You can be too smart for your own good.
The preferential payment provisions of the Corporations Act
2001 are one of the most powerful weapons in a
liquidator's armory. As many would be aware, creditors have
many defences available but the most often successfully employed is
the continuing business relationship or running account defence
contained in Section 588FA(3) of the Corporations Act. For the
technical detail on its application,
click here.
Recently, we had a situation where a creditor appears to
inadvertently forfeited their ability to maximise the application
of this defence!
The appointment
We were appointed liquidator to a manufacturing business. The trade
creditor above supplied stock to the company. After the business
defaulted on paying for the stock and accrued a large debt, the
trade creditor took various actions against the company including
the following:
