1Where a company's books and records are inadequate and internal management reports (here, 'headroom reports') cannot be verified against underlying accounting data, those reports are insufficient to establish insolvency on the balance of probabilities, even where they were used by management; the absence of typical indicia of insolvency (dishonoured cheques, supplier demands, COD terms, round-sum payments) weighed against a finding of insolvency on the facts.
2Following Cant v Mad Brothers Earthmoving, a payment by a related company to a creditor in reduction of the debtor's liability is not an unfair preference under s 588FA(1)(b) unless the plaintiff proves the payment diminished the debtor company's assets available to creditors; the existence of an intercompany loan account is insufficient without evidence of its state at the time of each payment.
3For the s 588FG(2) defence, the Commissioner is not necessarily taken to know the contents of ATO records (such as a taxpayer's failure to lodge a return) where no officer has had occasion to review them; however, once an officer is assigned to deal with the non-lodgement, the Commissioner becomes fixed with that knowledge, and a prolonged unexplained failure to lodge combined with an implausible explanation may give rise to reasonable grounds for suspecting insolvency.
