Re: Manion, Kevin R. & Ex Parte: Deputy Commissioner of Taxation [1979] FCA 8

CATCHWORDS

Bankruptcy Act 1966 s.122 - payee having failed to prove that it was a payee in the ordinary course of business, payment having been received as a result of statement made by payee at a meeting of certain of the bankrupt's creditors and as a result of the issue and service of a writ, payment declared void against the trustee of the estate of the bankrupt

as a preference.

Re: Alex Neville Bird (as Trustee of the estate of Yiangos Arcadiou, a bankrupt)

Ex parte: Tasmanian Board Mills Ltd. trading as Country and Western

SWEENEY J. 19 DECEMBER 1979

IN THE FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION No. 68 of 1977

BANKRUPTCY DISTRICT OF THE STATE OF VICTORIA

RE: ALEX NEVILLE BIRD (as Trustee cof the Estate of YIANGOS ARCADIOU, a bankrupt)

EX PARTE: TASMANIAN BOARD MILLS LTD. trading as Country and Western.

ORDER JUDGE MAKING ORDER: SWEENEY J. WHERE MADE: MELBOURNE DATE OF ORDER: 19 DECEMBER 1979

THE COURT DECLARES THAT:

The payment of $15,000 made by the bankrupt to the respondent on 28 September, 1976 and the payment of $5,000 made by the bankrupt to the respondent on

9 October 1976 are void as against the applicant as trustee of the property of the bankrupt and orders that the respondent pay to the applicant the sum of $20,000. It is further ordered that the respondent pay the applicant's costs of and incidental to the application, including reserved costs, such costs to be taxed if not agreed. Liberty 1s reserved to

either party to apply.

IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION

BANKRUPTCY DISTRICT OF THE

No. 68 of 1977

STATE OF VICTORIA

Re: Alex Neville Bird(as Trustee of the estate of Yiangos

Arcadiou, a bankrupt)

Applicant

Tasmanian Board Mills Ltd. trading as Country and Western

Respondent

REASONS FOR JUDGMENT

C.A. Sweeney J. 19 December, 1979

In this application, as amended by leave, the

applicant seeks the following declarations and orders:

u (a)

(b)

That payment made by the bankrupt to the Respondent on the 28th September, 1976 for $15,000 and on the 9th October, 1976 for $5,000.00 are void as against the applicant as Trustee of the property of the bankrupt

as belng payment having the effect of giving the respondent a preference priority or advantage over creditors of the bankrupt or alternatively by virtue of the Bankruptcy of the Bankrupt having been deemed to have relation back to date the 20th day of September, 1976 on which date the bankrupt gave notice to some of his creditors namely Gubbatta Nominees Pty. Ltd. trading as Highett Timber Co., Tasmanian Board Mills Ltd trading as Country and Western, Guardian Investments Pty. Ltd., Beneficial Finance Corporation Ltd. and Alliance Acceptance Corporation Limited, that he has suspended or is abovt to suspend payment of his debts.

An order that the respondent pay to the applicant the sum of $20,000.00."

The respondent based its notice of intention to oppose the application on the grounds:

"(a) that the payments referred to in the application did not have the effect of giving the Respondent a preference priority or advantage over creditors of the Bankrupt.

(b) that the said payments are not deemed to have relation back to the 20th day of September, 1976 as alleged in the said application or at all.

{c) that at the time that the said payments were made the Bankrupt was not insolvent."

At the hearing, on the application of Mr H.H. Ednie, of counsel for the respondent, leave was given to the respondent to add the following ground:

"(d) that the respondent is and at all times material was a payee in good faith and for valuable consideration and in the ordinary course of business within the meaning of sec.122(2}) and (4) and accordingly

lies outside the ambit of sub-~-sec. (1) of that section."

It was common ground between the parties that the bankrupt made payments to the respondent of $15,000 on 28 September and of $5,000 on 9 October 1976 in respect of a debt of $25,000 which he owed to the respondent.

