CATCHWORDS BANKRUPTCY - applicant seeking declarations that a Bill of Encumbrance executed by the bankrupts in favour of the respondents and certain payments made by the bankrupts to the respondents are void against the Official Trustee in Bankruptcy - Bankruptcy Act 1966 (Cwlth), s.122 - equitable charge on land - Property Law Act, 1974 (Qld), s.11 ~ unable to pay debts, whether payments within Bankruptcy Act 1966 (Cwlth), s.122(2) (a). BANKRUPTCY ACT 1966 (CWLTH), ss 122, 122(2) (a) PROPERTY LAW ACT, 1974 (QLD), s. 11 Re: WAYNE EDWARD CROSS and DEBRA ELLEN CROSS; ex parte: OFFICIAL TRUSTEE IN BANKRUPTCY (Applicant ) MICHAEL JOHN RITCHIE and JANISE MAY RITCHIE (Respondents) Petition Nos. 226 and 227 of 1981 FITZGERALD J. BRISBANE 131 MARCH 1983 IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION BANKRUPTCY DISTRICT OF THE SOUTHERN DISTRICT OF THE STATE OF QUEENSLAND of 1981 ) ) 5 Pet Nos 226 and 227 ) ) Re: WAYNE EDWARD CROSS and DEBRA ELLEN CROSS Ex parte: OFFICIAL TRUSTEE IN BANKRUPTCY Applicant MICHAEL JOHN RITCHIE and JANIS MAY RITCHIE Respondents JUDGE MAKING ORDER: FITZGERALD J. DATE OF ORDER: 11 MARCH 1983 WHERE MADE: BRISBANE THE COURT ORDERS THAT: 1. The Court declares that the amount standing to the credit of an interest bearing account at the National Bank of Australasia Limited, Elizabeth Street, Brisbane in the joint names of Robert John Hilmer, a member of the firm of Messrs Rylands and Hilmer, solicitors for Michael John Ritchie and Janise May Ritchie and Christopher Brice Lyndon a member of the firm of Messrs Crouch and Crouch solicitors for the Official Trustee in Bankruptcy eye 2. as trustees for the said Michael John Ritchie and Janise May Ritchie and the Official Trustee un Bankruptcy and invested in such account pursuant to an order of the Supreme Court of Queensland dated the 2lst day of July 1982 is property divisible amongst creditors of the bankrupts Wayne Edward Cross and Debra Lllen Cross and is vested in the Official Trustee in Bankruptcy pursuant to s.58(1) (a) of the Bankruptcy Act 1966. 2. The Court declares that a vayment of $3073.39 paid by the said bankiupts wayne Edward Cross and Debra Ellen Cros» to the said Michael John Ritchie and Janise May Ritchie in January 1981 31s void against the Official Trustes in Bankruptcy by virtue of s.122 of tne Bankruptcy Act 1966 and orders that the Application 1s dismissed as to the other payments alleged to be void against the Official Trustee in Bankruptcy. 3. The Court orders that the costs of the Official Trustee in Bankruptcy of and incidental to the proceedings in this matter including reserved costs, if any, be taxed and paid hy the respondents Michael John Ritchie and Janise May Ritchie. IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION Pet Nos. 226 and 228 of 1981 BANKRUPTCY DISTRICT OF THE SOUTHERN ) DISTRICT OF THE SPATE OF QUEENSLAND ) Re: WAYNE EDWARD CROSS and DEBRA ELLEN CROSS Ex Parte: OFFICIAL TRUSTEE IN BANKRUPTCY Applicant MICHAEL JOHN RITCHIE and JANISE MAY RITCHIE Respondents FITZGERALD J. 11 MARCH 1983 REASONS FOR JUDGMENT The Official Trustee in Bankruptcy 1s the trustee of the estates of Wayne Edward Cross and Debra Ellen Cross, each of whom became bankrupt on a Debtor's Petition on 1 May 1981. The respondents, Mr and Mrs Ritchie, were at all material times the proprietors of a building firm called "Manor Constructions". In the latter half of 1980, Manor Constructions commenced to build a house for the bankrupts on land situated at Cosmic Street, Robertson, a suburb of Brisbane. The land was mortgaged to a finance company which exercised its power of sale subsequent to the commencement of the bankruptcies. The Official Trustee and the respondents each claim to be entitled to the balance sale price after satisfaction of the first mortgagee. By an order of the Supreme Court of Queensland, the sum of $50,823.55, less certain costs 2. ordered to be paid to the finance company, has been invested in an interest bearing account to await the outcome of these proceedings. The Official Trustee also challenges certain payments made by the bankrupts to Mr and Mrs Ritchie in and after November 1980. The Official Trustee's claims are founded on s.122 of the Bankruptcy Act 1966 ("the Act"). It is common ground that the relevant period for the operation of that provision commenced at the beginning of November 1980. The respondents' principal assertion is that, prior to that time, they had become entitled to an equitable charge over the land to secure the monies payable to them by the bankrupts in respect of the building operations. They argue that this charge was outside the period of operation of s.122 of the Act and not only entitles them to the balance proceeds of sale of the land but protects all payments which they received which the Official Trustee now seeks to set aside. The Official Trustee did