Corio Bay Dairy Group - Case Update

The Supreme Court of Victoria has found that a deed of settlement did not preclude a company’s liquidator from pursuing an unfair preference claim against the counterparty to the settlement.

Before Corio Bay Dairy Group’s (CBDG) insolvency, Nutritional Powder Technology Pty Ltd (NPT) provided engineering and project management services to CBDG. In 2020, a dispute arose regarding unpaid invoices, and NPT commenced proceedings against CBDG asserting a lien over certain goods. CBDG entered voluntary administration in August 2020 and liquidation in December 2020.

In February 2021, the parties entered into a settlement deed settling the earlier dispute. Following the execution of the settlement deed, liquidator Jonathon Colbran of RSM demanded repayment of $555,640.70 in payments made by CBDG to NPT in April 2020, just a few months before the voluntary administration, asserting they were unfair preferences. The issue was whether the potential unfair preference claims were barred by the settlement deed.

The Court held that the deed of settlement did not preclude the liquidator from pursuing an unfair preference claim. The Court emphasised that the settlement deed must be restricted to those things in the contemplation of the parties at the time the release was given, which were: the lien; a dispute in relation to the priority of NPT’s interest in certain disputed assets; the earlier litigation proceeding; and the provision of the disputed assets by NPT to facilitate the completion of a separate sale agreement. The evidence showed the unfair preference claims were simply not in the contemplation of the parties at the time of execution of the settlement deed. Further, the true purpose of the transaction did not include the settlement of unfair preference claims.

The Court went on to conclude that the payments were unfair preferences.

Read the decision HERE.

Professionals involved:

• Carl Möller SC of the Victorian Bar (instructed by K&L Gates) for the liquidator, Jonathon Colbran of RSM

• A Morrison (instructed by Ward & Co. Legal Consultants) for NPT