Re Gs Enterprises Pty Limited (In Liquidation) and Re the Companies Act, 1981 and Re Mj Higgins and Tj Higgins Carrying On Business As Higgins Solicitors [1987] ACTSC 69 (14 October 1987)

SUPREME COURT OF THE ACT

IN THE MATTER OF G.S. ENTERPRISES PTY. LIMITED (In Liquidation)
AND IN THE MATTER of the Companies Act, 1981
AND IN THE MATTER of M.J. HIGGINS and T.J. HIGGINS carrying on business as
HIGGINS SOLICITORS
S.C. No. 26 of 1984
Bankruptcy - Companies

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Miles C.J.(1)

CATCHWORDS

Bankruptcy - settlement of property - settlor in liquidation within two years - void as against liquidator - Bankruptcy Act 1966 (Cth) s.120.

Bankruptcy - payments from solicitors' trust account to office account - whether payment to creditor in preference to other creditors - Bankruptcy Act 1966 (Cth) s.122.

Companies - resolution of directors and shareholders - whether for benefit of company as a whole - Companies Act 1981 s.237(1), (2).

Bank of Australasia v. Thomas Murray Hall, Trustee of the

Estate of James Robertson in Liquidation [1907] HCA 78; (1907) 4 CLR 1514

Rees v. Bank of New South Wales [1964] HCA 47; (1964) 111 CLR 210

Ramsey v. National Commercial Banking Corp of Australia Ltd. (1987) 5 ACLC 444

Re Shaw; Ex parte Andrew v. ANZ Banking Group Ltd. [1977] FCA 18; (1977) 31 FLR 118

Barton v. Official Receiver (1986) 66 ALR 355 at p 356

Kinsela and Another v. Russell Kinsela Pty. Ltd. (In Liq.) (1986) 4 NSWLR 722

HEARING

CANBERRA
14:10:1987

ORDER

A declaration that the said payment of $15,000.00 to M.J. Higgins and T.J. Higgins carrying on business as Higgins Solicitors is void as against the liquidator by virtue of s. 451 of the Companies Act, 1981.

The said M.J. Higgins and T.J. Higgins carrying on business as Higgins Solicitors pay to the liquidator of G.S. Enterprises Pty. Limited the sum of $15,000.00 plus interest pursuant to s.53A of the Australian Capital Territory Supreme Court Act 1933.

An order that the said M.J. Higgins and T.J. Higgins carrying on business as Higgins Solicitors pay the costs of the liquidator of and incidental to this application.

DECISION

This is an application by the liquidator of G.S. Enterprises Pty. Limited ("the company") to set aside a payment of $15,000.00 made by the company in November 1983 to the respondents, a firm of solicitors. The proceedings were commenced by summons, but subsequently points of claim and points of defence were filed. Application to wind up the company was made to this Court on 10 February 1984 and the winding-up order was made on 25 March 1984. The application is made on several alternative bases. First, it is alleged that the payment was made in pursuance of a resolution of the directors which was not made for the benefit of the company and is therefore void. Secondly, it is alleged that the payment amounted to a settlement of property within s.120 of the Bankruptcy Act 1966, not being a settlement in favour of a purchaser in good faith and for valuable consideration, and is void as against the liquidator. Thirdly, it is alleged that the payment was a fraudulent disposition within s.121 of the Bankruptcy Act or alternatively or in addition under the Fraudulent Conveyances Act 1570 (Imp.) preserved in this Territory by virtue of the Imperial Acts (Substituted Provisions) Ordinance 1986, Schedule 2 Part 7. Fourthly, it is alleged that the payment had the effect of giving a preference to the respondents who were creditors of the company and is accordingly void against the liquidator under s.122(1) of the Bankruptcy Act. Lastly, it is alleged that the payment was made pursuant to resolution of the directors which was a provision for indemnifying an officer of the company which is void under s.237 (1) of the Companies Act 1981. It is admitted by the respondents in their points of defence that $827.20 of the sum in question is owing to the liquidator.

