Re T G Cummins & Anor v Ex parte Harris, E.g.

The Federal Court of Australia was asked to decide whether a payment made by the debtors, Thomas George Cummins and Jill Imelda Cummins, to Refrigeration Parts (Old) Pty. Ltd. constituted a voidable preference under the Bankruptcy Act 1966. The trustees of the debtors, Ernest George Harris and Wilson Joseph Wilde, sought a declaration that the payment of $10,169.17 made in October 1983 was a voidable preference and an order for the respondent to repay the money. The respondent argued that the payment was made in good faith and in the ordinary course of business.

The court had to determine whether the payment was made in good faith and in the ordinary course of business. The burden of proof was on the respondent to establish that the payment was made in good faith and for valuable consideration in the ordinary course of business. The court examined the circumstances surrounding the payment, including the history of dealings between the parties, the repeated reminders and demands for payment, and the actions taken by the respondent, such as issuing a writ and using a debt collection agency.

The court found that the payment was not made in the ordinary course of business, as it was made after repeated reminders and demands, and particularly after 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 effect of the payment would be to give the respondent a preference over other creditors.

As a result, the court declared that the payment of $10,169.17 made by the debtors to the respondent on 6 October 1983 was void as against the applicants. The court ordered the respondent to repay the sum of $10,169.17 to the applicants, together with their costs of and incidental to the application, such costs to be taxed if not agreed; liberty to apply to either party.