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. E. J. Taylor & Son Pty. Ltd., the company in liquidation, conducted the business of building contractors. It had been formed in September 1954 as a family company. Indeed there were only two shareholders, E. J. Taylor and his wife, and both were directors. As might be expected, Mrs. Taylor took no part in the actual management of the company which was left in the hands of her husband, Edwin Joseph Taylor. Mrs. Taylor had a mother, Florence Catherine Quinn, who was an invalid. Indeed she died at the age of eighty-two on 1st September 1960. For two years before her death she was senile and confined to her bed and understood little that was going on around her. Her daughter held a wide power of attorney, dated 17th October 1955, for the management of her affairs. The not inconsiderable expense of nursing Mrs. Quinn and looking after her was paid from her banking account on which, of course, Mrs. Taylor was able to draw. Mrs. Quinn had a house which was sold in 1957. Of the purchase money £4,000 became available for investment. E. J. Taylor suggested to his wife that the sum might be lent to his company at eight per cent per annum interest, and this was done. The loan was the subject of an acknowledgment dated 26th July 1957 and signed by Mr. and Mrs. Taylor as directors. It acknowledged that the company was indebted to Mrs. Quinn in the sum of £4,000 and that the company agreed to repay the sum in full within six months from the date of a notice in writing to the company delivered at its registered office advising that repayment of the sum of £4,000 was to be made. The company agreed to pay interest in the meantime at eight per cent per annum payable monthly. The evidence is that Mrs. Taylor spoke to her husband about replenishing her mother's bank account somewhere early in 1959 and that he suggested that she, as attorney under power, make a written demand on the company. There was a letter dated 30th January 1959 to the secretary of the company in which her mother is made to say: "I wish to advise that I would like the repayment of £4,000 which I lent your company on 26th July 1957". Early in 1959 the bank account was overdrawn and according to the evidence Mrs. Taylor requested her husband to make arrangements for some payment into the account. On 10th March 1959 a payment of £160 as interest was made by the company. Early in April Mrs. Taylor again asked her husband to repay some of the indebtedness and on 8th April a sum of £500 was paid in by cheque signed by E. J. Taylor. A cheque signed by Mrs. Taylor made a further payment of £500 into the account on 17th June 1959, and on 20th July £500 was likewise paid in and the balance of the debt, viz. £2,500, was paid on 30th July. These two cheques were signed by E. J. Taylor, her husband. According to Taylor's evidence the payments of 17th June, 20th July and 30th July were made without any request from his wife, and the learned judge (Gibbs J.) so found. According to the evidence of Taylor business in the building trade is always in difficulties—"in one day and out the next". Be this as it may, the learned judge said that he had "no hesitation in finding that on 20th July Taylor knew that the company was insolvent". On that day he drew in his own favour a cheque for £1,250 on account of moneys that he had lent the company. An estimate of the position prepared on 4th August 1959 showed a deficiency of £23,475. A meeting of creditors was called and on 17th August 1959 a formal meeting of the company's shareholders resolved that the company should go into voluntary liquidation. The judge found that it was not until 3rd August 1959 that Mrs. Taylor knew that the company was insolvent. However, said his Honour, "I also find that before that date Mrs. Taylor knew that the company was experiencing difficulties although she hoped that it would be able to surmount them." Gibbs J. concluded "on the balance of probabilities, that from April onwards the company was unable to pay its debts as they became due out of its own money, within the meaning of the section. I find therefore", said his Honour, "that the liquidators have established that the payments were preferences within s. 95 (1) of the Bankruptcy Act. The question that then arises is whether the respondents have satisfied the onus that lies upon them of showing that Mrs. Quinn received the payments in good faith and for valuable consideration and in the ordinary course of business (s. 95 (2) and (3)). It is clear that Mrs. Quinn herself had no knowledge of any of these transactions. However, in the circumstances of the case, since Mrs. Taylor had the widest authority to manage Mrs. Quinn's affairs, her knowledge and state of mind should be imputed to Mrs. Quinn (see In re Drabble Brothers [1] ). The crucial question in the case is whether there was any lack of good faith on the part of Mrs. Taylor." 1. [1930] 2 Ch. 211, at pp. 234, 235. His Honour proceeded to discuss Mrs. Taylor's position and came to the conclusion that she neither knew nor ought reasonably to have suspected that the company could not pay its debts as they became due from its own money. His Honour further held that the payments were made in the ordinary course of business. Gibbs J. ended his judgment as follows: "I accordingly find that the respondents have satisfied the onus that lies upon them of showing that Mrs. Quinn was a payee in good faith and for valuable consideration and in the ordinary course of business. The application by the liquidators therefore fails as to all the payments and should be dismissed with costs." On appeal to the Full Court of the Supreme Court (the Chief Justice, Jeffriess J. and Hart J.) this decision was reversed as to the last three payments, viz. the £500 paid on 17th June, the £500 paid on 20th July and the £2,500 paid on 30th July 1959, on the ground that the finding that these payments were made in the ordinary course of business was against the evidence and the weight of evidence. I agree in this conclusion. In addition, I have great difficulty in sustaining the finding that the payments were made in good faith. I am inclined to think that on the facts Mrs. Taylor had reason to suspect that the company was unable to pay its debts as they became due and that the effect of the payments to her mother would be to give a preference, a priority or advantage over other creditors. As to the question whether the rights of Mrs. Quinn could be considered the rights of a payee in good faith and for valuable consideration and in the ordinary course of business, I have even more difficulty. Mrs. Quinn's daughter must be taken to represent her and the question applies to the daughter. She may be considered a payee for valuable consideration but I cannot see how the expression "in the ordinary course of business" applies to this transaction at all. I do not doubt that "in the ordinary course of business" refers to "business" as a general conception and is not restricted to the conduct of any particular business such as the business carried on in a shop or merchant's office or the like, but is referring to the transaction of business as a known and recognized activity pursued by anybody engaged in an attempt to win or earn or "make" money or a living in a systematic or regular way. But this seems to me to have been a family transaction in which a son-in-law, with the help of his wife, decided to borrow money from his mother-in-law for his company and then attempted to effect its repayment in the face of approaching disaster. The time-honoured phrase "in the ordinary course of business" is meant to refer to transactions regularly taking place in a sustained course of activity or some usual process naturally passing without examination. It must be remembered that the provisions relating to preference have a course of history which substantially begins with an attempt to invalidate transactions made in contemplation of bankruptcy or insolvency and calculated to disturb the ratable distribution of the debtor's assets or their proceeds which the law designed. There is attributed to the Court of Common Pleas of 1770 a statement of principle which perhaps explains this. "There is no case where ever such a preference as this was allowed. The same spirit of equality ought to warm the Courts of Justice, which warmed the Legislature when they made the bankrupt-laws; and if we should let this deed stand, we should tear up the whole bankrupt-laws by the roots": Linton v. Bartlet [1] . In Rust v. Cooper [2] , Lord Mansfield after restating the general principle to be "that a fraudulent contrivance, with a view to defeat the bankrupt laws, is void, and annuls the act" [3] refers to the "common course of business." He says: "There is a fundamental distinction between an act like this, and one done in the common course of business. The statutes have relation back only to the act of bankruptcy If, in a fair course of business, a man pays a creditor who comes to be paid, notwithstanding the debtor's knowledge of his own affairs, or his intention to break; yet, being a fair transaction in the course of business, the payment is good; for the preference is there got consequentially, not by design: it is not the object; but the preference is obtained, in consequence of the payment being made at that time" [1] . 1. (1770) 3 Wils. K.B. 47 [95 E.R. 926]. 2. (1777) 2 Cowp. 629 [98 E.R. 1277]. 3. (1777) 2 Cowp., at p. 632 [98 E.R., at p. 1279]. 4. (1777) 2 Cowp., at p. 634 [98 E.R., at p. 1280]. In the present bankruptcy law good faith apparently seems to have been considered not enough by itself to protect payments unless they took place in the ordinary course of affairs. Here it is plain that Mrs. Taylor thought her husband ought to secure enough money out of that lent by her mother to carry on the fragile life of the old lady, and the husband apparently took the additional view that she should not share in the disaster which overshadowed him. I can see no ordinary course of business in all this. I think the appeal should be dismissed. Kitto J. Before Gibbs J. in the Supreme Court of Queensland the respondents as liquidators of a company in voluntary liquidation sought a declaration that four payments made by the company within six months before the commencement of the winding up to a Mrs. Quinn (now deceased) were void as against the liquidators, and an order that the appellants, the executors of the will of the deceased, pay to the liquidators the total amount of the payments. The application was made under s. 275 of The Companies Acts, 1931 to 1960 Q. which provides (inter alia) that any payment which would, if made by an individual, be deemed in his bankruptcy a preference, a priority or an advantage over the other creditors shall, if made by a company, be deemed, in the event of its being wound up, a preference, priority or advantage of its creditors [sic], and be void accordingly. For the purposes of the section the commencement of the winding up is to be deemed to correspond with the presentation of the bankruptcy petition in the case of an individual. By virtue of s. 95 (1) of the Bankruptcy Act 1924-1960 Cth, so far as here material, a payment by a debtor in favour of a creditor within six months before the presentation of a bankruptcy petition on which he becomes bankrupt is void as against the trustee in bankruptcy if certain conditions are fulfilled. The conditions are that at the time of the payment the debtor was unable to pay his debts as they became due from his own money, and that the payment had the effect of giving that creditor a preference, a priority or an advantage over the other creditors. But sub-s. (2) of s. 95 provides that nothing in the section shall affect the rights of a "payee in good faith and for valuable consideration and in the ordinary course of business". Sub-section (3) places the burden of proving that the provisions of sub-s. (2) have been complied with upon the person who relies upon their having been complied with; and sub-s. (4), so far as material, provides that a creditor shall not be deemed a payee in good faith if the payment was made under such circumstances as to lead to the inference that the creditor 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. The learned Judge, after a full review of evidence, made findings of fact which reduce the problem for our consideration to a small compass. The company was a family affair, its only shareholders and only directors being a Mr. and Mrs. Taylor. Mrs. Quinn was Mrs. Taylor's mother. Being an invalid she gave Mrs. Taylor a power of attorney to manage her affairs. In exercise of her powers as attorney Mrs. Taylor in July 1957 lent £4,000 of Mrs. Quinn's money to the company, the company agreeing by a document dated 26th July 1957 to repay the amount in full, with interest at 8% per annum payable monthly, within six months from the date of notice in writing to repay. On 30th January 1959 Mrs. Taylor gave the company notice in writing to repay the £4,000. In February 1959 Mrs. Taylor orally asked her husband to arrange for a payment into Mrs. Quinn's bank account because it was then in debit. He did so, a payment of £160 for interest being paid into the account on 10th March 1959. This was apparently by no means the first payment of interest. The evidence was that several earlier payments had been made, and although they do not seem to have been made with strict regularity each month there is nothing to suggest that there was anything in relation to interest which either aroused any suspicion in Mrs. Taylor's mind that the company might be insolvent or ought reasonably to have done so. The giving of the notice to repay the loan had the effect that the last day for repayment was 30th July 1959. Three instalments were in fact paid at earlier dates: £500 on 8th April 1959, £500 on 17th June 1959 and £500 on 20th July 1959. The balance, £2,500, was paid on the last day of the six months, 30th July 1959. The first £500 was repaid in response to a specific request by Mrs. Taylor which she made because Mrs. Quinn's bank account was nearly depleted and money was needed for her current expenses. The other three payments were made without any further request. All four payments were made when the company was unable to pay its debts from its own moneys, and each of them had the effect of giving Mrs. Quinn a preference, priority or advantage over the other creditors. The winding up of the company commenced on 17th August 1959, so that all the payments were within the statutory six months period. The liquidators were therefore entitled to the relief they sought in respect of each of the four payments in respect of which it was not proved by Mrs. Quinn's executors that in the sense of s. 95 (2) of the Bankruptcy Act she was a payee in good faith, a payee for valuable consideration, and a payee in the ordinary course of business. As Mrs. Quinn herself by reason of her state of health had known nothing of the relevant event, and Mrs. Taylor had acted as her attorney throughout, Gibbs J. considered, and rightly, that the proofs necessary to satisfy s. 95 (2) had to be furnished as if Mrs. Taylor had been the payee in her own right. Gibbs J. was in fact satisfied of them all. That the four payments were for valuable consideration in the relevant sense there could be no doubt; for the past consideration consisting of the making of the loan was enough for the purposes of s. 95 (2): Ex parte Butcher; In re Meldrum [1] , affirmed sub. nom Butcher v. Stead [2] . Whether Mrs. Quinn was a payee in good faith on each of the four occasions was a question requiring careful consideration of what Mrs. Taylor knew and had reason to suspect as to the company's affairs. The earliest period as at which it was found that the company was in serious financial difficulties was April 1959; and it was not until 20th July 1959 that even Mr. Taylor, although he all along was in de facto charge of the company's affairs, became aware that the company was actually insolvent. Of course he knew from April onwards that the company was in difficulties, and his wife seems to have understood in a vague way that that was so. But although she was a director and in fact signed some of the relevant documents, her husband never discussed the business of the company with her; and the learned Judge, after both of them had given evidence and been fully cross-examined, was satisfied that she did not know that the company was insolvent until 3rd August 1959, i.e. after all the payments had been made. His Honour found that Taylor caused the last two payments to be made knowing that the company was insolvent and with the intention of preferring Mrs. Quinn over the other creditors, but that Mrs. Taylor neither knew nor had reason to suspect at any material time that the company was unable to pay its debts as they became due. He accordingly found that in respect of all the payments Mrs. Quinn was a payee in good faith. This finding the liquidator accepted. He could do no other, for the finding depended very much upon evaluation of the oral testimony, and was reached after careful consideration of the whole case. 1. (1874) L.R. 9 Ch. App. 595, at p. 601. 2. (1875) E.R. 7 H.L. 839, at pp. 847, 849, 852. There remained only the one question: had the executors proved that on each occasion Mrs. Quinn was a payee in the ordinary course of business? Gibbs J. held that she was. Upon this point, and upon this point alone, the Full Court of the Supreme Court reversed his decision as regards the last three payments, though not in regard to the first. From the Full Court's judgment the appeal to this Court is made. The learned members of the Full Court accepted the findings of fact which Gibbs J. had made. Their reversal of his decision really resulted from their taking a different view of the meaning of the expression "a payee in the ordinary course of business" in s. 95 (2) of the Bankruptcy Act. The primary Judge had fully recognized, on the authority of what had been said in three cases in this Court, Robertson v. Grigg [1] ; Burns v. McFarlane [2] , and Downs Distributing Co. Pty. Ltd. v. Associated Blue Star Stores Pty. Ltd. [3] , that the expression does not refer to any particular business, either of the debtor or of the creditor, but refers to what Rich J. had called in the lastmentioned case "the everyday usual or normal character of the transaction". His Honour took the view that a payee is a payee in the ordinary course of business in this sense, even though the payment to him is unfair in that it pays off one creditor at the expense of the others, if "in itself" it calls for no special remark and is a transaction (in the words of Williams J. in the Downs Distributing Company's Case [4] ) "into which it would be usual for a creditor and debtor to enter as a matter of business in the circumstances of the particular case uninfluenced by any belief on the part of the creditor (the emphasis is mine) that the debtor might be insolvent". But Gibbs J. did not consider that "the circumstances of the particular case" to be taken into account in deciding whether a payee is a payee in the ordinary course of business include the state of mind of the payer where the payee knows nothing of it. If this view of the law be wrong, it seems clear enough that his Honour's conclusion was wrong, at least in regard to the final payment; for Mr. Taylor, who was the company's agent in relation to the payments, knew when making the second and third payments that the company was having its difficulties; and at the time of the last payment he not only knew that it was insolvent but intended a preference in favour of his mother-in-law Mrs. Quinn. As I have said, however, it was found and must be accepted that Mrs. Taylor in fact knew nothing of all this; and the conclusion reached by Gibbs J. must, I think, stand unless the question whether a payee is a payee in the ordinary course of business is a question to which the knowledge and intention of the payer, though unknown to the payee, is relevant. 