Lyford, M.H. & Anor v Commonwealth Bank of Australia [1995] FCA 334

Lyford, M.H. & Anor v Commonwealth Bank of Australia [1995] FCA 334

The fixed charge aspects of the two equitable mortgages were void as against the liquidator and voidable as against the company under s565 of the Corporations Law, because the company was insolvent at the time and the Bank knew or suspected insolvency; floating charge aspects did not constitute settlements for s120 and remain valid; no breach of fiduciary duty was established.

Jurisdiction
Australia
Judgment Date
26 May 1995
Procedural Posture
Corporations Law Dispute / Final Judgment
Outcome
Equitable mortgages void to the extent of fixed charges; application otherwise dismissed; parties to be heard on costs.
Legal Topics
['voidable Transactions' 'equitable Mortgages' 'fiduciary Duties' 'good Faith' 'solvency' 'amendment to Pleadings']
['corporations Law' 'bankruptcy Law' 'equity Law' 'civil Procedure'] ['voidable Transactions' 'equitable Mortgages' 'fiduciary Duties' 'good Faith' 'solvency' 'amendment to Pleadings']

Case Brief

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Procedural Posture

Corporations Law Dispute / Final Judgment

Legal Issues

  1. 1 ['Whether the equitable mortgages granted by the company to the Bank constituted voidable settlements under s565 of the Corporations Law (applying s120 of the Bankruptcy Act 1966)' 'Whether the charges (fixed and floating) can be a settlement within the meaning of s120' 'Whether the fixed charges were retained and made in good faith' 'Whether the company was insolvent at the date of creation of each charge and whether the Bank was aware of insolvency' 'Whether there was a breach of directors’ fiduciary duty in granting the mortgages and whether the Bank participated']

Ratio Decidendi

The fixed charge aspects of the two equitable mortgages were void as against the liquidator and voidable as against the company under s565 of the Corporations Law, because the company was insolvent at the time and the Bank knew or suspected insolvency; floating charge aspects did not constitute settlements for s120 and remain valid; no breach of fiduciary duty was established.

Court Disposition

Equitable mortgages void to the extent of fixed charges; application otherwise dismissed; parties to be heard on costs.

Orders

  • ['The equitable mortgage granted by the second applicant to the respondent dated 13 July 1990 is void as against the first applicant and voidable as against the second applicant to the extent it is expressed to be a fixed charge.' 'The equitable mortgage granted by the second applicant to the respondent dated 31...