Legal Insights, Uncategorized

When your customer goes into liquidation.

Your business supplies goods or services on credit. One of your customers goes into liquidation. Luckily you have been fully paid. Then a few months later you receive a letter from the liquidator. The liquidator wants you to repay the last three payments that you received from that customer.

Why has this happened? What should you do? Can I help?

In this article the payment the liquidator wants repaid is referred to as a “voidable preference”

Why has this happened?

One important principle of liquidation/insolvency law is that all creditors should be treated evenly. This equal treatment is ensure that creditors do not spend all their time monitoring the financial position of their debtors. Equal treatment requires that in certain circumstances where one creditor is better off than another creditor, the better off or preferred creditor should return some of his bounty to the liquidator.

What should you do?

The first thing to do is not to ignore the letter. Secondly you need professional advice. This will let you access the:

  • legal merits of the liquidators position
  • costs of defending the liquidators claim
  • possibility of the matter being resolved out of Court

Can I help?

The Official Assignee is often appointed by the Court to liquidate companies. I worked for the Official Assignee’s office between 1996 to 1999 and have practiced as a lawyer for over 20 years. Whilst working for the Official Assignee and subsequently, I have successfully dealt with numerous void preference claims.

This experience enables me to very quickly assess the three issues referred to above and guide you how to deal with the voidable preference quickly.

Call me now if you have a customer going into liquidation.


Craig Orton, Associate

DDI: 09 837 3505

Mobile: 021 944 001