Australian Rock Walls Pty Ltd (in liquidation) ACN 158 089 448 & Anor v Commissioner of Taxation [2026] QMC 14

MAGISTRATES COURT OF QUEENSLAND CITATION: Australian Rock Walls Pty Ltd (in liquidation) ACN 158 089 448 & Anor. v. Commissioner of Taxation [2026] QMC 14 PARTIES: AUSTRALIAN ROCK WALLS PTY LTD (in liquidation) ACN 158 089 448 (First Plaintiff) Marcus WATTERS and Richard ALBARRAN as joint and several liquidators of Australian Rock Walls Pty Ltd (in liquidation) ACN 158 089 448 (Second Plaintiff) v COMMISSIONER OF TAXATION (Defendant) FILE NO/S: M 70896/24 DIVISION: Civil PROCEEDING: Claim filed 7 May 2024 ORIGINATING COURT: Brisbane DELIVERED ON: 14 July 2026 DELIVERED AT: Brisbane HEARING DATE: 29 April 2026 and 27 May 2026 MAGISTRATE: Magistrate Hay COUNSEL: N.M. Cooke of Counsel for the Defendant SOLICITORS: Agility Law Group for the Plaintiffs McInnes Wilson Lawyers for the Defendant 1. The plaintiffs claim that: (a) during the period from 2 March 2023 until 21 September 2023, the defendant received 9 transactions from the Company totalling $80,994.00; and (b) those transactions resulted in the defendant receiving an unfair preference, within the meaning of s 588FA of the Corporations Act. -- 1 of 24 -- 2 2. The defendant has led no evidence, relying instead upon non-admissions and putting the plaintiffs to proof on their case. 3. The plaintiffs submit that the evidence before this Court establishes that the transactions were made from the Company. They allege the defendant received more money from the transactions than it would have, had it proved the debt in the liquidation. 4. The defendant argues that the transactions are not unfair preferences because: (a) the use of the overdraft account was a rearrangement of money amongst unsecured creditors and, therefore, did not diminish the Company’s assets; (b) the money paid to the Company’s creditors out of the Company overdraft account is from the bank and not ‘from the company’ and therefore not a preference payment; and (c) the money paid by ARRW was from a separate entity and not ‘from the company’. The Law 5. Section 588FA(1) of the Corporations Act (the Act) provides: 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 transactions (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. [my emphasis] 6. “Transaction” is defined in s 9 of the Act to mean a transaction to which the company is party.1 7. To succeed on their claim the plaintiffs must prove, on the balance of probabilities, that: (a) the debt was an unsecured debt;2 1 A number of examples of “transactions” is provided and include: “(d) a payment made by the body”. 2 Corporations Act, s 588FA(1)(b) -- 2 of 24 -- 3 (b) the transactions were entered into at a time when the Company was insolvent;3 (c) the transactions were entered into during the relation-back period;4 (d) the Company and the defendant were both parties to the transactions;5 (e) the transactions resulted in the defendant receiving from the Company more than the defendant would have if it had proved the debt in the liquidation. 6 8. It has been held that “in deciding whether a creditor has received an unfair preference, it is necessary to look at the ‘ultimate effect’ of the ‘entire transaction’ between the company and the creditor.”7 9. The cases establish that to qualify as an unfair preference payment, the money paid must have come from the Company’s own money or assets, or money or assets to which it was entitled.8 10. In Cant v Mad Brothers Earthmoving Pty Ltd the Victorian Court of Appeal observed that “… the words ‘from the company’ are intended to convey that the payment be made out of moneys or assets to which the company is entitled.” [my emphasis] 9 11. Relevantly in Cant the Court of Appeal discussed what for it was the hypothetical scenario of using a company’s overdraft facility to pay the debt and, in so doing, observed: “The applicants also submitted that transactions that are plainly unfair preferences may involve no diminution in the company’s net assets, but merely the substitution of one creditor for another. The paying of a creditor using company funds drawn down from a bank overdraft was given as an example. It is true that such a transaction may leave the company’s balance sheet unchanged. At least where the overdraft is secured, however, the transaction will result in a diminution of the assets available to unsecured creditors, replacing an unsecured creditor with a secured one. In cases where the loan is not secured, it might be debated whether the payment is anything more than a rearrangement among creditors, whose treatment remains equal among themselves. After all, every payment by a company to a creditor has the effect of reducing the company’s liabilities and can therefore be said to cause no net diminution in assets. 3 Corporations Act, s 588FC(a) 4 Corporations Act, s 588FE(2) 5 Corporations Act, s 588FA(1)(a) 6 Corporations Act, s 588FA(1)(b) 7 Kassem and Secatore v Commissioner of Taxation [2012] FCA 152 at [31] per Nicholas J 8 Cant v Mad Brothers Earthmoving Pty Ltd 63 VR 222 at [109] – [110]. 