not dispute in these proceedings that the amount remaining due to the respondents in respect of the building operations exceeds the amount which is invested although, in the result, whether that is so is immaterial. The respondents' secondary contention is that they became entitled to an equitable charge early in December 1980 and that such charge is not, on the evidence, impeachable by the Official Trustee. The same consequences are claimed 3. for this charge save that it 1s accepted by the respondents that: it would not save one of the payments called in question which was made in November 1980. Finally, the respondents submit that, even 1f they had no charge on the land, none of the payments are caught by s.122 of the Act. Throughout the period of discussions which preceded the building work, and even in the initial period after it had commenced, the bankrupts presented an appearance of affluence. Mr Ritchie observed the bankrupts' apparent prosperity. He saw that each of the bankrupts had an expensive late model car, which he knew was leased. He was aware that the lease payments would be substantial. He was shown considerable quantities of jewels and large sums of cash which he was told were generated by the bankrupts' business operations. Although I doubt it, the bankrupts may even have been trading profitably up to September 1980. However, they were certainly on the path to bankruptcy soon afterwards. The male bankrupt gave evidence of a dramatic business loss in September 1980 which he discovered late in that month when he returned to work after a bout of illness. The _loss spoken of by the male bankrupt was related to jewels said to have been purchased as diamonds which were later discovered not to be diamonds. If that was true at all, it was only part of the story. Even the previous appearance of wealth was deceptive. The business of the bankrupts involved trading in jewels on their own behalf and on behalf of clients. The jewels 4. and cash which Mr Ritchie saw, represented the bankrupts' clients assets as well as the bankrupts' assets. The bankrupts were liable to pay their clients their investments and profits at call. Further, by September 1980, the bankrupts had also become involved in real estate speculation, either directly or by a company, Tassie Holdings Pty Ltd. Although their undertakings in the real estate field were impressively adventurous, there is nothing to indicate that they were markedly successful. The building work started in late September 1980. There was a considerable amount of materials obtained and work performed in the period from late September to the end of October 1980. After October 1980, no further work was performed or materials ordered, although some of the materials ordered and for which Manor Constructions had become responsible to the suppliers may have been delivered later. Coincidentally, the end of October 1980 also marks the expiration of the period which, for present purposes, precedes the operation of s.122 of the Act. During that period, the form of contract recommended by the Queensland Master Builders' Association and commonly adopted in respect of building works such as were contemplated for the bankrupts was that described as "L.S.C.2 (July 1980)". The description "L.S.C.2 (July 1980)" identified the document as a lump sum contract, type number 2, 5. an the form which had been prepared and was ready for printing in July 1980. That form of contract contained a clause 22 in the following terms: "22. Charge over Land The Proprietor hereby charges the parcel of land on which or on part of which the Works are to be erected with the due payment to the Builder of ail monies that may become payable to the Builder by virtue of this contract or otherwise arising from the carrying out of the work." The respondents' primary claim to an equitable charge on the land was founded on the submissions that a contract was entered into between the bankrupts and the respondents prior to the commencement of the building work in the terms ofan L.S.C. 2 (July 1980) form of contract and that that contract created the charge. Reference was made to Griffith v. Hodge (Supreme Court of New South Wales, Waddell J., 27 July 1979,unreported). See also Clark v. Raymor (Brisbane) Pty Ltd (No. 2) [1982] Qd.R 790. Among the answers sought to be made on behalf of the Official Trustee was a submission that there had been no compliance with s.1ll of the Property Law Act, 1974 (Qld). However, that submission seems to me to approach the _issue on too narrow a basis. Quite apart from any solution to such a difficulty whach might be found in the doctrine of part performance, modern notions of estoppel might well preclude reliance by the Official Trustee upon any lack of an enforceable contract, or indeed even the total 6. absence of any contract, if, for example, the respondents had