ARTICLE · 18 JANUARY 2018

Unfair preferences, third-party payments and the Quistclose trust

Bartier Perry Solicitors

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A creditor who receives a payment that could be an unfair preference, may not have to refund it to a trustee in bankruptcy.

AustraliaInsolvency/Bankruptcy/Re-Structuring

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If you are a creditor trying to collect a debt from a possibly insolvent client or customer, it is in your interest to know that in December 2017 the Full Court of the Federal Court confirmed that there are circumstances in which a creditor who receives a payment that would otherwise be an unfair preference, will not have to refund that payment to a trustee in bankruptcy if the payment is made by a third-party and the funds never became the property of the bankrupt.

The issue

We know that money received in payment of a debt in the six months before bankruptcy proceedings are started may have to be repaid to the debtor's trustee in bankruptcy, if the payment had the effect of giving the creditor a preference, priority or advantage over other creditors.

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