1. (1932) 47 C.L.R. 257, at pp. 267, 268. 2. (1940) 64 C.L.R. 108, at pp. 125, 128. 3. (1948) 76 C.L.R. 463, at pp. 476, 477, 480. 4. (1948) 76 C.L.R. 463, at p. 480. In the Full Court, Mansfield C.J. held that the first of the four payments was made to a payee in the ordinary course of business. His Honour gave as his reason that the payment was the outcome of a request to a debtor, made by a creditor who was in low financial circumstances, to pay portion of a debt which was due although payment could not have been legally enforced until 30th July. "As such", his Honour said, "it fell into place as part of the undisturbed common flow of business, and is not excluded from that category by the existing relationship between Mr. Taylor as the company's agent and Mrs. Quinn and her daughter, or by the fact, known to Mr. Taylor but not to Mrs. Taylor, that the company was in financial difficulties". Up to this point his Honour seems to have interpreted s. 95 (2) in the same sense as Gibbs J. But his Honour went on to hold that the other three payments were not payments to a payee in the ordinary course of business, because they were unsolicited payments to one of a number of creditors at a time when the payer knew that he was in serious difficulties, and his Honour thought that in those circumstances the family relationship involved assumed a significance which it lacked in the case of the first payment. The only new element, however, was the fact that the payments had not been specifically solicited, though in fact they were made in response to the notice of 30th January 1959. It is not altogether clear why his Honour thought that that was a sufficient point of distinction; but this may be left on one side, for his Honour does seem to have regarded as material the payer's knowledge of his own financial difficulties, and it is to that that I propose to address myself. Jeffriess J. did not deliver separate reasons for judgment. Hart J., the other member of the Full Court, agreed with Gibbs J. that Mrs. Taylor took the payments (i.e. for Mrs. Quinn) "in all good faith", but considered that as the last payment was "designed by the debtor (meaning by Mr. Taylor) to save what he could from the wreck of the family company for his family at the expense of the other creditors", it was not a payment "made" in the ordinary course of business. His Honour referred to several wellknown cases, and it will be necessary to examine them; but I pause to say at once what it seems to me has happened to s. 95 (2) if his Honour's approach to the problem be accepted. The language of the sub-section has been deserted, and its apparent purpose has been defeated; for the burden on the payee of proving that he was a payee in the ordinary course of business has become a burden of proving that the debtor was a payer in the ordinary course of business, and a protection intended for a creditor by reason of his merits has been made to depend on an absence of demerit in the debtor. The authorities in this Court upon which the Full Court relied begin with Robertson v. Grigg [1] , where the meaning of the expression "payee in the ordinary course of business" is discussed in the joint judgment of Gavan Duffy C.J. and Starke J. and in the judgment of Evatt J. Their Honours interpreted the expression not as referring to any particular business in which either the payer or the payee was engaged but as concerned with the character of the payment—"whether it is a fair transaction and what a man might do without having any bankruptcy in view". It is, I think, a misreading of the judgments to gather from these words, or from the judgments generally, that the expression looks at the payment from the debtor's point of view. The words quoted surely mean that if the payee is to be protected by s. 95 (2), the payment must have presented itself to him as a fair payment to accept, and what a debtor might offer who was uninfluenced by any prospect of bankruptcy. What is required, in my opinion, is the quality of ordinariness from a business point of view in the acceptance of the payment. After all, s. 95 (2) does not describe the payment. It describes the payee. He is required to be a person receiving the payment in good faith; receiving it for valuable consideration; receiving it in the ordinary course of business. 1. (1932) 47 C.L.R. 257. The next case in this Court is Burns v. McFarlane [2] . There, as in Robertson v. Grigg [1] , the question did not arise from whose standpoint the payment has to be considered, for on the facts as found the payment in that case wore the same appearance from either point of view. 1. (1940) 64 C.L.R. 108. 2. (1932) 47 C.L.R. 257. The third case is Downs Distributing Co. Pty. Ltd. v. Associated Blue Star Stores Pty. Ltd. [3] . That was a case in which the payee was found to be not a payee in good faith, and therefore, as Latham C.J. said [4] , it was unnecessary to determine the precise meaning of the words "in the ordinary course of business". Rich J., however, amplified what had been said concerning those words in Burns v. McFarlane [1] , observing that s. 95 (2) supposes that "according to the ordinary and common flow of transactions in affairs of business, there is a course, an ordinary course. It means", he said, "that the transaction must fall into place as part of the undistinguished common flow of business done, that it should form part of the ordinary course of business as carried on, calling for no remark and arising out of no special or particular situation" [2] . I do not read these words as meaning that in applying the concept they describe a court is to inquire into the state of the payer's mind at the time of the payment, and treat his knowledge and his intentions, though unknown to the payee, as part of the "situation". Williams J. [3] in the passage already quoted, made it clear that he for one was not unmindful of the fact that the expression he was explaining was used in the Act as descriptive of the payee. His Honour's words show plainly that he did not consider that in judging of the usualness of the transaction of payment it would be material to inquire whether there was a belief on the part of the debtor that he might be insolvent. 1. (1948) 76 C.L.R. 463. 2. (1948) 76 C.L.R., at p. 474. 3. (1940) 64 C.L.R. 108. 4. (1948) 76 C.L.R., at p. 477. 5. (1948) 76 C.L.R., at p. 480. I turn to the English authorities. The law as to the avoidance of fraudulent preferences was developed by the Judges as a branch of the law of public policy [4] upon the basis that where a transaction "is fraudulent, and done with no other view whatsoever but to defeat the equality of the bankrupt laws, it is void on account of such intended fraud": Rust v. Cooper [5] . The question to be decided was therefore in ultimate theory a question as to the intent with which the debtor made the payment; but it was reduced by the decisions to a more concrete form. It was made to depend upon two inquiries: (i) was the transaction voluntary (in the sense of spontaneous or gratuitous) on the part of the debtor, (ii) and did he carry it out in contemplation of bankruptcy? If Yes to both, no more need be shown in order to make the transaction void. The first inquiry was purely objective in relation to the debtor. A payment made by reason of pressure from the creditor was not voluntary. A payment which, considered without regard to the debtor's mental processes, was sufficiently explained as an occurrence in the ordinary course of trade, or of business, or (in one case) in the ordinary course of the debtor's mode of maintaining his family: Abell v. Daniell [6] was likewise not in the voluntary class. A good illustration may be seen in Cosser v. Gough [1] where Lord Kenyon placed in direct contrast a payment made by a debtor "officiously" on the eve of his bankruptcy and a payment in the ordinary course of trade. An early use of the expression "in the ordinary course of business" as the opposite of "voluntarily" occurs in Alderson v. Temple [2] where Lord Mansfield recalled a case in which a conveyance by a trader of all his effects for the payment of one or more bona fide creditors "of the most meritorious kind" had been held void, and stated as the reason: "because it was not an act in the ordinary course of business". Then a little later in the judgment in Alderson v. Temple [3] comes the passage which Gavan Duffy C.J. and Starke J. set out in their joint judgment. I shall not repeat it, but I must observe that to read it in its original setting is to see that Lord Mansfield was merely contrasting a payment which cannot be accounted for as other than the debtor's own idea with a payment which is explained by its consonance with the ordinary course of trade. A passage from Rust v. Cooper [4] was also quoted by Gavan Duffy C.J. and Starke J. For present purposes it is desirable to make a fuller quotation. His Lordship said: "If, in a fair course of business, a man pays a creditor who comes to be paid, notwithstanding the debtor's knowledge of his own affairs, or his intention to break; yet, being a fair transaction in the course of business, the payment is good: for the preference is there got consequentially, not by design: it is not the object; but the preference is obtained, in consequence of the payment being made at that time. Suppose a creditor presses his debtor for payment, and the debtor makes a mortgage of his goods, and delivers possession; that is, and, at any time, may be, a transaction in the common course of business, without the creditor's knowing there is any act of bankruptcy in contemplation; and, therefore, good. It is not to be affected by what passes in the mind of the bankrupt " [5] . (The italics are mine). 