Ne. : CATCHWORDS: Bankruptcy Act 1966 s.122 - payee having failed to prove that it was a paye@ in the o1dinary course of business, payment having been ceccived as a result of statement made by payee at a meeting of certain of the bankrupt's creditors aud as a result of the aussue and service of a writ, payment declared void against the trustee of the estate of the nankrupt as a preference. Re: Alex Neville Bard (as Trustee of tne estate of Yiangos Arcadiou, a bankrupt) Ex parte: Tasmanian Board Mills Ltd. trading as Country and Western SWELNEY J. 19 DECEMBER 1979 ne A IN THE FEDERAL CCURT OF AUSTPALIA GENDRAL DIVISION No. 68 of 19/7 BANKRUPTCY DISTFSICT OF THE STATE OF VICTORIA RE: ALEX NEVILLE BIRD (as Trustee of the Estate of YIANGOS ARCADIOU, a bankrupt) EX PARTE: TASMANI?N BOARD MILLS LTD. JUDGE MAKING ORDER: SWEENEY J. WHERE [IADE: MELBOURNE DATE OF ORDER: 19 DECEMBLP 1979 THE COURT DECLARES THAT: The payment of $15,000 made by the bankrupt to the respondent on 28 September, 1976 and the payment of $5,000 made by the bankrupt to the respondent on 9 October 1976 are void as against the applicant as trustee of the property of the bankrupt and orders that the respondent pay to the applicant the sun of $20,000. It is further ordered that tne respondent pay the applicant's costs of and incidental to the application, including resorved costs, such costs to be taxed 1f not agreed. Liberty :s reserved to either party to apply. IN THE FEDE2AL COURT OF AUSTrALIA GENERAL DIVISION BANKRUPTCY DISTRICT OP THE STATE CF VICTORIA No. 68 of 1977 Re: Ale: Neville Bird(as Trustce or the estate of Yrandos Arcadisu, ¢ bankrupt) Applicant Tasmanian Board Malis Ltd, trading es Country and Western Respondent REASCiiS FOR JUDGMENT C.A. Sweenz' J. 19 Decerbcz, 1979 In this application, as amended by leave, the applicant seeks the following declarations and crders: "(a) That payment made oy the binkrupt to the Respondenzc on the 2éth Seplumrer, 197€ for $15,000 ond on the Yth Octaver, 1976 for $5,000.00 are void as aqa..soct tne ap.licant as Trustee of the property of the ban rupt as being rayment uaving the cffect of caving the respondent a preference priority or advantage cver creditors of the bankr-pt or alternatively by virtue of the Bani.runtcy of the Bankrupt naving been éfored to havc relation back to Gate the 26ta dav of Septerbcu:, 1976 on which date the barkrunt gave sotice to some cf his crewitors nivvliy Gudeatta Nominees pty. Lta, trading as Highetc Timber Co., Tasmanian Board Mills Ltd tradiry as Country and Western, Guardian Iavestmoants Pty. Ltd., Beneficial Finance Corroration Ltd. and Alliance Acceptance Corporation Limited, that he has susperjed or 18 apout to suspend payment orf nis debts. (b) Ar order that the respondent pay to the applicant the sum of $20,000.00." wo 2/ 2. The respondent based its notice of intentzon ro oppose the application on the grounds: "(a) that the payments referred to in the application did not have the effect of giving the Pespondent a preference priority or advantage over creditors of the Bankrupt. (b) that the said payments are not deemed to have relation back to the 20th day of September, 1976 as alleged in the said application or at all. (c) that at the time that the said payments were made the Earnkrupt was not insolvent." At the hearing, on the application of Mr H.H. Ldnie, of counsel for the respondent, leave was given to the respoudent to add the following ground: "(d) that the respondent 1s and at all times material was a payee in good faith and for valuable consideration and in the ordinary course cf business within the meaning of sec.122(2) and (4) and accordingly lies outside the ambit of sub-sec. (1) of that section." It was common ground cetween the parties that the bankrupt made payments to the respondent of $15,090 on 28 September and of $5,000 on 9 October 1976 in respect of a debt of $25,000 which he owed to the respondent. The respondent by 1ts notice of intention to oppose the application put in ussue the question whether these payments had the effect of giving the respondent a »reference pricrity or advantage over the other creditors of the pankrupt. The evidence of the applicant, which I accept, plainly established that each of the payments had this effect. The respondent also contended that at the time of each of the payments the bankrupt was not unable to pay his debts as they became due fron his own money, within the reaning of s.122 of the Bankruptcy Act 1966. The meaning to be given