performed work and obtained materials for the bankrupts on the assumption that there was a contract and the bankrupts had acquiesced in the respondents' conduct. It may be added that, although there were suggestions that the subject of a contract was raised between late September and late November, the evidence was so vague and general it afforded no support for a conclusion that, even if the events in September 1980 were insufficient for the respondents' purposes, any deficiency was supplied during the course of the work in October. There is no need to pursue these matters. There 1s no reliable evidence which supports the respondents' claim. The female bankrupt was little involved or interested in the details relevant to this issue. The male bankrupt was not a witness whose evidence could be readily accepted, either generally or in relation to particular matters. Mr Ritch1re made it well-nigh impossible to separate fact from fiction by the obvious way in which he sought to gild the 11ly and by the different accounts which he has given from time to time, snot only in these proceedings but elsewhere. I can understand how important the amounts in dispute are to him and he may, by now, himself believe what he says. However, whether or not his evidence is deliberately incorrect, it was in my asséssment fundamentally unreliable. 7. A contract in the current L.S.C.2 (July 1980) form was left with the bankrupts along with proposed plans etc. during the discussions prior to the commencement of the work. The contract had not been signed by the respondents and was not then signed by the bankrupts. It was, at the time, of no particular importance. The male bankrupt said that he would have it perused by the bankrupts' solicitor. It was not again raised in conversation prior to the performance of the work. Nor was it signed or submitted to the solicitor. It was put aside and out of mind. Later when a contract was thought significant, it could not be found. I reject Mr Ritchie's evidence that not only was such a contract form provided for signature but that it was signed by the bankrupts on 29 September 1980 (affidavit paragraph 4), or that he was informed by the male bankrupt on 28 September 1980 and again on 29 September 1980 that it had been signed but mislaid (as he stated in his oral evidence). I also reject his evidence that the respondents would not have commenced or carried out work for the bankrupts had he not been led to believe that such a contract had been signed. I have already referred to the affluent appearance "which the bankrupts presented to Mr Ritchie. In particular, Mr Ritchie had been led to believe that there were large sums of cash from the bankrupts' business operations which they wished to dispose of when paying for the construction of their home. Such a course may well have been perceived 8. to have advantages for the respondents also. The male bankrupt informed Mr Ritchie of their intention to borrow on the security of the land and home. It was arranged that, un the meantime, available cash would be used to make payments by the bankrupts to the respondents. An initial cash payment of $7300 was made on 23 September 1980 when, according to Mr Ritchie, no contract had been signed, no work had been performed, and no materials had been ordered or obtained. At the time, the formality of a contract, let alone its terms, was of no moment to the parties. , Mr Ritchie had been led to believe that more cash would be frequently forthcoming. According to his evidence, by the end of September 1980 Manor Constructions had ordered goods and materials required for the project at a total cost to it of $39,449.38. Further, in October 1980 work was performed by sub-contractors of Manor Constructions to the value of $36,601.00, additional materials were ordered at a further cost to Manor Constructions of $6066.06, and fees totalling $4520.62 were paid by Manor Constructions to the City Council-and for insurance, plans etc. totalling $4520.62. At the end of October 1980, the total of the work performed and materials obtained or at least "ordered for the bankrupts' home by Manor Constructions was $86,637.05. Apart from the initial $7300.00 in cash the only payment which Manor Constructions had received was a payment by cheque of $5000.00 on 23 October 1980. 