Corporations Laws468, referred to. HA Kratzmann Pty Ltd (In Liq) v Tucker (No.2) [1968] HCA 44; (1968) 123 CLR 295, applied. Re Asiatic Electric Co Pty Ltd (In Liq) (1970) 92 WN (NSW) 361, distinguished. Bayley v National Australia Bank Ltd [1995] TASSC 13; (1995) 16 ACSR 38, not followed. National Acceptance Corporation v Benson (1988)12 NSWLR 213, discussed.

(per Debelle J) Re Union Accident Insurance Co Limited (1972) 1 WLR 640; Pollnow v Garden Mews-St Leonards Ply Ltd (1984) 9 ACLR 82; Re London Hamburg and Continental Exchange Bank, Emmerson's Case (1866) 2 Eq 231; Deputy Commissioner of Taxation v Horsburgh [1983] VicRp 118; (1983) 2 VR 591; Fire Nymph Products Ltd v The Heating Centre Pty Ltd (1988)14 ACLR 274; Re Wiltshire Iron Co,- ex parte Pearson (1868) LR 3 Ch App 443; Re Margart Pty Ltd (in liq) (1984) 2 ACLC 709; Wiley v The Commonwealth (1995)13 ACLC 1556; Tessa Furniture Pty Ltd (in liq) v Glendave Nominee Pty Ltd (1987) 9 NSWLR 254; Re J Leslie Engineers Co Limited (1976) 2 All ER 85, applied. Re Dry Docks Corporation of London (1888) 39 Ch D 306; Re Carapark Industries Ply Ltd (in liq) (1967) 1 NSWR 337; National Australia Bank Ltd v KDS Construction Services Pty Ltd (in liq) (1987)163 CLR 668; Banque Commerciale SA (in liq) v Akhil Holdings Limited (1990) 169 CLR 279; Centronics Systems Ply Ltd v Nintendo Co Limited (1992)111 ALR 13, considered.

HRNG ADELAIDE, 11 August 1995 #DATE 21:12:1995 #ADD 15:1:1996 Counsel for appellant: Mr R Whitington

Counsel for respondent: Mr W J Wells QC with Mr J M Cudmore

JUDGE1 DOYLE CJ This is an appeal against the decision of a Master of this Court.

The issue which arises on the appeal may be stated in the following manner. If a payment of money by a company (now in liquidation) to a creditor of the company is made void by the operation of s468 of the Corporations Law, and the amount of the payment is demanded by the company from the creditor, is the money payable to the liquidator of the company or to a Receiver and Manager appointed under a debenture given by the company, which debenture crystallised on the making of the winding up order and which gives a charge to the secured creditor over the undertaking of the company and all of its assets present and future? If the creditor has in fact paid the money to the Receiver and Manager with notice of the claim by the company, does that payment to the Receiver and Manager discharge the liability of the creditor to the company, whatever may be the entitlement to the money as between the Receiver and Manager and the liquidator?

In my opinion, in the situation described, the money is payable by the creditor to the company to be applied by the liquidator for the purposes of the winding up. In my opinion the Receiver and Manager, acting under the debenture, is not entitled to demand that the payment be made to the Receiver and Manager and is not able to give a good discharge of the liability. The payment to the Receiver and Manager having been made with notice of the claim by the liquidator, the fact of payment to the Receiver and Manager gives no defence to the claim now made by the company at the instance of the liquidator.

I now proceed to state my reasons for so concluding.

I propose to state the facts quite briefly. The plaintiff is Fresjac Pty Ltd (In Liquidation). I will refer to it as "the company". The company granted to Esanda Finance Corporation Ltd a mortgage debenture to secure repayment of a loan. The mortgage debenture is dated 14 June 1989. By the debenture the company granted to Esanda a floating charge over the whole of the company's assets and undertaking. The charged assets included assets acquired after the crystallisation of the floating security. The debenture was in the usual terms. The company was indebted to the defendant. On 3 March 1992 an application was made to the Court to wind up the company. Accordingly, an order later having been made, the winding up commenced that day. On 5 May 1992 the company paid to the defendant the money which it owed to the defendant. The winding up order was made on 16 June 1992. The charge granted by the debenture crystallised on the making of the winding up order. That was the basis upon which the case was conducted before his Honour and the basis upon which the appeal was conducted before us. On 17 June 1992 a Receiver and Manager was appointed under the debenture. On 11 November 1992 proceedings were commenced in the name of the liquidator of the company against the defendant, claiming a declaration that the payment made on 5 May 1992 was void by virtue of the operation of s468(1) of the Corporations Law and an order that the defendant pay the relevant amount to the plaintiff. On 13 August 1993 the defendant paid the amount claimed to the Receiver and Manager appointed under the debenture. I assume that that was done with notice of the claim made by the liquidator. On 17 March 1994 the company was added as a plaintiff in the action.

It should be noted that when the payment was made by the company to the defendant, the charge had not crystallised.

His Honour found in favour of the defendant. He concluded that the Receiver and Manager had the right to recover the amount of the impugned payment and accordingly the authority to give a valid discharge of the defendant's obligation to repay the money. It seems to have been common ground at trial that the payment was avoided by s468 of the Corporations Law. The Master's reasoning was that the right to recover the money under s468 was a chose in action which was subject to the charge because the right of action was property of the company which the charge sought to embrace. He held further that while a right to recover a preferential payment was, as a matter of construction, available only to a liquidator, s468 of the Corporations Law was not to be read as giving rise to a right of recovery available only to the liquidator of the company.

It can be seen that two matters were central to his Honour's reasoning. The first was that the right of action to recover the amount of the payment was property of the company to which the charge appeared to extend. The second was that there was no reason to read s468 as giving rise to a right of recovery limited to the liquidator and, accordingly, outside the scope of the charge.

His Honour also said that he saw no anomaly in the fact that if the payment had been avoided as a preferential payment, the moneys would have been payable not to the Receiver and Manager but to the liquidator or to the company for the use of the liquidator. His Honour's reasoning seems to have been that a payment made void by s481 could not be said to be made in the ordinary course of business, and the floating charge permitted only payments in the ordinary course of the company's business. On the other hand, he said, the payment to a creditor might be said to have been made in the ordinary course of business even though subsequently avoided by a liquidator. Apparently on the basis that the payment avoided by s481 could be regarded as having been made contrary to the terms of the debenture, his Honour thought it was not anomalous that it should be recoverable by the Receiver and Manager.

In the proceedings before his Honour the defendant also sought to resist the claim by the company by seeking an order validating the payment to the defendant. His Honour refused to make a validating order. We were informed that there is an appeal against that refusal, but for reasons not made altogether clear that appeal is not before us.

On appeal the Court heard thorough argument from the parties, which argument called in aid case law, the legislative history of the provisions and arguments of policy. It was agreed that there was no case precisely in point apart from Bayley v National Australia Bank Ltd [1995] TASSC 13; (1995) 16 ACSR 38. The decision in that case is directly contrary to the appellant's submission, and it was argued accordingly by the appellant that it was wrongly decided.

Section 468(1) of the Corporations Law provides as follows: "Any disposition of property of the company, other than an exempt disposition, and any transfer of shares or alteration in the status of the members of the company made after the commencement of the winding up by the court is, unless the court otherwise orders, void."

