Appellate decision of preference: don’t presume to save your MC Bacon!

August 10, 2018

gunnercooke has recently acted on behalf of the successful Respondents in an appellate decision (the Respondents winning at first instance) on insolvency preference delivered on 17 July. Given the dearth of decisions on preference over the last 40 years or so since MC Bacon (especially at appeal level), it is likely to be of significant importance to insolvency practitioners and lawyers.

The Respondents prevailed notwithstanding the fact that they has to overcome the statutory presumption of the desire to prefer. They were unable to submit evidence on the part of the debator, who had unfortunately passed away prior to the commencement of proceedings.

The case is a reminder that insolvency practitioners should not simply seek to rely on the benefit of the statutory presumption. The burden of proof in litigation seldom being decisive of itself. Whilst practitioners will benefit from reading the full decision, some additional points of note include the following:

  1. The Court rejected as ‘a facility’ the notion that a preference can only avoid being set aside if the motivating desires are ‘within the range of proper considerations by which a debator might be actuated’; and
  2. The Respondents succeeded despite the first instance finding that repayment of the old loan (from R1) was not a condition of the new loan (from R2) and the fact that repayment of the old loan did not occur until the day after the new loan.

The case has recently also been reported under [2018] All ER (D) 133 (Jul).


Written by Restructuring and Insolvency Partner, Séamas Gray

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