Good Samaritan payments subject to preference actions may be repaid in priority

In brief - Courts identify three circumstances for ordering priority repayments

Third-party payers should be aware that preference payment provisions may apply to "Good Samaritan" payments if debtors are placed in liquidation or declared bankrupt. However, as shown in Young v ACN 081 162 512 and Anor [2005] NSWSC 139, the courts will consider certain circumstances where third parties may be able to recover the payment in priority to other creditors.

"Good Samaritan" payments may pose risks for third-party payers

It is commonplace for a debtor to seek the assistance of a third party, such as a director, to pay off a debt in order to forestall insolvency. This may be seen as an ideal arrangement when a creditor refuses to provide any further goods and services until outstanding invoices have been paid and the debtor is desperate to keep their business running.