The respondent by its notice of intention to oppose the application put in issue the question whether these payments had the effect of giving the respondent a preference priority or advantage over the other creditors of the bankrupt. The evidence of the applicant, which I accept, plainly established that each of the payments had this effect.

The respondent also contended that at the time of each of the payments the bankrupt was not unable to pay his debts as they became due from his own money, within the meaning of s.122 of the Bankruptcy Act 1966.

The meaning to be given to these words has been laid down in Hymix Concrete Pty. Ltd. v Garritty (1977) 13 A.L.R. 321. At pp 327-8 Jacobs J. said:

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"The question remains, however, whether the circumstances lead to the inference that the appellant, through Mr O'Neil, had reason to suspect that the company was unable to pay its debts as they became due out of ats own money. Much depends upon the connotation of these last words. If they fall to be applied according to their literal terms then quite clearly the circumstances not only lead to but compel the inference that the appellant had reason to suspect. The company had large debts and no ready money with which to pay them. However, if the words meant that the total of liabilities exceeded the total of assets, the figures placed before Mr O'Neil both in the Dun and Bradstreet report and in the 31 March balance sheet showed a surplus of assets. But the words "unable to pay its debts as they become due from its own money" should not be applied in either of these ways. There is an intermediate application of them which has long been established. I shall not set out once again the passages in the judgments of the court in Bank of Austiakasia v Hal (1907) 4 CLR 1514, per Griffith CJ at 1528 and per Isaacs J at 1543. They are set out in the judgment of Taylor J in Rees v Bank of New South Wades (1964) 111 CLR 210 at 229-30; [1965] ALR 139 at 149-50. I shall set out some passages from the_judgment of Barwick CJ (111 CLR at 218-9; [1965] ALR at 141-2) which I think are particularly apposite to the present case:-

'The respondent's counsel submitted that, because the bank held the beliefs, which the primary judge accepted it did hold, as to the extent

of the company's trading stock and of the

causes of its current embarrassments, it

could not be said either to know or to have reason to suspect the company's insolvency -

its inability to meet its debts as they became due. But this submission springs from a basic Misconception and is not borne out by the judgments of this Court to which my brother Taylor refers. It 1s quite true that a trader, to remain solvent, does not need to have ready cash by him to cover his commitments as they fall for payment, and that in determining whether he can pay his debts as they become

due regard must be had to his realizable assets. The extent to which their existence will prevent a conclusion of insolvency will depend on a number of surrounding circumstances, one of which must be the nature of the assets and in the case of a trader, the nature of his business. Here the company's business was the sale of foodstuffs through a number of retail outlets. The asset whose value was said to negative a

conclusion of insolvency, or at any rate to

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obviate the suspicion of it, was its trading stock of foodstuffs. In the ordinary course of the company's business this asset was not available to be realized except by means of retail sales through its various shops ... The stock-in-trade was clearly not an asset which was available to be realized to meet current debts except in the ordinary course of the company's business, a course which had proved itself inadequate ...

"The bank in this case knew that the company was overtrading, that its only source of money to meet its current trading debts was the takings of its shops, that the whole of the takings were being deposited to the overdrawn account, and that the company's trading debts were not being currently met. However acceptable the motive of the bank

in endeavouring to keep the company afloat, by proving its belief that the company had

an excess of trading stock over those debts of which the bank was aware, it cannot escape the conclusion that, at the least, it had reason to believe that the company was insolvent. Clearly that stock, in the company's circumstances, was not within the category of realizable assets to which Isaacs J refers in

Bank of Australasca v Hae2d (1907) 4 CLR 1514 at 1543; 14 ALR 51."

Words used in later cases, apparently more favourable to a creditor, must be read in the light of the enunciations to which I have referred and should be taken as no more than an application of the well established principle to particular circumstances: Queensland Bacon Pty Ltd v Rees (1966) 115 CLR 266; 1966

ALR 855; Sandefz v Purter (1966) 115 CLR 666. A temporary lack of liquidity must be distinguished from an endemic shortage of working capital whereby liquidity can only be restored by a successful outcome of business ventures in which the existing working capital has been deployed."