Under the law as it stood at the time of the relevant events, this was the section which governed events occurring between the filing of the application before a winding up order, which was the commencement of the winding up, and the making of the winding up order. Under the law as it stood at the relevant time events prior to the commencement of the winding up were governed by s451 of the Corporations Law, which had the effect of importing aspects of the law of bankruptcy and in particular s122 of the Bankruptcy Act which invalidates an undue preference.

The Court was referred to the relevant legislative history, and it is convenient to record some features of that history here. The first point to note is that the Bankruptcy Act contains no equivalent of s468. It does, of course, provide for the recovery of preferential payments made before the presentation of the petition on which the sequestration order was made and made in the period between the presentation of the petition and the making of the sequestration order. In the case of companies, there has been a provision in similar terms to the now s468 for well in excess of 100 years. There was a period of time during which transactions between the date of a petition for winding up and the making of a winding up order were governed both by that provision and by s122 of the Bankruptcy Act: see re Omnico Ltd (1976) 1 ACLR 381 at 388 and Tellsa Furniture Pty Ltd (In Liquidation) v Glendave Nominees Pty Ltd (1987) 9 NSWLR 254 at 261. That situation came to an end with the enactment of s451 of the Companies Code in 1981 and since then transactions after presentation of a petition or application have not been regulated by the provisions relating to preferences. A new regime was introduced with effect from 23 June 1993 by Part 5.7B of the Corporations Law.

Section 122 of the Bankruptcy Act provides that a preference caught by the section is void as against the trustee in bankruptcy. Reflecting this language s451 of the Corporations Law provided that payments which would be void in bankruptcy are to be void as against the liquidator. Section 468, and its predecessors, have generally simply provided that the relevant transaction is void. It was argued by the appellant that nothing much should be made of this contrast in language. It was argued that earlier provisions in Companies Law relating to preferences did not contain the expression "as against the liquidator". The argument flowing from this was that no distinction was to be drawn between the provisions relating to void dispositions and the provisions relating to preferences, and that the words "as against the liquidator" were not intended to introduce any difference. It is true that there is some variation in the statutory language of the various Companies Act relating to void payments: see Companies Act 1934 (SA) s281, Companies Act 1962 (SA) s293(1). However, the reference which these provisions made to bankruptcy law might well support a submission that, in picking up and applying that law, they picked up and applied the concept of the disposition being void as against the trustee in bankruptcy or, in the case of a company, as against the liquidator. The same comment applies to s265 of the Companies Act (1929) (UK) in the form in which it was when In re Yagerphone, Ld (1935) Ch 392 was decided.

The significance of the reference to a preference being void as against the liquidator remains to be seen. But in my opinion the topic of the recovery of preferences in the liquidation of a company should be approached on the basis that the statutory concept is one of a disposition which is void as against a liquidator, either as a matter of express language or by the importation of concepts from bankruptcy law.

This case illustrates, if illustration is needed, the difficulties which can attach in law to the concept of voidness. In the present case a distinction is sought to be drawn between the recovery of an amount of a payment made void as against a liquidator and the recovery of the amount of a payment which is simply made void. The respondent argued that in the latter case the object of the recovery was to recover property or assets the title to which vested in the company. In the case of a void disposition of money it was argued that the chose in action to recover the money must be the property of the company, that accordingly the proper plaintiff was the company itself and that the debenture, or the charge granted by it, applied to and covered the chose in action.

In this way the respondent's argument was based upon the concept of voidness. On the other hand, the appellant argued that the avoidance effected by s468 was for a purpose, namely the rateable division of assets, and so the appellant argued that s468 did not simply render a disposition void, the consequences of that then being left to sort themselves out as it were. On the appellant's argument the avoiding effect was to secure a benefit for the unsecured creditors and the section was to be applied accordingly.

I will have to come back to some of these points, but at this stage I make the point that in my opinion it is not safe to assume that one can resolve the issues in this case simply by reasoning, in the abstract as it were, from the concept of a void disposition.

True it is that in National Acceptance Corporation Pty Ltd v Benson (1988) 12 NSWLR 213, the Court of Appeal held that "void" in the then s368(1) meant void for all purposes related to or incidental to the administration of the winding up of the company. Accordingly, when a company in liquidation made a payment to its creditor, and that money was repaid by the creditor to the company, on the basis that the payment was avoided, the creditor was then able to sue a guarantor of the company's indebtedness notwithstanding the fact that at the time of the payment by the company to the creditor the liability of the guarantor had been discharged by the making of the payment.

The judgment of Priestley JA in that case contains a valuable discussion of the relevant legislative history and a valuable consideration of the meaning of "void". And, as Kirby P said (at 214) the word "void" should be given its ordinary meaning, namely that the relevant transaction is to be treated as "...having no legal effect for any purpose as against the world so that it is as if the transaction which is "void" has not occurred, at least so far as the eye of the law is concerned...".

Accordingly, in that case the payment by the company to the creditor was treated as never having happened, and it followed that the creditor could, after making repayment, again assert its rights under the guarantee.

But in the present case the payment by the company to the defendant having been avoided, and the defendant having repaid the money, it seems to me that one must be cautious in allowing supposedly logical implications of the notion of voidness to control the answer to the question of entitlement to the money. Granted, one can hypothesise that if the payment had never been made by the company to the defendant, the money would still be in the hands of the company and would be subject to the charge. But on the other hand it has to be borne in mind that, the payment having been avoided, a right to recover an amount equal to the payment arises and the question is, who benefits from the exercise of that right. The court is not concerned simply with the avoidance of the original payment.

In the present case, once the money of the company was paid to the defendant, the money of the company had lost its identity. At the time of the payment and immediately thereafter the company had no rights in relation to the money paid to the defendant. Upon the making of the winding up order the payment by the company to the defendant was avoided, having been made after the commencement of the winding up, and the result of that avoidance is that a new right to compel repayment of an equivalent amount of money arose. At least in the case of a money payment it is not possible, as it seems to me, to analyse the matter as if the payment had never taken place: cf Re J. Leslie Engineers Co Ltd (1976) 2 All ER 85 at 90-91.

The distinction in this context between dispositions of property and payments of money is brought out clearly by the High Court in its decision in N.A. Kratzmann Pty Ltd (In Liq) v Tucker (No.2) [1968] HCA 44; (1968) 123 CLR 295 (Kratzmann's Case). There the Court was dealing with a preferential payment, and with the question of the consequential order to be made when the payment was made by one company in liquidation to another company in liquidation. The Court there referred to the position of a secured creditor who has a charge over all the assets of a bankrupt when a payment to a creditor is made by the bankrupt out of money subject to the charge, and the payment is subsequently declared void as a preference. The Court made the point that in such a case the moneys, when recovered, will not be subject to the charge. The Court said (at 301) : "In such a case it may be said that although the moneys paid as a preference were at the time of payment subject to the charge, the moneys recovered by the trustee are not the same moneys and that they do not, by virtue of payment to the trustee, become moneys of the bankrupt or in any way subject to the charge: when recovered they become the moneys of the trustee and his title to them does not depend upon his succession to any title which the bankrupt had."