9 Supra at [109] -- 3 of 24 -- 4 Partial payment in return for forgiveness of a debt will cause an increase in net assets. Yet either could constitute a preference. Consideration of the net asset position is therefore a distraction. The more pertinent issue is whether the assets available for distribution among creditors have been reduced. It is unnecessary and undesirable to attempt to say more about hypothetical analogies.” [my emphasis]10 12. In Melbourne v Commonwealth, 11 Williams J described the nature of an overdraft as follows: …But overdrafts are not granted in gross. The essence of an overdraft is that the indebtedness of the customer to the bank is not fixed but fluctuates from time to time within the agreed limit as moneys are paid in and draw out of an active current account operated upon in the ordinary course of the business of the customer. 13. Further, at 63 Latham CJ also described the nature of an overdraft as follows: The right to borrow money on overdraft includes (if, indeed, it does not actually mean) a right to borrow from a bank. The word “overdraft” is the word most commonly used to describe advances by a bank. 14. I was also referred to cases such BounceLED Pty Ltd v Clear Skies Corp Pty Ltd (in liq)12 in which Justice Richmond observed some disquiet expressed in NSW single judge decisions concerning the reasoning in Cant, whilst ultimately noting that he was bound to follow it. It is relevant to note the factual distinction in BounceLED in so far as it pertained to payments from money said to be the subject of a ‘Quietclose’13 trust to which the Company did not have a beneficial right. Whereas in the present proceeding the Company had a right to access and overdrawn the account to satisfy its debts. 15. The defendant submits: “Although the terms of the overdraft may differ from bank to bank, and even account to account, the principles remain the same. Accordingly, in making the payment, the account holder is not actually using its own assets, but rather the assets of the bank.”14 16. In this proceeding it relevant that the words of s. 588FA(1)(a) contemplate circumstances such as these, namely where there are more parties to the transaction than just the Company and the Creditor. 10 Supra [112] 11 (1947) 74 CLR 31 at 101 12 Unreported, [2023] NSWSC 121 13 Barclays Bank Ltd v Quietclose Investments Ltd [1970] AC 567 14 Submissions on behalf of the defendant filed 24 April 2026 at [23] -- 4 of 24 -- 5 The Evidence 17. The parties agree that: (a) 30 August 2023 is the “relation-back day” for the purposes of Part 5.7B of the Corporations Act;15 (b) the “relation-back period” is the period commencing on 1 March 2023 and ending on 2 November 2023; 16 (c) each of the following payments was received by the defendant during the relation- back period and in reduction of the Company’s unsecured indebtedness to the defendant:17 Date Amount 1 2 March 2023 $5,269.00 18 2 17 March 2023 $8,800.00 19 3 17 April 2023 $8,800.00 20 4 16 May 2023 $8,800.00 21 5 19 May 2023 $14,125.00 22 6 14 June 2023 $8,800.00 23 7 13 July 2023 $8,800.00 24 8 16 August 2023 $8,800.00 25 9 21 September 2023 $8,800.00 26 TOTAL $80,994.00 (the ‘transactions’); (d) the Company was insolvent at the time of the transactions.27 18. It is agreed that all but one of the transactions (being transaction 5 in the sum of $14,125), were made from the Company’s overdraft account to the defendant at the Company’s 15 SOC at [7]; Defence at [7] 16 SOC at [8]; Defence at [8] 17 SOC at [9]; Defence at [9(c)] 18 Affidavit M J Watters filed 3 June 2025 at [7] and Exhibit MW-2 p.21, transaction date 1 March 2023 19 Affidavit M J Watters filed 3 June 2025 at [7] and Exhibit MW-2 p. 25, transaction date 16 March 2023 20 Affidavit M J Watters filed 3 June 2025 at [7] and Exhibit MW-2 p. 32, transaction date 14 April 2023 21 Affidavit M J Watters filed 3 June 2025 at [7] and Exhibit MW-2 p. 35, transaction date 15 May 2023 22 Affidavit M J Watters filed 3 June 2025 at [7], [8(d)] and Exhibit MW-2 p. 80, transaction date 18 May 2023 23 Affidavit M J Watters filed 3 June 2025 at [7] and Exhibit MW-2 p. 39, transaction date 13 June 2023 24 Affidavit M J Watters filed 3 June 2025 at [7] and Exhibit MW-2 p. 45, transaction date 12 July 2023 25 Affidavit M J Watters filed 3 June 2025 at [7] and Exhibit MW-2 p. 49, transaction date 15 August 2023 26 Affidavit M J Watters filed 3 June 2025 at [7] and Exhibit MW-2 p. 55, transaction date 20 September 2023 27 SOC at [11]; Defence at [11] -- 5 of 24 -- 6 direction. Transaction 5 was made from a third party’s account (being the ARRW Account) to the defendant. Findings The Fifth Transaction from ARRW 19. I find that the fifth transaction made from the ARRW account was not made ‘from the company’ and did not result in an unfair preference to the defendant. Whilst it may be possible to infer from the transactions that ARRW might be a related entity, I am not satisfied that the evidence on that point reaches the necessary evidentiary standard. There is no evidence that either money or assets to which the Company was entitled were used by ARRW when paying the defendant, or to otherwise establish the nature of the arrangement, if any, between the Company and ARRW regarding