Barwick C.J. and Gibbs J. concurred in the judgment of Jacobs J.

The test so approved in the Hym1x Concrete Pty. Ltd. case is expressed in the words of Griffith C.J. (1907 4 CLR at p 1528):

oe eS

was:

applicant

"4,

"The question is not whether the debtor would be able, if time were given him, to pay his debts out of his assets, but whether he is presently able to do so with moneys actually available. The most favourable construction that can be put on the words 'his own moneys'is that they include any moneys of which the debtor can obtain immediate command by sale or pledge of his assets."

The test as formulated by Isaacs J. (at p 1543)

"The Act requires the debtor to be able

to pay his debts as they become due.

This does not mean that he 1s always

bound to keep by him in cash a sum sufficient to meet all his outstanding indebtness however distant the date of payment may be. If at the time he makes the assignment, the debtor's position 15s such that he has property either in the form of assets in possession or of debts, which 1f realized would produce sufficient money to pay all his indebtedness, and 1f that property 1s 1n such a position as to title and otherwise that it could be realized in time to meet the indebtness

as the claims mature, with money thus belonging to the debtor, he cannot be

said to be unable to pay his debts as they become due from his own moneys. In other words, 1f the debtor can, by sale or mortgage of property which he owns at the time of the assignment, change the form

of the property into cash wholly or partly but sufficient for the purpose of paying his debts as they become due, that requirement of the section is satisfied."

In his affidavit sworn on 10 August 1979, the

said:

THAT I first became aware of the financial affairs of the above named bankrupt early in September, 1976 when I approached the bankrupt on behalf of the Housing Builders' Association Limited who were acting on behalf of a group of his major creditors an relation to his financial affairs. At that stage I had a number of discussions with the bankrupt during which he indicated to me what his assets and liabilities were. The said assets consisted largely of real estate and work in progress and the

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liabilities consisted largely of trade creditors and amounts advanced against

the security of real estate and work in progress. As a result of the information obtained from the bankrupt I made further enquiries as to the values of the various assets of the bankrupt and have personally inspected a great number of the real estate assets of the said bankrupt, as hereinafter appears.

THAT I have personally on the 22nd September,

19876 inspected the following properties of

the bankrupt, namely - Lots 60,61,80 to 85 and 194 Nangiloc Crescent, Werribee; Lots

62 to 68, 70 to 72, 74 to 77 and 79 Glenmoyne Street Werribee; and also some land;

The impression which I have gained from this inspection was as follows:

Lot 85 completed 84 completed and occupied 83 reached lock up except roof & floor not complete electric points in

82 lock up roof complete

81 Fix up lock up stage

80 Fix up lock up stage

79 completed other than paths

61 faxing and finishing stage

60 fixing and finishing stage

104 Plaster finishing only not f1x, no sewerage 62 Frame stage and windows

63 frame stage and windows

64 wall frame stage

65 brick work stage.

66 frame stage and windows

67 frame stage and windows - tiles on site 68 frame stage and windows, bricks - tiles on site 69 faxing and finishing 1

70 frame stage

71 footings

72 frame stage - 7 windows -bricks on site 73 Vacant land - sold and settled

74 Frame stage and windows - tiles and bricks

on site

75 frame stage and windows

76 frame stage

77 frame stage

78 vacant land

103 timber on site only

102 timber on site only

22 timber on site only

101 vacant land

105 vacant land

7.

I would estimate that with proper supply of labour and material it would have taken one to two months to complete some of the houses and two to three months to complete the remaining ones,

6. THAT I have had a great deal of experience in valuing real estate and also building works in progress. In addition to having the qualifications of being a trustee in bankruptcy and official liquidator and a chartered accountant, I have gained a great deal of experience as to real estate values, burlding works in progress and mortgage liabilities by reason of having been for a period of twenty years associated with the building industry (including personally having performed work as a builder) and also by reason of having been for a period of two or three years a board member of the Housing Builders Registry Board.

