Lineville Pty Ltd (in liquidation) as trustee sold goods supplied by H.A.G. Import Corpn. (Australia) Pty Ltd. The terms and conditions of sale granted HAG a security interest in Lineville’s inventory and proceeds. During the relation-back period, Lineville made various payments to HAG for goods it had supplied.
Lineville’s liquidators sued HAG claiming that it had received the payments in respect of an unsecured debt because HAG’s security interest vested under s 267 of the Personal Property Securities Act 2009 (Cth), or alternatively, valuing HAG’s security interest at either the relation-back day or the day of each payment, HAG was taken to be unsecured under s 588FA(2) of the Corporations Act 2001 (Cth).
The Court held that: HAG was a secured creditor under the general law; Lineville’s inventory should be valued on the day of each payment; HAG could not trace proceeds into an account which was in overdraft; under s 588FA(2), HAG was taken to be unsecured for part of the claim. Under s 588FF, the Court ordered HAG to pay the liquidators part of the claimed amount.