the fifth transaction. The Other Eight Transactions from the Overdraft 20. I find that remaining eight of the nine transactions were ‘from the company’. I reject the defendant’s contention that the money paid from the overdraft was from the bank and, therefore, could not be from the Company. Whilst I do accept the defendant’s contention that the money held in the overdraft was the bank’s money, I find that there were three parties to the transaction, namely the bank, the Creditor and the Company. In so doing I conclude that the transactions from the overdraft should be treated in the same way as transactions coming from a saving account held in the Company’s name, which strictly speaking is also the bank’s money. As noted by Barwick CJ in Croton v R: “[T]hough in a popular sense it may be said that a depositor with a bank has “money in the bank”, in law he has but a chose in action, a right to recover from the bank the balance standing to his credit in account with the bank at the date of his demand, or the commencement of action. That recovery will be effected by an action for debt. But the money deposited becomes an asset of the bank which may use it as it pleases:…”. 28 21. Whilst the overdraft may be an unsecured line of credit in favour of the Company, that does not derogate from it being used by the Company for the payment of its debts from money or assets to which the Company is entitled as per the reasoning in Cant. I find that 28 Croton v R (1967) 117 CLR 326 at 330 per Barwick CJ. -- 6 of 24 -- 7 the overdraft gave the Company access to money over which it had a right by virtue of its agreement with the bank. Whilst the precise terms of that agreement are not in evidence in this proceeding, it is not disputed that the overdraft is in the Company’s name and operated by, or at the direction of, the Company’s directors. Nor is it disputed that the Company’s income was paid into the overdraft. For these reasons, I reject the defendant’s contention that the transactions were only between the defendant and the bank and conclude that the Company was a party to the transaction. 22. The Company’s decision to pass its income through the overdraft account enabled the Company to both (i) meet its agreed obligations to the bank for the overdraft facility; and (ii) to continue to pay its creditors by then redrawing those credited repayments to pay the Company’s debts in circumstances where it would not, on the evidence, otherwise have been able to do so. For these reasons, I find, that there was a diminution of the Company’s net assets. 29 23. I also accept the evidence of Mr Watters that the eight transactions from the overdraft account caused the defendant to receive more than it would have, had it been required to prove for the debt in the liquidation.30 24. Accordingly, I conclude that the remaining 8 transactions were an unfair preference because. (a) the debt was an unsecured debt; (b) the transactions were entered into at a time when the Company was insolvent; (c) the transactions were entered into during the relation-back period; (d) the Company and the defendant were parties to the transactions; and (e) the transactions resulted in the defendant receiving from the Company more than the defendant would have received if it had proved the debts in the liquidation. 29 Affidavit of M J Watters filed 3 June 2026 at [14] and Affidavit of M J Watters filed 19 April 2026 at [9] & [10]. 30 Affidavit of M J Watters filed 19 April 2026 at [9]. -- 7 of 24 -- 8 -- 8 of 24 -- MAGISTRATES COURT OF QUEENSLAND CITATION: Australian Rock Walls Pty Ltd (in liquidation) ACN 158 089 448 & Anor. v. Commissioner of Taxation [2026] PARTIES: AUSTRALIAN ROCK WALLS PTY LTD (in liquidation) ACN 158 089 448 (First Plaintiff) Marcus WATTERS and Richard ALBARRAN as joint and several liquidators of Australian Rock Walls Pty Ltd (in liquidation) ACN 158 089 448 (Second Plaintiff) v COMMISSIONER OF TAXATION (Defendant) FILE NO/S: M 70896/24 DIVISION: Civil PROCEEDING: Claim filed 7 May 2024 ORIGINATING COURT: Brisbane DELIVERED ON: 14 July 2026 DELIVERED AT: Brisbane HEARING DATE: 29 April 2026 and 27 May 2026 MAGISTRATE: Magistrate Hay COUNSEL: N.M. Cooke of Counsel for the Defendant SOLICITORS: Agility Law Group for the Plaintiffs McInnes Wilson Lawyers for the Defendant 1. The plaintiffs claim that: (a) during the period from 2 March 2023 until 21 September 2023, the defendant received 9 transactions from the Company totalling $80,994.00; and (b) those transactions resulted in the defendant receiving an unfair preference, within the meaning of s 588FA of the Corporations Act. -- 9 of 24 -- 2 2. The defendant has led no evidence, relying instead upon non-admissions and putting the plaintiffs to proof on their case. 3. The plaintiffs submit that the evidence before this Court establishes that the transactions were made from the Company. They allege the defendant received more money from the transactions than it would have, had it proved the debt in the liquidation. 