Hunter Wholesale Confectioners Pty Limited (In Liquidation) v Sweeties Confectionery Pty Limited

Hunter Wholesale Confectioners Pty Limited (in liquidation) initiated legal proceedings against Sweeties Confectionery Pty Limited, presenting a dispute concerning the return of goods held in storage. The case was adjudicated in the Federal Court of Australia. The primary issue before the court was whether a payment made by Sweeties to Hunter on the eve of Hunter's liquidation constituted an unfair preference under the Corporations Act 2001 (Cth). Additionally, the court examined whether Sweeties had knowledge that Hunter was likely to become insolvent when the payment was made. Furthermore, the court needed to determine if the mixture of goods in the warehouse satisfied the objective criteria for an unfair preference.

The court considered the nature of the bailment agreement between the parties, which stipulated that goods held at Hunter's warehouse were to be returned upon demand, with replacement stock or monetary compensation provided if the goods were sold. However, the goods in question were mixed and not identifiable, complicating the return process. The court also evaluated whether Sweeties' claim in conversion was valid given the mixture of goods and the inability to ascertain Sweeties' share in the mixed stock. The measure of damages in such a scenario was another critical aspect of the court's analysis.

In reaching its decision, the court found that the payment made by Sweeties did not constitute an unfair preference because Sweeties did not possess knowledge that Hunter was likely to become insolvent at the time of the payment. The court emphasised the objective test for unfair preferences, which Sweeties did not meet. The mixture of goods did not absolve Sweeties of liability for conversion, but the court determined that the measure of damages would be based on the value of the goods in the mixed stock. The court concluded that the payment did not unfairly prejudice Sweeties' position as a creditor and dismissed the claim for conversion.