has finish our work on 12 Mar 2013, while Evolve declare 6 months last in liquidation, How we can know Evolve were going to liquidate ? It is unfair and non-sense to me or anybody , i knew Evolve were declare liquidate, if i knew, our Company will not sent any person to help any work for Evolve, this is Common Sense to everyone, Why Philip Hokking [sic] has no sense of issue? 2) Mr Philip was state i knew owner of Evolve, so he pay me preference in unfair pay. I can say Mr Philip was has no mind of thinking about this issue. He is OZ, and i am Asian, we have no relationship and after we finish ANZ Tower, he was unable to pay everyone while payment hold by BUILT and finally arrange by UNION. 3) Finally, i was ask one of foreman to help only in the weekend, knowing nothing of Evolve was problem with water leaking until Hokking [sic] told me." 1. It seems to me that this evidence leads to the conclusion that a reasonable person in the position of Mr Chang would have had "a positive feeling of apprehension or mistrust" that Evolvebuilt would be able to pay its debts at the time that the payments to Kennico were made. This conclusion follows from the fact that the work carried out by Kennico for Evolvebuilt was completed by 12 March 2013, that the payments were made over a subsequent period of two months, and that, more importantly, Mr Chang's letter to the solicitor to the liquidators showed that he was aware that Evolvebuilt was "unable to pay everyone" and that payment had been arranged by the CFMEU. 2. It follows that Kennico has failed to establish the first limb of the defence in s 588FG(2)(b)(i). It also follows that the second limb of the defence in s 588FG(2)(b)(ii) has not been made out. Conclusion 1. In the result, the following orders should be made: 1. In relation to the first to fifth respondents: 1. Dismiss the appeal. 2. Order the appellants to pay the first to fifth respondents' costs of the appeal. 1. In relation to the sixth respondent: 1. Allow the appeal. 2. Set aside the orders made by the primary judge dismissing the appellants' claim against the sixth respondent. 3. Direct the appellants and the sixth respondent to bring in short minutes of order to give effect to this judgment within 7 days. 4. Order the sixth respondent to pay the appellants' costs of the appeal against it and have a certificate under the Suitors Fund Act 1951 (NSW) if eligible. 1. BEAZLEY P: I have had the advantage of reading in draft the judgment of the Chief Justice. I agree with his Honour's reasons and proposed orders. 2. GLEESON JA: I agree with Bathurst CJ. ********** Amendments 13 July 2018 - Cover sheet - Change "A Martin" to "A G Martin" DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 13 July 2018