Re T G Cummins & Anor v Ex parte Harris, E.g. - [1985] FCA 309

BANKRUPTCY - whether payment a preference priority or advantage

in favour of a creditor	- meaning of "in good faith" - meaning o€
"in the ordinary course	of business" - Bankruptcv Act 1966,
ss.122, 124.

Bankruptcv Act 1966, s s . 1 2 2 ,

124, 231.

Re Bird (as Trustee of the Estate of Arcadiou); ex parte

M. & G.

Casabene & Sons (1979) 39 F.L.R. 281

Brittain; Ex parte Barnes (1984) 2 F.C.R.

Re K. & R. Fabrlcations (O'ld.)Pty.Ltd. (In Liquidation) (1980)

32 A.L.R. 183

Re Lee Furniture Pty.Ltd.

(In Liq.)

8 A.C.L.R.

2 5 1

T.G. CUMMINS & ANOR.; EX PARTE E.G. HARRIS & ANOR. and

REFRIGERATION PARTS (OLD) PTY.LTD. \ , . . J \ , . . ' ' _ ' '

I .

Part X Nos. 4 & 5 of 1984

, \

CORAM:	Spender J.
Brisbane

3 July 1985

"BANKRUPTCY ACT,

1966"

IN THE FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION

Part X NOS.4 & 5 of 1984

BANKRUPTCY DISTRICT

OF THE

Re: THOMAS GEORGE CUMMINS

SOUTHERN DISTRICT

OF THE

and JILL IMELDA CUMMINS

STATE OF OUEENSLAND

trading under the style

firm name of "NAM

CONSTRUCTIONS"

(Debtors)

Ex parte: ERNEST GEORGE

HARRIS and WILSON JOSEPH

WILDE

(Trustees/Applicants)

a:	REFRIGERATION PARTS

(OLD) PTY.LTD.

(Respondent)

MINUTE OF ORDER

JUIXE MAKING ORDER:	Spender J.
DATE OF ORDER:	3 July 1985
WHERE MADE:	Brisbane
THE COURT ORDERS THAT:

(1) the payment made by the debtors

to the respondent

of $10,169.17 on 6 October 1983, is void as against

the applicants;

(2) the respondent pay to the applicants the

sum of

$10,169.17 together with their costs

of and

Incidental to the application, such costs to be

taxed if not

agreed;

(3) liberty to apply to either party.

Note: -

Settlement and entry

of orders I s dealt with in

Order 36

of the Federal Court

Rules.

"BANKRUPTCY ACT, 1966"

IN THE FEDERAL COURT OF

PJJSTPALIA

GENERAL DIVISION

Part X Nos.4 & 5 of 1984

BANKRUPTCY DISTRICT

OF THE

Re: THOMAS GEORGE CTJMMINS

SOUTHERN DISTRICT

OF THE

and JILL 11-ELDA

CUMM-

STATE OF oIJEENSLAND

trading under the style or

firm name of "NAM

CONSTRUCTIONS"

(Debtors)

Ex parte : ERNEST GEORGE

HARRIS and WILSON JOSEPH

(Trustees/Applicants)

e:	REFRIGEEhTION PARTS

ULD) PTY .LTD.

(Respondent

SPENDER J.

3 JULY 1985.

REASONS FOR JUDGMENT

This application is brought by Ernest George Harris and

Wilson Joseph Wilde, the trustees

of the property of Thomas

George Cummins and Jill Imelda Cummins, appointed under deeds

assigrment executed on

17 February 1984. The trustees claim that

payment of

$10,169.17 made in October 1983 to Refrigeration

Parts

(Qld) Pty.Ltd. by Nam Constructions, which was the firm

name under which Thomas George Cummins and Jill Imelda Cummins traded constituted a preference within the meaning of s.122 of

the Bankruptcy Act

1966.

They seek

a declaration to that effect and an order

requiring the respondent to pay to the trustees the money it has

received. Refrigeration Parts

(Qld) Pty.Ltd., the respondent,

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: [1985] FCA 309
Decision Date: 3 Jul 1985

CaseChat Overview and Summary

This case involved an application by the trustees of the bankrupt estates of Thomas George Cummins and Jill Imelda Cummins, trading under the name of Nam Constructions, to the Federal Court of Australia to declare a payment made by the debtors to Refrigeration Parts (Old) Pty Ltd as a void preference. The trustees argued that the payment of $10,169.17 made in October 1983 constituted a preference under section 122 of the Bankruptcy Act 1966, which would give the creditor an unfair advantage over other creditors. The respondent, Refrigeration Parts (Old) Pty Ltd, opposed the claim, arguing that the payment was made in good faith and for valuable consideration in the ordinary course of business.

The central legal issues in this case were whether the payment was made in good faith and whether it was made in the ordinary course of business. The court had to consider the circumstances surrounding the payment and determine whether the respondent had reason to suspect that the debtors were unable to pay their debts as they became due and that the payment would give them a preference over other creditors.

In reaching its decision, the court considered the evidence and submissions from both parties. The court found that the payment was not made in the ordinary course of business, as it was made after several reminders and demands for payment, including a final notice and the issuance of a writ. The court also found that the payment was not made in good faith, as the circumstances objectively led to the inference that the respondent had reason to suspect that the debtors were unable to pay their debts as they became due and that the payment would give them a preference over other creditors.

Based on these findings, the court declared the payment void as against the applicants and ordered the respondent to pay the sum of $10,169.17 to the applicants, together with their costs of and incidental to the application.

This case highlights the importance of considering the circumstances surrounding a payment when determining whether it constitutes a void preference under the Bankruptcy Act 1966. The court's decision emphasizes the need for creditors to act in good faith and in the ordinary course of business when dealing with potentially insolvent debtors.

Orders