7. THAT from the information provided to me by the bankrupt and from the enquiries that I have personally made and from the examination of the books and records of the bankrupt I have prepared a Statement of Assets and Liabilities of the bankrupt as at the 15th September, 1976. Now produced and shown to me at the time of swearing this my Affidavit and marked with the letter "A" is the said Statement of Assets and Liabilities."

Exhibit A was in the following form:

"YTANGOS ARCADIOU STATEMENT OF ASSETS & LIABILITIES AS AT THE 15TH SEPTEMBER, 1976

ASSETS

Land and work in progress at estimated realisable value. $1,029,476

Less

- Advances secured by mortgage:-

~ Allaance Acceptance Corp. Ltd. $ 125,905 - Beneficial Finance Co. Ltd. 268,000 - Cofure Pty. Ltd. 105,500 ~ Guardian Investments Pty. Ltd. 460,188 959,593 $ 69,812 Stock on Hand $ 40,000 Amounts due on Contract of Sale 29,000 69,000 $ 138.812

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LIABILITIES A.N.2. Bank $ 43,000 Less Mortgage Security $ 25,000 $ 18,000 Trade Creditors 251,964 Other Creditors:- - Land Tax $ 6,274 - Income Tax 15,553 ~ Interest Accrued 11,500 33,327 303,291 $ 164,479 CONTINGENT ASSETS Equity in land purchased under a contract of sale. 50,000 $ 114,479"

The applicant's account of the state of the

bankrupt's affairs continued as follows:

"g,

THAT unless the bankrupt had some additional

assets other than the assets which he

disclosed to me (and If have no reason to

suppose that he did have such additional

assets) I can swear positively that the

financial position of the bankrupt was

not better than set out in the Statement

of Assets and liabilities prepared by me,

that 1s to say, his excess of liabilities

over assets was at least the sum of $114,479.00."

It became clear in the course of the evidence

that the bankrupt had no additional assets. The applicant's

narrative resumed:

"9,

THAT ever since the beginning of September,

31976 until the 15th March, 1977 I kept in

contact with the bankrupt and was conversant with his financial position during that period. That the financial position of the bankrupt did not improve at any time since the 15th September, 1976 until his petition for a Sequestration Order was accepted by the Registrar on the 15th March 1977 and consequently at all times during that period

the excess of liabilities over assets was at

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9.

least the sum of $114,479.00 and increasing and certainly as not in any way better either on the 28th September 1976 or on the 9th October, 1976.

10. THAT on the 16th day of February, 1977 I was appointed by the bankrupt to be his controlling trustee pursuant to Part X of the Bankruptcy Act.

11. THAT on the 23rd day of February, 1977 a meeting of the creditors of the said bankrupt duly convened under the said Part X passed a resolution that he present his own petition.

12. THAT the bankrupt did present his own petition which was accepted by the Registrar of this Honourable Court on the 15th day of March, 1977.

13. THAT apart altogether from the fact that the bankrupt's liabilities exceeded his assets as set out in paragraphs 8 and 9 hereof his liquidity position during the entire period from 15th September, 1976 until 15th March, 1977 was such that he was unable to pay his debts from his own money or from any monies which he may have readily realized. Ail the real estate of the bankrupt was heavily mortgaged in favour of a number of finance companies, being Beneficial Finance Corporation Limited, Cofive Pty. Limited and Alliance Acceptance Corporation Limited. The remaining titles were held by the bankrupt's former Solicitors, Messrs. Dudley, Tregent & Co. in a few instances by reason of a registered mortgage in favour of a finance company controlled by them known as Guardian Investments Pty. Ltd., but the majority of cases by reason as what they alleged to be a equitable mortgages in favour of the said Guardian Investments Pty. Ltd. The validity of the said equitable mortgages was disputed by the bankrupt, however the said titles the subject matter of the said equitable mortgages were not available for borrowing monies. Subsequently as a result of an application which was made by the said Guardian Investments Pty. Ltd. the Federal Court of Australia, a declaration was made that the said properties was subject to a valid equitable mortgage in favour of the said Guardian Investments Pty. Ltd. However, from the information obtained by me from the bankrupt, the bankrupt did not have any available cash or assets to satisfy all, or for that matter, even a substantial proportion of the debts due and owlng as at the 15th September 1976. This position continued right up to the time where the Registrar accepted the bankrupt's petition for a sequestration order. The total unsecured

