Large Corporate Client Targeted for Preference Claim

By undertaking an early analysis of the communications between our client and the company in liquidation, we were able to prepare a detailed and rigorous response to the liquidators ’preference claim. Despite the threat of commencement of proceedings, we were able to make an early “Calderbank” offer and consequently achieve a very quick and low settlement.

Facts:

• Client: Australian subsidiary of an international consumer electronics company.
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• Location: Victoria.
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• Situation: Liquidator’s preference claim.
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• Outcome: Quick and low settlement compared to the preference claim demand.
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• Key elements of success: Early targeted factual analysis to support defence and counter arguments.

Our client received a demand from a Liquidator for a significant sum, arising from alleged unfair preference with respect to payment for goods supplied by our client.

We claimed both:

1. That the transactions were part of a running account, as if together they constituted a single transaction; and
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2. The client had a defence of good faith, reasonable grounds and valuable consideration.

Both required that we undertook an analysis of the business relationship and extensive communications between the client and the company in liquidation over a significant period leading up to and including the relation back period.

The question of running account was, in the circumstances, complex and is a contentious aspect of the question of unfair preference. The good faith and reasonable grounds defence is also, by its nature, highly factually specific.

We were able to achieve a quick settlement at a significantly reduced amount, compared to the claim, through moving immediately to a targeted factual analysis.

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