4. The defendant argues that the transactions are not unfair preferences because: (a) the use of the overdraft account was a rearrangement of money amongst unsecured creditors and, therefore, did not diminish the Company’s assets; (b) the money paid to the Company’s creditors out of the Company overdraft account is from the bank and not ‘from the company’ and therefore not a preference payment; and (c) the money paid by ARRW was from a separate entity and not ‘from the company’. The Law 5. Section 588FA(1) of the Corporations Act (the Act) provides: 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 transactions (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. [my emphasis] 6. “Transaction” is defined in s 9 of the Act to mean a transaction to which the company is party.1 7. To succeed on their claim the plaintiffs must prove, on the balance of probabilities, that: (a) the debt was an unsecured debt;2 1 A number of examples of “transactions” is provided and include: “(d) a payment made by the body”. 2 Corporations Act, s 588FA(1)(b) -- 10 of 24 -- 3 (b) the transactions were entered into at a time when the Company was insolvent;3 (c) the transactions were entered into during the relation-back period;4 (d) the Company and the defendant were both parties to the transactions;5 (e) the transactions resulted in the defendant receiving from the Company more than the defendant would have if it had proved the debt in the liquidation. 6 8. It has been held that “in deciding whether a creditor has received an unfair preference, it is necessary to look at the ‘ultimate effect’ of the ‘entire transaction’ between the company and the creditor.”7 9. The cases establish that to qualify as an unfair preference payment, the money paid must have come from the Company’s own money or assets, or money or assets to which it was entitled.8 10. In Cant v Mad Brothers Earthmoving Pty Ltd the Victorian Court of Appeal observed that “… the words ‘from the company’ are intended to convey that the payment be made out of moneys or assets to which the company is entitled.” [my emphasis] 9 11. Relevantly in Cant the Court of Appeal discussed what for it was the hypothetical scenario of using a company’s overdraft facility to pay the debt and, in so doing, observed: “The applicants also submitted that transactions that are plainly unfair preferences may involve no diminution in the company’s net assets, but merely the substitution of one creditor for another. The paying of a creditor using company funds drawn down from a bank overdraft was given as an example. It is true that such a transaction may leave the company’s balance sheet unchanged. At least where the overdraft is secured, however, the transaction will result in a diminution of the assets available to unsecured creditors, replacing an unsecured creditor with a secured one. In cases where the loan is not secured, it might be debated whether the payment is anything more than a rearrangement among creditors, whose treatment remains equal among themselves. After all, every payment by a company to a creditor has the effect of reducing the company’s liabilities and can therefore be said to cause no net diminution in assets. 3 Corporations Act, s 588FC(a) 4 Corporations Act, s 588FE(2) 5 Corporations Act, s 588FA(1)(a) 6 Corporations Act, s 588FA(1)(b) 7 Kassem and Secatore v Commissioner of Taxation [2012] FCA 152 at [31] per Nicholas J 8 Cant v Mad Brothers Earthmoving Pty Ltd 63 VR 222 at [109] – [110]. 9 Supra at [109] -- 11 of 24 -- 4 Partial payment in return for forgiveness of a debt will cause an increase in net assets. Yet either could constitute a preference. Consideration of the net asset position is therefore a distraction. The more pertinent issue is whether the assets available for distribution among creditors have been reduced. It is unnecessary and undesirable to attempt to say more about hypothetical analogies.” [my emphasis]10 12. In Melbourne v Commonwealth, 11 Williams J described the nature of an overdraft as follows: …But overdrafts are not granted in gross. The essence of an overdraft is that the indebtedness of the customer to the bank is not fixed but fluctuates from time to time within the agreed limit as moneys are paid in and draw out of an active current account operated upon in the ordinary course of the business of the customer. 13. Further, at 63 Latham CJ also described the nature of an overdraft as follows: The right to borrow money on overdraft includes (if, indeed, it does not actually mean) a right to borrow from a bank. The word “overdraft” is the word most commonly used to describe advances by a bank. 14. I was also referred to cases such BounceLED Pty Ltd v Clear Skies Corp Pty Ltd (in liq)12 in which Justice Richmond observed some disquiet expressed in NSW single judge decisions concerning the reasoning in Cant, whilst ultimately noting that he was bound to follow it. It is relevant to note the factual distinction in BounceLED in so far as it pertained to payments from money said to be the subject of a ‘Quietclose’13 trust to which the Company did not have a beneficial right. Whereas in the present proceeding the Company had a right to access and overdrawn the account to satisfy its debts. 