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10.

debts owing by the bankrupt as at the

15th September, 1976 was the sum of $273,791.00. Practically all of that sum was for debts which were overdue, in some cases very much overdue. This liquidity position continued and in fact became gradually worse during the said period

of six months. However, the bankrupt did obtain an advance of $100,000.00 from Guardian Investments Pty. Ltd. This advance improved

the bankrupt's liquidity position slightly but for a short period of time. However, even after receipt of that sum of money, which was received on or about the 28th September, 1976 the bankrupt had nowhere near sufficient monies to pay all his overdue accounts and had no way of raising sufficient money to make up the balance. The liquidity position of the bankrupt was not any better either on the 28th September, 1976 or on the 9th October, 1976 (except of course that by the 28th September, 1976 the bankrupt did receive the advance of $100,000.00.

THAT generally speaking the accounts of the bankrupt as at the 15th September, 1976 were not merely overdue but in fact very much overdue. Produced to me at the time of swearing this my Affidavit and marked with the letter "B" is a schedule showing the extent to which the amounts due to the trade creditors were overdue as at 15th September 1976. The great majority of the creditors to whom debts were owing as at 15th September, 1976 have not received any payment whatever in relation to those debts. That in addition to the debts set out in exhibit "B" the bankrupt was indebted as at the 15th September, 1976 to the following persons or institutions, for the following amounts : -

Mr. T. Vella (Keonga Auto Port)

64 Glengala Road, West Sunshine $ 1,454.15 Anastious Kitparoglou

17 Mentha Street, Sunshine 1,500.00 Eric Smith 534.00 American Plaster

53 Wheatsheas Road, Glenroy 6,000.00 M. Nicopoulos,

53 May Street, North Altona 4,580.00 A.V. Desbubulous 2,324,34 Conula Electrics 3,900.00

This information about additional creditors was obtained by me from Proofs of Debt which I have received as the Bankrupt's Trustee.

--ell/

il,

15. THAT the business of the bankrupt was basically that of a builder on his own account, that is to say, the bankrupt made it a practise to purchase the land and then after building a project would sell the land together with the building.

In some cases the building projects were

sold before completion. Occasionally the bankrupt built projects purely as a

contract builder but this applied by and large only to members of his family. In addition, the bankrupt purchased 50 blocks

of land in the Werribee area on a deposit

of $500.00 per block with the expectation

of building a number of "Spec" homes and selling the homes as they were built. In order to finance the project in question

the bankrupt made a practice of borrowing money from finance companies at rates of interest of approximately 16 per centum

per annum secured by the first mortgage to the total mortgageable value of the properties in question. As at 15th September 1976, 30 of those blocks were settled and were subject to mortgages to finance companies and were being built upon as hereinbefore referred to and the remaining 20 had not been settled. As at 15th September, 1976 there was an amount of overdue interest payable by the bankrupt with respect to the said mortgages in the sum of approximately $11,500.00.

16. THAT the bankrupt had two bank accounts, one with the A.N.Z. Banking Group Limited, the other with the National Bank of Australasia Limited. Insofar as the A.N.Z. Banking Group Limited overdraft 1s concerned this was partly secured (the value of the security was approx- imately $32,000.00 and the amount of the overdraft was approximately $43,000.00) but at all times during the said period of six months the amount with respect to which the bankrupt was indebted to the bank substantially exceeded the limit of the overdraft and the bank made it a practice as from 1975 to return cheques drawn by the bankrupt "refer to drawer". Insofar as the account with the National Bank of Australasia Limited is concerned there was no security given and no provision for overdraft. The account was originally in credit for small amounts and would fluctuate fairly widely. However, the money paid in would be drawn out almost immediately to pay the most pressing accounts.

