Not all third party payments are unfair preferences

In a recent decision of the Supreme Court of New South Wales (In the matter of Pacific Plumbing Group Pty Limited (in liquidation)  [2024] NSWSC 525), Justice Black determined that a payment made by a third party was not an unfair preference because the payment did not diminish assets available to creditors.

Key Takeaways

• When identifying potential recoveries, liquidators should carefully consider whether payments made by third parties amount to unfair preferences.
  
  
• Liquidators bear the onus of proving that payments made by third parties are unfair preferences, even where the liquidator's claim is undefended.
  
  
• Book entries recording the relevant transaction together with an inferred arrangement for payment will not alone be sufficient. The liquidator must establish that the relevant third party payment was from the company and diminished the assets available for distribution to creditors.