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Important win for creditors defending unfair preference claims

By Michael McDonnell* 

The ‘PPSA defence’ has, in recent times, become a very valuable tool used by creditors to defend unfair preference claims. The Supreme Court of South Australia recently overturned the decision of the District Court of South Australia in Matthews v The Tap Inn Pty Ltd [2015] SADC 108 that was being relied upon by liquidators nationwide to limit the value of the PPSA defence.

This decision focused on whether a creditor’s security is to be valued as at the date of liquidation. This is relevant because liquidators can only pursue unfair preference payments provided they are in respect of an unsecured debt, hence the time for valuing that security can also be a key consideration. There are competing arguments as to which of the following times are correct for valuing the security under the unfair preference regime because the legislation is not clear.

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