Robertson v Grigg

The appellant, as trustee of an assigned estate under Part XI of the Bankruptcy Act 1924-1930, appealed from a decision of the Court of Bankruptcy. The dispute concerned payments made by a road authority to the respondent, which the trustee sought to set aside as an unlawful preference or, alternatively, as void unregistered assignments of book debts. The debtor had entered into road construction contracts and obtained advances from the respondent, agreeing to repay these advances from progress payments due under the contracts. Within six months of the deed of assignment, the debtor provided written orders to the road authority for payment of these moneys to the respondent, which were subsequently honoured.

The legal issues before the High Court were whether the written orders constituted void unregistered assignments of book debts under the Bills of Sale Act 1899-1925 (W.A.), and whether the payments made to the respondent constituted an unlawful preference under section 95 of the Bankruptcy Act 1924-1930. The trustee argued that the moneys payable under the contracts were book debts and that the transactions were either void under the Bills of Sale Act or constituted a preference under the Bankruptcy Act, as the respondent had received preferential treatment over other creditors.

A majority of the High Court held that the moneys payable under the road construction contracts were not "book debts" and therefore the orders were not void under the Bills of Sale Act. Regarding the preference claim, the Court, assuming section 95 applied to deeds of assignment under Part XI, found that the transactions were protected by section 95(2)(b) of the Bankruptcy Act. This sub-section exempts purchasers, payees, or encumbrancers who act in good faith, for valuable consideration, and in the ordinary course of business. The Court reasoned that the test for "ordinary course of business" was whether the transaction was fair and what a person might do without contemplating bankruptcy. The majority also noted that advances made more than six months before the assignment, secured by valid equitable assignments, were not affected by section 95.

The appeal was dismissed. The Court affirmed the decision of the Court of Bankruptcy, finding that the respondent had acted in good faith and for valuable consideration in the ordinary course of business, and that the equitable assignments of future moneys were validly created before the six-month period preceding the deed of assignment.