to tnese words has been laid down in Hymix Concrete Pty. Ltd. v Garritty (1977) 13 A.L.R. 321. At pp 327-8 Jacobs J. said: 37/ "Phe question remains, rovevcr, whether the circumstances lead lo cine anfurence that the appellant, through Mr O'Neil, hid reason to suspect that the company was unukJe to pay ats debts as they sacet: dur out of its own money. Huca depends upon the connotation of these last words. If tney fal] to be applied according to tavir Jiteral terms then quits clearly the circumstances "ot orly lead to but compel the infercence thal the appellant had reason to suspect. The company nad large debts and no ready morey with thich to pay them. However, if the words meant that the total of liabilities escecded the tatal of assets, the figures placed Lefore Mr O'Neil both in the Dun and Bredsticet report and in the 31 March balance sncet shewed a surplus of assets. But the words ""unakle to pay its debts as they Lecome Cus from its own money" should not be applicd 11 esther of these ways. There 1S an intermedsate application of them which has long becn established. I shall not set out once again the passages in the judgments of tne court in Cark cj dAustiadasee v Hat2 (1907) 4 CLR 1514, per Griffith CJ at 1528 and per Isaacs J at 1543. They are set eut in the judgment of Taylor G ain Rees v Bank of New S. ttn Wee.s (1964) 111 CLR 210 at 229-30; (.1964] ALR 139 at 149-50. I shall set out some passagas from tne_juderant of Barwick CJ (111 CLR at 218-9; (1967] ALR at 141-2) which I thank are particularly apposite to the present case:- 'The respondent's courscel supnitted that, bec the bank nel¢e the heliets, whick the prioary judge accepted it dia held, as to the extent of the company's trading stock and of the causes Of 1tS current erpvarrassments, 1t could not be siid either to knew or to have reason to sus,-ct the corpary's insolvency - its inability to mect its debts as the, occane due. But this subsissei2n serings from a hasit misconception and 1s rot borne cut by the judgments of 172213 Covre to whic my brothec Taylor refers. It 1S quate true that a trader, to remain solve..i, dees not need to have ready cash by ham tc cover his comnaitnents as they fall for payment, and that in determining whether he can pay his cebts as they become due regard must be had to his realizable assets. The extent to which therr existence will prevent a conclusion of insolvency '1111 Gepend on a number of surrounding circumstunces, one af which must be the nature of the assets and in the case of a trader, the nature cf his business. Here the company's business was the sale of foodstuffs through a numver of retail outlets. Tne asset wnose value was said to negative a conclusion of ansolvescy, or at any rate to 00 f4 obviate the suspicion of it, was its trading stock of foodstuffs. In the ordinary course of the cotpany's business t1s asset was not avarlable to be realized exzcept by msaans of retail sales through 1ts various shops ... The stcck-in-trade vas cleerly not an asset which was available to be realized to reet current debts excert in the ordinary course of the corzany's business, a course which had proved itself 1radequate ... "The bank in this case knew that the company was overtrading, that 21ts only source of money to meet 1ts current trading cebts was the takings of its shops, that the wnole of the takings were being deposited to tne overdrawn account, and that tne company's trading Gepts were not peing currently mst. However acceptablo the motive of the b ann in endeavouring to keep the company afloat, by proving its belier that the company had an excess of tradiny stock over those debts of whach the bank was aware, Bf cannot escape the conclusion that, at the least, it had reason to believe tnat the company was aunsolvent. Clearly that stoc:, in the corpany's circumstances, was not with.n the category of realizable assets to which Isaacs J refers in Bank of Aatitadasad v tac' (1967) 4 CLR i514 at 1543; i4 ALR 51." Words useld in later cases, apparently rore favourable co a creditor, must ve read in the laght of tne enuncrations to which T rave an application of the vell ecetablished a referred and shouli be taker as no nore to particular circumstances: Qucensluia bacon Pty Ltd v Rees (19€6) 115 CLP 266; 1366 ALR 855; Sandedi v Porter (1966) 115 CLR 666. A temporary lack of licuidity must be Gistingui shed from un erdcenic snortage or working capital whereby liquidity can only be restored by a successful outcome of business ventures in which the existing working has been ceployed." Barwick C.J. and Gibbs J. concurred in of Jacobs J. capital the juagnent The test so approv.d in the Hymix Concrete Pty. Ltd. case 1s expressed in the words of Griffith C.d. at p 1528): (1907 4 CLR 222 5/ "The question 1s nov whether the debtor would be able, 1f tima were given hain, to pey nis debts out of his assets, but whether he 15 presently able to do so with moneys actuali, availavie. 