Sandell v Porter [1966] HCA 28

High Court of Australia Barwick C.J. McTiernan, and Windeyer JJ. Sandell v Porter [1966] HCA 28

ORDER Appeal allowed with costs. Declaration and order of the Federal Court of Bankruptcy in so far as the same relate to the payments made by the bankrupts to the appellant between 15th October 1963 and 14th February 1964 (both dates inclusive) and to the payment by the appellant to the respondent of the sum of £3,650 be set aside and in lieu thereof order that the respondent's application in so far as it related to such declaration and order be dismissed with costs.

Cur. adv. vult.

The following written judgments were delivered:—

May 13 Barwick C.J.

Hubert Henry Albert Sandell and Athol George Traynor (the bankrupts) in July 1962 entered into partnership as builders. The partnership business was to build houses on contract for building owners who were financed by loans progressively advanced according to the extent of the building work done. It would appear that the building owners were providing themselves with only a small proportion of the total contract price. On some occasions, the bankrupts accepted the building owner's contribution to that price in instalments and on at least one occasion appear themselves to have financed a building owner for his contribution to that price by taking promissory notes from him.

The partnership operated profitably, according to Mr. Sandell's account of things, in the financial year 1962-1963 and expected to do likewise during 1963-1964. This expectation on his part continued until the end of 1963 by which time the bankrupts appear to have realized that the building operations on which they were engaged were not turning out as profitably as they had expected.

By October 1963 they had increased the number of buildings they were contemporaneously constructing and it would seem that by this time, if indeed it had not been in that situation earlier, the partnership was substantially undercapitalized.