1. (1768) 4 Burr., at p. 2239 [98 E.R., at p. 168]. 2. (1777) 2 Cowp. 629, at p. 633 [98 E.R. 1277, at p. 1279]. 3. (1829) M. & M. 370 [ 173 E.R. 1192]. 4. (1789) 1 T.R. 156 (n) [99 E.R. 1027(n)]. 5. (1768) 4 Burr. 2235, at p. 2240 [98 E.R. 165, at p. 168]. 6. (1768) 4 Burr. 2235 [98 E.R. 165]. 7. (1777) 2 Cowp. 629, at p. 634 [98 E.R. 1277, at p. 1280]. 8. (1777) 2 Cowp., at pp. 634, 635 [98 E.R., at p. 1280]. What is important to notice is that an intent on the part of a debtor who knew he was insolvent to give a preference to one creditor over the others was not one of the circumstances to be considered for the purpose of deciding whether the transaction was in the ordinary course of business and therefore not voluntary. The position thus reached was described by Bacon C.J. in Ex parte Blackburn; In re Cheesebrough [6] : "It has, however, never, that I know of, been suggested that a payment in the ordinary course of trade, the honouring bills of exchange presented at their maturity, or the payment of debts which had become due in the usual and customary manner, or payments made in fulfilment of a contract or engagement to pay in a particular manner or at a particular time, were open to any objection on the ground of their being voluntary, even although they were made without any express demand by the creditor, unless, indeed, the creditor had at the time notice of an act of bankruptcy committed by the debtor. To hold otherwise would be to embarrass and impede the most ordinary every-day transactions of commerce, and to make it impossible for creditors to know when the payments received by them in good faith and in common course could be maintained by them or not" [1] . 1. (1871) L.R. 12 Eq. 358. 2. (1871) L.R. 12 Eq., at pp. 363, 364. That was the point. And accordingly when s. 92 of the Bankruptcy Act, 1869, made the old objective tests, the spontaneity of the payment and contemplation of bankruptcy, no longer decisive of validity, and adopted as the test for the future whether the payment (etc.) had been made "with a view of giving such creditor a preference over the other creditors", a proviso was added to obviate the inconvenience and injustice that would result in some cases if nothing mattered but the debtor's state of mind. The proviso was that the section should not affect the rights of a purchaser, payee, or incumbrancer in good faith and for valuable consideration. Henceforth "in the ordinary course of business" as a test of whether a payment satisfied the old objective criteria was irrelevant. Of course there was a use that could still be made of the expression, for to say that the act of a debtor in making a payment was an act done by him in the ordinary course of business would amount to denying that he did it with a view of preferring the payee over the other creditors: cf. per Lord Blackburn in Tomkins v. Saffery [2] . "The mere fact" said Vaughan Williams J. in In re Eaton & Co.; Ex parte Viney [3] , "a man in business, when insolvent, meets a bill of exchange raises no inference of an intention or view to prefer the holder of the bill, because in the ordinary course of business a man must either meet his bills or put up his shutters". The expression thus came to be used in a context which treated it as explanatory of the debtor's state of mind. 1. (1877) 3 App. Cas. 213, at p. 233. 2. [1897] 2 Q.B. 16, at p. 18. When the Commonwealth Bankruptcy Act 1924, took up the expression it placed it in a different context. The course adopted was to make the debtor's state of mind completely immaterial to the validity of a preference, priority or advantage given to one creditor over the others. Whether the debtor has acted with a view of giving a preference or, on the contrary, has acted in the ordinary course of business matters no longer. A payment which has in fact given a creditor an advantage over the others within the statutory period is void, subject only to a provision enacted for the protection of a payee of a particular kind. It is in the definition of that particular kind of payee that the legislature has laid hold of the phrase "in the ordinary course of business", in order to express, as it had expressed in such contexts as that of the passage I have set out from Rust v. Cooper [1] an idea, in relation to the creditor's acceptance of the payment, which goes beyond his good faith but has nothing to do with the debtor's knowledge of his own financial position or any intention he may have of giving a preference. The payee must have taken the money not only in good faith—at the least without knowing, and without having reason to suspect, that the payer was unable to pay his debts as they became due and that the effect of the payment would be to give him an advantage over the other creditors—but also without there being, in his taking it, anything unusual or remarkable to make it other than an ordinary business transaction. That is how I would understand s. 95 (2). In s. 96 (1) a similar addition was made to the general provision for protecting a payment (etc.) made before sequestration: the person (other than the debtor) with whom the transaction took place must not have had notice of any available act of bankruptcy committed by the debtor or the presentation of a petition, and the transaction must have been in good faith and in the ordinary course of business. It seems inconceivable that under that section the debtor's knowledge or intention should enter into a question as to whether a transaction was in the ordinary course of business. 1. (1777) 2 Cowp. 629, at pp. 634, 635 [98 E.R. 1277, at p. 1280]. I would therefore regard as irrelevant in the present case, on the question whether the appellant was a payee in the ordinary course of business, the financial condition of the company at the times when the payments were made, the state of Taylor's knowledge at those times, and the intention with which Taylor caused the payments to be made; for these things were all unknown both to Mrs. Quinn and to Mrs. Taylor. I would also regard as irrelevant the fact that Mrs. Taylor knew that the company was having financial difficulties, for the finding has been made that she did not know it was insolvent. There is many a company in the community known to be having financial difficulties. To hold that a creditor of such a company who knows that fact but knows nothing more cannot be a payee of his debt in the ordinary course of business would surely be out of the question. Moreover I would regard as of no significance the fact that the first three payments of £500 each were made during the six months instead of being kept, like the balance, until the last day. The payment of the debt by such instalments does not seem to me to be out of the ordinary for a transaction of the kind. Finally, in my opinion, the family relationship has nothing to do with the question whether Mrs. Quinn was a payee in the ordinary course of business. In brief, I think, with all respect to those who differ, that the question in such a case as the present becomes blurred, so that immaterial considerations are allowed to affect the answer, if it is put in the form whether the payment was in the ordinary course of business. The question the section asks is whether the payee was a payee in the ordinary course of business. In my opinion the appeal should be allowed and the judgment of Gibbs J. should be restored. Taylor J. The question in this appeal is whether certain payments made by E. J. Taylor & Son Pty. Limited to Florence Catherine Quinn, now deceased, constituted preferences within the meaning of s. 275 of The Companies Acts 1931 to 1960 Q.. The payments in question are three in number, £500 paid on 17th June 1959, £500 paid on 20th July 1959 and £2,500 paid on 30th July 1959, and it was held by Gibbs J. that, in relation to these payments, and an earlier payment of £500 made on 8th April 1959 and within six months preceding the commencement of the company's winding up, Mrs. Quinn was, in the language of s. 95 of the Bankruptcy Act 1924-1960 Cth, a "payee in good faith and for valuable consideration and in the ordinary course of business". Accordingly he dismissed the application of the liquidator for a declaration that the payments constituted preferences but on appeal