'Tne most favourable construction taat can be put on the words 'l11s own moneys '1is that they include any moneys of wnich the debtor can obtain immediate command by sale or pledge of his assets." The test as formulated by Isaacs J. (at p 1543) was: "The Act regaulres the debtor to be able to pay his debts as they become due. This does not mean that he is always bound to keep by him in casn a sum sufficient to meet all his outstanding indebtness however distant the Gate of payment ray be. If at the time he makes the assignient, the debtor's position is such that ne has property either in the form of assets itn possession or of cebts, which 1f£ realized would proauce sufficient noney to pay all his indebtejiness, and 17 that property 15 1n Such a position as 49 title and otherwise that it could be realized in time to meet the indebtness as the claims mature, with uwacy thus belonging to the debtor, he cannot be said to be unable te pay his debts as they become duc from ais own rormeys. In other words, 1f the debccr can, by sale or mortgage of property which he owns at the tame of tne assignaont, chante the form of the property into cash wiolly or partly but sufficient for the purpo.e of paving h:s Gebts as they cecore due, that requlrement of the section ic satisfied." In his affidavit sworn on 10 August 1979, the applicant said: "4. THAT I first became aware of the financial affairs of the aoove naved bankrupt early in Septemrer, 1976 hen T aprroached the bankrupt on behalfl of the iisnusing Builders' Association Limited who were acting on behalf of a group of his mayer creditors in relation to his financral affairs. At that stage I had a number of discussions with the bankrupt during which he indicated to me what his asscts and liabilities were. The said assets consisted largely of real estate an. work in progress and the liabilities consisted largely of trade creditors and amounts 2dvanced against the security of real estire and work in progress. As a result of the information obtained fron the bankrupt 1 made furtner enauiries as to the values of tne various assets of the bankrupt und have personally inspected a great numoer of the real estate assets of the said bankrupt, as hereinafter appears. THAT I have personally on the 22nd September, 1976 inspected the following properties of the bankrupt, namely - Lots 60,61,80 to 8&5 and 194 Nangiloc Crescent, Werribee; 62 to 68, Street Lots 70 to 72, 74 to 77 and 75 Glenmoyvne Werribee; and also some land; The impression which I have gained from tnis inspection was as follows: Lot &583 817960626466687¢7274 76738102101 complcced completed and occupred reached lock up except roof complete electric points in lock up roof complete Fix up lock up stage Fix up lock up stage completed other than paths fixing and finishing stage faxing and finishing staye & floor not Plaster finisning only not £1x%, no se.erage Frame stage and iindovs frame stage and windows wall frame stage brick worx staye. frame stage and windows frame stage and winiows - tiles or sit2 frame stage and windovs, bricks - tilss on sitet frixin, and finishing 1 frare stage footings Frame stage - 7 vwandows ~-bricks on site Vacanl land - so1d and se ttied Frame stage and windows - trles and kricks on site frame stage and windows frame stage frare stage vacant land timber on site only timber on site only timber on sice only vacant land vacant land 7. I would estimate that with proper supply of lakour and material it would have taken one to two tronths to complete some of the houses and two to three months to complete the remaininy ones. THAT IT have had a great deal of experience zn valuing real estate and also building works in progress. In addition to having the qualifications of being a trustee in bankruptcy and official liguidator and a chartered accountant, I have gained a great deal of experience as to real estate values, building works in progress and mortgage liabilities by reason of having been for a »eriod of twenty years associctec with the building industry (including personally