The Court went on to refer with apparent approval to the decision in In re Yagerphone, Ld (1935) 1 Ch 392 and to the decision in N.W. Robbie and Co Ltd v Witney Warehouse Co Ltd (1963) 1 WLR 1324, where the same principles were applied to the liquidation of a company. The Court then said (at 301-302) : "The case would be otherwise, of course, where a preference consists of the disposition of specific and identifiable property subject to a charge validly created in relation thereto by a bankrupt prior to his bankruptcy and where the avoidance of the disposition affects title to such property ... In such a case the result of the avoidance of the disposition is to revest the property in the trustee subject to the charge which the bankrupt had validly created prior to the bankruptcy."

As to the position of a secured creditor when property the subject of the security has been disposed of in circumstances constituting a preference, the Court appears to have accepted the view that the secured creditor could not itself assert a claim to set aside the dealing as a preference. The Court referred to decisions to the effect that in such a case the trustee ought not to assert such a claim where the resultant benefit would accrue only to the secured creditor. The Court went on to say (at 302) : "But the very existence of the rule plainly acknowledges that if specific property, to which a charge, validly created by the bankrupt prior to his bankruptcy, has

attached prior to the time of its disposition, is subsequently recovered as a preference the trustee's title will be no higher or better than that of the bankrupt to which he has succeeded."

This decision of the High Court seems to me to establish that the avoidance of a transaction and the consequences of that avoidance require separate consideration, and in particular will require separate consideration when the relevant transaction is a payment of money. In such a case the final result will not be disclosed simply by an analysis which proceeds on the basis that title to the property has not left the company which disposed of the property.

And it seems to me that the analysis which is found in Kratzmann's Case has potential application to s468 as well as to preferential dispositions of property. The Court there acknowledged that the avoidance of a preferential disposition may result in the revival of a proprietary interest which is subject to a security. But the Court held that the position of the secured creditor would be different when the recovery of the relevant property or payment was not upon the basis of the assertion of the (re-vested) title to secured property. As I understand the decision of the High Court, the point being made was that in the case of a money payment, moneys recovered by a trustee in bankruptcy or by a liquidator were not received as the charged property, or as its substitute, but simply as moneys due on a common law cause of action by virtue of the avoidance of the payment. That left the destination of the proceeds of the recovery to be decided. And in the case of a preference the Court held that the recovery was for the benefit of the unsecured creditors.

That same question has to be decided here, and it seems to me that Kratzmann's Case demonstrates that the destination of the proceeds of the recovery of money are not to be determined by reference to title to property (the payment of money being involved) nor by reference simply to the notion of a void transaction or the notion of a transaction which, as a matter of law, is taken never to have happened. As I have endeavoured to explain, even the law has difficulty denying facts and the fact is that the money had changed hands, the property of the company had passed, and the effect of the avoidance of the transaction is to create a right to the recovery of an equal amount of money.

Finally, in the course of this rather lengthy preliminary, I must refer to the policy arguments which were pressed upon the Court. The respondent argued that the purpose of the provisions relating to preferential dispositions is to avoid their preferential effect, which seemed to mean the preference of one creditor over other creditors. It was then argued that this was done by recovering the amount of the payment for rateable distribution, and only for that purpose. Putting it a little differently, the preferential effect was one of the things which led to the avoidance of the transaction, and requiring the property recovered to be distributed rateably was a necessary and logical consequence of the recovery. On the other hand, the respondent argued, the purpose of s468 was different. It was to preserve the assets of the company, to keep them inalienable so that they could be dealt with according to law. The recovery was to restore the status quo, and it was consistent with that purpose and policy to recognise the position of the secured creditor. If the payment had never been made the secured creditor would have had the benefit of the money.

The appellant argued that the purpose of the provisions relating to preferences and of the provisions relating to void dispositions is to ensure a rateable distribution among the creditors. Either way, it was argued, recoveries for the purposes of distribution and the proceeds of a recovery were not property in which the secured creditor had an interest. The appellant distinguished the situation in which what was recovered was a particular item of property, which property had been subject to a secured interest before it was disposed of. In that situation, the appellant argued, title prevails over policy.

It seems to me that the purpose of both provisions is the same, but that to so conclude does not advance matters much.

It seems to me that underlying both provisions is a policy in favour of the orderly distribution of assets, with due recognition of the rights of secured creditors. The object is to prevent the debtor conferring, and any creditor obtaining, a particular advantage in the period preceding bankruptcy or a winding up order. For obvious reasons it makes sense to discourage self help for creditors in the period preceding a bankruptcy or winding up. It makes sense to impose more stringent controls in the period after the issue of winding up proceedings, and in that period not to require as a pre-condition to recovery that there be a preferential effect.

It seems to me that the provisions relating to preferences and the provisions relating to the avoidance of dispositions both have an eye to the preservation of assets, to the preservation of the status quo, and to a later orderly distribution of assets among creditors, subject to the rights of secured creditors. I am unable to see any significant difference between the purpose of the two regimes.

To my mind such considerations of policy do not resolve the issue which is before the Court, save that I would reject the notion that the purpose of the provisions relating to preferential dispositions is specifically and solely recovery in the interests of general creditors to the exclusion of a secured creditor. I refer to the passages which I have cited from Kratzmann's Case. Of course, it is the general creditors who are usually the beneficiaries of the recovery of a preferential disposition, but that would also usually be true in relation to the recovery of a void disposition.

It therefore seems to me that these considerations of policy are not decisive in the resolution of the matter. There is here a competition between the interests of the secured creditor and the interests of the general creditors. The competition is not resolved by the mere avoidance of the disposition because that does not cause the title to specific property the subject of a security to revest in the company. Policy arguments of the kind just adverted to do not resolve the dispute over the disposition of the proceeds of the recovery action.

In this context there is something more which might usefully be said about the position of the secured creditor. It goes without saying that generally the rules relating to bankruptcy and liquidation recognise the rights of a secured creditor. If a disposition of property infringes the rights of a secured creditor, that secured creditor can still enforce those rights notwithstanding later bankruptcy or liquidation. In the present case the right of action which is being enforced is not a right which arises out of the security of the secured creditor. In that respect the present case seems to me to be readily distinguishable from Re Asiatic Electric Co. Pty Ltd (In Liq) (1970) 92 WN (NSW) 361. In that case prior to the winding up the company had given a charge over the whole of its assets and undertaking to a creditor. The charge was partly fixed and partly floating, but became fixed as to all assets on the making of the winding up order. Facts come to light on the basis of which the liquidator proposed to institute proceedings for misfeasance against certain officers of the company. The issue was whether an amount recovered in those proceedings would be held by the liquidator for distribution amongst the unsecured creditors or would be caught by the terms of the debenture and passed to the secured creditor. Street J held that the claim under the misfeasance section was a claim available regardless of insolvency, a claim available to the company immediately prior to the winding up. In that respect he contrasted it with a claim to recover a preference which became available only in, and for the purposes of, the winding up of the company. The claim made by the misfeasance summons was a chose in action which might have been litigated prior to the winding up. He went on to say (at 364): "Upon the winding up the floating charge became fixed and specific, both in respect of this chose in action and in respect of the other assets covered by the debenture. A

claim to enforce this chose in action is significantly different from a claim to avoid a preference such as was dealt with in In re Yagerphone Ld and in Re Quality Camera Co. Pty Ltd."