2. There is no evidence as to the date of incorporation of the company, but it is common ground that it had carried on business in the Territory for some time prior to the end of 1983 in the retail liquor trade. The respondents, and particularly Mr. Michael Higgins, one of the partners, had acted as the company's solicitors. In 1982 (or early 1983) a director of the company, Mr. Peter Tyson, was committed for trial on a charge or charges that he had imposed upon the Commonwealth by falsely completing certain liquor licence returns lodged on behalf of the company. The respondents acted for Mr. Tyson in those committal proceedings and in representations made subsequently for the filing of a no bill. Those representations were unsuccessful and in October 1983 the trial was fixed for hearing in the Supreme Court on Monday, 14 November 1983.

3. The events over the week or so prior to the trial were the subject of affidavit and oral and documentary evidence before me. Affidavit evidence was given by Mr. Rodney John Barnett, a director of the company, Mr. Tyson and Mr. Higgins and they all submitted to cross-examination. There was some conflict in the evidence given by Mr. Barnett and Mr. Tyson. Mr. Tyson was not an impressive witness and I have little hesitation in preferring the evidence of Mr. Barnett. The evidence of Mr. Barnett is, moreover, supported in some respects by documents.

4. By the middle of 1983 those charged with the administration of the affairs of the company knew that it was in financial difficulties. An agreement was entered into on 1 June 1983 whereby Messrs. Coopers & Lybrand, chartered accountants, took over certain duties relating to accounting and financial control functions within the company. It was provided that cheques for $500 or more drawn upon the company's bank account had to be countersigned by Messrs. Coopers & Lybrand. Furthermore, one of three persons whose name appeared in the schedule of the agreement were also required to countersign cheques for more than $500. None of those persons was a director of the company. One of them was Mr. David William Sistrom. Messrs. Coopers & Lybrand drew up financial statements for the year ended 30 June 1983, but the statements were expressed not to include an audit and Messrs. Coopers & Lybrand disavowed whether the statements presented a true and fair view of the financial position or of the operating results for the year. Nevertheless, a statement by directors was signed, apparently by Mr. Tyson, to the effect that there were reasonable grounds to believe that the company would be able to pay its debts as and when they fell due. This statement was undated.

5. On 7 November 1983 a meeting of directors of the company was called. The agenda for the meeting was concerned with a large number of matters relating to the financial affairs of the company but in particular Item 4 of the agenda appears as follows:

"ITEM 4:

6. Trial of Peter Tyson with specific reference to:

(a) The amount which shall be required from the
company by Messrs. Higgins Solicitors, in
advance in respect of counsel's fees;

(b) The management of the company during the
continuance of the trial which will
necessitate the ansence of Peter Tyson;

(c) The company's intention in the event that
Peter Tyson is convicted on one or more of
the charges laid against him, with specific
reference to:-

(i) The current directorship held by
Peter Tyson (vide Section 227 of the
Companies Act);

(ii) The future management of the company
(vide Section 227)."

7. A document purporting to be draft minutes of the meeting held on 7 November 1983 records, after reference to the forthcoming trial of Peter Tyson, "that the company will pay $10,000 to Messrs. Higgins solicitors, for legal costs".

8. Mr. Tyson maintained in his evidence that the minutes are inaccurate and that what happened was that he proposed a successful motion to the effect that the company pay to him the sum of $10,000 for his legal costs. Although the document in evidence as the minutes was not formally adopted by the company, I accept in the light of the evidence given by Mr. Barnett that it is a true record of the resolution that was carried.

