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ARTICLE · 23 FEBRUARY 2022

Can I set off an unfair preference claim?

Cathro & Partners
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This case considered whether the right of set off was a defence to unfair preference claims brought by a liquidator.

AustraliaInsolvency/Bankruptcy/Re-Structuring
Cathro & Partners
Cathro & Partners
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The full Federal Court, in the recent decision of Morton as Liquidator of MJ Woodman Electrical Contractors Pty Ltd v Metal Manufacturers Pty Limited [2021] FCAFC 228 considered the provisions of s553C of the Corporations Act 2001 (Cth) ("the Act") and whether the right of set off was available as a defence to unfair preference claims bought by a Liquidator in line with the provisions of s588FA of the Act.

What are the provisions included in s553C of the Corporations Act?

S553C notes:

(1) Subject to subsection (2), where there have been mutual credits, mutual debts or other mutual dealings between an insolvent company that is being wound up and a person who wants to have a debt or claim admitted against the Company:

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