9. According to Mr Ritchie, no reason existed for that payment; it was just a voluntary payment in advance which the bankrupts were prepared to make and the respondents were happy to receive. Again, according to Mr Ritchie, a further voluntary payment was made by cheque on 3 November 1980. This time the amount was $10,000.00. Again, according to Mr Ritchie, there was no reason for the payment to be made. It is difficult not to suspect that these payments were practical gestures from the bankrupts when the anticipated cash payments had not been forthcoming. To an extent, perhaps, this 1s borne out by the round sums which were paid by cheque. It is also supported by the collateral arrangement which Mr Ritchie said existed. His evidence was that it was arranged that the bankrupts could redeem their payments of $15,000.00 by cheque by paying the respondents a similar amount in cash in return for a cheque from the respondents. In paragraph 13 of his affidavit, Mr Ritchie said: "I gave Mr Cross a cheque for $15,000 drawn on the account of Manor Constructions with the knowledge that my bank would not clear the cheque unless and until there was lodged to the credit of my account a similar sum of money. As Mr Cross did not give me the $15,000 in cash my bank dishonoured my cheque on 12 November 1980." af There does not seem to me to be the slightest doubt that, by this time, the bankrupts were unable to meet their debts out of their own moneys as they fell due. I 10. have left out of account entirely the opinion of Mr Richards, the Official Receiver. All the evidence, murky and confused as it is, points in the same direction. On the other hand, I see no reason to doubt that the previous payments which had been received by the respondents fell within the protection of para 122(2) (a) of the Act. From this point on events commenced to move much more rapidly. There had been no work performed or materials ordered since the end of October. The initial reasons May well have been as explained by Mr Ritchie, viz. delay in delivery of materials. There can be little doubt, however, that by the beginning of December the work was at a standstill because the respondents were not being paid for what they had already done. On 18 November 1980, the bankrupts gave the respondents a further cheque for $10,000. Again, according to Mr Ritchie this was a voluntary pre-payment which the respondents were happy to receive. If that were so, it was a curious thing for the bankrupts to do when there were no funds in the bankrupts' account to meet the cheque which was dishonoured when presented. Mr Ritchie said that he accepted the = male bankrupt's explanation that he had not completed security arrangements over real estate at Annerley which was required by the bankrupts" bank before it would permit the bankrupts to overdraw on their account. In the 11. respondents' position, one might well have wondered why the bankrupts would be making arrangements for an overdraft with their bank in order to permit them to make voluntary payments in advance or why, in such an event, they would be in such a hurry to make an advance voluntary payment and that they would do so prior to the necessary arrangements being made with the bank. Mr Ritchie never again presented the dishonoured cheque. His only explanation for that was that he waited for the bankrupt to tell him that it was in order to do so. Further, he said that soon afterwards he was given reason to believe that the bankrupts' request to the Australian Mutual Provident Soceity for a loan to pay for the house construction was likely to be granted. He said that, at that point, he considered that the loan funds were the likely source of payment to the respondents for their work. I have no hesitation in concluding that the respondents were pressing for payment, unsuccessfully, by this point and were being fobbed off by the bankrupts. Reference had been made not only to the proposed borrowing but to the property at Annerley. The respondents may have hoped that the bankrupts had adequate assets notwithstanding a "liquidity problem" but their fazth was surely being tested by the events. By the end of November 1980, the success of the bankrupts' application for a loan had become more important. Presumably, the amount apparently requested, 12, $200,000.00 was intended to pay out the existing mortgage on the land as well as pay for the building of the home. Mr Ritchie was contacted by an employee of the Australian Mutual Provident Society. It may be inferred that the bankrupts had given the Society the name of Manor Constructions as the builder with which they were dealing. 'The Society asked to see the building contract between the parties. The lack of and the need for a contract became obvious to Mr Ritchie. By that time, the Queensland Master Builders' Association had withdrawn the form of contract designated L.S.C.2 (July 1980) from distribution and had replaced it with a new form of contract designated L.S.C.2 (November 1980). Clause 22 had been omitted from the new form of contract as a result of legal advice which the Queensland Master Builders' Association had received concerning the stamp duty previously attracted by that clause. It 1s not in dispute that the July and November 1980 versions of the L.S.C.2 contracts were otherwise substantially similar. Mr Ritchie obtained contract forms from the Queensland Master Builders' Association. He was given the L.S.C.2 (November 1980) form. Mr Ritchie prepared a contract. He used the L.S.C.2 (November 1980) form. The bankrupts did not sign 1t immediately. As before, the male bankrupt wished to have the document approved by the bankrupts' solicitor. An affidavit was filed in these proceedings by the solicitor 13. who acted for the bankrupts in late 1980. He swore that in or about November 1980, a building contract in the L.