Sheahan v Air Con Serve Pty Ltd - [1995] SASC 5193

COURT IN THE FULL COURT OF THE SUPREME COURT OF SOUTH AUSTRALIA DOYLE CJ(1), DUGGAN(2) and NYLAND(3) JJ

CWDS
Corporations - winding-up - conduct and incidents of liquidation - undue preferences - payments by Receiver and Manager out of fund subject to debenture - whether payments by company - personal liability undertaken by Receiver and Manager - payments not recoverable. Corporations Law s 565; Bankruptcy Act 1968 (Cth) s 122, referred to. Octavo Investments Pty Ltd v Knight (1979) applied. Re Margart; Hamilton v Westpac Banking Corporation
(1964) 79 FLR 330, 9 ACLR 269, distinguished. Australian and Overseas Telecommunications Corporation Ltd v Russell Kumar and Sons Pty Ltd (1992) 10 ACSR 24, not followed. Ramsay v National Australia Bank (1989) VR 59; Expo International Pty Ltd v Torma (1985) 3 NSWLR 225, discussed.

HRNG ADELAIDE, 5 June 1995 #DATE 1:8:1995 #ADD 20:9:1995

Counsel for appellant Air Con: Mr D Clayton QC with Mr T Cogan

Solicitors for appellant Air Con: Tim Cogan

Counsel for appellant Carrier: Mr D Clayton QC with Mr N Kandelaars

Solicitors for appellant Carrier: Adams Kandelaars

Counsel for respondent Sheahan: Mr N Strawbridge with Mr D Pilkington

Solicitors for respondent Sheahan: Minter Ellison Baker O'Loughlin

Counsel for respondent/appellant: Mr A Besanko QC
Campbell and Schroder

Solicitors for respondent/appellant: Finlaysons
Campbell and Schroder

ORDER
Appeal allowed.

JUDGE1 DOYLE CJ This is an appeal from a decision of a Master of this Court. The decision appealed against was given in respect of two actions tried jointly by the Master. In each action the plaintiff was the liquidator of TOC Pty Ltd ("the company"). A winding up order was made in respect of the company on 11 September 1991 on a summons filed on 27 May 1991.

2. In each case the defendant was a creditor of the company. In the first action the defendant was Air Con Serve Pty Ltd ("Air Con") and in the second action the defendant was Carrier Airconditioning Pty Ltd ("Carrier"). Each defendant was a creditor of the company as a result of work performed by the defendant for the company pursuant to a contract with the company made before the company went into liquidation.

3. Sometime prior to the relevant events the company had granted mortgage debentures ("the debenture") to the Australia and New Zealand Banking Group Limited ("the bank") to secure its indebtedness to the bank. On 29 April 1991 the bank, exercising its powers under the debenture, appointed Mr Campbell receiver and manager of the company (I will refer to him as the receiver). The contracts between the company and each defendant were entered into before the receiver was appointed.

4. In each action the liquidator sought to recover from the defendant the amount of payments made by the receiver in respect of moneys admittedly owed by the company to the relevant defendant. In each case the issue was whether the payment by the receiver was recoverable by the liquidator as a preferential payment pursuant to s565 of 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: [1995] SASC 5193
Decision Date: 1 August 1995

CaseChat Overview and Summary

The Full Court of the Supreme Court of South Australia considered an appeal from a decision of a Master of the Court regarding two actions against Air Con Serve Pty Ltd and Carrier Airconditioning Pty Ltd, who were creditors of the company TOC Pty Ltd. The liquidator of TOC Pty Ltd sought to recover payments made by the receiver and manager of the company as preferential payments under the Corporations Law. The key issues before the Court were whether the payments made by the receiver were recoverable as preferential payments and whether the receiver had undertaken personal liabilities that could affect the company's liability. The Court found that the payments made by the receiver were not recoverable as preferential payments because they were made in discharge of a personal obligation undertaken by the receiver, not as a payment by the company. The Court concluded that the receiver's personal obligation meant the payment was not a payment by the company for the purposes of the Bankruptcy Act. The Court allowed the appeal, set aside the Master's orders, and dismissed the claims made by the liquidator against the defendants, as well as the claims made by the defendants against the third parties.

Orders