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12,

17. THAT by reason of the above facts I verily believe that the bankrupt was unable at all times from the 15th September 1976 to the 15th March, 1977 to pay all his debts from his own money and that he was unable to raise by mortgage or pledge sufficient money with which together with his own money would have been sufficient to pay his debts due and owing."

I accept the evidence of the applicant and reject the statements made by the bankrupt in which he expressed his disagreement with certain aspects of that evidence. The managing director of the respondent, Mr John Steel, made an affidavit in which he described the bankrupt at the relevant times as "a man of substance and, a person who, with proper management of his affairs would have been able to pay his creditors in full". His opportunity to form a reliable judgment of the bankrupt's solvency was limited and I could not accept his opinion of the bankrupt and his affairs. It is open to further doubt in the light of the attitude adopted by the respondent before and during the meeting of some of the bankrupt's creditors on 20 September 1976, to which further

reference will be made.

I am satisfied that at the date of each of the payments in question the bankrupt was unable to pay his debts from his own money as they became due, within the meaning of s.122.

The other ground upon which the respondent sought to base his opposition to the orders sought under this section was the claim that 1t was a payee in good faith and for valuable consideration and in the ordinary course of business. It was agreed that it was a payee for valuable consideration but the other elements of this ground were contested.

The evidence showed that on 6 September 1976 the respondent issued a writ in the Supreme Court of Victoria, in which it claimed $25,437.38 for goods sold and delivered to the bankrupt between the months of February and July 1976.

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13.

This writ was served upon the bankrupt on

20 September 1976, on which day a meeting of certain of his

creditors was held. The applicant described the proceedings

at this meeting as follows:

"18.

meeting:

THAT a meeting took place on the 20th September, 1976 at my previous offices, situated at 289 Flinders Lane Melbourne between a Mr. John

Steel, a Mr. Hitchcock a Mr. Gary Bernard Hearst, a Mr. Timos Vertes, a Mr. Noel Tregent, Mr. Yiangos Arcadiou and myself. At that meeting

I was representing the Housing Builders Association who was acting on behalf of a group of his major creditors. Messrs. Steele and Hitchcock were

both representing the respondent Tasmanian Board Mills Ltd. trading as Country and Western, one

of his creditors. Mr. Hearst was representing Gubbatta Nominees Pty. Ltd trading as Highett Timber Co., one of his creditors. Mr. Vertes was a Solicitor acting on the bankrupt's behalf and also on behalf of two of his secured creditors namely Beneficial Finance Corporation Limited

and Alliance Acceptance Corporation Limited, and Mr. Noel Tregent who had previously been the bankrupt's Solicitor was representing Guardian Investments Pty. Ltd one of his creditors. During that meeting Mr. Yiangos Arcadiou stated that he must find $100,000.00 to be able to carry on. He said he would consider a scheme of arrangement

or some scheme whereby the creditors would supervise the completion of the houses. Mr. Steele stated that he was opposed to this manner of proceeding and wanted Mr. Arcadiou to be made bankrupt, as only an Official Receiver was capable of handling the matter. There was some discussion about realization of the assets and completion of the work in progress. Although Mr. Arcadiou did not say so in so many words he made it perfectly clear to everyone at the meeting that he had suspended payment of his debts. Also during the meeting the bankrupt was told (I believe by me) that the reason for the meeting was that the creditors were concerned about his non-payment of debts. The bankrupt made a comment to the effect that he was unable to pay the debts as the progress payments from a finance company were not being made. I do not recall the exact words he used."

Mr Tregent gave the following account of the

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14.