having performed work as a bu1ider) and also by reason of having becn for a period of two or three years a board Member of the Housing Builders Registry Board. THAT from the information provided to me by the bankrupt and from the enyqurries that I have personally made and from the examination of the books and records of the bankrupt I have prepared a Statcment of Assets and Liabilities of the bankrupt as at the 15th September, 1976. Now produced and shorn <0 me at the time of swearing this my Affidavit and marked with the Jetter "A" 1s tne said Statement of Assets and Liabilities." Exhibit A was in the followincg form: "¥LANCOS ARCADTOU STATEMENT OF ASSETS & LIABILTTIVS AS AT THE 15TK SEPTLVAr?. L97E ASSETS Land and work in froyress at estimated Less realisable value. $1,629,476 ~ Advances secured by mortgage:- - Alliance Acceptance Corp. Ltd. $ 125,905 - Beneficial Finance Co. Ltd. 268,006 - Cofure Pty. Ltd. 105,500 - Guardian Investments Pty. Ltd. 460,185 959,593 $ 69,812 Stock on Hand $ 40,000 Amounts due on Contract of Sale 7 29,000 69,000 S$ 138.912 8/ LIABILITIES A.N.Z. Bank $ 43,000 Less Mortgage Security 25,000 $ 18,000 Trade Creditors 251,964 Other Creditors:- - Land Tax $ 6,274 - Income Tax 15,553 - Interest Accrued 11,500 33,327 — 303,291 $ 164,479 CONTINGENYT ASSETS Equity in land purcnased under a contract of sale. 50,000 $ 114,479" The applicant's bankrupt's affairs continucd as follows: "ea, Giscliosed to me (and I have account of the state of the THAT unless the bankrupt had some additional assets other tnan the assets whzren he no reason to suppose that he di have scch add? tional assets) I can swear positively trat the financial position of the tankrurt was not better than set out in the Statenent of Assets and liabilities prepared by me, that 1s to say, his ercess of laabilities Over assets was at least tne sum oi $114,479.00." Tt that the bankrupt had no adcaitional assets narrative resumed: "9. THAT ever since the tne 15th 1976 until March, 1977 becarre clear in the course of the evidence . The applicant's beginrirg of September, Tt kept in contact with the bankrupt and was conversant wich his financial vosition during that period. That the financial position of the bankrupt did not improve at any time since the 15th September, for a Sequestration Order the Registrar on tne 15th conscau.ntly at all times the excess of liabilities 1976 until his petition was accepted by March 1977 and during that period over assets Was at 20 9 a, a 9, least the sum of $114,479.90 and increasing and certainly as not in ary way better either on the 28tn Septerser 1976 or on the 9th Octobe, 1976. 10. THAT on the J6th aay of Pebruary, 1977 I was appointed by the barkrupt to be his controlling trustce pursnanc to Part X of the Bankruptcy Act. ll. THAT on the 23rd day of Fetvruary, 1977 a meeting of the creditors cf the said bankrupt duly convened uncer the said Part X passed a resolution that he present nis own petition. 12. THAT the bankrupt did prescnt his own petition which was accepted by the Recistrar of this Honourable Court on the 15tn day of March, 1977. 13. THAT apart altogether from the fact that the bankrupt's liabilities exceccnAd his assets as set out in paragrarhs 8 and 9 hereof his liquidity position during the entire }-eriod from 15th September, 1976 until id5th "Maren, 1977 was such that ne 'as unable to pay his debts from his cwn money or from any monies which he may have readily realized. «All the real estate of the bankrurt was heavily rortgajyed in favour of a number of finerce companies, being Beneficial Finance corporation Liriteu, Cofive Pty. Lamited and Alliance Acceptanc2 Corserat:onr Limited. The cenaining tities were neld by tae bankrupt's former Sclicivis's, Messr Tregent & Co. an a few instances sy registered mortgage in favour of a company controlled by them .nown as investments Pty. Lid., but the majorzit., by reason as what tney alloged to be a evurtaible mortgages in favour of ti.c said Cuaréian investments Pty. Led. The ealidzty ce the said s discuted kv ANKOUOGT, S$ the subject racter of the u. 2s wee-@ Not avar:lable for tOmMOr ORR ct oO mm ie) © ou equitable rortgag?:s wa however the said said eguitable me oF é i] borrowing monies. Suysegrvertly as a result of an application which was mz. Investments Pty. Ll. the Federal Court of Australia, a declaration was wade thut the said propertics was subject to a valid equitable mortgage in favour of the said Guardian Investmints Pty. Lré. lhe, ewer, from