Head of Restructuring and Insolvency at Hamilton Locke Nick Edwards recently spoke with Lawyers Weekly on the implications of the recent judgment handed down by the High Court of Australia in Metal Manufacturers Pty Limited v Morton.
The High Court’s decision confirmed that set-off cannot be used by a creditor as a defence to a liquidator’s preference recovery claim.
Nick spoke to Lawyers Weekly and weighed in on the implications of this and noted,
“The High Court decision provided clarification on a vexed and uncertain area of law in the insolvency landscape.
It is now clear ‘set-off’ is dead in the water as a defence to a preference claim,
The decision was a win for liquidators, with respect to set-off and unfair preferences.
This takes away a potential defence many creditors may elect to run when confronted with a claim by a liquidator. Often this is done spuriously and often in bad faith,
[The decision] provides certainty around an area of law that created at times unnecessary issues and often resulted in stalemates in relation to potential recoveries.
These stalemates could impact the return to creditors as there were often unnecessary costs incurred (often by lawyers, I hate to say) as claims were dragged out,”
Nick also commented,
“For lawyers in this space, it means the position is settled, and this should flow through to the advice given not only to liquidators on prospects but also in relation to any claim by a liquidator if acting for a creditor.”
It will also allow administrators to identify with more certainty potential claims and prospects of recoverability ideally when preparing the report to creditors,
Critically, these recoveries may be viewed in light of a DOCA proposal, and the ultimate return achievable.”
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