Unfair Preferences – Recent High Court clarification

We recently pondered what insolvency would look like this year and it seems to some extent we have an answer, as Special Counsel Caroline Callegari explains.

Introduction

On the 8th of February 2023, the High Court handed down two very important decisions that provide guidance to insolvency practitioners, their advisors, and creditors of an insolvent company on the defences available when a liquidator claims a claw back on the basis of an alleged “unfair preference” payment.

We will provide more detailed case summaries in the near future, but for now a quick ‘heads up’ is as follows:

Case 1: Metal Manufacturers Pty Limited v Morton [2023] HCA1

In this case the High Court finally “put to bed” the question of whether set-off under S553C is an available defence to unfair preference claims. The High Court held that it does not apply as a defence.

Case 2: Bryant v Badenoch Integrated Logging Pty Ltd [2023] HCA2

This decision dealt with the running account balance defence under S588FA (3) and upheld the decision of the Full Federal Court that the peak indebtedness rule does not apply.

Watch this space - a further, more detailed summary of the cases and their impact is to follow.

How Sharrock Pitman Legal can help?

If you have a specific issue about insolvency, whatever that may be (whether in relation to pursuing or resisting a claim), please do not hesitate to contact member of our Litigation Team.

If we can assist you please contact us by email litigation@sharrockpitman.com.au or call 1300 205 506.

Related articles

Will 2023 be the year that insolvency becomes normal?

The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

Liability limited by a scheme approved under Professional Standards Legislation.

For further information contact  
Caroline Callegari

Caroline Callegari is an Associate Principal and leads our Disputes & Litigation team. She has an advisory and advocacy practice in the following areas: Commercial Litigation, corporate and personal disputes, debt recovery and, insolvency and bankruptcy matters. Caroline can be contacted on (03) 8561 3324.

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