the Full Court reversed his decision except as to the payment on 8th April 1959 and this payment is not now in question. The business of the company was that of building contractors and at all material times Edwin Joseph Taylor and the respondent Christabel Janet Taylor were its only directors. Mrs. Quinn, to whom the payments were made and who died on 1st September 1960 at the age of eighty-two, was Mrs. Taylor's mother and Mrs. Taylor and the other respondent, Vincent Patrick Quinn, are the executors of Mrs. Quinn's will. It appears that Mrs. Taylor was not an active director of the company and, according to the learned trial judge, she had little, if any, knowledge of the company's affairs. "Although she was a director", his Honour said, "Mrs. Taylor took little part in the management of the affairs of the company. Meetings of directors were not held and Mrs. Taylor was not consulted about the company's affairs. She took telephone messages and occasionally signed cheques when her husband was not available but those were practically the only duties she performed for the company, although she received not inconsiderable fees as a director". The four payments originally challenged, which aggregated £4,000, were made in repayment to Mrs. Quinn of an amount lent by her to the company in 1957. But at this time Mrs. Taylor held a power of attorney from her mother and under its authority managed her affairs. Gibbs J. found that Mrs. Quinn was bedridden and senile for some few years before her death and that she could comprehend only very little of what was going on about her. She required nursing attention both by day and by night and the expense of caring for her was heavy. It was in these circumstances that Mrs. Taylor, acting under her power of attorney, advanced the sum of £4,000 to the company in 1957. What happened was that Mrs. Quinn's house was sold in that year and the sum of £4,000 became available for investment. She discussed the matter with her husband and at his suggestion that sum was lent to the company on 26th July 1957. In return for a cheque drawn on her mother's account Mrs. Taylor received from the company a written document which acknowledged receipt of the sum of £4,000 and evidenced an agreement by the company to repay the amount of the loan in full "within six months from date of notice in writing delivered to the registered office of the company". In the meantime the company agreed to pay interest at the rate of £8 per cent per annum monthly. By January 1959 Mrs. Quinn's resources had been almost depleted and Mrs. Taylor spoke to her husband with a view to obtaining repayment of some part of the loan. His reply was that she should write to the company about it and, accordingly, on 30th January 1959, she made a demand in writing upon the company for the repayment of the sum of £4,000 in accordance with the company's undertaking. Nothing was paid by the company until 10th March 1959 when a cheque for interest in the sum of £160 was paid into Mrs. Quinn's account. After a further conversation with her husband towards the end of March or early in April 1959 when Mrs. Taylor again asked for repayment of some part of the debt a payment of £500 was made on account of the principal sum. This amount was also paid by the company into Mrs. Quinn's account. The next payment on 17th June 1959 was effected by a cheque which was actually signed by Mrs. Taylor but she says that she has no recollection of having signed it. Then followed a further payment of £500 by the company to Mrs. Quinn's account on 20th July 1959 and the balance of £2,500 was paid on 30th July 1959. According to Mrs. Taylor's evidence she made no request to her husband in respect of any of the last three payments and she did not know whether she had been notified that some of the payments had been made. It was found as a fact by the learned trial judge that the payments on 17th June, 20th July and 30th July were made by the company without any request from Mrs. Taylor. It is obvious that some months before the payment of 17th June was made the company was in serious financial difficulties, and it was found as a fact by the learned trial judge that from April onwards it was unable to pay its debts as they became due out of its own money and that when the company made the last two payments Taylor knew that the company was insolvent. Further his Honour expressly found that the last two payments were made by Taylor with the intention of preferring Mrs. Quinn over the other creditors. Indeed, by 4th August 1959 an accountant employed by the company had prepared an estimated statement of the company's assets and liabilities and three days later, on 7th August 1959, he arranged to call a meeting of the company's creditors. Ten days later, on 17th August, a meeting of the company was held and it was resolved that it should go into voluntary liquidation. The extent of Mrs. Taylor's knowledge of the financial position of the company was investigated in the original proceedings. It is unnecessary to review this evidence in detail but it is clear that Mrs. Taylor did know that the company was experiencing difficulties although she hoped, as the trial judge found, that it would be able to surmount them. However, it was found in her favour that the payments were not made under such circumstances as to lead to the inference that she knew or had reason to suspect that the company was unable to pay its debts as they became due or that the effect of the payment would be to give Mrs. Quinn a preference, a priority or an advantage over the other creditors. This finding was not seriously challenged and the only question for us is whether the learned trial judge's finding that Mrs. Quinn was a payee in the ordinary course of business should be restored. Under the English bankruptcy law and the earlier bankruptcy law of a number of the States of the Commonwealth provision was made for the avoidance of what were called "fraudulent preferences" and a payment by a debtor unable to pay his debts from his own money made in favour of a creditor and having the effect of giving the creditor a preference over other creditors fell within this category if made "with a view" of giving such creditors such a preference. Under these provisions lack of knowledge of the debtor's affairs on the part of the creditor was of no consequence; it was sufficient if it appeared that the "substantial, effective or dominant" intention of the debtor in making the payment was to prefer the creditor to whom the payment was made (Ex parte Hill; In re Bird [1] and Muntz v. Smail [2] ). There are decisions to the effect that once a trustee in bankruptcy proved that the debtor was insolvent at the time when the payment was made and that the payment had the effect of giving the creditor a preference the onus lay upon the latter, if he wished to support the payment, to establish that it was not made with the intention of preferring him (In re Eaton & Co.; Ex parte Viney [3] ; and In re Lake; Ex parte Dyer [4] . But these decisions are in conflict with Ex parte Lancaster; In re Marsden [5] and Sharp v. Jackson [6] and with later cases, including Peat v. Gresham Trust Ltd. [7] ). Whether any particular payment is made with a view to prefer one creditor to another or others almost invariably falls to be established under the English legislation upon consideration of evidence of the circumstances in which it was made and the intent may be inferred from a great variety of circumstances. But, perhaps, the most potent circumstance for consideration is whether the payment was made in the ordinary course of business. This expression was not intended or taken to require an examination of the character of the business of the debtor and, thereupon, a conclusion reached as to whether the impugned transaction fell within the scope of the activities usually or commonly carried on in such a business; the test was whether the transaction had found its origin in and was accounted for by ordinary business considerations. If and when this was found to be so and no other special circumstances appeared, that fact was constantly regarded for all practical purposes as being inconsistent with the contemporaneous existence of any intent "or view" to prefer the payee. The "ordinary course of business" and an "intent to prefer" were, it seems to me, treated as quite inconsistent notions so that once it was proved that a payment had in fact been made with the sole or dominant "view" of preferring a creditor it was impossible to say that it had been made in the ordinary course of business. 1. (1883) 23 Ch.D. 695. 2. (1909) 8 C.L.R. 262. 3. [1897] 2 Q.B. 16. 4. [1901] 1 K.B. 710. 5. (1884) 25 Ch. D. 311. 6. [1899] A.C. 419. 