TRUSTEE OF THE BANKRUPT ESTATE OF HICKS & HICKS

The Trustee of the Bankrupt Estate of Hicks & Hicks (the Trustee) sought to recover funds from Mr Thomas, alleging that Mr Thomas had received preferential payments from the bankrupts, Hicks & Hicks, within six months of their bankruptcy. The dispute concerned whether these payments constituted voidable preferences under the *Bankruptcy Act 1966* (Cth). The matter came before Stevenson J in the Federal Court of Australia.

The central legal issue before the Court was whether the payments made by the bankrupts to Mr Thomas were voidable preferences. To establish this, the Trustee was required to demonstrate that the payments were made within six months of the bankruptcy, that they were made to a creditor, that they had the effect of placing that creditor in a position superior to other creditors, and that the bankrupts were insolvent at the time of the payments. A key element of the dispute revolved around whether Mr Thomas was a "creditor" at the time of the payments, and whether the payments were made in the ordinary course of business.

Stevenson J dismissed the Trustee's application, finding that the Trustee had failed to establish the necessary elements for a voidable preference. The Court determined that the payments were not made to Mr Thomas in his capacity as a creditor, but rather in discharge of a debt owed by the bankrupts to a third party, for which Mr Thomas was merely a conduit. Consequently, the payments did not have the effect of preferring Mr Thomas over other creditors. Furthermore, the Court found that the payments were made in the ordinary course of business, which is a defence to a claim for unfair preference.

The Initiating Application of Mr Thomas filed on 3 May 2013 is dismissed.