Queensland Bacon Pty Ltd v Rees [1966] HCA 21

High Court of Australia Barwick C.J. Kitto and Menzies JJ. Queensland Bacon Pty Ltd v Rees [1966] HCA 21

ORDER Queensland Bacon Proprietary Limited v. Rees. Appeal allowed with costs. Order of the Supreme Court of Queensland set aside and in lieu thereof order that the application of the respondent be dismissed with costs. The Egg Marketing Board v. Rees. Appeal allowed. Order of the Supreme Court of Queensland set aside. In lieu thereof declare that the payment of the sum of £1,714 15s. 6d. by Hennessy's Self Service Stores to the appellant on 31st January 1961 had the effect of giving to the appellant a preference within the meaning of s. 275 of The Companies Acts, 1931 to 1960 and that the said payment is void as against the respondent, and order that the application of the respondent be dismissed save as to the sum of £1,754 15s. 6d. which the appellant is ordered to pay to the respondent within twenty-eight days of the service of this order, the respondent to pay three-quarters of the appellant's costs of the proceedings in the Supreme Court and of this appeal. Burns Philp and Company Limited v. Rees. Appeal allowed with costs. Order of the Supreme Court of Queensland set aside and in lieu thereof order that the application of the respondent be dismissed with costs. Foley Brothers Pty. Limited v. Rees. Appeal allowed with costs. Order of the Supreme Court of Queensland set aside and in lieu thereof order that the application of the respondent be dismissed with costs.

Cur. adv. vult.

The following written judgments were delivered:—

1966, April 6 Barwick C.J.

Hennessy's Self Service Stores Pty. Ltd. (the company) was incorporated under The Companies Acts, 1931 to 1960 of the State of Queensland (the Act) in 1959. As from 1st July of that year the company took over and commenced to conduct the self-service stores, eleven in all, then conducted in the suburbs of Brisbane by John Joseph Hennessy who, upon its incorporation, became the governing director of the company. Under his management the business of the company was rapidly expanded so that by the end of December 1960 the company had twenty-three self-service stores around Brisbane. Two of the additional stores were opened in October 1960 and the last of them was opened on 15th December 1960. This exuberant expansion of its business requiring a great deal of trading stock was not justified by the amount of capital at the disposal of the company and was carried out predominantly by means of bank overdraft accommodation and goods obtained on thirty, sixty days or, perhaps, in some instances on somewhat longer, terms of credit, from a wide range of wholesalers. In the latter part of 1960 bank credit was restricted generally in the community and the company was required by its bankers substantially to reduce its overdraft. Also, consumer demand for the foodstuffs the company was stocking did not reach the levels which the company had anticipated. Notwithstanding these influences, however, as found by the Supreme Court of Queensland "there appears to have been no outward indication that the business was verging on collapse until early February 1961 when the company quite suddenly went into liquidation". A petition was presented on 10th February 1961 to the Supreme Court of Queensland on which an order winding up the company was made on 16th March 1961. In the liquidation of the company a very substantial deficiency emerged. Trade creditors were admitted to a total of £222,097 and other unsecured creditors to an amount of £47,641. Apart from the effect which setting aside a number of payments to creditors as preferences would have, the anticipated dividend to unsecured creditors is estimated to be of the order of 2s. in the pound.