7. [1934] A.C. 252. Section 95 of the Commonwealth Act initially, at least, casts the net a little wider than the English legislation. If upon the evidence all that appears is that a payment has been made to a creditor by a person unable to pay his debts as they become due from his own money and that the payment has the effect of giving that creditor a preference, a priority or an advantage over the other creditors, the section operates to avoid the payment as against the trustee if the debtor becomes bankrupt on a bankruptcy petition presented within six months after the making of the payment (S. Richards & Co. Ltd. v. Lloyd [1] ). But the operation of s. 95 (1) will be defeated if the payee establishes that he was a payee in good faith and for valuable consideration and in the ordinary course of business (sub-s. (2) and (3)). It is clear, therefore, that as far as s. 95 (1) is concerned the intention of the debtor, and for that matter, that of the creditor, is an irrelevant consideration though the extent of the latter's knowledge will be most material in relation to the issue of good faith. How far the debtor's intention in making the payment is relevant to the question whether the payment was made in the ordinary course of business has, perhaps, not been directly decided in relation to s. 95 but if it has no bearing on that issue the surprising result will follow that a payment which constituted a fraudulent preference under the English bankruptcy law and that of a number of the States of the Commonwealth may well escape the operation of s. 95 though it was designed, as I have already said, to cast a somewhat wider net. 1. (1933) 49 C.L.R. 49. In considering this question it is desirable to repeat that under the old law the fact that a payment was made to a creditor in the ordinary course of business for all practical purposes negatived any suggestion that it had been made with a view to preferring the creditor. I quote from the joint judgment of Gavan Duffy C.J. and Starke J. in Robertson v. Grigg [2] : "But was he (i.e. the respondent) a purchaser "in the ordinary course of business"? These words may be traced a long way back in bankruptcy law. Thus in Alderson v. Temple [3] and Rust v. Cooper [4] , we find Lord Mansfield denying that acts in the ordinary course of business amount to fraudulent preferences. "If a bankrupt, in course of payment pays a creditor; this is a fair advantage, in the course of trade: or, if a creditor threatens legal diligence, and there is no collusion; or begins to sue a debtor; and he makes an assignment of part of his goods; it is a fair transaction, and what a man might do without having any bankruptcy in view." "If, in a fair course of business, a man pays a creditor who comes to be paid, notwithstanding the debtor's knowledge of his own affairs, or his intention to break; yet, being a fair transaction in the course of business, the payment is good; for the preference is there got consequentially, not by design." Again, Lord Blackburn, in Tomkins v. Saffery [1] says: "Now I think you must say that it is not with a view to give an undue preference, if a man makes a payment to a creditor in the ordinary course of business." And he instances the case of a man struggling on and making payments to keep his business going" [2] . This case, together with Burns v. McFarlane [3] and Downs Distributing Co. Pty. Ltd. v. Associated Blue Star Stores Pty. Ltd. (In Liquidation) [4] , are clear authorities for the proposition that the conclusion whether a payment has, within the meaning of s. 95 (2), been made in the ordinary course of business does, as was the position under the English law, not require an examination of the character of the debtor's business. In the first-mentioned case the test was stated by Gavan Duffy C.J. and Starke J. in the following words: "The test under s. 95 of the ordinary course of business is not whether the act is usual or common in the business of the debtor or of the creditor, but whether it is "a fair transaction, and what a man might do without having any bankruptcy in view" " [2] . Much the same view was expressed by Evatt J. in the same case when he said that "the "ordinary course of business" is not, I think, to be related to any special business carried on by either debtor or creditor but is concerned with the character of the impeached transaction itself" [5] . Likewise in the joint judgment of Rich, Dixon and McTiernan JJ. in Burns v. McFarlane [3] , it was said: "Unlike the expression found in the bills-of-sale legislation, viz., "transfers of goods in the ordinary course of business of any trade or calling", it does not require an investigation of the course pursued in any particular trade or vocation and it does not refer to what is normal or usual in the business of the debtor or that of the creditor" [6] , whilst Starke J. in the same case briefly recapitulated the test propounded in Robertson v. Grigg [7] "that the test under s. 95 of the ordinary course of business was not related to any special business carried on by the debtor or creditor but was whether the transaction was fair and what a man might do without having any bankruptcy in view" [1] . In the latest of these cases Rich J. carried the matter a little further when, after quoting from the earlier cases to show that the expression "does not require an investigation of the course pursued in any particular trade or vocation and it does not refer to what is normal or usual in the business of the debtor or that of the creditor" [1] , went on to emphasize that "it is an additional requirement and is cumulative upon good faith and valuable consideration" [2] . "It is, therefore", he said, "not so much a question of fairness and absence of symptoms of bankruptcy as of the everyday usual or normal character of the transaction. The provision does not require that the transaction shall be in the course of any particular trade, vocation or business. It speaks of the course of business in general. But it does suppose that according to the ordinary and common flow of transactions in affairs of business there is a course, an ordinary course. It means that the transaction must fall into place as part of the undistinguished common flow of business done, that it should form part of the ordinary course of business as carried on, calling for no remark and arising out of no special or particular situation" [3] . 1. (1932) 47 C.L.R. 257. 2. (1768) 4 Burr. 2235, at p. 2240 [98 E.R. 165, at p. 168]. 3. (1777) 2 Cowp. 629, at p. 634 [98 E.R. 1277, at p. 1280]. 4. (1877) 3 App. Cas. 213, at p. 235. 5. (1932) 47 C.L.R., at p. 267. 6. (1940) 64 C.L.R. 108. 7. (1948) 76 C.L.R. 463. 8. (1932) 47 C.L.R., at p. 267. 9. (1932) 47 C.L.R., at p. 273. 10. (1940) 64 C.L.R. 108. 11. (1940) 64 C.L.R., at p. 125. 12. (1932) 47 C.L.R. 257. 13. (1940) 64 C.L.R., at p. 128. 14. (1948) 76 C.L.R., at p. 476. 15. (1948) 76 C.L.R., at pp. 476, 477. 16. (1948) 76 C.L.R., at p. 477. With these observations in mind it is important to emphasize once again that the section contemplates that a payee may be a payee in good faith and yet not in the ordinary course of business (cf. sub-ss. 2 (a) and 2 (b) of s. 95). In other words it may clearly appear that the payment was not made or incurred under such circumstances as to lead to the inference that the creditor knew or had reason to suspect that the debtor was unable to pay his debts as they became due or that the effect of the payment would be to give him a preference, a priority or advantage over other creditors and yet he may not be a payee in the ordinary course of business. Indeed he may not know that he has received the payment and there is evidence in the present case which shows that all or some of the payments now in question were paid into Mrs. Quinn's bank account without her knowledge and, possibly, without the knowledge of her attorney, Mrs. Taylor. To my mind, s. 95 appears as an attempt to rationalize the old law and to accept the view that a payment made by a debtor in the ordinary course of business negatives any design or intent to prefer the creditor and to afford a complete answer where the payment is so made, provided also that he is also a payee in good faith within the meaning of the section. However, upon consideration of the local cases to which I have referred, the learned trial judge seems to have thought that a payment must be taken to have been made in the ordinary course of business unless the payment, considered entirely apart from the circumstances which have induced it, exhibits at the time some unusual feature. He said: "Here all that occurred was that a debtor chose to pay off its debt although it could lawfully have delayed payment if it had wished, and the creditor accepted the payment. A man may pay his debts before he is obliged to do so, even though he has not bankruptcy in view. Such a payment, in itself, calls for no special remark, and it would be usual for a debtor to make and a creditor to receive such a payment uninfluenced by any belief on the part of the creditor that the debtor was insolvent." In this passage there is some adaptation of a quotation already made from the judgment of Rich J. in Downs Distributing Co. Pty. Ltd. v. Associated Blue Star Stores Pty. Ltd. (In Liquidation) [1] when he said "it means that the transaction must fall into place as part of the undistinguished common flow of business done, that it should form part of the ordinary course of business as carried on, calling for no remark and arising out of no special or particular situation" [2] . But this means no more and no less than that the transaction will be taken to have been in the ordinary course of business if after examination of the circumstances in which it took place it is found to possess these characteristics. When the circumstances in which these payments were made are examined it is seen that they were made at a time when the company owed large sums to unsecured creditors, a great deal of which had been outstanding for more than three months, that some of the payments in question were made before the company was obliged to make them, that at least from April onwards the company was unable to pay its debts as they became due out of its own money, that the payments were made to Taylor's wife's mother almost immediately before liquidation and that the last two payments at least were made with the intention of preferring Mrs. Quinn over the other creditors. In these circumstances it is, I think, impossible to say that they "fall into place as part of the undistinguished common flow of business done" [2] . Nor do they appear, in the language of Gavan Duffy C.J. and Starke J. in Robertson v. Grigg [3] , as "what a man might do without having any bankruptcy in view" [4] . To my mind the express finding that the last two payments were made with the intention of preferring Mrs. Quinn alone precludes the conclusion that they were made in the ordinary course of business and consideration of the circumstances in which the payment of 17th June 1959 was made leads me to the conclusion that it must share the same fate. 1. (1948) 76 C.L.R. 463. 