9. Sometime over the next few days Mr. Higgins came to the conclusion that the cost of senior counsel would be greater than expected and that it would be necessary for the respondents to be put in funds to the extent of $15,000 if Mr. Tyson was to be represented as planned at the trial. Mr. Tyson said in his evidence that he attempted over these next few days to make contact with Mr. Sistrom in order to obtain a company cheque for $15,000 which could then be paid into Mr. Tyson's bank account thus enabling him to draw a bank cheque for that amount payable to the respondents. For whatever reason, there was no contact during this period between Mr. Tyson and Mr. Sistrom. There was a telephone conversation between Mr. Higgins and Mr. Tyson on or possibly shortly before Friday, 11 November 1983. Mr. Tyson told Mr. Higgins that there had been disagreement between himself and Mr. Sistrom over Mr. Tyson's management and that Mr. Sistrom had said that he would countersign a cheque for the costs of the trial only if Mr. Tyson immediately resigned from the company. Mr. Higgins said in his affidavit of 26 September 1986 that he told Mr. Tyson that he required payment to be made by bank cheque and to be from Mr. Tyson and not from the company, that it was not up to Mr. Higgins to sort out any arrangement between Mr. Tyson and the company and that Mr. Higgins did not wish to get involved in that aspect of the matter. Mr. Tyson's account of the conversation is somewhat different but does not really contradict Mr. Higgins' account. According to Mr. Tyson, Mr. Higgins said words to this effect, "I understand your problem, but you are our client and it is your responsibility to pay the money into trust before the hearing". As Mr. Higgins' account is not essentially contradicted, I am prepared to accept it. However, the exact import of what was said, insofar as it reflected the state of mind of Mr. Higgins, deserves further consideration.

10. Between Friday, 11 November (or earlier) and Sunday, 13 November 1983 Mr. Tyson gained access to the cash takings from some of the company's liquor outlets and took possession of a total sum of $15,000 in cash. The fact that Mr. Tyson had gained access to the cash takings became known to Mr. Barnett who telephoned Mr. Tyson to express concern. There is conflict on the evidence as to whether this occurred on 11 November or on 13 November, but I do not think that it makes any difference. In any event it was at some stage over that weekend that Mr. Barnett telephoned Mr. Higgins. Mr. Barnett claims that in that conversation Mr. Higgins told him that he had already received the money and was holding it for safe-keeping. On the other hand, Mr. Higgins' account is that he stated that he was aware of the fact that Mr. Tyson had gained access to the funds and that he further stated that he understood that there was a company resolution "approving a payment to Peter to cover his legal fees". On this particular matter I think that the memory of Mr. Barnett is probably at fault and he conceded as much. However, for reasons to which I will later refer, I am not convinced that Mr. Higgins used the precise words that he claims he used. Alternatively, if he did use those words, I am not convinced that they reflected his true state of mind.

11. On Monday, 14 November 1983 the sum of $15,000 was taken by Mr. Tyson to the respondents' offices and deposited into their trust account. On the same day the trial of Mr. Tyson commenced. Two days later he was acquitted.

12. On 17 November 1983 a meeting of shareholders of the company took place and there is no dispute that the minutes in evidence accurately record what happened.

"The meeting noted that Peter Tyson had been
acquitted of the charges against him relating to
the company's 1977 liquor licence return. The
meeting RESOLVED that the company should pay
Mr. Tyson's legal costs in relation to the
charges. It was noted that the directors had
previously approved a payment of $10,000 for this
purpose but that Mr. Tyson had in fact paid the
sum of $15,000 from company funds to the trust
account of Higgins Solicitors on account of these
costs (on the basis that any surplus would be used
in reduction of other outstanding accounts of the
company for legal fees). The meeting RESOLVED
that the payment by Mr. Tyson be ratified."

13. These resolutions had been drafted by Mr. Higgins and it was Mr. Higgins who drew up the minutes. Mr. Higgins had, however, not been present at the meeting on 7 November and it seems that he relied upon Mr. Tyson for his understanding as to what had occurred on that occasion.

