Creditor defeats liquidator’s unfair preference claim
It is a defence to an unfair preference claim to show there were no reasonable grounds to suspect the insolvency of the debtor company.
10 July 2019
It is a defence to an unfair preference claim to show there were no reasonable grounds to suspect the insolvency of the debtor company.
A recent court decision considered whether arguments about the meaning of the contract constituted a genuine dispute for challenging a creditor’s statutory demand for payment of debt.
In the recent case of 1st Fleet Pty Ltd (in liquidation), the Court clarified the information disclosure obligations of external administrators in the Insolvency Practice Schedule (Corporations) (IPSC) and Insolvency Practice Rules (Corporations) 2016 (Rules).
Bank guarantees are frequently given as security in commercial transactions because they are widely regarded as being ‘like cash’. However, the Queensland Court of Appeal’s recent decision in Santos Limited v BNP Paribas confirms that compliance with the terms of a bank guarantee is an essential precondition to payment on demand.
In business it is not uncommon for a director of a company to be owed money by that company. If the commercial relationship breaks down, the director may think it is an option to serve a creditor’s statutory demand on the debtor company.
In the recent court decision of Trenfield v HAG Import Corporation (Australia) Pty Ltd [2018] QDC 107, the liquidators recovered unfair preferences from a retention of title creditor who argued it was a secured creditor.
In the recent decision of Heavy Plant Leasing [2018] NSWSC 707, a creditor successfully defended an unfair preference claim by establishing it did not have reasonable grounds to suspect the insolvency of the debtor company, who was a subcontractor in the earth moving business.
A debtor company will often seek to set aside a creditor’s statutory demand on the basis that there is a genuine dispute as to the existence or amount of the alleged debt claimed by the creditor, the debtor company has an off-setting claim against the creditor (or both), that reduces or cancels out the amount claimed in the statutory demand.
Commonly, a creditor being sued by a liquidator to refund an alleged unfair preference is owed money by the company in liquidation.
Topics discussed: Market value of repossessed commercial vehicle and steps taken to sell vehicle & Increasing a credit card limit where the funds were used for gambling
On 11 September 2017, the Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Bill 2017 was passed by the Senate. The Bill features two key changes to the Corporations Act
Just because a liquidator asserts you have received an unfair preference, does not necessarily mean you have or that there are no potential defences available to you.