the inforraticn optaic:{ by ma from tae bankrupt, the bar"rupt did not have any availabl cash or assets to satisfy all, or for that matter, even a substantial propoction of the debts duc and owing as at the 15th September 1976. This position continved rigrt up toe the tine where the Registrar accented tiie bankrupt's petition for a sequestration order. The total unsecured ++ -L0/ 10. debts owing by the bankrupt us at the 15th September, 1976 was t.r- sum oF $273,751.00. Practically all of that sum was for debts which were overilue, in some cases very much overdue. This licuidity position continued and in fact became gradually verse during the said period of six montns. Huw2ver, :e bankrupt did obtain an advance of $100,000.00 from Gucrdran Investments Pty. Ltd. This advance 1iproved the bankrupt's Llignuidity position slightly but for a short period of time. However, even after receipt of that sum of money, whica was cecerved on or abort the 2€th September, 1976 the banxrupt had nowhere near sufficient mon.es to pay all nis overdue accounts and had no way of raising sufficient money to make up the balance. The liguidity position of the bantrupt was not ary better either on the 28th Suptember, 1976 or on the 9th October, 1976 (except of course that by the 28th September, 1976 the bankrupt did receive the advance of $100,000.00. 14. THAT generally speaking the accounts of the Bankrupt as at che 15th Septe ther, 1976 were not merely overdue but in fact very much overdue. Produced to me at the time of swearing this ny; Affidavit and marked with the letter "EB" ig a schedule showing the extent to wnich the arcunts due to the trade creditors were overdue is at 15th September 1976. Tne great nazority of the creditors to whom deots were owiny as at lotn September, 1976 have not received any payment wnatever in relation to those devts. That in addition to tne debts sat out in exhibit "5" the bankrupt was indebted as at the 15th Septercer, 1976 to the followiny persons or inscitucic.+, for the following amounts . - Mr. T. Vella (Keonga Auto Port) 64 Glen:ala Road, West Sunshine $ 1,454.15 Anastious Kitperoylou 17 Mentha Sureet, Sunshine 1,060.90 Eric Smith 534.60 American Plaster 53 Wheatsheas Road, Glenroy 6,C€cG.00 M. Nicopoulos, 53 May Strect, North Altona 4,5°9.69 A.V. Desbudulous 2,324,34 Conula Electrics 3,900.00 This informaticn about additional creditors was obtained by me from Proofs of Debt which T have recélved as the Bankrupt's ''rustee. ..-11/ 15. il. THAT the business of the bankrupt vas basically that of a builder on his ovn 16. account, twut as to say, the bankrupt made it a practise to purchase the land and thin after huilding 2 project woula sell the land tej ether wit: the buildairg. In some cases the butid:nj yrojecis were sold pefore corpletion. Occasionally the bankrupt burlt projects purely as a contract builder but this applied by and large only to menvers of his fanily. In addition, the ban«rupt purchased 50 blocks of land an the Werribee freea on a denosit of $500.C0 ber block wiih tne enpectation of building a namper of "Spec" homes and selling the homes as they were Lu1lt. In order to finance the project 1n question the bankrupt made a practzice orf borrowing money from finance companies at rates of interest of upproximatel y 16 per centum per annum secured by the first mortgage to the total merigayeable value of the properties in qvestion. as at 15th September 1976, 30 of those blocks were settl2d ard were subject to nortgages to finance corpanics and were being buzlt upon as hereinbefore reterradi to and the remaining 20 had not been settled. as at 13th September, 1976 there vus an amount of overdue interest payaole by the bankrupt with respect to mne Suld mortgages an the sum of approximately $11,500.00. THAT tne bankrupt had two pank accounts, onc cs wich the A.N.Z. Banking recoup Lir2 tee ne other sith the National van of Australasia Limited. Insofar as the A.31.2. Bankxine Gro. Limated overdraft 18 concaorned this was partly secure: 1 (the vaive of the security was appron- imate .y $37,099.00 aod Lie anount oF the overuralt was alpromamatecly $43,960.33) put ao all times dariny the sali per1ou of s2: ins the anount with respect tu whaicn tie b was indented to the Lunk substantially 2a the linmic of tre overdvart and the Lan* made 1t a praccice as fron 1975 to return cheques drawn by the bankrast "refer to drawer" Insofar as the account with the National Bank of Australasia Limited 1S concerned there was no sccurity given and no provision for overdraft. The account was eriginally in credit for smail ameunts ard would | fluctuate fairly widely. HYowevec, the moncy paid an would be dram out almost immediately to pay the most pressing accounts. ~.