14. I return to the situation as it existed on 14 November. The respondents had acted for the company over a period it seems of at least a couple of years. During that time they had also acted as the personal solicitors for Mr. Tyson. Routinely, statements had been sent to the company for fees for professional services rendered both to the company and to Mr. Tyson on a personal basis. Routinely, the company paid for the professional services rendered both to it and to Mr. Tyson. It appears that as at 14 November 1983 the respondents had not rendered a bill for their fees incurred in connection with the committal proceedings against Mr. Tyson. In any event the respondents had not been paid their fee for those services. Those fees amounted to $1,983.40. The respondents had rendered statements to the company in the period February to May 1983 amounting to $10,746.41, against which they allowed a credit to the company for liquor purchases of one half of that amount. Subsequently, the company sent three post-dated cheques, each for a date in October and each for the sum of $1,791.13. It appears that the proceeds of these cheques were paid into the respondents' trust account but were not credited against any particular account either in the name of the company or in the name of Mr. Tyson until 14 November 1983 at the earliest. It will be remembered that from June onwards cheques had to be countersigned by Messrs. Coopers Lybrand, and it may have been that these cheques were all drawn prior to 1 June. Neither the books of the company nor of the solicitors were in evidence and although whatever evidence there was was not easy to follow, I find that on or after 14 November 1983 the proceeds of these three cheques, together with the $15,000 which had been deposited in cash on that day, were credited to various accounts in the name of the company and of Mr. Tyson. I make that finding in the light of the concession by Mr. Higgins that the accounts were, to use the term of counsel, a shambles. That finding leads me to the further conclusion that the respondents did not immediately deal with the $15,000 as if it were a payment made by Mr. Tyson on his own behalf to be applied in respect of the costs of the trial. I took Mr. Higgins to say at one stage during his evidence that on 14 November 1983, despite the initial allocation of the $15,000 together with the post-dated cheques to various company and Tyson accounts which he could not exactly identify, there was a reconciliation on that day whereby the sum of $14,172.80 was credited to the account in Mr. Tyson's name in respect of the trial. I am not able to accept that any such reconciliation took place on that date, as at that stage it was not known how long the trial would last and what exactly the amount of professional fees would amount to. Furthermore, payment by solicitors out of their trust account into an office account for services yet to be performed would be irregular to say the least.

15. It was not until 29 November 1983 that a statement of account was sent to Mr. Tyson showing as a debit the amount of fees and disbursements incurred in respect of the trial and a credit in the same amount "Transferred from trust". On the same day a letter was sent by the respondents to the company showing "old accounts" rendered prior to but not paid with remittance advice of 16 September 1983 amounting to $3,255.50. Against that amount the letter showed credits, one of those being "surplus of funds supplied for Tyson trial" of $827.20, with a total net owing shown as $1,302.20.

16. The letter continued as follows:

"Credits have been appropriated to eliminate all
of the old accounts other than 14348 which is an
account relating to Mr. Tyson's personal affairs
and remains outstanding.

The October accounts totalling $3,082.72 remain
outstanding and further accounts for November have
yet to be rendered. Against these, however, there
are our purchases since August to be offset.

The present company crisis is requiring substantial
further work by us and in the circumstances
we would request regular weekly payments of at
least $500.00 on the arrears plus advance
payments on new work.

An arrangement by Mr. Tyson in respect of payment
of his personal account would also be
appreciated."

17. The contents of this letter and of the account rendered to Mr. Tyson do not tally with the evidence given by Mr. Higgins and it is impossible to know what was the true situation as to the accounting procedure. However, it may be noted that in sub-paragraph (g) (vi) of the particulars furnished under para 11 of the points of defence, the respondents state that they "do not seek to retain" the $827.20 referred to in the letter as "surplus funds supplied for Tyson's trial". The exact basis upon which this concession is made has not been disclosed.