§.c.2 (November 1980) form was delivered into his possession by the male bankrupt. He was not cross-examined and his evidence was not questioned. So far as I can tell, the copy of the contract which the solicitor annexed to his affidavit as a copy of the contract delivered into his possession in or about November 1980 by the male bankrupt is identical in all respects with the contract in fact signed by the bankrupts and Mr Ritchie and back-dated to 29 September 1980, save that the copy produced by the solicitor omits the signatures, including the signature of the witness who was not called by either party, and the date. The date for possession of the site 1s shown as 29 September 1980, the same date as was written in as the date of execution of the contract which makes provision for progress payments to follow "architect's certificate of value of works". It would not be suprising if the Australian Mutual Provident Society had insisted that it would require an architect's certificate as evidence of the value of the work done. The L.S.C.2 (November 1980) contract was the only contract entered into by the parties. It was entered into in early December 1980. I reject Mr Ritchie's evidence that there was at the time of or in connection with the 'execution of that contract any discussion with respect to 14. a charging clause or to the form of the L.S.C.2 (July 1980) contract, or any agreement that a charging clause should form part of the parties' contractual relationship. It 1s now obvious that the bankrupts were in deep financial difficulties by the time the building contract was signed. Nonetheless, they kept the respondents hopeful if not optimistic. On 2 December 1980, at about the time the contract was signed, they gave the respondents another cash payment, this time of $3945.00. Not without considerable hesitation, I conclude that this payment also is protected by para. 122(2)(a). The critical consideration seems to me to be the belief which I find was held by the respondents that the borrowed funds would be forthcoming and that the bankrupts' immediate shortage of money was merely a temporary liquidity problem. At about this time, for the first time, the respondents obtained a progress certificate from a firm of architects. According to Mr Ritchie, the total of the work performed and materials ordered as at the end of October 1980 was $86,637.05. On 5 December, the respondents received a certificate from a firm of architects that the value of the works at that date was $72,000. On the same day, the respondents wrote to the bankrupts enclosing a copy of the certificate, requesting payment but acknowledging the sum of $25,427 had been "paid ... by way of advance". The difference, $46,573, was described as "now due". Under the terms of the contract which had been executed progress certificates were payable within 7 days. 15. Of course, the bankrupts did not make payment to the respondents. Nonetheless, they kept their expectations alive. additional real property was referred to, this time units at the Gold Coast. Further, on 15 December 1980, the male bankrupt produced to Mr Ritchie a letter from the Australian Mutual Provident Soceity advising that a loan of $160,000 had been approved on terms set out in an accompanying loan offer. That document was not produced. Plainly, 1t involved conditions including a condition relating to a satisfactory medical examination for insurance purposes. There is no acceptable evidence that the bankrupts ever accepted the offer of loan. Certainly, according to Mr Ritchie, the male bankrupt anformed him that he did not wish to have the medical examination required at that time in case he failed it because of the illness which he had suffered during the latter part of the year. The male bankrupt's evidence is not inconsistent with that account of events. On 19 December 1980, the bankrupts paid to the respondents another $2,000.00 in cash. Perhaps influenced more by charity than strong conviction, I have concluded that, in view of the letter of 15 December 1980 from the Australian Mutual Provident Society, this payment also attracted the protection of para 122(2) (a). Although the progress certificate was overdue, the tenor of the evidence suggests that the time for payment was tacitly extended because the loan was imminent. The cash payment was, in the circumstances, consistent with the general arrangement that payments on account be made from time to time as circumstances permitted. 