-12/ _—-- 12, 17. THAT by reason of the akov« facts I verily believe that the bankrupt was unable at all times frou the 15th September 1976 to the 15th March, 1977 to pay all nis debts from his own money and thet sc ves unable to raise by mortgage or pledge surfteicut mcney sith which together with his owr money would have been sufficient to pay his deots due and owing." I accept the evidence of the applicant and reject the statements made by the bankrupt in which he expressed his disagreement with certain aspects of that evidence. The managing director of the respondent, ilr John Steel, made an affidavit in which he described the bankrupt at the relevant times as "a man of substance and, a person who, with proper management of his affairs would have been able to vay his creditors in full". His opportunity to form a reliable judgment of the bankrupt's solvency a5 limited and I coulda not accept his opinion of the bankrupt and his affairs. It is open to further doubt in the light of the attitude adcvted by the respondent before and curing the meeting of some of the bankrupt's creditors on 20 September 19746, to which further reference will be made. I am satisfied that at the date of each of the payments in gucstion the bans«rint wos unable to pay Ais debts from his cwn money as they becare duc, within the weaning o s.122. The other ground ugon vhicn the responeer: swine to pase his opposition to the orders sougnt cnder this section was the claim that it was a va,yee in yoed faith and for valuable consideravion and in tne orcinary course of business. It was agreed that it was e pa,ee for valuable consideration but the other elewents of this grourd were contested. Tne evidence showed that on 6 September 1976 the respondent issued a writ in the Supreme Court of Victoria, in which it claimed $25,437.33 for gocris sold and delivered to the bankrupt between the months of February and July 1976. «eel 3/ 13, This writ was served upon the bankrupt on 20 Septerber 1976, cn which day a m_etirg of certain of his creditors was held. 'he applicant @escriped the proceedings at this meeting as follows: "18. meeting: THT a meeting teok p € on the 20th Sopucrber, 1976 at my previous o , Situated at 239 Flinders Lane Nelbourne between a mr. dohn Steel, a Mr. Hatchcock a mr. Cary wernard Hearst, a Mr. Timos Vertes, a Mc. Noel Trecent, Mr. Yiangos Arcadiou and "yselt. At that meeting I was representing tne Yousing Burluers Association who was acting on behal: of a group of h2s najor creditors. Nassrs. Steele and Hitchcock were both representing the respondent Tasmanian Board Mills Ltd. tracing as Cointry and Western, one of his creditors. Mr. Hearst was representing Gubbatta Nominees Pty. Lid trading as Highett Tamber Co., oma of his creditors. Mr. Vortes vas a Solicitor actirg on the Sankrupt's behalf and also on pehkalf of cso cf nie secirad creditors narely Beneficial Firarce Corporation Timited and Alliarce Acc2ptance Corp soration Simited, and re. Noel Tregcnt woo had x1eviously been the bankrupt's Soliciter was representing Cuardian Investments Pty. Ltd cne of his creditors. Daring that mectirg Mr. ¥Yiargos istcadiou stated that he must find $100, 200. 90 tu be able to carry on. He said he would consider a scheme of arvangement or sone schene caereb, the creditors would supervise tne completion of tne houses. tir. Stecle stated taat ne was cpsos-d to this marner cf Rtas A proceeding and wanted "iv. Arcading to be made bankrupt, as only an Official Fecciver of handling the macter. Tnerc was sore about realization of the aessecs and comz the work in progress. Althouch tir. Aras not say sO in oo ity vords he mada it Clear £9 everyone at the so -etirg ther suspended paymont of bis Lepts. Also meeting cit benrrupt wav told (T belierc L, that the reason for the nroecirg tts thea creditors were concerncd stout nis non-payment of depts. the Sankrupt nage a commant to the effect that Be was upable to pay the debts as tne progress payments From a finance corpany were not veiny made. I do aot recall tne exaucr sords he used." Mr Tregent ga'e the tollowing account of the ee L4/ 14. 