Re EJ Taylor & Son Pty Ltd [1964] HCA 11

High Court of Australia Dixon C.J. Kitto, Taylor, Menzies and Windeyer JJ. Re EJ Taylor & Son Pty Ltd [1964] HCA 11

ORDER Appeal dismissed with costs.

Cur. adv. vult.

The following written judgments were delivered:—

Feb. 25 Dixon C.J.

This is an appeal from an order of the Full Court of the Supreme Court of Queensland setting aside an order of Gibbs J. and declaring that certain payments made in the voluntary liquidation of E. J. Taylor & Son Pty. Ltd. were preferences, viz. £500 paid on 17th June 1959, £500 paid on 20th July 1959 and £2,500 paid on 30th July 1959, and ordering that the now respondents, viz. the liquidators of E. J. Taylor & Son Pty. Ltd. (in liquidation) do recover against the now appellants the sum of £3,500: Re E. J. Taylor & Son Pty. Ltd. [5] .

1. [1963] Qd.R. 284.

The chief ground of appeal to this Court is that the payments of £500 on 17th June and £500 on 20th July and £2,500 on 30th July 1959 were made in the ordinary course of business, and that the Full Court were wrong in holding the contrary and setting aside the affirmative findings of Gibbs J.

By s. 275 of The Companies Acts 1931 to 1960 of the State of Queensland it is provided that any payment which would, if made by an individual, be deemed in his bankruptcy a preference, shall if made by a company, be deemed, in the event of its being wound up, a preference of its creditors, and be invalid accordingly. For the purpose of the provision the commencement of the winding up is deemed to correspond with presentation of the bankruptcy petition in the case of an individual. By s. 95 of the federal Bankruptcy Act 1924-1960 which is thus so to speak incorporated, a payment made by any person unable to pay his debts as they become due from his own money, in favour of any creditor having the effect of giving that creditor a preference, a priority or an advantage over the other creditors, shall, if the debtor becomes bankrupt on a bankruptcy petition presented within six months thereafter be void as against the trustee in bankruptcy. This provision is qualified by sub-s. (2) of s. 95 which includes the provision that the rights of a purchaser, payee or encumbrancer in good faith and for valuable consideration and in the ordinary course of business shall not be affected. Sub-section (3) casts the burden of proving compliance with this qualification upon the person who relies upon it. Sub-section (4) qualifies the provision by denying good faith to a creditor who knew or had reason to suspect that the debtor was unable to pay his debts as they became due and that the effect of the payment would be to give him a preference, a priority or an advantage over the other creditors.