16. By the beginning of January 1981, it is beyond argument that all was not well and that the respondents knew it. The bankrupts seem to have decided that they could not afford the repayments to the Australian Mutual Provident Society and had decided not to proceed with the loan. Presumably, they told the respondents of their decision. It seems likely that the respondents then looked to their position and, on perusing the contract, saw for the first time that the form used contained no clause 22. From that point on, the respondents have attempted to improve their position and the bankrupts seem to have had some sympathy with the respondents' endeavours. The bankrupts' indebtedness to the respondents increased in December 1980 by $800 for architect's fees, probably related to the issue of the progress certificate. From then on, the only increases have been in respect of interest at 15% on money outstanding, as provided for in the contract. On 5 January 1981, the respondents informed the bankrupts that work was suspended as from 15 December 1980 until payment of the progress payment was received. At about the same time Mr Ritchie asked his solicitor to prepare a mortgage which he intended to have registered as a second mortgage over the land if Mr and Mrs Cross would execute such a document. That 17. was done and then Mr Ritchie presented the mortgage to the bankrupts for signature. It was then that a discussion took place as to the presence of a charging clause in the L.S.C.2 (July 1980) form of contract which the bankrupts had mislaid and the absence of such a clause in the contract in fact entered into by the respondents and the bankrupts. The bankrupts had asked Mr Ritchie to take the mortgage to their solicitor for perusal. Mr Ritchie took the mortgage to the bankrupts' solicitor. According to that solicitor, and his evidence was not questioned and he was not cross-examined, Mr Ritchie informed him "that he realised that he got 'way ahead of himself' and that he had no security". The solicitor also said that, on that occasion, Mr Ritchie informed him that "he had presented Cross with two separate building contracts on two separate occasions, one in September 1980 and the other in November 1980 and that he had been informed by Cross that he, Cross, had lost them both". The latter observation accords with a suggestion raised before me, but which is unimportant, that a second L.S.C.2 (November 1980) form of contract had been prepared because the first, lake the earlier (July 1980) document, was misplaced by the bankrupts. The mortgage was not signed. However, the bankrupts were not without some regard for the respondents' position. The nett proceeds from the sale of a Gold Coast unit, the sum of $3073.39, were paid to the respondents from the trust account of a solicitor acting for the bankrupts. By then, the bankrupts were, and were known by the respondents, to be, unable to pay their debts as they fell due from their 18. own money and the payment was, in the event, a void preference by virtue of s.122. From that point, matters deteriorated. The respondents lodged a caveat (January 1981), commenced arbitration proceedings (February 1981), 1ssued a writ against the bankrupts for specific performance (March 1981), and commenced proceedings in the Supreme Court of Queensland against the finance company (for which the Official Trustee was later substituted). In March 1981, the respondents returned and obtained credit for certain of the materials on the site but it 1s agreed that the questions thus raised are beyond the scope of these proceedings. For what it was worth, an interim award in favour of the respondents was made in the arbitration on 14 April 1981, under which the bankrupts were to make payments by instalments. Meanwhile on 6 April 1981, the bankrupts gave the respondents a cheque for $5000 but asked that it not be presented until the respondents were advised that funds were available. The advice was never forthcoming. On 24 April 1981, a week before they presented their petitions for the purpose of becoming bankrupt, the bankrupts executed a bill of mortgage or encumbrance in favour of the respondents. By that document it was recited that the bankrupts had agreed "both orally and pursuant to the terms of certain Articles of Agreement and Conditions of Building Contract ... to charge the ... land ... with the due payment ... of all monies that may become payable ... 