Rees v Bank of New South Wales [1964] HCA 47

Rees v Bank of New South Wales [1964] HCA 47

The deposits made to the overdrawn account of the company, retained by the bank in permanent reduction of its indebtedness between 1 December 1960 and 8 February 1961, constituted voidable preferences. This follows as the company was unable to pay its debts as they became due throughout the period, the arrangement operated to give the bank a preference, and the bank had reason to suspect (and arguably knew) of the company’s insolvency, depriving the bank's conduct of statutory good faith protection. The Supreme Court's finding of good faith did not suffice due to s. 95(4) of the Bankruptcy Act 1924-1960 (Cth); accordingly, the payments are void as against the liquidator.

Jurisdiction
Australia
Procedural Posture
Appeal / Appeal to the High Court From the Supreme Court of Queensland
Outcome
Appeal allowed
Legal Topics
['voidable Preferences' 'liquidation' 'creditor Preference' 'corporate Insolvency']
['insolvency' 'company Law' 'bankruptcy'] ['voidable Preferences' 'liquidation' 'creditor Preference' 'corporate Insolvency']

Case Brief

Summary, issues, holding and outcome

More case intelligence is available

Unlock the full research layer for this judgment.

Full judgment text Downloadable case file Legal principles 1 Authorities cited 2 Party arguments 2 Amounts and remedies 1
Sign in to unlock

Procedural Posture

Appeal / Appeal to the High Court From the Supreme Court of Queensland

Legal Issues

  1. 1 ['Whether payments made into the overdrawn account of a company within six months prior to liquidation, and retained in permanent reduction of an overdraft, constitute voidable preferences under s. 275 of The Companies Acts, 1931 to 1960 (Qld), incorporating s. 95 of the Bankruptcy Act 1924-1960 (Cth).' 'Whether the respondent bank had reason to suspect the company’s insolvency, depriving them of the protection of good faith under s. 95(4) of the Bankruptcy Act 1924-1960 (Cth).']

Ratio Decidendi

The deposits made to the overdrawn account of the company, retained by the bank in permanent reduction of its indebtedness between 1 December 1960 and 8 February 1961, constituted voidable preferences. This follows as the company was unable to pay its debts as they became due throughout the period, the arrangement operated to give the bank a preference, and the bank had reason to suspect (and arguably knew) of the company’s insolvency, depriving the bank's conduct of statutory good faith protection. The Supreme Court's finding of good faith did not suffice due to s. 95(4) of the Bankruptcy Act 1924-1960 (Cth); accordingly, the payments are void as against the liquidator.

Court Disposition

Appeal allowed

Orders

  • ['Order of the Supreme Court of Queensland set aside.' 'Declare that the payments made into the current account of the company with the Fortitude Valley Branch of the respondent bank from 1 December 1960 to 8 February 1961 (both inclusive) as to £20,292 thereof were invalid as against the liquidators by force of s....