2. (1948) 76 C.L.R., at p. 477. 3. (1948) 76 C.L.R., at p. 477. 4. (1932) 47 C.L.R. 257. 5. (1932) 47 C.L.R., at p. 267. In my opinion the appeal should be dismissed. Menzies J. The respondents, the liquidators of E. J. Taylor & Son Pty. Ltd., commenced proceedings to have it declared that payments totalling £4,000 made by the company to Mrs. Florence Catherine Quinn (who died and whose estate is represented by the appellants) amounted to a preference within the meaning of s. 275 of The Companies Acts 1931 to 1960 Q. and were invalid accordingly. The application was heard by Gibbs J. who found that the payments in question (1) were for valuable consideration because they were in satisfaction of a debt owing by the company to Mrs. Quinn and (2) were in good faith because she did not know, and had no reason to suspect, the facts that the company was unable to pay its debts as they became due and that the effect of the payments would be to give her an advantage over other creditors. Accepting these findings which were unchallenged, the only question with which we are now concerned is whether the payments in issue were made in the ordinary course of business. Gibbs J. held that they were but his decision on this point was reversed by the Full Court as to payments totalling £3,500. The finding of Gibbs J. on the point now at issue was expressed shortly as follows:—"Here all that occurred was that a debtor chose to pay off its debt although it could lawfully have delayed payment if it had wished, and the creditor accepted the payment. A man may pay his debts before he is obliged to do so, even though he has not bankruptcy in view. Such a payment, in itself, calls for no special remark, and it would be usual for a debtor to make and a creditor to receive such a payment uninfluenced by any belief on the part of the creditor that the debtor was insolvent." His Honour's reference to the company having paid the debt before it was obliged to do so is explained by the facts. On 26th July 1957 Mrs. Quinn lent the company £4,000 to be repaid in full "within six months from the date of notice in writing delivered to the registered office of the Company advising that repayments of the sum is to be made." Interest at 8 per cent was payable monthly—that is £26.13.4 per month. Interest, it would seem, was paid for some time but must have fallen into arrears not later than October 1958, for on 10th March 1959 a sum of £160 was paid by way of interest. In the meantime, on 30th January 1959 Mrs. Quinn's attorney, her daughter Mrs. Taylor who was also a director of the company, wrote to the secretary of the company as follows: "I wish to advise that I would like repayment of £4,000 which I lent your Company on 26th July 1957." Then followed these payments on account of the money lent: 8th April 1959, £500; 17th June 1959, £500; 20th July 1959, £500; 30th July 1959, £2,500. These dates show that £1,500 was paid on dates earlier than that by which the company was bound to pay (i.e. 30th July 1959). What happened about interest after 10th March 1959 was not disclosed. The reason for the notice to repay was that money was needed to pay the nursing and medical expenses necessary for Mrs. Quinn's care. Before April 1959 these expenses were about £18 per week and thereafter they were about £30 per week. They were paid out of Mrs. Quinn's banking account which, on 27th January 1959, was in credit to the extent of £117. From its incorporation in 1954 there were but two directors of the company, E. J. Taylor and his wife, Mrs. Quinn's daughter and attorney. Mrs. Taylor's evidence was that she did not remember ever seeing a balance sheet or a bank statement of the company. Her husband and the company's secretary and the company's accountant each swore that he did not show Mrs. Taylor any balance sheet or bank statement. How the provisions of s. 139 of The Companies Acts 1931 to 1960 Q. requiring every balance sheet of a company to be signed by two directors were complied with was a matter not explained. The financial position of the company during the period in which the payments in question were made is sufficiently indicated by stating that in August 1959, at the end of the period, the company owed about £90,000 to unsecured creditors who will not receive more than two shillings in the pound; on 31st March 1959, at the beginning of the period, it owed unsecured creditors £107,354, of which £31,342 had then been owing for more than three months. Gibbs J. made the following findings that seem to me of importance in deciding this appeal:— (1) "It is not in dispute that the four payments totalling £4,000 were made, that they were in favour of a creditor, that they had the effect of giving the creditor a preference over the other creditors or that the payments were made within six months of the commencement of the winding up, which commenced when the resolution was passed on the 17th August, 1959 (Section 233 of The Companies Acts)". (2) "I think that I should conclude, on the balance of probabilities, that from April onwards the company was unable to pay its debts as they became due out of its own money, within the meaning of the section". (3) "I am not prepared to find that Taylor was aware before the 20th July that the company was insolvent". (4) "I have no hesitation in finding that on the 20th July Taylor knew that the company was insolvent". (5) "Mrs. Quinn died on the 1st September 1960, aged 82. For the last two years of her life at least she was bedridden and senile and her sight was bad. She could comprehend only very little of what was going on about her. Her daughter managed her affairs It is clear that Mrs. Quinn herself had no knowledge of any of these transactions. However, in the circumstances of the case, since Mrs. Taylor had the widest authority to manage Mrs. Quinn's affairs, her knowledge and state of mind should be imputed to Mrs. Quinn". (6) "I find that the payments on the 17th June, 20th July and the 30th July were made by the company without any request having been made by Mrs. Taylor. After the payment was made on the 17th June Mrs. Quinn's account was £604. 3. 0 in credit; the third payment on the 20th July brought the credit balance up to at least £914". (7) "I do accept that it was not until the 3rd August 1959, that Mrs. Taylor knew that the company was insolvent. However, I also find that before that date Mrs. Taylor knew that the company was experiencing difficulties although she hoped that it would be able to surmount them". (8) "On 20th July, Taylor, besides drawing the company's cheque for £500 in favour of Mrs. Quinn, also drew, on behalf of the company, in his own favour, a cheque for £1,250 in repayment of moneys that he had lent to the company". The onus of proof that the payments were made in the ordinary course of business was, of course, upon the appellants and accordingly I am not sure that his Honour's carefully expressed negative statement (3) above helps the appellants very much. At this point it is, I think, necessary to examine the relevant portion of the text of s. 95 of the Commonwealth Bankruptcy Act, for what s. 275 of The Companies Acts, 1931 to 1960 Q. does is to invalidate any payment made by a company before its winding up which, if it had been made by an individual, would, in a bankruptcy upon a petition presented upon the date of the commencement of the company's winding up, be deemed in that bankruptcy to be a fraudulent preference—that is a payment avoided as against the trustee in bankruptcy by s. 95 of the Bankruptcy Act. What s. 95 avoids inter alia are payments made in particular circumstances "in favour of any creditor or of any person in trust for any creditor" having a particular effect. The word "creditor" is not defined, so it bears its ordinary meaning, and it is important to keep in mind that what are avoided are certain transactions between the person who becomes bankrupt and a creditor or a trustee for a creditor: see Robertson v. Grigg [1] , per Dixon J. [2] . There is no doubt that the payments which the company made here to Mrs. Quinn would, if made by an individual who became bankrupt when the liquidation of the company commenced, fall within s. 95 (1) unless excluded therefrom by s. 95 (2). It is this latter sub-section that is therefore particularly important for present purposes and it is desirable to set it out together with s. 95 (3):—"(2) Nothing in this section shall affect—(a) the rights of any person making title in good faith and for valuable consideration through or under a creditor of the bankrupt; or (b) the rights of a purchaser, payee or encumbrancer in good faith and for valuable consideration and in the ordinary course of business. (3) The burden of proving that the provisions of the last preceding sub-section have been complied with shall lie upon the person who relies upon their having been complied with". 