19. by virtue of the aforesaid Articles of Agreement and Conditions of Building Contract or otherwise arising from the carrying out of the works referred to in the aforesaid Articles of Agreement and Conditions of Building Contract ...". The respondents do not rely upon this document, which was never registered, save for its evidentiary value. The conclusions of fact which I have recorded seem to me to lead inexorably to the only possible result in these proceedings. No occasion exists to discuss the many questions of law which might have arisen had the facts been only slightly different. The respondents' claim to an equitable charge upon the land fails because that was never part of the pargain between the parties at any relevant time. The payments to the respondents after the end of 1980 were made by the bankrupts when they were unable to pay their debts as they became due from their own money and had the effect of giving the respondents a preference over other creditors. The respondents then knew that the bankrupts were unable to pay their debts as they became due from their own money and must have known or had reason to suspect that the effect of the payments would be to give the respondents a preference over other creditors. The 20. earlier payments which are called in question in these proceedings were also made by the bankrupts at a time when they were unable to pay their debts as they became due from their own money and had the effect of giving the respondents a preference over other creditors. However, the respondents then had no knowledge or reason to suspect that the debtors were unable to pay their debts or that they were not paying their other creditors or that the effect of the payments would be to give the respondents a preference over other creditors. A strict contractual obligation to make payment to the respondents seems only to have arisen on or about 12 December 1980 after presentation of the progress certificate to the bankrupts. Prior to that time, the arrangements between the bankrupts and the respondents were for the bankrupts to make payments to the respondents as and when they could in the context ghat the bankrupts proposed to borrow to pay for the respondents' work. It is true that the pattern of payments was less than the respondents anticipated. However, the other circumstances as they appeared to the respondents caused them to believe that the cause of this was no more than a temporary liquidity problem for the bankrupts which would be cured when the borrowing was effected. Even after the progress certificate became due, the respondents were given cogent evidence that the loan would be forthcoming and again they were content to go along with the bankrupts on the basis that the loan would be used to discharge the debt and, 21, in the meantime, payments would be made on account from time to time. Looked at from a practical point of view, the bankrupts were proving somewhat less than satisfactory 1n honouring their loose arrangements with the respondents but were not in any real sense failing to meet their obligations and there was nothing to indicate to the respondents that the bankrupts were not paying their other debts. In the circumstances, it seems, to me, right to consider the payments made in November and December 1980 as payments received by the respondents in good faith and for valuable consideration and in the ordinary course of business. Many of the relevant cases in relation to this aspect of the matter are referred to in the judgment of Re Bird (as Trustee of the Estate of Arcadiou): Ex parte: M. & G. Casabene and Sons (1979) 39 F.L.R. 281. c The order of the Court is as follows: 1. The Court declares that the amount standing to the credit of an interest bearing account at the National Bank of Australasia Limited, Elizabeth Street, Brisbane in the joint names of Robert John Hilmer, a member of the firm of Messrs Rylands and Hilmer, solicitors for Michael John Ritchie and Janise May Ritchie and Christopher Brice Lyndon a member of the firm of Messrs Crouch and Crouch solicitors for the Official Trustee in Bankruptcy 22. as trustees for the said Michael John Ritchie and Janise May Ritchie and the Official Trustee in Bankruptcy and invested in such account pursuant to an order of the Supreme Court of Queensland dated the 21st day of July 1982 is property divisible amongst creditors of the bankrupts Wayne Edward Cross and Debra Ellen Cross and is vested in the Official Trustee in Bankruptcy pursuant to s.58(1) (a) of the Bankruptcy Act 1966. 2. The Court declares that a payment of $3073.39 paid by the said bankrupts Wayne Edward Cross and Debra Ellen Cross to the said Michael John Ritchie and Janise May Ritchie in January 1981 is void against the Official Trustee in Bankruptcy by virtue of s.122 of the Bankruptcy Act 1966 and orders that the Application is dismissed as to the other payments alleged to be void against the Official Trustee in Bankruptcy. 3. The Court orders that the costs of the Official Trustee in Bankruptcy of and incidental to the proceedings in this matter including reserved costs, if any, be taxed and paid by the respondents Michael John Ritchie and Janise May Ritchie. wiht? ra é ad 7 . eta 7 OL Gainre ay yy Datocd st sie Ia