Octavo Investments Pty Ltd v Knight [1979] HCA 61

Octavo Investments Pty Ltd v Knight [1979] HCA 61

Payments made by Coastline to Octavo were payments by a prospective insolvent company to a creditor having the effect of giving that creditor a preference, priority or advantage over other creditors. Although the payments were made from trust assets, Coastline as trading trustee had a proprietary beneficial interest in the trust assets through its right of indemnity, and creditors of the trust business could have resort to that interest. Section 122 of the Bankruptcy Act was therefore apt to apply by force of s. 293 of the Companies Act. The words "from his own money" did not require that the payment itself be sourced from non-trust money. However, because company property did not vest in...

Jurisdiction
Australia
Procedural Posture
Appeal / High Court Appeal From the Full Court of the Supreme Court of Queensland
Outcome
Appeal otherwise dismissed with costs; order varied as to the recipient of payment.
Legal Topics
['voidable Preferences' 'winding Up' 'trading Trusts' "trustee's Right of Indemnity" 'trust Property' 'property Divisible Among Creditors']
['insolvency Law' 'corporations Law' 'trusts'] ['voidable Preferences' 'winding Up' 'trading Trusts' "trustee's Right of Indemnity" 'trust Property' 'property Divisible Among Creditors']

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

Legal Issues

  1. 1 ['Whether payments made by a company acting as trading trustee from trust assets to a creditor were void preferences under s. 293 of the Companies Act and s. 122 of the Bankruptcy Act 1966 Cth.' "Whether trust property or the trustee's right of indemnity over trust assets could support the application of the preference provisions where the trustee would have been an individual bankrupt." 'Whether the phrase "from his own money" in s. 122 (1) of the Bankruptcy Act qualified the source of the payment or described the debtor\'s inability to pay debts.' 'Whether repayment of the preference should be ordered to the liquidators or to Coastline Distributors Pty. Ltd. (in liquidation).']

Ratio Decidendi

Payments made by Coastline to Octavo were payments by a prospective insolvent company to a creditor having the effect of giving that creditor a preference, priority or advantage over other creditors. Although the payments were made from trust assets, Coastline as trading trustee had a proprietary beneficial interest in the trust assets through its right of indemnity, and creditors of the trust business could have resort to that interest. Section 122 of the Bankruptcy Act was therefore apt to apply by force of s. 293 of the Companies Act. The words "from his own money" did not require that the payment itself be sourced from non-trust money. However, because company property did not vest in...

Court Disposition

Appeal otherwise dismissed with costs; order varied as to the recipient of payment.

Orders

  • ['Vary the order of the Full Court of the Supreme Court of Queensland dismissing the appeal by providing for substitution in the order of Connolly J. of the words "pay to Coastline Distributors Pty. Ltd. (in liquidation)" for the words "pay to the Applicants".' 'Otherwise dismiss the appeal with costs.']