[2023] NSWSC 816

Re Harmony Homes Pty Ltd (in liq) (No 2)

See [8]

Catchwords

CORPORATIONS — Winding up — Voidable transactions — Unfair preferences — Separate question — Whether company was insolvent in the six months prior to its entry into external administration, or at some date in that period —Liquidator’s report clearly establish that the Company could not pay its debts, as and when they fell due

Cases cited

Sutherland & Anor as joint liquidators of Australian Coal Technology v Hanson Construction Materials Pty Ltd[2009] NSWSC 232

Legislation cited

Corporations Act 2001 (Cth)

Judgment

[1]
In these proceedings, the liquidator of Harmony Homes Pty Ltd (the Company) seeks to recover from the six remaining defendants amounts said to have been unfair preferences paid to them by the Company.
[2]
On 20 March 2023, the Court ordered that the following question be determined separately and in advance of the other issues in the proceedings, namely:
[3]
The liquidator seeks the following answer to that question, namely:
[4]
In support of that answer, the liquidator filed an affidavit annexing a solvency report prepared by him. None of the defendants filed evidence opposing the question to be answered in that way. There was only one appearance, which was on behalf of the first defendant, Bunnings Group Limited. That defendant did not oppose the question being answered in the way contended for by the liquidator.
[5]
Section 95A of the Corporations Act 2001 (Cth) states:
[6]
The Company was placed into liquidation on 1 July 2019. Consequently, the relevant period is the period between 1 January to 30 June 2019. Prior to the Company being placed into liquidation, it operated a construction business from leased premises in Baulkham Hills and carried out building projects in NSW. The following matters are apparent from the liquidator's report:
1. (1)
  The Company's liquidity ratio (that is, the ratio of current assets over current liabilities) was significantly less than one during the whole of the relevant period and was trending downwards;
2. (2)
  The Company had no capacity to borrow money or to raise additional capital. There was no reason to think its directors had a capacity or willingness to provide further significant funding to the Company. In fact, both directors, who had guaranteed the liabilities of the Company, had been made bankrupt;
3. (3)
  The Company suffered significant trading losses over the relevant period;
4. (4)
  The Company had overdue Commonwealth and State taxes which had increased from $538,221.18 on 2 January 2019 to $675,365.10 on 28 June 2019. It had defaulted on a number of occasions on payment arrangements it had reached with the Australian Taxation Office;
5. (5)
  Suppliers had placed the Company on cash delivery terms and a number of suppliers had demanded payment, threatened to commence proceedings or commenced proceedings. As at 30 June 2019, trade creditor liabilities in excess of $1 million and representing more than 50 percent of all creditors were more than 3 months overdue. That was the position throughout the whole of the period;
6. (6)
  An analysis of the Company's bank statements indicates that it made a substantial number of rounded payments to creditors that cannot be reconciled to the payment of specific debts; and
7. (7)
  The Company was unable to produce timely and accurate information concerning its financial position.
[7]
In my opinion, these matters clearly establish that the Company could not pay its debts, as and when they fell due, during the whole of the relevant period. Accordingly, it is appropriate to make the orders sought by the liquidator.
[8]
The orders of the Court are:
1. (1)
  The question of whether Harmony Homes Pty Ltd (in liq) was insolvent in the six months prior to its entry into external administration, or at some date in that period, be answered as follows:
2. (2)
  These proceedings, and each of the following proceedings:
3. (3)
  Costs reserved.