15. The defendant submits: “Although the terms of the overdraft may differ from bank to bank, and even account to account, the principles remain the same. Accordingly, in making the payment, the account holder is not actually using its own assets, but rather the assets of the bank.”14 16. In this proceeding it relevant that the words of s. 588FA(1)(a) contemplate circumstances such as these, namely where there are more parties to the transaction than just the Company and the Creditor. 10 Supra [112] 11 (1947) 74 CLR 31 at 101 12 Unreported, [2023] NSWSC 121 13 Barclays Bank Ltd v Quietclose Investments Ltd [1970] AC 567 14 Submissions on behalf of the defendant filed 24 April 2026 at [23] -- 12 of 24 -- 5 The Evidence 17. The parties agree that: (a) 30 August 2023 is the “relation-back day” for the purposes of Part 5.7B of the Corporations Act;15 (b) the “relation-back period” is the period commencing on 1 March 2023 and ending on 2 November 2023; 16 (c) each of the following payments was received by the defendant during the relation- back period and in reduction of the Company’s unsecured indebtedness to the defendant:17 Date Amount 1 2 March 2023 $5,269.00 18 2 17 March 2023 $8,800.00 19 3 17 April 2023 $8,800.00 20 4 16 May 2023 $8,800.00 21 5 19 May 2023 $14,125.00 22 6 14 June 2023 $8,800.00 23 7 13 July 2023 $8,800.00 24 8 16 August 2023 $8,800.00 25 9 21 September 2023 $8,800.00 26 TOTAL $80,994.00 (the ‘transactions’); (d) the Company was insolvent at the time of the transactions.27 18. It is agreed that all but one of the transactions (being transaction 5 in the sum of $14,125), were made from the Company’s overdraft account to the defendant at the Company’s 15 SOC at [7]; Defence at [7] 16 SOC at [8]; Defence at [8] 17 SOC at [9]; Defence at [9(c)] 18 Affidavit M J Watters filed 3 June 2025 at [7] and Exhibit MW-2 p.21, transaction date 1 March 2023 19 Affidavit M J Watters filed 3 June 2025 at [7] and Exhibit MW-2 p. 25, transaction date 16 March 2023 20 Affidavit M J Watters filed 3 June 2025 at [7] and Exhibit MW-2 p. 32, transaction date 14 April 2023 21 Affidavit M J Watters filed 3 June 2025 at [7] and Exhibit MW-2 p. 35, transaction date 15 May 2023 22 Affidavit M J Watters filed 3 June 2025 at [7], [8(d)] and Exhibit MW-2 p. 80, transaction date 18 May 2023 23 Affidavit M J Watters filed 3 June 2025 at [7] and Exhibit MW-2 p. 39, transaction date 13 June 2023 24 Affidavit M J Watters filed 3 June 2025 at [7] and Exhibit MW-2 p. 45, transaction date 12 July 2023 25 Affidavit M J Watters filed 3 June 2025 at [7] and Exhibit MW-2 p. 49, transaction date 15 August 2023 26 Affidavit M J Watters filed 3 June 2025 at [7] and Exhibit MW-2 p. 55, transaction date 20 September 2023 27 SOC at [11]; Defence at [11] -- 13 of 24 -- 6 direction. Transaction 5 was made from a third party’s account (being the ARRW Account) to the defendant. Findings The Fifth Transaction from ARRW 19. I find that the fifth transaction made from the ARRW account was not made ‘from the company’ and did not result in an unfair preference to the defendant. Whilst it may be possible to infer from the transactions that ARRW might be a related entity, I am not satisfied that the evidence on that point reaches the necessary evidentiary standard. There is no evidence that either money or assets to which the Company was entitled were used by ARRW when paying the defendant, or to otherwise establish the nature of the arrangement, if any, between the Company and ARRW regarding the fifth transaction. The Other Eight Transactions from the Overdraft 20. I find that remaining eight of the nine transactions were ‘from the company’. I reject the defendant’s contention that the money paid from the overdraft was from the bank and, therefore, could not be from the Company. Whilst I do accept the defendant’s contention that the money held in the overdraft was the bank’s money, I find that there were three parties to the transaction, namely the bank, the Creditor and the Company. In so doing I conclude that the transactions from the overdraft should be treated in the same way as transactions coming from a saving account held in the Company’s name, which strictly speaking is also the bank’s money. As noted by Barwick CJ in Croton v R: “[T]hough in a popular sense it may be said that a depositor with a bank has “money in the bank”, in law he has but a chose in action, a right to recover from the bank the balance standing to his credit in account with the bank at the date of his demand, or the commencement of action. That recovery will be effected by an action for debt. But the money deposited becomes an asset of the bank which may use it as it pleases:…”. 28 21. Whilst the overdraft may be an unsecured line of credit in favour of the Company, that does not derogate from it being used by the Company for the payment of its debts from money or assets to which the Company is entitled as per the reasoning in Cant. I find that 28 Croton v R (1967) 117 CLR 326 at 330 per Barwick CJ. -- 14 of 24 -- 7 the overdraft gave the Company access to money over which it had a right by virtue of its agreement with the bank. Whilst the precise terms of that agreement are not in evidence in this proceeding, it is not disputed that the overdraft is in the Company’s name and operated by, or at the direction of, the Company’s directors. Nor is it disputed that the Company’s income was paid into the overdraft. For these reasons, I reject the defendant’s contention that the transactions were only between the defendant and the bank and conclude that the Company was a party to the transaction. 