3. THAT L was presant at a reeting of the major creditors of the vankru3' which tvok place on the 20th September, 1973 at the offices ts £ the applicant Mr. Neville Dard. At that meeting the following persons were present namely Mr. Yaancos Arcadiou, Mr. ¢lex Neville Bird, a Mr. John Steele, a tr Hitchcock, a Mr. Gary Bernard Hearst, a Mr. Timos Vertes, and mysalF. AL that meeting the applicant was reoresenting the IIcusing Builders Association who wes acting on behalt of a group of major creditors. Messrs Steele & Hitchcock were both representing the Respondent Tasmanian Board .iills Limitcd trading as Country and Western, one of his creditors. Mr. Hearst was representing Gubbatta Nominecs Pty. Ltd. trading as Hicneit Timber Co., one of his creditors. Mr. Vertes was a Solicitor acting on the bankrupt's ozhalf and also on behalf of two of his secured creditors namrely Beneficial Finance Corporation Ltd. and Alliance Acceptance Corporation Liaited, and I, who had previously been tne bankrut's Solicitor, was representing Guardian Invecstmants Pty.Ltd. also one of his crecicors. During that discussion Mr. Arcadiou stuted that he would consider a scheme of arrangement or some scheme whereb, the credztors weuld supe.ise the completion of the houses. Mr. Steel stuted that he was opvosed to this manner of proce.cirtg ard wanted Mr. Arcadiou to be made ban-cuvt, as only an O1rficial Receiver was capable of handling tue matter. There was some Giscussicn csbeut the realization of the assets and comsletron of the vor' an » The suid Mr. Bird said to tne said Mr. frculLe during that mecting that there were a let cf compluints to the Housin, Suslders, Asscci ion about him not raving his 3ubts. Tne said Mr. Arcadicu repviied "ho can I, tne propezties have reached the stage wits. £ am due for procrtss payments from finance cer_lanies bur they arc net makiny the progress paymutvs". Lay r I accent the account of t ¢ meeting given by the applicant and Mr Tregeont fror whach it 33 seer that the payments made to the respondent werc nade as a result of the statement made by Mr Steel that ne wanted Mr Arcadiou to be made bankrupt, as only an Official Receiver was capable of handling the matter, and as a result of the 1ssue and servace of the writ. In my opirion, the respondent has failed to show that e1tner parrwent was made in the ordinary course of business (see Re Bailey; oe. 15/ 15. Ex parte Law and Austin (1952) 16 A.B,.C. 80; Commins v 1; Re Hoare (1972-1973) I. & R. Spires investrents Pty. bt A.L.R. 1134). Tndeed, I am satisfied that neither payrent was made in the ordinary course of business. In Re Ballav, ox parte Law and Austin, Clyne J. had to consider a case in which the respondent obtained two payments from a debtor, one as a result cf the efforts of her solicitors and the other after the seizure by a sheriff of property of the debtor under writ of execution. Clyne J. held (at p 85) that "payments receéivei by a creditor as a result oF his solicitor's demands or in consequence of some process of execution cannot be regarded as payments roceived by the creditor 'in the ordinary course of business',. In Re Hoare: Commins v I. & R. Spbies Tnvesuments Pty. Ltd. an overdue payment of rent was received afcer judgment hac beer cbtained in respect of it and a writ of fieri facias had been issued. The writ had been withdrawn by the solicitors for the creditor to enable a sale te Lo. made cf property, from the proceeds ot which priyment was recoived by those solacitors on behalf of the creditor. Tt wes held that this payrnent hed not been mide in the ordinary coucse cf business. The applicart having esteblisned that each of the payments fell within s.122 and the cespondent having farlea to discharess2 the burden laird upon it by sub-sec. (3) of proving that 1% was a poyee tn the oruirar, course o* business, the applicant 25, 1n my opanicn, entitled to the Geclarations ari orders sovght. tf is unnecessary to congicer tne question whether the respondent was a payee in good faith within the meaning of 8.122, or the claim of the applicant hased upon s.123. The Court declares tnat tne payrent of $15,600 raic by the barkrapt to the respondon: on 28 September, 1976 the payment of $5,000 made by t @ banirapt to the respondent on 9 Cctoner 1976 are vo1d as against the applicant as trustee of the property of the bankruvt and orders tnat tne resp fe) pay to the applicant the sum of $20,000. It is further order? 16. that the respondent pav the applicant's costs of and incident21 to the application, including reserved costs, such costs to bu taxed 1f not agreed. Liberty 1s reserved to e1tler party to apply.