In other words, the claim in the present case does not involve an assertion by the secured creditor that there has been a disposition of property by the company which infringes its security. Nor does it involve the assertion of a right which existed independently of the liquidation and to which the security attached independently of the liquidation. In those senses the rights of the secured creditor are not implicated. What is asserted is that the security attaches to a right of recovery of money which right is consequential upon the avoiding effect of s468. And that right is asserted on the basis that the transaction which is avoided by s468 was a transaction involving a disposition of property the subject of the security. As it happens the disposition or payment was not a breach of the security, because at the time of the payment the charge was floating, but I do not think that that makes any difference. Indeed, in Kratzmann's Case the High Court appeared to think that in the case of a money claim the crystallisation of the security was of no significance to the outcome. Their Honours said (at 301) referring to the decision in N.W. Robbie and Co. Ltd v Witney Warehouse Co. Ltd (1963) 1 WLR 1324 at 1338 : "It is of significance that his Lordship did not think that the decision in any such case could depend upon whether or not the charge had crystallised at the time when the payment to the creditor was made."

I have therefore concluded that arguments of policy and purpose based upon the statutory provisions do not resolve the matter for decision, nor does the application of the notion of a void transaction nor do arguments based upon the notion that the payment is to be treated as a matter of law as never having been made. Nor do considerations of title resolve the matter for decision because this is not a case in which the liquidator asserts a proprietary claim. Nor, in my opinion is a difference in the outcome when a preferential payment is recovered compared with recovery of a void payment explicable on the basis that in the case of bankruptcy the recovery is by the trustee in bankruptcy whereas in the case of a liquidation the recovery is by a liquidator. I say this because although authority establishes that a claim to recover a preferential payment may and should be brought in the name of the liquidator: Bibra Lake Holdings Pty Ltd (In Liq) v Firmadoor Australia Pty Ltd (1992) 7 WAR 1, it seems that nevertheless the appropriate order in such a case is for the payment of any money recovered to the company: Octavo Investments Pty Ltd v Knight [1979] HCA 61; (1979) 144 CLR 360 at 372. This suggests that the fact that money is received by the company is not sufficient of itself to enable a charge to attach to the money, because it is clear that in the case of the recovery of a preferential payment such recovery is for the benefit of the general creditors and not for the benefit of a secured creditor.

It remains now to attempt to resolve the issue of the proper disposition of the moneys in question.

In my opinion the appellant's submissions should be accepted. There are a number of reasons for concluding that just as a preferential money payment is, when received, not caught by a charge over company assets, nor is a void money payment when recovered.

The purpose of s468 and s565 as it was (dealing with undue preferences) is the same, to the extent that each avoids a disposition of property before a liquidation order is made, with a view, in my opinion, to rateable distribution among the general creditors and subject to the rights of secured creditors.

Each provision results, in the case of the recovery of a money payment, in a repayment to the company in liquidation of the amount of the preferential or void payment.

In my opinion the fact that a preference is void "as against the liquidator", whereas a payment caught by s468 is simply void is not a basis for differentiating the outcome or disposition of moneys received under the respective sections. This is so because the words "as against the liquidator" do not control the disposition or destiny of moneys received as a preference, or have the effect of requiring property recovered as a preference to be applied for the general creditors. First, because as Kratzmann's Case demonstrates, if a disposition of specific and identifiable property subject to a charge is avoided as a preference, the security given by the charge will attach to that property in the case of a void payment. It must follow that the effect of the words "as against the liquidator" is not to control the destination of the property recovered, and to direct the property to the general creditors. The effect of the words is to control who may invalidate the preference, and to identify the liquidator as the person with that right, not to decide or determine who is entitled to the proceeds.The absence of those words is not, therefore, an argument for a different destination for the property. Secondly, as Octavo Investments demonstrates, money recovered as a preferential payment should be paid to the company in liquidation. Therefore, it cannot be said that such money is beyond the reach of a charge over company property because it is received by or at the instance of the liquidator and not by the company. Accordingly, it cannot be said that the result when a preferential disposition is recovered is reached on the basis that the legislation requires such property to be held for the general creditors.

This suggests that a preferential payment is recovered for the benefit of general creditors because the right of recovery consequent upon the avoiding effect of the section is a right to be exercised by the liquidator, and not by a secured creditor. Accordingly, the right is not one which falls within the reach of a charge, although a consequence of its exercise may be to restore to a company property which is subject to and then caught by a charge granted to a secured creditor.

What this emphasises is the need to distinguish between the avoiding effect of the section, the location of the right to recover property disposed of by the company in a transaction avoided by the section, and the entitlement apart from that to rely upon the avoiding effect of the section.

The preference cases indicate, in my opinion, that the right to recover property disposed of in a transaction avoided as a preference belongs to a trustee in bankruptcy or liquidator, and property recovered by the exercise of that right will not vest in a secured creditor unless the exercise of the right should cause the revesting of title in specific property subject to a security. The preference cases do not deal with the ability of other persons to rely upon the avoiding effect of the section for other purposes.

This is not to say that the two concepts have always been clearly distinguished, nor to deny that some of the preference cases might be interpreted as having derived the location of the right to proceeds (the liquidator, for the general creditors) from the location of the right to assert the voidness of a preference (a liquidator appointed for the benefit of the general creditors): see Ford's Principles of Corporations Law (looseleaf: (27.331)). But as pointed out above, the location of the right to assert voidness does not also determine the location of the right to proceeds recovered after the cancellation of a void transaction.

In my opinion the same approach should be taken to section 468. Its purpose seems to me, as I have already said, to be the same as the purpose of the preference provisions to enable recovery of property for the benefit of creditors but subject to the rights of secured creditors. The phrase "void as against the liquidator' does not, for the reasons I have given, control the result of the avoidance of a disposition, and so does not give rise to a relevant difference. I can see no reason for taking a different approach to the location of the right to claim recovery of the property disposed of by the void transaction, despite the absence of the phrase "as against the liquidator". Common sense suggests that the liquidator must decide whether to exercise that right, and that other persons cannot do so. This is so, even though the company is the appropriate plaintiff. It is the liquidator who causes the company to take action.

It does not follow that other persons cannot rely in other ways upon the avoidance effected by section 468. The disposition is void for all purposes, and as National Acceptance Corporation v Benson (1988) 12 NSWLR 213 illustrates, a person enforcing a guarantee may do so on the basis that a payment discharging the guaranteed debt is avoided by section 468. What this illustrates is, as I have said, that persons other than the liquidator may rely upon the avoiding effect of section 468 for a variety of purposes, but that the right to recover the property disposed of by the void transaction is under the control of the liquidator. The mere right to assert or rely upon voidness cannot, as a matter of logic, give rise to a right to recover the property disposed of by the void transaction.

The right to recover property disposed of in a transaction voided by s468 is not property of the company, and the proceeds of the exercise of the right do not fall to be treated as property of the company caught by pre-existing charges or security but, in my opinion, specific property the subject of a charge or security will, if recovered, again be subject to that charge or security.

On this approach, the right to recover property the disposition of which is avoided by s468 is not a right to which a charge or security will attach.