18. It is submitted on behalf of the liquidator (and the exact relevance of the submission will be discussed in a moment) that as at 14 November 1983 and subsequently the company was insolvent. This is denied on behalf of the respondents. In my view it is established on the probabilities that the company was insolvent. In order to prove insolvency at a particular date it is not necessary that a balance sheet of assets and liabilities for the day in question be drawn up and presented to the Court. I adopt the test of Isaacs J. in Bank of Australasia v. Thomas Murray Hall, Trustee of the Estate of James Robertson in Liquidation [1907] HCA 78; (1907) 4 CLR 1514 at p 1543, approved in Rees v. Bank of New South Wales [1964] HCA 47; (1964) 111 CLR 210:

"The Act requires the debtor to be able to pay his
debts as they become due. This does not mean that
he is always bound to keep by him in cash a sum
sufficient to meet all his outstanding indebtedness
however distant the date of payment may be.
If at the time he makes the assignment, the
debtor's position is such that he has property
either in the form of assets in possession or of
debts, which if realized would produce sufficient
money to pay all his indebtedness, and if that
property is in such a position as to title and
otherwise that it could be realised in time to
meet the indebtedness as the claims mature, with
money thus belonging to the debtor, he cannot be
said to be unable to pay his debts as they become
due from his own moneys. In other words, if the
debtor can, by sale or mortgage of property which
he owns at the time of the assignment, change the
form of the property into cash wholly or partly
but sufficient for the purpose of paying his debts
as they become due, that requirement of the
section is satisfied."

19. Applying that test, I am satisfied, wherever the onus might lie, that on 14 November 1983 and for the relevant period thereafter the company did not have assets which were sufficient for paying its debts as they became due.

20. The liquidator's estimate is that at 16 November 1983 the company owed its major creditors a total sum of about $650,000. Of that total there was a bank overdraft which amounted to $15,665.63 on 14 November, reduced to $2,243.55 on 17 November. The company's liquor licensing fee relating to liquor purchases up to 30 June 1983 was $92,922.66 but that was not payable, as to one half, until 30 November 1983 and, as to the remaining half, until 30 May 1984. Westpac Banking Corporation as first debenture holders was owed $332,000 and it was estimated that the surplus available to second debenture holders and unsecured creditors was about $36,000. Major creditors included Glaxo Beverages for $42,874.70, Haselgroves Pty. Limited for $91,465.65, Taylor Ferguson & Co. Pty. Limited for $51,743.90, Tooth & Co. for $20,893.17 and Wynn's Winegroves Pty. Limited for $28,602.95. The profit before taxation earned by the company in the year ended 30 June 1983 was $21.096. The company's balance sheet as at 30 June 1983 included stock valued at retail value of $597,142 although it was doubtful whether that represented the true situation when the stock had been purchased for $448,512. The company in fact failed to meet several formal demands for payment served upon it between July and 14 November 1983 and the bank had failed to honour several cheques drawn by it during that period in purported payment of trade debts. I accept the liquidator's opinion that on 14 November 1983 and afterwards the company was unable to pay its debts as they fell due.

21. Mr. Higgins claims that he did not know and indeed had no reason to believe that the company was insolvent. Indeed he still contends that the company was in fact not insolvent. For the reasons above stated I reject that contention. I do not think that it has been established that Mr. Higgins saw the statements of the financial affairs of the company as at 30 June 1983. Nevertheless, between August and November Mr. Higgins clearly became aware that the company was in financial difficulty. He knew that there were proceedings in the New South Wales District Court brought by Glaxo Beverages Pty. Limited against the company for $41,964.70 and that half of the amount claimed by that creditor represented cheques which had been cancelled by the company. He had been put in possession of that information by early August 1983, and had been instructed by the company to ensure that the plaintiff could justify every cent claimed. By 25 November Mr. Higgins advised the company that there did not seem be any defence which could properly be filed.