22. The Company’s decision to pass its income through the overdraft account enabled the Company to both (i) meet its agreed obligations to the bank for the overdraft facility; and (ii) to continue to pay its creditors by then redrawing those credited repayments to pay the Company’s debts in circumstances where it would not, on the evidence, otherwise have been able to do so. For these reasons, I find, that there was a diminution of the Company’s net assets. 29 23. I also accept the evidence of Mr Watters that the eight transactions from the overdraft account caused the defendant to receive more than it would have, had it been required to prove for the debt in the liquidation.30 24. Accordingly, I conclude that the remaining 8 transactions were an unfair preference because. (a) the debt was an unsecured debt; (b) the transactions were entered into at a time when the Company was insolvent; (c) the transactions were entered into during the relation-back period; (d) the Company and the defendant were parties to the transactions; and (e) the transactions resulted in the defendant receiving from the Company more than the defendant would have received if it had proved the debts in the liquidation. 29 Affidavit of M J Watters filed 3 June 2026 at [14] and Affidavit of M J Watters filed 19 April 2026 at [9] & [10]. 30 Affidavit of M J Watters filed 19 April 2026 at [9]. -- 15 of 24 -- 8 -- 16 of 24 -- MAGISTRATES COURT OF QUEENSLAND CITATION: Australian Rock Walls Pty Ltd (in liquidation) ACN 158 089 448 & Anor. v. Commissioner of Taxation [2026] PARTIES: AUSTRALIAN ROCK WALLS PTY LTD (in liquidation) ACN 158 089 448 (First Plaintiff) Marcus WATTERS and Richard ALBARRAN as joint and several liquidators of Australian Rock Walls Pty Ltd (in liquidation) ACN 158 089 448 (Second Plaintiff) v COMMISSIONER OF TAXATION (Defendant) FILE NO/S: M 70896/24 DIVISION: Civil PROCEEDING: Claim filed 7 May 2024 ORIGINATING COURT: Brisbane DELIVERED ON: 14 July 2026 DELIVERED AT: Brisbane HEARING DATE: 29 April 2026 and 27 May 2026 MAGISTRATE: Magistrate Hay COUNSEL: N.M. Cooke of Counsel for the Defendant SOLICITORS: Agility Law Group for the Plaintiffs McInnes Wilson Lawyers for the Defendant 1. The plaintiffs claim that: (a) during the period from 2 March 2023 until 21 September 2023, the defendant received 9 transactions from the Company totalling $80,994.00; and (b) those transactions resulted in the defendant receiving an unfair preference, within the meaning of s 588FA of the Corporations Act. -- 17 of 24 -- 2 2. The defendant has led no evidence, relying instead upon non-admissions and putting the plaintiffs to proof on their case. 3. The plaintiffs submit that the evidence before this Court establishes that the transactions were made from the Company. They allege the defendant received more money from the transactions than it would have, had it proved the debt in the liquidation. 4. The defendant argues that the transactions are not unfair preferences because: (a) the use of the overdraft account was a rearrangement of money amongst unsecured creditors and, therefore, did not diminish the Company’s assets; (b) the money paid to the Company’s creditors out of the Company overdraft account is from the bank and not ‘from the company’ and therefore not a preference payment; and (c) the money paid by ARRW was from a separate entity and not ‘from the company’. The Law 5. Section 588FA(1) of the Corporations Act (the Act) provides: 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 transactions (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. [my emphasis] 6. “Transaction” is defined in s 9 of the Act to mean a transaction to which the company is party.1 7. To succeed on their claim the plaintiffs must prove, on the balance of probabilities, that: (a) the debt was an unsecured debt;2 1 A number of examples of “transactions” is provided and include: “(d) a payment made by the body”. 2 Corporations Act, s 588FA(1)(b) -- 18 of 24 -- 3 (b) the transactions were entered into at a time when the Company was insolvent;3 (c) the transactions were entered into during the relation-back period;4 (d) the Company and the defendant were both parties to the transactions;5 (e) the transactions resulted in the defendant receiving from the Company more than the defendant would have if it had proved the debt in the liquidation. 