In addition, in my opinion money recovered as the result of the avoidance of a preference or because a payment is void is not to be regarded as property of a company to which a charge or security can attach.

These conclusions emphasise the similarity between the preference provisions and s468, despite the difference of language ("void as against the liquidator" and "void") and despite the difference in the stages before liquidation to which they apply and the differences in the manner in which they operate. On the other hand they avoid the oddity (as some would see it) of a better result for a secured creditor in respect of a void payment, and the oddity of a remedy conferred for the purposes of a liquidation working for the benefit of the secured creditor. I do not pretend the result which I have reached is obvious, or that the contrary arguments are lacking in substance.

Having come to this conclusion it is appropriate that I should explain, in brief terms, how it sits with the more significant and relevant cases which were referred to in argument. I will deal with them in chronological order.

Willmott v London Celluloid Company (1886) 31 Ch D 425 held that the rule in bankruptcy that the doctrine of fraudulent preference cannot be enforced for the benefit of a single creditor or class of creditors, but only for the benefit of the general body of creditors, applied to the winding up of a company under the Companies Act 1862. Accordingly, the court rejected a claim by a debenture holder of a company in liquidation to recover moneys alleged to have been paid by way of fraudulent preference. The judgment of Bacon VC states firmly that only the liquidator may raise the question of fraudulent preference (at 434) and accepts that recovery is for the purposes of distribution amongst creditors generally (at 435). It establishes an approach to the preference provisions which, in the end, I have concluded should also be applied to s468.

No doubt, the emphatic language of the judgment of Bacon VC and the judgments which he cites require some modification in the light of the passages already cited from Kratzmann's Case. I say that because there the High Court made the point (at 302) that if the result of the avoidance of a preference was the recovery of specific property to which a charge attached, the charge will prevail. In other words, title or proprietary interests would then prevail.

Gough's Garages, Limited v Pugsley (1930) 1 KB 615 is a much cited case. It establishes that notwithstanding the onset of liquidation, a Receiver and Manager retains power to take possession of the property subject to a charge and to take proceedings in the name of the company to recover or preserve that property : O'Donovan, "Company Receivers and Managers", par13.120. It was there held that a statutory right to obtain compensation or a new lease of premises was a right caught by a charge over all assets of the company, and exercisable by the Receiver and Manager although a winding up order had been made. Greer LJ said (at 621): "But a right of any kind, such as a right to a chose in action, is property which may be pledged to debenture holders just as any other kind of property. It does not matter whether the property in question was in existence in the hands of the company granting the debenture at the time when the debenture was given, or whether it came into existence by the operation of a subsequent Act of Parliament. It seems to me that to deprive the debenture holders of a right, under the part of the debenture that I have mentioned, to realise a valuable right of the company, because the company has gone into liquidation, is to nullify one of the valuable rights given to the receiver by the debenture."

This emphasises that the debenture may reach rights of action, including statutory rights. It is one of the bases upon which the respondent argued in this case that, s468 having avoided the payment by the company to the defendant the right to sue for recovery of the payment was a right at common law, a right of action which was property to which the debenture attached. As to that, I accept the principle on which Gough's Garages rests. The issue is whether the right to recover the amount of a payment avoided by s468 is property caught by the debenture.

In re Yagerphone, Ld (1935) Ch 392 deals with the case of a preferential payment and a contest between a liquidator and a receiver. Bennett J held that once the payment was made by the company the money was no longer the property of the company. Secondly, he held that the right to recover the sum paid (the payment being a preference) was conferred "for the purpose of benefiting the general body of creditors" (at 398). He must have meant that the right of action was not property of the company to which the debenture attached. He also said (at 398) that the money when recovered "... did not become part of the general assets of Yagerphone, Ld, but was a sum of money received by the liquidators impressed in their hands with a trust for those creditors amongst whom they had to distribute the assets of the company."

I will return later to the reference to a trust (see the discussion below of Re Starkey (1994) 1 QdR 142).

The correctness of this decision was accepted in Kratzmann's Case. It makes it clear that the right of action given to recover a preferential payment is not an asset caught by a charge of assets, and that money recovered in exercise of that right is not an after-acquired asset caught by such a charge. The explanation, not made explicit, must be that such money is money recovered because liquidation has supervened and for the purposes of distribution in the liquidation, and as such is not to be regarded simply as property of the company.

The issue is whether the right of action which flows from s468 and money recovered by virtue of s468 is to be treated the same way.

N.W. Robbie and Co. Ltd v Witney Warehouse Co. Ltd (1963) 1 WLR 1324 was also referred to with approval in Kratzmann's Case. The Court of Appeal there took the view of In re Yagerphone, Ltd which I have expressed above, but also seemed to proceed on the premise that it did not matter whether the preferential payment was made before or after the relevant charge crystallised (see Russell LJ at 1337-1338).

In re Quality Camera Co. Pty Ltd (1965) 83 WN (Pt1) (NSW) 226 the company paid money and returned goods to its creditors before a receiver was appointed under a debenture that it had given, and before it was ordered to be wound up. The liquidator claimed from the creditor the amount of the money paid and the value of the goods returned on the basis that each involved a preferential disposition. The creditor paid both amounts to the receiver. The liquidator then claimed those amounts from the receiver. Relying upon Willmott and Re Yagerphone, Ld, McLelland CJ in Eq said (at 229) : "The payments and return of goods in question were void as preferences as against the liquidator, but these circumstances could not give any title to the receiver. The money received by the liquidator upon the setting aside of the preferences could not become part of the general assets of the company."

The decision illustrates the point already made, that money recovered as a result of a preference, and the right of recovery, are not caught by a charge over assets, even when the money is the value of specific goods which were caught by the charge.

I have already referred to Re Asiatic Electric Co. Pty Ltd (1970) 92 WN (NSW) 361. The case itself dealt with a claim under a misfeasance summons against company directors in respect of events preceding a winding up order. It was held that although the claim was available to the liquidator "as a matter of procedural simplicity" (at 363), the claim existed before the winding up order was made, that the claim was justiciable without regard to the fact of a winding up and unlike a preference claim was not "available only in, and for the purposes of, the winding up ..." (at 363). The decision again emphasises the fact that a preference claim is for the purposes of a winding up, and that this is relevant to the destination of the proceeds of such a claim. It shows that claims unrelated to a winding up are treated differently.

I have already referred to National Acceptance Corporation Pty Ltd v Benson (1988) 12 NSWLR 213. I respectfully agree with the decision and with the reasoning. But I do not consider that that decision determines the question at issue here, which is the entitlement as between liquidator and receiver, to the moneys repayable as a result of the avoidance of the payment by the company to the defendant. I do not consider that that issue can be resolved by applying the notion expressed by Kirby P (at 215) that "the law treats the payment as never having happened". The same, in my opinion, could be said of a preferential payment. In my opinion the question remains as to the entitlement to assert the avoiding effect of s468 in the sense of giving effect to it by demanding that property be returned or money paid and as entitlement to what is returned.

