David Grant & Co Pty Ltd v Westpac Banking Corp- Ferndell Development v Westpac Banking

The case of *David Grant & Co Pty Ltd v Westpac Banking Corp* and *Ferndell Development v Westpac Banking* involved appeals to the High Court of Australia concerning the interpretation and application of section 67 of the *Bankruptcy Act 1966* (Cth) and the doctrine of equitable assignment. The primary dispute revolved around whether certain payments made by a company, Ferndell Development Pty Ltd, to Westpac Banking Corporation constituted preferential payments that could be clawed back by the trustee in bankruptcy of David Grant & Co Pty Ltd.

The High Court was required to determine whether the payments made by Ferndell to Westpac were made by Ferndell as a debtor of the bankrupt company, David Grant & Co Pty Ltd, or whether Ferndell was merely a conduit for payments from a third party. A further key issue was whether the payments, if made by Ferndell as a debtor, were made under circumstances that would render them voidable preferences under section 67 of the *Bankruptcy Act*. The court also considered whether the transactions amounted to an equitable assignment of a debt owed by Ferndell to David Grant & Co Pty Ltd, and if so, whether such an assignment was effective to defeat the claims of the trustee.

The High Court, in its joint judgment, reasoned that the evidence did not establish that Ferndell was indebted to David Grant & Co Pty Ltd in a manner that would attract the operation of section 67 of the *Bankruptcy Act*. Instead, the court found that the payments were made by Ferndell in discharge of its own obligations, or as directed by a third party, and not as a debtor of the bankrupt. The court affirmed that for a payment to be a preference, it must be made by the debtor to a creditor. The court also held that there was no effective equitable assignment of any debt owed by Ferndell to David Grant & Co Pty Ltd that could prejudice the trustee's position.

Consequently, the High Court allowed the appeals, setting aside the orders of the lower courts. The trustee's claim for the recovery of the payments as voidable preferences was dismissed.