The High Court has ruled that a creditor is required to deduct payments received from guarantors - when filing a proof of debt in the liquidation of the principal debtor - if those payments were received prior to the liquidation date.
In Re Equiticorp Industries Group Ltd (in liquidation) & OTS; Stotter & Downey v Equiticorp Australia Ltd (in liquidation) and AnorJustice Fisher held that it was against public policy to allow the creditor to include in the claim a sum of money already received by a creditor, particularly in this case where the monies received had been appropriated to the debts of the principal debtor.
Contractual stipulations allowing such a claim were held to be void as being against public policy and against the pari passu* principle. This decision departs from the Australian courts which have ruled that pre liquidation receipts received from guarantors of a principal debtor do not need to be deducted from the claim made against the principal debtor in liquidation.
Justice Fisher stressed that a creditor's claim is to be ascertained at the date of liquidation, and any money received prior to that date must be deducted where it has been appropriated to the debt.
The question was left open as to whether an agreement to place any money
received in a suspense account, which does not reduce the claim on the
debtor, would be enforceable.
* def: pari passu - the principle of proportional sharing between creditors of the same priority.
This article is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances and no liability will be accepted for any losses incurred by those relying solely
on this article.
Copyright Phillips Fox, November 2001
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