Bibra Lake Holdings Pty Ltd (In Liq) v Firmadoor Australia Pty Ltd (1992) 7 WAR 1 holds that a liquidator is a necessary party to proceeding to recover a preferential payment. Reliance was placed upon the fact that the proceeds of recovery were received by the liquidator for distribution among the general creditors and upon the fact that a preference is void "as against the liquidator". To my mind, no particular implication flows from any of this in relation to a claim under s468. The fact that the company is itself the appropriate plaintiff in a claim made in reliance upon s468, if that be the case (which I do not have to decide) does not, in my opinion, determine the entitlement to the proceeds of the claim. Indeed, as was pointed out in Kratzmann's Case, the avoidance of a preference by a liquidator might, in some situations, result in the recovery of an asset subject to a charge in favour of a secured creditor.

Re Starkey (1994) 1 Qd R 142 held that the proceeds of payments recovered by a liquidator as preferences in a winding up were assets under the control of the liquidator that were available to meet claims of creditors, including a claim by the Commissioner of Taxation under s221P of the Income Tax Assessment Act 1936. In the course of his judgment McPherson JA made the point, with which I respectfully agree, that the proceeds of the recovery of a preferential payment are not held on trust for unsecured creditors. He said (at 153-154) : "If a secured creditor may not set in motion for his own benefit a procedure for avoiding preferences that exists for the benefit of the unsecured creditors, it is a logical consequence that he should not be able to claim the proceeds of avoiding such a preference when recovered. But it is another matter to say that the liquidator holds those proceeds in trust for the unsecured creditors if what is meant by that is a "trust" in the full sense of the word, under which the unsecured creditors are equitable owners of

the assets in winding up. There is little in recent decisions to support that view of the rights of creditors."

He found nothing contrary to the view in Kratzmann's Case, and nor do I.

I should also refer to the judgment of the Full Court of the Federal Court in Ferrier v Civil Aviation Authority [1994] FCA 1571; (1994) 127 ALR 472, which at 484-487 contains a helpful discussion of the history and rationale of the preference legislation.

Finally, I refer to Bayley v National Australia Bank Ltd [1995] TASSC 13; (1995) 16 ACSR 38. The case is precisely in point. The liquidator of a company recovered certain amounts from creditors of a company on the basis that they were paid by way of dispositions made void by s468. Relying upon National Acceptance Corporation Pty Ltd v Benson, and the statement that a void transaction "must be regarded as never having taken place at all in law" (Priestley JA at 220) Wright J held that the money recovered was payable to the holder of a floating charge over the assets of the company. He said (at 40) : "On the basis of these opinions, which appear to me to be plainly correct, the funds which were improperly disposed of after the commencement of liquidation proceedings remain the property of the company at all relevant times and upon being restored to the company by the liquidator's actions became once more subject to the respondent's floating charge."

I am, with respect, unable to accept this reasoning. Once the money was paid over by the company it ceased to be the property of the company. On the liquidation of the company the payment was avoided, but in fact it had happened. Avoidance could not be effected by revesting in the company the title to the money, as could be done if land or an identifiable chattel was involved. Avoidance was effected by giving the company (caused to act by the liquidator) a claim to recover an equivalent amount of money. Entitlement to that money was a separate issue, and I have already explained why I think the correct conclusion is that the money, upon its receipt, is not an asset of the company to which the charge attaches.

It follows that I am not prepared to apply the reasoning which appealed to Wright J.

This examination of the cases shows that with the exception of Bayley v National Australia Bank there is no decision precisely on point. Counsel did not refer us to any other case on point.

The issue, in my opinion, is whether a distinction is to be drawn between entitlement to money recovered upon the avoidance of a preferential disposition and entitlement to money recovered upon the avoidance of a void disposition. I have concluded that no distinction should be drawn, having rejected certain suggested bases for drawing a distinction, as I did earlier in this judgment, and having examined in particular what was said in Kratzmann's Case about the effect of avoiding a preferential disposition.

The respondent also argued that having repaid the money to an officer of the company (the Receiver and Manager), the respondent should not be required to have regard to whether that officer is accountable to the liquidator for it. Put a little differently the argument was that the respondent had a good discharge from the company, and was not concerned with the question of whether the recipient was accountable to the liquidator for it.

I would reject that submission. In my opinion it must follow from my conclusions that the Receiver and Manager had no authority to receive or to give a discharge for the moneys payable to the company. The respondent may well have a claim against the Receiver and Manager to recover what it paid to him, but that is another issue. The liquidator might also have a claim against the Receiver and Manager, but that also is another issue. I mention again that the respondent must be taken to have made the payment with notice of the liquidator's claim.

The respondent also argued that the judgment under appeal should be upheld because the proceedings were originally commenced by the liquidator as plaintiff, and the re-payment was made by the defendant to the company by the Receiver and Manager before the company became a plaintiff in the action. Accordingly, it was contended, the company had not claimed payment until after the claim was satisfied.

The first difficulty with this argument is that on my conclusions the claim was not satisfied by the payment to the Receiver and Manager. The second difficulty, in my opinion, is that the re-payment was made with notice that the original payment was claimed to be avoided by s468. I cannot understand how uncertainty about the correct plaintiff in the resultant proceedings can affect the position.

This point seems to me to fall with the point with which I have just dealt.

Accordingly, I would allow the appeal, set aside the judgment dismissing the claim made by the plaintiff (the present appellant), and substitute for that a judgment (1) declaring that the payment of $25056.67 on 5 May 1992 by the company to the defendant Michael Mount PPB (A Firm) is void by virtue of the provisions of s468 of the Corporation Law, (2) ordering that the counterclaim for a declaration pursuant to s468 validating the payment be dismissed, (3) ordering that the defendant do pay to the plaintiff the sum of $25056.67 with interest, and (4) ordering that the defendant pay to the plaintiff its costs of the action. The second of these orders is intended to reflect the decision of the Master, and does not prejudice the appeal against the dismissal of the counterclaim.

JUDGE2 MATHESON J I agree with the judgment of Doyle CJ and with the orders he proposes.

JUDGE3 DEBELLE J Fresjac Pty Ltd (in liq) (Receiver and Manager Appointed) which, for convenience, I will refer to as "Fresjac" was one of a number of associated companies with common directors. Its primary undertaking was a bakery business. Fresjac borrowed money on behalf of the group from Esanda Finance Corporation Ltd ("Esanda"). Fresjac executed a mortgage debenture dated 14 June 1989 to secure the repayment of the loan. The debenture was security for one million and forty-four thousand dollars ($1,044,000). By the debenture Fresjac granted to Esanda a fixed and floating charge over the whole of its assets and undertakings subject to any prior charge. The charged assets included "all assets acquired after the date or dates upon which the floating security" crystallised.

2. Clause 20 of the debenture provided for the automatic crystallisation of the charge. The relevant parts of Clause 20 were in these terms: "THE indebtedness and liability hereby secured shall not only become payable as aforesaid but shall also immediately become due and payable without any demand or notice and the

security hereby constituted shall thereupon immediately become enforceable (a) if the Company shall commit any breach of or fail to observe any covenant or condition in this Debenture contained and on its part to be performed or observed, or (b) if an order is made or notice is given of intention to propose a resolution for the winding up of the Company, or ... (e) if such chattels or property are or is otherwise by operation of law taken out of the control of the Company ..."

