SPARAD (No 100) LTD (formerly known as AEFC Ltd) v J B HARKNESS (as liquidator of Spedley Securities Ltd (In Liq)) [1997] NSWCA 290

SPARAD (No 100) LTD (formerly known as AEFC Ltd) v J B HARKNESS (as liquidator of Spedley Securities Ltd (In Liq))

SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

PRIESTLEY and CLARKE JJA, and ABADEE AJA 22 October 1996, 14 February 1997 [1997] NSWCA 290

INSOLVENCY — VOIDABLE PREFERENCES — s122 BANKRUPTCY ACT 1966 (CTH) — WHETHER CHEQUE DISHONOURED WITHIN MEANING OF s69 CHEQUES AND PAYMENT ORDERS ACT 1986 (CTH)

INSOLVENCY — VOIDABLE PREFERENCES — BANKRUPTCY ACT 1966

(CTH) S122 — Loan from appellant to Spedley — loan called by appellant — repayment made by cheque by Spedley — bank advised appellant of intention to refuse payment of cheque — intention to refuse payment speedily reversed and cheque met in full — liquidator brought proceedings seeking to recover payment as a preference — appellant argued payment protected by s122(2)(a) Bankruptcy Act 1966 (Cth) — trial judge found for liquidator — On appeal: (1) whether cheque dishonoured within meaning of s69 Cheques and Payment Orders Act 1986; (2) when payment was effected and loan discharged; (3) whether payment made in good faith and in the ordinary course of business; (4) whether s122(4)(c) deeming provision applied.

Held: Unnecessary to answer (1) and (2); as to (3) and (4) the repayment was made in good faith and in the ordinary course of business, and was not made under such circumstances as to lead to the inference that the appellant knew or had reason to suspect that Spedley was unable to pay its debts as they became due from its own money.

Priestley JA In 1988 Spedley Securities Ltd (Spedley) was, and had been for some years, a dealer in the short term money market. An application to wind Spedley up was filed in the Supreme Court on 11 April 1989. A winding up order was made on 25 May 1989.

By its liquidator, Spedley later commenced proceedings against a number of companies seeking to recover property transferred or payments made by Spedley prior to the commencement of the winding up proceedings. A number of these proceedings were for the recovery of allegedly preferential payments by Spedley, in the six months preceding 11 April 1989. of amounts lent to Spedley. In one of these proceedings, which was not a preference claim, it was necessary to decide when Spedley became unable to pay its debts as they fell due, from its own moneys. Cole J held that Spedley had been in this position from 10 October 1988, and every day after that, until the winding up order was made!. Cole J noted in his reasons that the defendants in thirty-one other proceedings brought by the liquidator had agreed to be bound by his finding on this matter. Those proceedings included the present.