The issue turned on the meaning of the words have had” in “would section 588FG(2)(b)(ii) and whether those words: refer to a past course of conduct in which a person”, in the  “reasonable creditor’s would have engaged; or “circumstances”, are limited to what such a person” would have concluded on the  “reasonable basis of the information in fact available to the particular creditor. The held that the words have had” in section “would 588FG(2)(b)(ii) should be construed as the person’s” “reasonable assessment of information in fact in the possession of the creditor and into whose the reasonable business person is “circumstances” theoretically placed. Thus, "a reasonable person in the [creditor's] circumstances" is taken to know the facts actually available. As regards additional inquiries, the only relevant fact that a person” is taken to know is that inquiries that could or “reasonable should have been made, had not been made. The court opined that if section 588FG(2)(b)(ii) obliged a creditor to make inquiries and, therefore, a person” in its “reasonable circumstances is taken to have done so, an honest response by the debtor would usually, perhaps always, contain grounds for suspicion, if not proof, of insolvency. The court found that it is most unlikely that Parliament intended the defence to be virtually unavailable. (It should be noted that the court's consideration of this issue was on the presumption that there was no deemed actual knowledge of such information, although, as discussed in paragraph (b)(ii) of this case note, the court did not need to decide that issue. In the more recent case of Dean-Wilcocks v Commissioner of Taxation [2004] NSWSC 1058 the court was called to decide the issue and held that ATO is deemed to have knowledge of all information that has been conveyed to its various officers and sections.) Finally, the court observed that a failure to make inquiries may, in some cases, be of considerable significance when determining the good faith element of the defence under section 588FG(2)(a), but that was not so in the circumstances of this case. 5.6 Contracting prior to registration (By Kate Griffiths, Blake Dawson Waldron)
The issue turned on the meaning of the words “would have had” in section 588FG(2)(b)(ii) and whether those words:  refer to a past course of conduct in which a “reasonable person”, in the creditor’s “circumstances”, would have engaged; or  are limited to what such a “reasonable person” would have concluded on the basis of the information in fact available to the particular creditor. The held that the words “would have had” in section 588FG(2)(b)(ii) should be construed as the “reasonable person’s” assessment of information in fact in the possession of the creditor and into whose “circumstances” the reasonable business person is theoretically placed. Thus, "a reasonable person in the [creditor's] circumstances" is taken to know the facts actually available. As regards additional inquiries, the only relevant fact that a “reasonable person” is taken to know is that inquiries that could or should have been made, had not been made. The court opined that if section 588FG(2)(b)(ii) obliged a creditor to make inquiries and, therefore, a “reasonable person” in its circumstances is taken to have done so, an honest response by the debtor would usually, perhaps always, contain grounds for suspicion, if not proof, of insolvency. The court found that it is most unlikely that Parliament intended the defence to be virtually unavailable. (It should be noted that the court's consideration of this issue was on the presumption that there was no deemed actual knowledge of such information, although, as discussed in paragraph (b)(ii) of this case note, the court did not need to decide that issue. In the more recent case of Dean-Wilcocks v Commissioner of Taxation [2004] NSWSC 1058 the court was called to decide the issue and held that ATO is deemed to have knowledge of all information that has been conveyed to its various officers and sections.) Finally, the court observed that a failure to make inquiries may, in some cases, be of considerable significance when determining the good faith element of the defence under section 588FG(2)(a), but that was not so in the circumstances of this case. 5.6 Contracting prior to registration (By Kate Griffiths, Blake Dawson Waldron)
CORPORATE-LAW-ELECTRONIC-BULLETIN-November-2004.docx