3. By September 1991 Fresjac could no longer maintain the agreed repayments to Esanda. Esanda retained Mr Perkins, a member of the defendant firm of chartered accountants, to investigate the financial prospects of Fresjac. After Mr Perkins had delivered his report, Esanda decided that, although Fresjac was in default under the mortgage debenture, it would permit Fresjac to continue to trade provided that the directors of Fresjac permitted Mr Perkins to take effective control of the financial management of the company. It was intended that Fresjac would either trade its way out of its financial difficulties or the bakery business would be sold as a going concern. Fresjac agreed to this proposal.

4. In September 1991 Mr Perkins assumed control of the financial management of Fresjac. Mr Perkins was able to persuade the suppliers to continue to supply Fresjac on the footing that they would be paid for current supplies. His assurance did not include payment of arrears and there was to be no immediate payment of all or part of the arrears. As the result of the efforts of Mr Perkins, Fresjac was able to continue to trade and it did so until it was wound up by order of this Court.

5. Despite the efforts of Mr Perkins, the financial difficulties of Fresjac continued. On 3 March 1992 an application to wind up Fresjac was filed in this Court. It is convenient to set out the remaining facts in the form of a chronology: 27 April 1992 This Court appointed a provisional liquidator of Fresjac.

30 April 1992 This Court made an order revoking the appointment of the provisional liquidator.

5 May 1992 Fresjac paid $25,056.67 to the defendant for fees for the services of Mr Perkins.

16 June 1992 This Court made an order winding up Fresjac and appointed Mr A R Campbell liquidator.

17 June 1992 Exercising powers contained in Clause 21 of the debenture, Esanda appointed Mr Perkins receiver and manager of Fresjac.

11 November 1992 Mr Campbell, exercising his powers as liquidator, instituted proceedings to recover the payment of the sum of $25,056.67 on the ground that the payment was a disposition of property made after the commencement of the winding up and was therefore void pursuant to s468(1) of the Corporations Law.

11 December 1992 Mr Perkins resigned as receiver and manager and Mr Duncan was appointed in his place.

6 August 1993 The defendant repaid the sum of $25,056.67 to Fresjac. The payment was not made to the liquidator.

13 August 1993 Mr Duncan, as receiver and manager of Fresjac, issued a receipt for the payment of $25,056.67.

17 March 1994 Fresjac joined as plaintiff in this action.

6. The payment of the sum of $25,056.67 was made before Esanda had appointed its receiver and manager. It will have been noticed also that, although the demand for repayment was made by the liquidator, the repayment was made to the company and the receiver issued a receipt for that payment. Fresjac and its liquidator claim that the company is entitled to be paid $25,056.67 by the defendants notwithstanding the payment by the defendants to the receiver and manager of Fresjac. A Master of this Court held that the payment was properly made to the receiver and that the receiver had validly issued a receipt for the payment. Fresjac appeals from that decision.

7. It will have been noticed that the charge in favour of Esanda had crystallised on 27 April 1992 by dint of the fact that the Court had ordered the appointment of a provisional liquidator: see Clause 20(e) of the charge. Such an appointment is intended to preserve the assets of the company pending an order winding up the company: Re Dry Docks Corporation of London (1888) 39 Ch D 306: Re Carapark Industries Pty Ltd (in liq) (1967) 1 NSWR 337, 341. This was the express intent of the appointment in this case. The order authorised the provisional liquidator to take the assets of the company into his custody and protect them. The provisional liquidator assumes control of the company from the directors who retain only a residual power to oppose the application for winding up and to appeal against a winding up order: Re Union Accident Insurance Co Limited (1972) 1 WLR 640; Pollnow v Garden Mews-St Leonards Pty Ltd (1984) 9 ACLR 82, 89. Lord Romilly MR graphically expressed the position in Re London Hamburg and Continental Exchange Bank, Emmerson's Case (1866) LR 2 Eq 231, 237, stating that the appointment of a provisional liquidator paralyses the affairs of the company. Thus, on the appointment of the provisional liquidator, the chattels of property were by operation of law taken out of the control of the company and the charge crystallised. The fact that the appointment of the provisional liquidator was revoked does not alter the position. The operation of Clause 20(e) had been triggered by the appointment.

8. This was an instance where the contract between borrower and lender expressly provided for crystallisation. Such a contract should operate according to its terms: Deputy Commissioner of Taxation v Horsburgh [1983] VicRp 118; (1983) 2 VR 591, 599; Fire Nymph Products Ltd v The Heating Centre Pty Ltd (1988) 14 ACLR 274 and, on appeal (1992) 7 ACSR 365. The payment made by Fresjac to the defendant was, therefore, a payment from the assets of the company which were then subject to a charge to Esanda.

9. The parties presented their argument on this appeal and the case had been conducted on the footing that the charge did not crystallise until the winding up order was made on 16 June 1992. It will be noticed that the reasons of the Chief Justice treat the issues on the basis that the charge did not crystallise until then. Mr Wells QC, who appeared for the respondent, conceded that, although there were arguments pointing to an earlier crystallisation of the charge, he did not want to argue that the crystallisation had occurred earlier than the winding up order. This Court should not be bound by a concession which, on its face, should not have been made and where the question is a question of law which requires no further evidence: cf National Australia Bank Ltd v KDS Construction Services Pty Ltd (in liq) [1987] HCA 65; (1987) 163 CLR 668, 679-680. See also Banque Commerciale SA (in liq) v Akhil Holdings Limited (1990) 169 CLR 279, 304 and Centronics Systems Pty Ltd v Nintendo Co Limited [1992] FCA 584; (1992) 111 ALR 13, 57. The terms of para.20(e) of the charge are clear. The effect of the appointment of a provisional liquidator is well settled by authority. This Court should, therefore, hold that the charge crystallised on 27 April 1992 when the provisional liquidator was appointed.

10. It is common ground that the payment made by Fresjac was void pursuant to s468(1) of the Corporations Law. A payment invalidated by s468(1) is void for all purposes related to or incidental to the administration of the winding up of Fresjac: National Acceptance Corporation Pty Ltd v Benson (1988) 13 ACLR 1. The invalid transaction is treated as if it had never, in law, occurred and as if it had no relevant legal effect as against the world: per Kirby P in National Acceptance Corporation Pty Ltd v Benson (supra) at 2. Priestley JA expressed the same principle in other terms (at p8). He said, once the winding up order is made, the transaction is "to have no legal effect from the time it took place... The transaction must in law be regarded as never having taken place at all unless the court otherwise orders." Thus, applying those principles to the circumstances of this case, the payment made by Fresjac was in law never made so that the money used to make the payment at all times remained an asset of Fresjac subject to the charge. In other words, because in law the payment did not take place, Esanda as secured creditor is deemed not to have lost its beneficial interest in the money. So, when the money was repaid, Esanda was entitled to receive it and the receiver as its agent was entitled to issue a receipt for it. To hold otherwise would be to ignore the fact that the money was subject to a charge which had crystallised and that, in law, the payment was a nullity and had never occurred. Thus, the receiver appointed by Esanda was entitled to give a good receipt for the payment and neither the liquidator nor Fresjac can now sue to recover the payment. Even if the money had been repaid to the liquidator as the person making the demand, the liquidator had no entitlement to retain it but was required to pay to Esanda or the receiver which Esanda had appointed.

