Re Hicks, William Clive & Anor Ex parte Russell, Daniel James - [1980] FCA 14

Re: WILLIAM CLIVE HICKS and GAYNER BLANCHE HICKS
Ex parte: DANIEL JAMES RUSSELL
No. NSW 94 of 1978
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY
Lockhart J.

CATCHWORDS

Bankruptcy - mortgages by debtor to creditors - mortgages executed when debtors insolvent - whether mortgages constituted a preference - determination of extent of preference.

HEARING

SYDNEY

#DATE 11:2:1980

ORDER

The mortgage dated 12 May 1978 from William Clive Hicks and Gayner Blanche Hicks to Graham Rex Howard had the effect of giving to Graham Rex Howard a preference within the meaning of s. 122 of the Bankruptcy Act 1966 and that the said mortgage is void as against the applicant in so far as it constitutes a security over or charge upon any of the property of the said William Clive Hicks and Gayner Blanche Hicks. Otherwise, the application is dismissed.

THE COURT ORDERS THAT:

The respondent Graham Rex Howard pay one quarter of the costs of the applicant of this application.

The applicant pay the costs of the respondents, The Commercial Savings Bank of Australia Limited, The Commercial Bank of Australia Limited and Dallas Acceptance Pty. Limited of this application.

Otherwise no order as to costs.

JUDGE1

The trustee of a deed of assignment ("the deed") under Part X of the Bankruptcy Act 1966 ("the Act") seeks declarations that three mortgages are void against him as preferences under s. 122 of the Act.

The deed was executed on 3 July 1978 by William Clive Hicks and Gayner Blanche Hicks ("the debtors"), who are husband and wife. It was on that date also that the special resolution requiring the execution of the deed was passed by the creditors.

Before the execution of the deed the debtors were self employed builders carrying on business in the Albury district. The female debtor played little, if any, role in the business. She looked after her husband and family.

The debtors acquired an interest as conditional purchasers in a property, No. 885 Stelling Street, Albury, ("the property") on 1 May 1976.

On 2 September 1977, the debtors executed a mortgage over the property to Mary Frances Grace Hughes to secure an advance of $10,000.00 made by her to them.

On 19 January 1978, the debtors executed a mortgage over the property to Dallas Acceptance Pty. Limited ("Dallas") to secure an advance of $6,865.10. This mortgage was registered in the General Registry of Deeds on 28 June 1978.

On 3 May 1978, the debtors executed a discharge of the mortgage to Mrs. Hughes which was lodged with the Under Secretary of Lands on 12 July 1978.

The debtors executed a mortgage dated 3 May 1978 over the property and a form of transfer by way of mortgage to The Commercial Savings Bank of Australia Limited ("the savings bank") to secure an advance of $25,000.00. The mortgage was lodged with the Under Secretary of Lands on 12 July 1978.

The…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [1980] FCA 14
Decision Date: 11 FEBRUARY 1980

CaseChat Overview and Summary

In the case of Re Hicks, William Clive & Anor Ex parte Russell, Daniel James, the applicants sought to challenge the validity of mortgages executed by the Hicks, which they claimed constituted preferences under the Bankruptcy Act 1966. The applicants argued that these mortgages unfairly prejudiced other creditors of the Hicks, who were declared bankrupt. The dispute was heard by the Federal Court of Australia.

The primary legal issues the court needed to resolve were whether the mortgages executed by the Hicks to Graham Rex Howard constituted preferences under section 122 of the Bankruptcy Act 1966, and if so, to what extent these preferences were voidable. The court was also required to determine the extent to which the mortgages could be set aside to restore the equitable position of the creditors.

The court determined that the mortgage dated 12 May 1978, executed by William Clive Hicks and Gayner Blanche Hicks to Graham Rex Howard, indeed constituted a preference. The Hicks were found to be insolvent at the time of executing the mortgage, and this transaction conferred an unfair advantage to Howard over other creditors. Consequently, the mortgage was declared void to the extent that it constituted a security over or charge on any of the Hicks' property. The court also ordered that Graham Rex Howard pay one quarter of the applicant's costs, while the applicants were ordered to bear the costs of the other respondents. The application was otherwise dismissed without costs to any party.

Orders

Orders of the court

The mortgage dated 12 May 1978 from William Clive Hicks and Gayner Blanche Hicks to Graham Rex Howard had the effect of giving to Graham Rex Howard a preference within the meaning of s. 122 of the Bankruptcy Act 1966 and that the said mortgage is void as against the applicant in so far as it constitutes a security over or charge upon any of the property of the said William Clive Hicks and Gayner Blanche Hicks. Otherwise, the application is dismissed.

THE COURT ORDERS THAT:

The respondent Graham Rex Howard pay one quarter of the costs of the applicant of this application.

The applicant pay the costs of the respondents, The Commercial Savings Bank of Australia Limited, The Commercial Bank of Australia Limited and Dallas Acceptance Pty. Limited of this application.

Otherwise no order as to costs.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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