Creditor defeats unfair preference claim by liquidator

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.

The most common way of defending a liquidator's unfair preferences claim is to rely upon section 588FG(2) of the Corporations Act 2001(Cth); commonly called the 'good faith defence'.

Whether a creditor can successfully rely on the defence will depend on the specific facts and circumstances of the creditor's dealings with the debtor company. The cases make it clear that the court will have regard to all of the circumstances, assessed accumulatively. It is a matter of looking, through the contemporary eyes of the parties, at the commercial circumstances that prevailed between them. It is not a matter of looking at the evidence with the benefit of hindsight.