This conclusion is entirely consistent with the rationale of s468(1). It is well settled that s468(1) is intended to prevent, during the period which must elapse between an application to wind up a company and the hearing of the application, the improper alienation and dissipation of the assets of the company: Re Wiltshire Iron Co; ex parte Pearson (1868) LR 3 Ch App 443; Re Margart Pty Ltd (in liq) (1984) 2 ACLC 709; Wiley v The Commonwealth (1995) 13 ACLC 1556. Section 468 does not distinguish between secured and unsecured creditors. As the purpose is to preserve assets pending the hearing of the petition, all creditors, secured and unsecured, are entitled to the benefit of the provision. The effect of the section is to seek to restore the status quo in respect of those transactions which are not validated pursuant to s468(3). A secured creditor is, therefore, entitled to the protection of s468 as much as any other creditor. To accede to the submission of the liquidator is to interpret s468 in a way which excludes secured creditors from the benefit of s468. If that had been the intention of the Parliament, s468 could have been expressed in other terms. The word "void" in s468(1), therefore, means void against all parties. The secured creditor, therefore, has standing to sue to recover the payment which was made by the company in breach of s468. Although one of the purposes of s468 is to ensure that creditors are paid pari passu that is not its only purpose. The section was not intended to alter the rights of secured creditors. They are equally entitled to the protection of s468, a conclusion which is entirely consistent with one of the basic considerations in any liquidation, namely, that the function of the liquidation is to divide the assets of the company rateably amongst unsecured creditors subject to any special obligations and special obligations: Tessa Furniture Pty Ltd (in liq) v Glendave Nominee Pty Ltd (1987) 9 NSWLR 254, 255.

12. If a company makes no disposition of its assets pending the hearing of the winding up application, those assets which are subject to a charge would remain subject to the charge and those assets which are not secured would be available for unsecured creditors. The position should be no different if in fact a disposition were made in breach of s468(1). The conclusion is also consistent with the position of a secured creditor who holds a charge over the assets of a company which has been wound up. The assets secured by the charge remain subject to the charge notwithstanding the liquidation. The conclusion is consistent also with the fact that, upon crystallisation of the charge, Esanda could have immediately appointed the receiver who could have taken charge of the assets of Fresjac and thus prevented the invalid payment. In other words, each of these facts is but a reminder of the beneficial ownership of Esanda in the money as part of the assets of Fresjac subject to the charge.

13. In short, s468(1) does not, either expressly or by implication, prefer the interests of any one class of creditors over the interests of another. Instead, it seeks to preserve the property of the company for all creditors, secured or unsecured. If part of the company's property is subject to a charge, that property will be dealt with according to the nature and effect of the charge. The position of unsecured creditors should not be improved by reason of the accident that the company happens to make a payment out of monies the subject of the charge which has crystallised.

14. I respectfully agree with Wright J in Bayley v National Australia Bank Ltd [1995] TASSC 13; (1995) 16 ACSR 38, 40 that funds which are improperly disposed of after the commencement of the liquidation proceedings remain the property of the company at all relevant times and upon being restored to the company by the action of the liquidator become once more subject to the respondent's floating charge. The position is the stronger in circumstances such as these where the charge had crystallised before the time the payment was made.

15. Further, s468(1) provides a means by which the secured creditor can recover property which has been disposed of in breach of the charge. As a floating charge is an equitable charge, the secured creditor may not be able to recover property which has been disposed of to a bona fide purchaser for value who does not have notice of the charge. Section 468 may provide the only means by which a secured creditor or a receiver appointed by him can recover property disposed of in breach of the charge. As Oliver J noted in Re J Leslie Engineers Co Limited (1976) 2 All ER 85, 90, the section says nothing about recovery. It merely avoids the disposition. There is no reason why that right should not be available to the secured creditor. The payment in this case was made to the defendant firm at a time when the company was being administered by a person appointed by Esanda who was also a member of the defendant firm. Although those and other facts might have made it difficult in the particular circumstances of this case for Esanda to have recovered payment under the debenture, I do not think that fact precludes the defendant from relying on s468.

16. I have reached this conclusion on the footing that the charge is crystallised so that Esanda had a beneficial interest as a secured creditor in relation to the monies the subject of the invalidated payment. I would have reached the same conclusion had the charge not crystallised until the date of the winding up order. Most of the reasons already given apply with equal force. I summarise the relevant reasons. Because the effect of s468(1) is that the payment did not take place, Esanda as secured creditor is deemed not to have lost its beneficial interest in the money. It is entitled to receive the money on repayment whether or not the charge had crystallised. Further, as already mentioned, s468(1) does not prefer the interests of any one class of creditors over the interests of another. Instead, it seeks to preserve the property of the company for all creditors. The property of the company recovered by virtue of s468 should be available to creditors according to the nature of their respective rights and interests as if the invalid transaction had never occurred.

17. Thus no issue arises as to the authority of the receiver to receive the money. In any event, for the reasons which follow the receiver had authority to receive the moneys and the receipt therefor discharged the defendant's liability. Notwithstanding the order winding up Fresjac, the receiver retained the power to take possession of property, the subject of the charge. It is well settled that: 1. Where a receiver has been appointed pursuant to a debenture, the order winding up the company limits the agency of the receiver to bind the company. The agency is limited so as to be consistent with the existence of the winding up. The agency of the receiver continues in existence for the purpose of the receiver's dealing with the property charged in the debenture or other relevant security, but not so as to permit the creation of a pecuniary liability provable against the company in the winding up.

2. It follows that the same position obtains where the receiver has been appointed after the winding up order has been made.

3. The winding up order does not affect the power of the receiver to hold and dispose of the company's property subject to the debenture, including the power to use the company's name for that purpose.

4. Upon his appointment the receiver takes complete control of the charged property and the company is dispossessed from

5. The receiver may continue or commence proceedings in the name of the company to enforce choses in action which constitute part of the security under the debenture pursuant to which he has been appointed.

6. After the winding up of the company the receiver does not, as a general rule, become agent for the debenture holder unless the latter directs or interferes with his activities. In short the winding up does not interfere with the receiver's right to take possession of and sell the company's assets which are subject to the charge.

18. These propositions are to be found in reported decisions and in the relevant texts and have recently been restated and affirmed by Lockhart J in Wiley v The Commonwealth (supra). It follows that the receiver had authority to receive the payment which constituted a recovery of part of the charged property of Fresjac and his receipt discharged the defendant's liability.

19. The appellant referred to N A Kratzmann Pty Ltd v Tucker [1968] HCA 44; (1968) 123 CLR 295, at 300-302, and submitted that a distinction should be drawn between money and specific and identifiable property subject to the charge. That decision dealt with a sum of money which had been paid out of moneys subject to a charge and which had been recovered by a liquidator as a preference. The decision turns on the fact that the liquidator could sue to recover the preference but the secured creditor could not. I do not think the principle applies to a disposition of property invalidated by s468 and made after the charge has crystallised.

20. It was also contended by the appellant that the consequences of invalidity by reason of s468(1) should be the same as for a preference invalidated by s451. This contention ignores the fact that s451 renders the transaction void against the liquidator only whereas s468(1) renders the transaction void against the world.

21. For all of these reasons I would dismiss the appeal.