Sheahan v Carrier Air Conditioning Pty Ltd

HIGH COURT OF AUSTRALIA

BRENNAN CJ, DAWSON, GAUDRON, GUMMOW AND KIRBY JJ

JOHN SHEAHAN v CARRIER AIR CONDITIONING PTY LTD and ANDREW RYRIE CAMPBELL & ANOR(Matter No A 42 of 1995); JOHN SHEAHAN v AIR CON SERVE PTY LTD and ANDREW RYRIE CAMPBELL & ANOR (Matter No A 43 of 1995)
Corporations

(1997) 147 ALR 1

12 August 1997
Corporations

Corporations—Winding up—Preferences—Payments by receiver and manager to company's creditors from funds subject to debenture—Whether payments made by company or receiver—Effect of personal undertaking of liability by receiver—Nature of receiver's agency—Preferential effect where no unsecured creditors disadvantaged—Whether payments voidable preferences recoverable by liquidator. Corporations Law, ss 421(1), 565. Bankruptcy Act 1966 (Cth), ss 122(1), 122(1A).

Orders

Order:
Appeals dismissed with costs.

Decision

BRENNAN CJ.

The appellant is the liquidator of TOC Pty Ltd (formerly known as T O'Connor & Sons Pty Ltd) ("TOC"), the winding up of which is deemed to have commenced on the filing of a summons for winding up on 27 May 1991. Prior to the winding up, the Australia and New Zealand Banking Group Limited ("the Bank") had appointed the respondent Mr A R Campbell ("the Receiver") receiver and manager of the undertaking and assets of TOC. The appointment was made in exercise of the Bank's powers under a mortgage debenture given by TOC to secure its liability to the Bank for advances which, at the time of the Receiver's appointment, stood at more than $4.5 million. TOC had sub- contracted with Jennings Industries Ltd for the installation of air conditioning equipment at the Adelaide Entertainment Centre and had further sub-contracted the work to the corporate respondents ("Carrier" and "Air Con"). When the Receiver was appointed, the work was incomplete. TOC had to complete the work in order to be paid by Jennings but it owed Carrier and Air Con substantial amounts for the work that they had performed up to that stage.

The Receiver was appointed by the Bank on 29 April 1991. On 2 May 1991 he issued a circular to the creditors of the Company notifying them that he had assumed control of the Company's affairs. In the circular he stated, in part:

"It is my intention to continue the company's operations for the time being. Accordingly, I would appreciate your making goods and services available to the company upon your normal trading terms and conditions when so requested by us. In this regard, would you please adopt the following procedure with regard to the company's account:

1. Close your present account as at the close of business on 28th April 1991 and promptly render a statement of the account, as at that date, direct to the company; and

2. Open a new account styled 'T. O'Connor & Sons Pty. Ltd. (Receiver & Manager Appointed) - Receiver & Manager's Account' for all transactions occurring on and after 29th April 1991. Invoices and monthly statements in respect of this account should be rendered direct to my office.

Supplies and services upon this account…