Preferences—rebuttable presumption fails to save the day (Re O’Shaughnessy (Deceased); Abdulali (trustee in bankruptcy) v Finnegan)

Preferences—rebuttable presumption fails to save the day (Re O’Shaughnessy (Deceased); Abdulali (trustee in bankruptcy) v Finnegan)

Preferences—the rebuttable presumption does not lead to easy victories, even when a key witness is missing. A businessman juggling the many (and perhaps usual) pressures of an insolvent business he is seeking to save is perfectly possible to have no regard to preferring anyone, even an associate. A judgment based on sound findings of fact and a fair analysis of the relevant statute and case law is unlikely to be appealable. Written by Mark Sands, personal insolvency partner at Quantuma LLP.

Re O’Shaughnessy (Deceased); Abdulali (trustee in bankruptcy) v Finnegan and another [2018] EWHC 1806 (Ch), [2018] All ER (D) 133 (Jul)

What are the practical implications of this case?

It is tempting to see a case where a rebuttable assumption works in your favour as a strong case, especially where a key witness is expected to fail to give evidence. This case is a reminder that a rebuttable presumption is but one side of the coin. Insolvency practitioners and their legal teams need to gather and consider all the (perhaps limited) evidence before deciding whether to issue proceedings and not simply rely on a rebuttable presumption. When you weigh up what the court may decide, if the rebuttable presumption is needed to tip the prospects of success in your favour then you may not have a strong case and so it may in effect be decided on the toss of a coin.

The district judge at first instance, approved by Birss J on appeal, almost used the ‘sunshine test’ (see Re White & Osmond (Parkstone) Ltd (unreported, 30 June 1960)). Practitioners should bear that in mind when debating which desire most influenced a debtor (or company). A debtor busy trying to save his business is often influenced by those desires rather than worrying about what may happen to one or other creditor if his business fails.

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About the author:

Stephen qualified as a solicitor in 2005 and joined the Restructuring and Insolvency team at Lexis®PSL in September 2014 from Shoosmiths LLP, where he was a senior associate in the restructuring and insolvency team.

Primarily focused on contentious and advisory corporate and personal insolvency work, Stephen’s experience includes acting for office-holders on a wide range of issues, including appointments, investigations and the recovery and realisation of assets (including antecedent transaction claims), and for creditors in respect of the impact on them of the insolvency of debtors and counterparties.