Recent Developments In Respect Of Unfair Preference Claims

HCCW 755/2005 – Re Sweetmart Garment Works Limited (in Liquidation) – Recent developments in respect of unfair preference claims

Introduction

An unfair preference claim is (in theory) a powerful tool for liquidators to recover assets of the company when a creditor's position has been unfairly improved by the company prior to its winding up. However, in practice the tool has rarely been used, and even more rarely been used successfully. This may change following a recent decision of the High Court in which we acted for the liquidators, partners of Grant Thornton.

In a case where the preferred creditor is an "associate" of the company (for instance a director), the onus is on the preferred creditor to show that the company was not influenced by a desire to prefer the creditor over other creditors of the company in taking the steps complained of.