Re Hicks, William Clive & Anor Ex parte Russell, Daniel James [1980] FCA 14

Re Hicks, William Clive & Anor Ex parte Russell, Daniel James [1980] FCA 14

The mortgage to Graham Rex Howard was void against the trustee because, when the debtors were insolvent and within six months before the creditors' special resolution requiring execution of the deed, they granted him security for a past indebtedness that had arisen over 12 months earlier, giving him a preference, priority or advantage over other creditors; he was not an encumbrancer in good faith, for valuable consideration and in the ordinary course of business. The challenges to the savings bank and bank failed because the savings bank advance was always intended to be secured by mortgage over the property and, viewed as a whole, the payment of $16,000.00 into the debtors' bank account...

Jurisdiction
Australia
Judgment Date
11 February 1980
Procedural Posture
Bankruptcy Application for Directions Seeking Declarations That Mortgages Were Void as Preferences Under S. 122 of the Bankruptcy Act 1966 / Reasons for Judgment and Orders on the Application
Outcome
The application was allowed only in relation to the Graham Rex Howard mortgage and otherwise dismissed.
Legal Topics
['voidable Preferences' 'deed of Assignment Under Part X of the Bankruptcy Act 1966' 'mortgages Granted by Insolvent Debtors to Creditors' 'determination of Extent of Preference' 'ordinary Course of Business and Good Faith Defences']
['bankruptcy' 'insolvency' 'mortgages'] ['voidable Preferences' 'deed of Assignment Under Part X of the Bankruptcy Act 1966' 'mortgages Granted by Insolvent Debtors to Creditors' 'determination of Extent of Preference' 'ordinary Course of Business and Good Faith Defences']

Case Brief

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Procedural Posture

Bankruptcy Application for Directions Seeking Declarations That Mortgages Were Void as Preferences Under S. 122 of the Bankruptcy Act 1966 / Reasons for Judgment and Orders on the Application

Legal Issues

  1. 1 ['Whether the mortgage dated 12 May 1978 from the debtors to Graham Rex Howard had the effect of giving him a preference, priority or advantage over other creditors and was void against the trustee under s. 122 of the Bankruptcy Act 1966.' 'Whether the mortgage to The Commercial Savings Bank of Australia Limited was a preference where the first advance was made on 27 April 1978 and the mortgage was dated 3 May 1978.' "Whether the payment of $16,000.00 by the savings bank into the debtors' account with The Commercial Bank of Australia Limited gave the bank a voidable preference to the extent the payment reduced the debtors' overdraft." 'If there was a preference to the bank, what was the maximum recoverable amount on the running account analysis.']

Ratio Decidendi

The mortgage to Graham Rex Howard was void against the trustee because, when the debtors were insolvent and within six months before the creditors' special resolution requiring execution of the deed, they granted him security for a past indebtedness that had arisen over 12 months earlier, giving him a preference, priority or advantage over other creditors; he was not an encumbrancer in good faith, for valuable consideration and in the ordinary course of business. The challenges to the savings bank and bank failed because the savings bank advance was always intended to be secured by mortgage over the property and, viewed as a whole, the payment of $16,000.00 into the debtors' bank account...

Court Disposition

The application was allowed only in relation to the Graham Rex Howard mortgage and otherwise dismissed.

Orders

  • ['The Court declares that the mortgage dated 12 May 1978 from William Clive Hicks and Gayner Blanche Hicks to Graham Rex Howard had the effect of giving to Graham Rex Howard a preference within the meaning of s. 122 of the Bankruptcy Act 1966 and that the said mortgage is void as against the applicant in so far as...