22. By 10 August 1983 Mr. Higgins was aware that a notice had been issued pursuant to s.364 of the Companies Act on behalf of Seagram Wines & Spirits Co. Pty. Ltd. for an amount of $6,695.15 and that a similar notice had been issued on behalf of Wynn Winegrowers Pty. Ltd. for a sum of $28,602.95. Amongst the exhibits there was an undated note in Mr. Higgins' handwriting with a heading reference "Att. Directors' Meeting" and with an entry "discussed solvency. Sistrom indicates assets and liabilities about even". There is a further file memo in Mr. Higgins' handwriting bearing date 7 November, indicating communication with Mr. Tyson and noting "confident can trade out if D.S. stops interfering and lets him run it. Big X'mas trade. D.S. wants him to step down. Maybe a receiver." I take this latter memo to be a record of a telephone call from Mr. Tyson reporting on the meeting of 7 November.

23. Letters written by Mr. Higgins on 10 August 1983 in response to the s.364 notices refer to "cash-flow problem being experienced by our client" and the company's inability to comply with the notice.

24. The reference to "the present company crisis" and the request for regular weekly payments of at least $500 on arrears owing and more especially the request for "advance payments on new work" in the letter written by Mr. Higgins to the company on 29 November 1983 are, in my view, a strong indication of his realisation at that stage that the company faced not only a situation of financial difficulties but that the circumstances were critical. I take into account that the state of mind of Mr. Higgins as at 29 November 1983 may not have been the same as it was on 14 November, but it is nevertheless a relevant matter to consider.

25. I conclude on the probabilities that it is true that at 14 November 1983 Mr. Higgins did not "know" that the company was insolvent nor did he have any "belief" that that was the case. That, however, is not the end of the matter. I am satisfied that he closed his mind to those precise matters which needed to be taken into account in order to determine whether the company was solvent or not, that he realised that the company might be insolvent, and that he was prepared to investigate no further than to accept from Mr. Sistrom the advice that assets and liabilities were about equal. He told Mr. Tyson that the monies to be received on account of the costs of the trial would have to come from Mr. Tyson and not from the company and was concerned to stress that he did not wish to become involved in any arrangements between the company and Mr. Tyson in this regard. In my view the belief of Mr. Higgins was that the company was in financial difficulty but that with the imminent Christmas period it was to be hoped that it could trade out of its difficulties. In my view that does not amount to a belief that the company was solvent. Mr. Higgins consciously stopped short of addressing his mind to the precise question of whether the company was solvent or not.

26. The minutes of the meeting of directors of 7 November indicate that it was the intention of the company that the costs of Mr. Tyson to the extent of $10,000 would be met by the company. It was not intended that the company pay that amount or any other amount to Mr. Tyson for him to disburse by way of legal expenses. Accordingly, when the cash sum of $15,000 was deposited into the respondent's trust account it was still the property of the company. It may well be that payment by the company to the respondents did not occur until there was a book transfer from the trust account into one or other of the accounts of the company or of Mr. Tyson to which reference has already been made: Ramsey v. National Commercial Banking Corp of Australia Ltd. (1987) 5 ACLC 444 at 448 (Supreme Court of Victoria, Marks J.). Whether the book transfer was on 14 November 1983 or, as is I think more likely, when the trial of Mr Tyson concluded, by that time the company was no longer able to deal with the monies deposited to the respondents' trust account, and they were subject to the control of the respondents: Re Shaw; Ex parte Andrew v. ANZ Banking Group Ltd. [1977] FCA 18; (1977) 31 FLR 118.

27. For the purposes of s.120 of the Bankruptcy Act whether payment took place on 14 November or at some date between then and 29 November does not greatly matter. Sub-s.120 (8) provides that "settlement of property" includes any disposition of property. In my view depositing the cash sum of $15,000 into the trust account involved a disposition of the company property. If it did not, then there was a disposition when the money came under the control of the respondents, or, at the latest, when they made the book entries debiting the trust account and crediting the various company and Tyson accounts.