6 8. It has been held that “in deciding whether a creditor has received an unfair preference, it is necessary to look at the ‘ultimate effect’ of the ‘entire transaction’ between the company and the creditor.”7 9. The cases establish that to qualify as an unfair preference payment, the money paid must have come from the Company’s own money or assets, or money or assets to which it was entitled.8 10. In Cant v Mad Brothers Earthmoving Pty Ltd the Victorian Court of Appeal observed that “… the words ‘from the company’ are intended to convey that the payment be made out of moneys or assets to which the company is entitled.” [my emphasis] 9 11. Relevantly in Cant the Court of Appeal discussed what for it was the hypothetical scenario of using a company’s overdraft facility to pay the debt and, in so doing, observed: “The applicants also submitted that transactions that are plainly unfair preferences may involve no diminution in the company’s net assets, but merely the substitution of one creditor for another. The paying of a creditor using company funds drawn down from a bank overdraft was given as an example. It is true that such a transaction may leave the company’s balance sheet unchanged. At least where the overdraft is secured, however, the transaction will result in a diminution of the assets available to unsecured creditors, replacing an unsecured creditor with a secured one. In cases where the loan is not secured, it might be debated whether the payment is anything more than a rearrangement among creditors, whose treatment remains equal among themselves. After all, every payment by a company to a creditor has the effect of reducing the company’s liabilities and can therefore be said to cause no net diminution in assets. 3 Corporations Act, s 588FC(a) 4 Corporations Act, s 588FE(2) 5 Corporations Act, s 588FA(1)(a) 6 Corporations Act, s 588FA(1)(b) 7 Kassem and Secatore v Commissioner of Taxation [2012] FCA 152 at [31] per Nicholas J 8 Cant v Mad Brothers Earthmoving Pty Ltd 63 VR 222 at [109] – [110]. 9 Supra at [109] -- 19 of 24 -- 4 Partial payment in return for forgiveness of a debt will cause an increase in net assets. Yet either could constitute a preference. Consideration of the net asset position is therefore a distraction. The more pertinent issue is whether the assets available for distribution among creditors have been reduced. It is unnecessary and undesirable to attempt to say more about hypothetical analogies.” [my emphasis]10 12. In Melbourne v Commonwealth, 11 Williams J described the nature of an overdraft as follows: …But overdrafts are not granted in gross. The essence of an overdraft is that the indebtedness of the customer to the bank is not fixed but fluctuates from time to time within the agreed limit as moneys are paid in and draw out of an active current account operated upon in the ordinary course of the business of the customer. 13. Further, at 63 Latham CJ also described the nature of an overdraft as follows: The right to borrow money on overdraft includes (if, indeed, it does not actually mean) a right to borrow from a bank. The word “overdraft” is the word most commonly used to describe advances by a bank. 14. I was also referred to cases such BounceLED Pty Ltd v Clear Skies Corp Pty Ltd (in liq)12 in which Justice Richmond observed some disquiet expressed in NSW single judge decisions concerning the reasoning in Cant, whilst ultimately noting that he was bound to follow it. It is relevant to note the factual distinction in BounceLED in so far as it pertained to payments from money said to be the subject of a ‘Quietclose’13 trust to which the Company did not have a beneficial right. Whereas in the present proceeding the Company had a right to access and overdrawn the account to satisfy its debts. 15. The defendant submits: “Although the terms of the overdraft may differ from bank to bank, and even account to account, the principles remain the same. Accordingly, in making the payment, the account holder is not actually using its own assets, but rather the assets of the bank.”14 16. In this proceeding it relevant that the words of s. 588FA(1)(a) contemplate circumstances such as these, namely where there are more parties to the transaction than just the Company and the Creditor. 10 Supra [112] 11 (1947) 74 CLR 31 at 101 12 Unreported, [2023] NSWSC 121 13 Barclays Bank Ltd v Quietclose Investments Ltd [1970] AC 567 14 Submissions on behalf of the defendant filed 24 April 2026 at [23] -- 20 of 24 -- 5 The Evidence 17. The parties agree that: (a) 30 August 2023 is the “relation-back day” for the purposes of Part 5.7B of the Corporations Act;15 (b) the “relation-back period” is the period commencing on 1 March 2023 and ending on 2 November 2023; 16 (c) each of the following payments was received by the defendant during the relation- back period and in reduction of the Company’s unsecured indebtedness to the defendant:17 Date Amount 1 2 March 2023 $5,269.00 18 2 17 March 2023 $8,800.00 19 3 17 April 2023 $8,800.00 20 4 16 May 2023 $8,800.00 21 5 19 May 2023 $14,125.00 22 6 14 June 2023 $8,800.00 23 7 13 July 2023 $8,800.00 24 8 16 August 2023 $8,800.00 25 9 21 September 2023 $8,800.00 26 TOTAL $80,994.00 (the ‘transactions’); (d) the Company was insolvent at the time of the transactions.27 18. It is agreed that all but one of the transactions (being transaction 5 in the sum of $14,125), were made from the Company’s overdraft account to the defendant at the Company’s 15 SOC at [7]; Defence at [7] 16 SOC at [8]; Defence at [8] 17 SOC at [9]; Defence at [9(c)] 18 Affidavit M J Watters filed 3 June 2025 at [7] and Exhibit MW-2 