Let’s just throw the law away!

In a recent decision in the District Court in Queensland the Court decided, in the matter of Morton & Anor v Rexel Electrical Supplies Pty Ltd [2015] QDC 49, that a Creditor in receipt of a Preference Demand/Payment could, in simple terms, offset that demand/payment against any outstanding pre liquidation debt owing to it. Thus, in essence the creditor will effectively receive the full benefit of the preference payment anyway.

Given such a stance, it might be simpler and more cost effective to simply remove the entire Preference provisions from both the Corporations Act and the Bankruptcy Act altogether!

Now I know of recent times I have had some discussions with different authorities who have come under a consistent barrage of preference claims and have, as a consequence, expressed that they have had a gutful of the frustration that the whole process is causing. So I can easily understand from their point of view that this decision may well be seen as a godsend!

We often have people chasing us for a fixed price dealings and thus the oft quoted figure of $6,000 is regularly thrown up, (search the web and you’ll find those that specialise in this arena). However, if you read the fine print the fee excludes any amount that they are able to recoup from ‘any party’ in the future. Such a fee is simply a quote to induce someone to the table, not to do a professional job.

When this figure first popped up there were many that said you could not do a professional matter for that figure. Alas, it fell on deaf ears, the authorities were happy – it was market forces at work driving costs down! In reality it simply changed the game, suck someone in then look for ways, that with appropriate legal assistance, you could claw back money from a variety of parties; directors, creditors, authorities, insurance policies, in fact almost anyone. The sad ending in the whole tale is that in the majority of cases the recoveries achieve nothing more than paying fees, both legal and accounting. I wonder if they would consider changing their mind in hindsight.

In reality it’s time to ensure that appropriate costs are marked against what needs to be done, and a more efficient process is considered in dealing with preferences and the like. If the industry and the market are unwilling to do this then maybe, just maybe, the Queensland Court has the right idea and we should just dump the legislation. It certainly doesn’t appear to assist Creditors.

In fact why even try to be fair at all; if it will always be the bully that wins and right and wrong don’t count?