1. (1932) 47 C.L.R. 257. 2. (1932) 47 C.L.R., at p. 271. What s. 95, sub-s. (2) (a), protects is the rights of a person making title in the circumstances there stated through or under a creditor to whom sub-s. (1) applies. On its face it does not relate to a person who obtains title from a person making title through or under a creditor nor does it relate to a person who is himself a creditor. Section 95 (2) (b) protects the rights of "a purchaser, payee or encumbrancer" and, in conformity with s. 95 (2) (a), one might have expected this provision to refer not to a creditor but to a purchaser, payee or encumbrancer from a creditor. Section 95, sub-s. (4), however, makes it clear that if sub-s. (2) (b) is not exclusively concerned with the rights of creditors, it does comprehend the rights of creditors, for the words in sub-s. (4) "a creditor shall not be deemed to be a purchaser, payee or encumbrancer in good faith" clearly enough, in referring back to sub-s. (2) (b), indicate that the earlier sub-section is dealing with the rights of creditors. It follows from this and from what has already been said that s. 275 of The Companies Acts, 1931 to 1960 Q., incorporating as it were s. 95 of the Bankruptcy Act 1924-1960 Cth, would protect the rights of Mrs. Quinn and her estate in receiving the payments in question if she is to be regarded as a payee "in the ordinary course of business". The conception of a creditor receiving from his debtor payment of a debt due and payable otherwise than in the ordinary course of the payee's business is somewhat odd. A payee who has no business might be so described so that such a creditor could never have his rights protected by sub-s. (2) (b), but that seems highly unlikely. The oddness is quite as apparent if attention is given to the word "purchaser" in sub-s. (2) (b). Is a purchase of a house for a home by a private creditor necessarily outside the protection of sub-s. (2) (b) while a finance company, being a creditor, which buys a house in the course of its business, is capable of bringing itself within the protection of the sub-section? The same difficulty arises with the third class of creditor referred to in sub-s. (2) (b)—that is an encumbrancer. It seems most unlikely that the business actually carried on by the creditor should be examined to see whether the payment was in the ordinary course of business. Similar considerations make it unlikely that all that should be looked at to determine whether a transaction is "in the ordinary course of business" is the business of the person making the payment. It is not surprising, therefore, that the courts have rejected out of hand the notion that to determine what is in the ordinary course of business requires an investigation into what is normal or usual in the business of the debtor or the creditor: see Robertson v. Grigg [1] per Gavan Duffy C.J. and Starke J. [2] and per Evatt J. [3] ; Burns v. McFarlane [4] per Rich, Dixon and McTiernan JJ. where their Honours, speaking of the expression "in the ordinary course of business", said: "It does not require an investigation of the course pursued in any particular trade or vocation and it does not refer to what is normal or usual in the business of the debtor or that of the creditor" [5] : see also per Starke J. [6] ; Downs Distributing Co. Pty. Ltd. v. Associated Blue Star Stores Pty. Ltd. (In Liquidation) [7] , per Latham C.J. [1] , per Rich J. [2] and per Williams J. [3] . It is therefore clearly established that the determination of what is meant by "in the ordinary course of business" must take into account considerations other than the businesses carried on by the creditor and the debtor. 1. (1932) 47 C.L.R. 257. 2. (1932) 47 C.L.R., at p. 267. 3. (1932) 47 C.L.R., at p. 273. 4. (1940) 64 C.L.R. 108. 5. (1940) 64 C.L.R., at p. 125. 6. (1940) 64 C.L.R., at p. 128. 7. (1948) 76 C.L.R. 463. 8. (1948) 76 C.L.R., at p. 474. 9. (1948) 76 C.L.R., at p. 477. 10. (1948) 76 C.L.R., at p. 480. The authorities, it seems to me, show that the payments here in question occurred in the ordinary course of business if there were nothing about them that was unusual according to ordinary business standards. In other words, the payments were in the ordinary course of business if the company and Mrs. Quinn, as represented by Mrs. Taylor, were, with regard to them, acting in accordance with the standards of honesty and fairness which are ordinarily accepted by the business community. In Robertson v. Grigg [1] Gavan Duffy C.J. and Starke J. said: " the test under s. 95 of the ordinary course of business is not whether the act is usual or common in the business of the debtor or of the creditor, but whether it is "a fair transaction, and what a man might do without having any bankruptcy in view" " [1] . In Burns v. McFarlane [2] Rich, Dixon and McTiernan JJ. said, supporting the finding that what was done was in the ordinary course of business: "The transaction considered as a whole presented the appearance of a perfectly fair and honest attempt to place the finances of Woon's business on a sound basis" [3] and Starke J. said that in Robertson v. Grigg [4] it was held "that the test under s. 95 of the ordinary course of business was not related to any special business carried on by the debtor or creditor but was whether the transaction was fair and what a man might do without having any bankruptcy in view" [5] . In Downs Distributing Co. Pty. Ltd. v. Associated Blue Star Stores Pty. Ltd. (In Liquidation) [6] Rich J. said:—"It is, therefore, not so much a question of fairness and absence of symptoms of bankruptcy as of the everyday usual or normal character of the transaction. The provision does not require that the transaction shall be in the course of any particular trade, vocation or business. It speaks of the course of business in general. But it does suppose that according to the ordinary and common flow of transactions in affairs of business there is a course, an ordinary course. It means that the transaction must fall into place as part of the undistinguished common flow of business done, that it should form part of the ordinary course of business as carried on, calling for no remark and arising out of no special or particular situation" [7] . It is true that all the statements I have quoted are not exactly to the same effect but my reading of them as a whole leads me to the conclusion which I have already stated. I should perhaps add that because the section under consideration treats a payment "in good faith" as different from a payment "in the ordinary course of business" and so requires a construction of each phrase which leaves some room for the other, I have not found much help from decisions in cases where this distinction did not have to be observed. 1. (1932) 47 C.L.R. 257. 2. (1932) 47 C.L.R., at p. 267. 3. (1940) 64 C.L.R. 108. 4. (1940) 64 C.L.R., at p. 125. 5. (1932) 47 C.L.R. 257. 6. (1940) 64 C.L.R., at p. 128. 7. (1948) 76 C.L.R. 463. 8. (1948) 76 C.L.R., at p. 477. Applying the standard which I think s. 95 lays down, I agree with the Full Court that the payments here in question were not in the ordinary course of business. The company was insolvent when they were made, owing unsecured creditors about £90,000, of which little would be paid. The company was completely controlled by Mr. and Mrs. Taylor, a son-in-law and daughter of Mrs. Quinn, who was represented by Mrs. Taylor who, if she knew no more, knew that, when the payments were made, the company was in financial difficulty. The last two payments, made on the 20th and the 30th July respectively and totalling £3,000, were made and were made to prefer Mrs. Quinn when Taylor knew that the company was hopelessly insolvent. In these circumstances, for the favoured unsecured creditor owed £3,500 to be paid twenty shillings in the pound because of her special position leaving the others owed £90,000 or thereabouts to receive two shillings in the pound if they are lucky, seems to me something that was entirely outside the ordinary course of business. In my opinion this appeal should be dismissed. Windeyer J. I concur in the view that this appeal should be dismissed. The question whether a payment was "in the ordinary course of business" must be determined having regard to the effect that old phrase now has in its context in the Bankruptcy Act. But in determining that, the meaning and consequences that it had in bankruptcy law in the past ought not to be overlooked. It goes back to the days when bankruptcy law concerned only traders. It postulates, it seems to me, the carrying on of a business of some kind by someone, in the course of which payments are made or received. In its context in s. 95 it attracts attention, I think, both to the business of the payer, if he be in business, and to the business of the payee, if he be in business, so that one asks was the questioned payment one that would be made by the payer and received by the payee in the ordinary course of a business transaction between them. A transaction that amounts to a preference in fact is not to be seen only from one aspect when the application of s. 95 is under consideration. It must be seen in the light of all the circumstances. So regarded, the payments in question in this case cannot, I think, be supported and are void as against the liquidator.