p.21, transaction date 1 March 2023 19 Affidavit M J Watters filed 3 June 2025 at [7] and Exhibit MW-2 p. 25, transaction date 16 March 2023 20 Affidavit M J Watters filed 3 June 2025 at [7] and Exhibit MW-2 p. 32, transaction date 14 April 2023 21 Affidavit M J Watters filed 3 June 2025 at [7] and Exhibit MW-2 p. 35, transaction date 15 May 2023 22 Affidavit M J Watters filed 3 June 2025 at [7], [8(d)] and Exhibit MW-2 p. 80, transaction date 18 May 2023 23 Affidavit M J Watters filed 3 June 2025 at [7] and Exhibit MW-2 p. 39, transaction date 13 June 2023 24 Affidavit M J Watters filed 3 June 2025 at [7] and Exhibit MW-2 p. 45, transaction date 12 July 2023 25 Affidavit M J Watters filed 3 June 2025 at [7] and Exhibit MW-2 p. 49, transaction date 15 August 2023 26 Affidavit M J Watters filed 3 June 2025 at [7] and Exhibit MW-2 p. 55, transaction date 20 September 2023 27 SOC at [11]; Defence at [11] -- 21 of 24 -- 6 direction. Transaction 5 was made from a third party’s account (being the ARRW Account) to the defendant. Findings The Fifth Transaction from ARRW 19. I find that the fifth transaction made from the ARRW account was not made ‘from the company’ and did not result in an unfair preference to the defendant. Whilst it may be possible to infer from the transactions that ARRW might be a related entity, I am not satisfied that the evidence on that point reaches the necessary evidentiary standard. There is no evidence that either money or assets to which the Company was entitled were used by ARRW when paying the defendant, or to otherwise establish the nature of the arrangement, if any, between the Company and ARRW regarding the fifth transaction. The Other Eight Transactions from the Overdraft 20. I find that remaining eight of the nine transactions were ‘from the company’. I reject the defendant’s contention that the money paid from the overdraft was from the bank and, therefore, could not be from the Company. Whilst I do accept the defendant’s contention that the money held in the overdraft was the bank’s money, I find that there were three parties to the transaction, namely the bank, the Creditor and the Company. In so doing I conclude that the transactions from the overdraft should be treated in the same way as transactions coming from a saving account held in the Company’s name, which strictly speaking is also the bank’s money. As noted by Barwick CJ in Croton v R: “[T]hough in a popular sense it may be said that a depositor with a bank has “money in the bank”, in law he has but a chose in action, a right to recover from the bank the balance standing to his credit in account with the bank at the date of his demand, or the commencement of action. That recovery will be effected by an action for debt. But the money deposited becomes an asset of the bank which may use it as it pleases:…”. 28 21. Whilst the overdraft may be an unsecured line of credit in favour of the Company, that does not derogate from it being used by the Company for the payment of its debts from money or assets to which the Company is entitled as per the reasoning in Cant. I find that 28 Croton v R (1967) 117 CLR 326 at 330 per Barwick CJ. -- 22 of 24 -- 7 the overdraft gave the Company access to money over which it had a right by virtue of its agreement with the bank. Whilst the precise terms of that agreement are not in evidence in this proceeding, it is not disputed that the overdraft is in the Company’s name and operated by, or at the direction of, the Company’s directors. Nor is it disputed that the Company’s income was paid into the overdraft. For these reasons, I reject the defendant’s contention that the transactions were only between the defendant and the bank and conclude that the Company was a party to the transaction. 22. The Company’s decision to pass its income through the overdraft account enabled the Company to both (i) meet its agreed obligations to the bank for the overdraft facility; and (ii) to continue to pay its creditors by then redrawing those credited repayments to pay the Company’s debts in circumstances where it would not, on the evidence, otherwise have been able to do so. For these reasons, I find, that there was a diminution of the Company’s net assets. 29 23. I also accept the evidence of Mr Watters that the eight transactions from the overdraft account caused the defendant to receive more than it would have, had it been required to prove for the debt in the liquidation.30 24. Accordingly, I conclude that the remaining 8 transactions were an unfair preference because. (a) the debt was an unsecured debt; (b) the transactions were entered into at a time when the Company was insolvent; (c) the transactions were entered into during the relation-back period; (d) the Company and the defendant were parties to the transactions; and (e) the transactions resulted in the defendant receiving from the Company more than the defendant would have received if it had proved the debts in the liquidation. 29 Affidavit of M J Watters filed 3 June 2026 at [14] and Affidavit of M J Watters filed 19 April 2026 at [9] & [10]. 30 Affidavit of M J Watters filed 19 April 2026 at [9]. -- 23 of 24 -- 8 -- 24 of 24 --