28. It was argued on behalf of the respondents that neither the deposit to the trust account nor the payment out of the trust account by crediting the various accounts of the company and Mr. Tyson could amount to a settlement within s.120 and that despite the terms of sub-s.120 (8), s.120 was directed at dispositions of property which had a quality of "permanence". Whilst it may be acknowledged, somewhat paradoxically, that "permanence" is a relative concept, the High Court has said that the term "settlement" in the Bankruptcy Act is directed at something more lasting than "the immediate dissipation or consumption of the money", Barton v. Official Receiver (1986) 66 ALR 355 at p 356. A payment to a creditor in discharge of a debt is not, in my view, a settlement of property. Hence s.120 and s.122 may be seen to be mutually exclusive. The deposit of the $15,000 into the trust account on 14 November was not intended to be transitory to be followed by the immediate dissipation or consumption of that sum or any part of it but had to abide the anticipated rendering of professional services to Mr. Tyson and payment to counsel and other disbursements.

29. Section 122 (1) is directed against a payment made in favour of a creditor having the effect of giving that creditor a preference over other creditors. It was disputed on behalf of the respondents that the company was a debtor, but on the evidence to which I have already referred it was so, although the exact sum which it owed as at 14 November or between then and 29 November is almost impossible to determine. At least it may be concluded that the total indebtedness of the company to the respondents in the interim did not at any one time exceed what was paid to the respondents. There is a difficulty involved in applying s.122(1) to a payment to a creditor which exceeds the amount of the debt owed by the bankrupt to the creditor. It would seem to me that, as s.122(1) and s.120 are mutually exclusive, then in that sort of situation what is not caught by one section is likely to be caught by the other. In other words, if the bankrupt pays the creditor more than the creditor is owed, then the excess may be categorised as a settlement under s.120. For the purposes of both s.122(1) and s.120 I find it positively established that the respondents were not purchasers in good faith in the sense contemplated by the Act.

30. I might add that on 14 November and over the week or so previously, Mr. Higgins was in a particularly difficult position. He was acting for a man who was facing a trial on criminal charges and he had already briefed senior counsel to appear on the trial. His client had not sought to put him in funds until the morning of the trial itself. Ethically he was bound at that stage to continue to represent the accused and amongst other things to be responsible for payment of counsel's fees. It was no doubt difficult to resist the deposit of cash and understandable that the cash was received without precise consideration of the true situation regarding the company and its creditors.

31. As I have come to a firm conclusion that the deposit of $15,000 to the trust account of the respondents on 14 November (or the adjustment of accounts between then and 29 November) 1983 was void as against the liquidator as a settlement of property under s.120, it follows that relief in the nature of that sought by the liquidator must be granted. Alternatively, I am of the view that, if there was not a settlement under s.120, then the payment from the trust account by the respondents in respect of the various accounts of the company and of Mr. Tyson was payment to a creditor within s.122(1), even though it is impossible to establish exactly when particular payments occurred and into which accounts the payments were made. In the circumstances, it is unnecessary to make any findings or to rule as to the claim made under the Fraudulent Conveyances Act. I also think that it is not necessary to consider at length whether the resolutions of the directors and of the shareholders were void either under the general law because they were not for the benefit of the company as a whole or under s.237(2) of the Companies Act. It is sufficient to say that for the reasons advanced by Street C.J. in Kinsela and Another v. Russell Kinsela Pty. Ltd. (In Liq.) (1986) 4 NSWLR 722 a resolution of directors or of shareholders will be declared void where in the case of an insolvent, or even a near insolvent, company they have acted without due regard to the interest of creditors. The resolution of 14 November 1983 to pay Mr. Tyson's costs of $10,000 and the resolution of 17 November 1983 purporting to ratify the payment of $15,000 for Mr. Tyson's costs were, in my view, made without due regard, indeed without any regard at all, to the position of creditors. It might be noted that if those resolutions were void, they were void for all purposes and the effect may be different from an avoidance under s.120 or s.122(1) which provides for avoidance against the liquidator only.

32. I make orders in terms of paragraphs (b), (c) and (d) of the summons dated 15 September 1986. I shall hear the parties on whether it is necessary to make an order in accordance with paragraph (a).