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ARTICLE · 27 DECEMBER 2021

Insolvency - unfair preferences and statutory set-off under section 553C

Bartier Perry Solicitors
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The creditor of an insolvent company has no statutory right of set-off against a liability to repay an unfair preference.

AustraliaInsolvency/Bankruptcy/Re-Structuring
Gavin Stuart
Gavin Stuart
Emma Boyce
Emma Boyce
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In October 2021, we published an insolvency update relating to the quantification of preference claims in Australia, specifically the recent Badenoch decision and its impacts on the peak indebtedness rule.

Late last week, the Full Court of the Federal Court of Australia (Full Court) delivered the much-anticipated judgment in Morton as Liquidator of MJ Woodman Electrical Contractors Pty Ltd v Metal Manufacturers Pty Limited [2021] FCAFC 228.

In this judgment the Full Court was asked to answer the question "Is statutory set-off, under s 553C(1) of the Corporations Act 2001 (Cth), available to the defendant in this proceeding against the plaintiff's claim as liquidator for the recovery of an unfair preference under section 588FA of the Act?"

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