Liquidator foiled after payment ruled not void

There are times when one is compelled to ask what motivates a liquidator to pursue an 11th hour payment to a creditor when the sought after sum, once costs are deducted, amounts to sixth fifths of bugger all?

For iNO such a time came on Tuesday as we read the judgement of Justice Fabian Gleeson In the matter of Skypac Aviation Pty Ltd (in liq) [2020] NSWSC 1697.

O’Brien Palmer (OBP) principal Chris Palmer has expended considerable time and effort chasing monies for Skypac’s creditors since he was appointed liquidator by order of the court in November 2015.

That effort however has not been gratified by a succession of judgments in his favour and on Tuesday this week Justice Gleeson did nothing to reverse this regrettable trend.

In delivering his reasons, the judge dashed Palmer’s hopes of a modest recovery of $58,860.00 plus interest and instead declared that a payment by Skypac Aviation Pty Ltd to Hope Estates Pty Ltd on 16 October 2015 is not void by reason of s 468(1) of the Corporations Act 2001 (Cth).

Whilst Palmer’s counsel, Alwyn Narayan of Craddock Murray & Neumann Lawyers defeated the defendant’s efforts to have the payment classified as an exempt disposition under s 468(2)(b) because it was made by an Australian ADI, he wasn’t able to overcome his opponent’s submissions in respect of the court deploying its powers of discretion to order the payment otherwise exempt.

As former Prime Minister John Howard once said: “Context is everything” and certainly the circumstances surrounding the payment were used to good effect by counsel for the defendant, David Parish of Nine Wentworth Chambers.

Preeminent amongst those circumstances were the actions of Palmer’s predecessors, Graeme Beattie and Chris Darin, who were appointed voluntary administrators (VAs) of Skypac on October 15, 2015.

Having sought to adjourn winding up proceedings commenced by the ATO, the VAs attempted to trade the business in anticipation of a deed of company arrangement (DoCA) being proposed.

To continue to trade and honour the company’s contractual obligations however, Beattie and Darin needed the aircraft Skypac had been leasing from defendant Hope Estates Pty Ltd.

On being appointed Beattie told Hope Estates that the VAs would continue to pay its invoices. At this point the contested payment had already been authorised by Skypac and was being processed by Westpac.

Parish told the court his client had no idea that there was a winding up application on foot and that his client would not have agreed to continue providing the aircraft to Skypac if he had known such payments would likely be clawed back by a liquidator.

Further, by providing the aircraft and allowing the company to trade and continue generating income, the defendant had benefitted all creditors.

His honour agreed, dismissing Palmer’s submission that the payment was not made in good faith and honest intentions.

“Contrary to the liquidator’s submission, the payment resulted in a broadly commensurate benefit to Skypac in continuing its business during the period of the administration,” the judge said.

“Thus the payment served the interests of Skypac and its creditors in obtaining the use of the aircraft during the administration, which I infer included using the aircraft to fulfil charter contracts for value.”

Justice Gleeson dismissed Palmer’s application for a declaration that the payment is void and ordered the liquidator to pay costs Hope Estates’ incurred in defending the proceedings from February 2020 onwards.

Beattie and Darin meanwhile lasted about a month as VAs before the winding up proceedings were heard and Palmer appointed.

The Minutes of a Meeting of Skypac creditors reveal that it wasn’t until December 2018 that the VA’s remuneration of $59,795.50 was approved.

At the same meeting, resolutions approving the future remuneration and disbursements of the liquidator were defeated by the casting of a special proxy from the ATO requiring meeting chairman and OBP manager Craig Tinkler to vote against the resolutions.

Justice Gleeson’s decision is however not the first such defeat for Palmer.

In March 2019 Justice Kelly Rees struck out claims Palmer brought against various Skypac creditors to recover unfair preferences.

While all parties agreed the company was insolvent at the time the payments were made the defendants in that case identified an opportunity to seek summary dismissal.

They got it because Justice Rees found a great deal can turn on one word in section 468(1) of the Corporations Act 2001 (Cth).

“Put shortly, the first and fifth defendants contend that any disposition of Skypac’s property made on the day that the winding up commenced was not made “after” the commencement of the winding up and is not, and cannot be, void within the meaning of section 468(1) of the Corporations Act 2001 (Cth) (the Act),” her honour said.

For the reasons which follow, I agree.” See: In the matter of Skypac Aviation Pty Ltd (in liquidation) [2019] NSWSC 291.

Palmer declined to comment for this article, saying when contacted that he had not read the judgment. Support INO’s continued chronicling of the insolvency sector.