In what will be a worrying decision for insolvency practitioners, the High Court declined to make an order requiring the repayment of a preference payment in Bucknall and another v Wilson (Re Fowlds)  EWHC 1200 (Ch).
In this case, the Joint Trustees in Bankruptcy applied for a restitution order under section 340(2) Insolvency Act 1986 and were successful in obtaining a finding that a payment made amounted to a preference.
However, the court declined to make any order to restore the position, on the basis that relief may be declined in exceptional circumstances if justice so requires. The Respondent to the application had been successful in evidencing such circumstances. In particular, the Respondent evidenced that she no longer had the monies received or any proceeds thereof (which is tantamount to a change of position defence often seen in unjust enrichment claims). Her general financial position was poor in that she had low income and no assets other than her home, which would have to be sold to pay any order.
In relation to the actual preference payment, the court had found that this was paid on a commercial basis at arm’s length for work carried out by the Respondent, and that she had no knowledge that it was a preference.
All these factors taken together led the court to conclude that this case was “out of the norm” and that justice and fairness meant no order for repayment should be made.
Whilst the court did state that its decision was rare, this case will no doubt remind officeholders of the need to consider more than just the making out of the preference, to include the circumstances of the recipient. Indeed, enquiries should be made to ascertain their position at the earliest opportunity.
For more information, please do not hesitate to contact Alexandra Withers.