3. THAT I was present at a meeting of the major creditors of the bankrupt which took place on the 20th September, 1976 at the offices of the applicant Mr. Neville Bird. At that meeting the following persons were present namely Mr. Yiangos Arcadiou, Mr. Alex Neville Bird, a Mr. John Steele, a Mr Hitchcock, a Mr. Gary Bernard Hearst, a Mr. Timos Vertes, and myself. At that meeting the applicant was representing the Housing Builders Association who was acting on behalf of a group of major creditors. Messrs Steele & Hitchcock were both representing the Respondent Tasmanian Board Mills Limited trading as Country and Western, one of his creditors. Mr. Hearst was representing Gubbatta Nominees Pty. Ltd. trading as Highett Timber Co., one of his creditors. Mr. Vertes was a Solicitor acting on the bankrupt's behalf and also on behalf of two of his secured creditors namely Beneficial Finance Corporation Ltd. and Alliance Acceptance Corporation Limited, and I, who had previously been the bankrupt's Solicitor, was representing Guardian Investments Pty.Ltd. also one of his creditors. During that discussion Mr. Arcadiou stated that he would consider a scheme of arrangement or some scheme whereby the creditors would supervise the completion of the houses. Mr. Steel stated that he was opposed to this manner of proceeding and wanted Mr. Arcadiou to be made bankrupt, as only an Official Receiver was capable of handling the matter. There was some discussion about the realization of the assets and completion of the work in progress. The said Mr. Bird said to the said Mr. Arcadiou during that meeting that there were a lot of complaints to the Housing Builders Association about him not paying his debts. The said Mr. Arcadiou replied "how can I, the properties have reached the stage when I am due for progress payments from finance companies but they are not making the progress payments".

I accept the account of the meeting given by the applicant and Mr Tregent from which it is seen that the payments made to the respondent were made as a result of the statement made by Mr Steel that he wanted Mr Arcadiou to be made bankrupt, as only an Official Receiver was capable of handling the matter, and as a result of the issue and service of the writ. In my opinion, the respondent has failed to show that either payment was made in the

ordinary course of business (see Re Bailey;

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15.

Ex parte Law and Austin (1952) 16 A.B.C. 80; Commins v I. & R. Spies Investments Pty. Ltd; Re Hoare (1972-1973) A.L.R. 1134). Tndeed, I am satisfied that neither payment

was made in the ordinary course of business.

In Re Bailey, ex parte Law and Austin, Clyne J. had to consider a case 1n which the respondent obtained two payments from a debtor, one as a result of the efforts of her solicitors and the other after the seizure by a sheriff of property of the debtor under writ of execution. Clyne J. held (at p 85) that "payments received by a creditor as a result of his solicitor's demands or in consequence of some process of execution cannot be regarded as payments received by the creditor 'in the ordinary course of business'."

In Re Hoare: Commins v I. & R. Spies Investments

Pty. Ltd. an overdue payment of rent was received after judgment had been obtained in respect of it and a writ of fieri facias had been issued. The writ had been withdrawn by the solicitors for the creditor to enable a sale to be made of property, from the proceeds of which payment was received by those solacitors on behalf of the creditor. It was held that this payment had not been made in the ordinary course of

business.

The applicant having established that each of the payments fell within s.122 and the respondent having failed to discharge the burden laid upon it by sub-sec. (3) of proving that it was a payee in the ordinary course of business, the applacant is, in my opinion, entitled to the declarations and orders sought. It 1s unnecessary to consider the question whether the respondent was a payee in good faith within the meaning of s.122, or the claim of the applicant based upon s.123.

The Court declares that the payment of $15,000 made by the bankrupt to the respondent on 28 September, 1976 and the payment of $5,000 made by the bankrupt to the respondent on 9 October 1976 are void as against the applicant as trustee of the property of the bankrupt and orders that the respondent pay to the applicant the sum of $20,000. It 1s further ordered

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16.

that the respondent pay the applicant's costs of and incidental to the application, including reserved costs, such costs to be

taxed 1f not agreed. Liberty 1S reserved to either party to

apply.