Insolvency - unfair preferences and statutory set-off under section 553C

• Published date: 27 December 2021
• Subject Matter: Insolvency/Bankruptcy/Re-structuring, Insolvency/Bankruptcy
• Law Firm: Bartier Perry
• Author: Mr Gavin Stuart and Emma Boyce

In October 2021, we published an insolvency update relating to the quantification of preference claims in Australia, specifically the recent Badenoch decision and its impacts on the peak indebtedness rule.

Late last week, the Full Court of the Federal Court of Australia (Full Court) delivered the much-anticipated judgment in Morton as Liquidator of MJ Woodman Electrical Contractors Pty Ltd v Metal Manufacturers Pty Limited [2021] FCAFC 228.

In this judgment the Full Court was asked to answer the question "Is statutory set-off, under s 553C(1) of the Corporations Act 2001 (Cth), available to the defendant in this proceeding against the plaintiff's claim as liquidator for the recovery of an unfair preference under section 588FA of the Act?"

The Full Court answered no.

We set out the details of the judgment and its effect below.

The facts

In this matter, Morton as a Liquidator of MJ Woodman Electrical Contractors Pty Ltd (Company) brought proceedings against Metal Manufacturers Pty Ltd (Metal Manufacturers), seeking the repayment of $190,000.00 that Metal Manufacturers had received during the relation-back period.

Metal...