The High Court recently granted an application under s 292 Companies Act 1993 to set aside substantial payments made on behalf of Northern Crest Investment Limited (in liquidation) (NCI) to satisfy a debt owed to Robt. Jones Holdings Limited (RJH).

In 2008, NCI fell behind in rental and rates payments to RJH and between 2008 and 2010 RJH took a number steps to enforce its rights under the lease. In 2010, RJH received 13 payments totalling $752,000 from Columbus Property Marketing Pty Limited (Columbus) and MSH No.2 Limited (MSH2) discharging the full debt owed by NCI. NCI was subsequently placed in liquidation.

The liquidators argued the payments were insolvent transactions made on NCI's behalf and therefore voidable transactions. RJH opposed, arguing the payments were not transactions of NCI, as Columbus and MSH2 voluntarily made the payments.

The High Court held the payments were voidable transactions, as they were a redirection of licence fees owed to NCI and made with NCI's knowledge and consent. Further, the payments were made at a time when NCI was unable to pay it due debts. RJH had therefore received more than it would have received as an unsecured creditor in NCI's liquidation.

The Court further rejected RJH's argument that the liquidators had abused the process by insufficiently investigating the licence and loan arrangements before filing the Court application.

The Court set aside the payments and ordered RJH to pay the total of $752,000 plus interest from the date of liquidation.

A copy of the decision can be found here.