Australian High Court: No Statutory Set-Off Against Unfair Preference Claims

In Short

The Situation: Historically, creditors pursued by liquidators under the unfair preference regime could rely on a statutory set-off as a defence to the claim, reducing or eliminating their liability to repay what would otherwise be preference payments, on the basis that the liability for the unfair preference payment formed part of a running account between the creditor and the company.

The Development: In Metal Manufactures Pty Ltd v Morton as liquidator of MJ Woodman Electrical Contractors Pty Ltd (in liq) [2023] HCA 1, the High Court of Australia held that debts owed to creditors cannot be set off against a liquidator's unfair preference claim during winding up.