8 Pages Posted: 13 Sep 2006
Date Written: September 2006
Can a payment in satisfaction of an antecedent debt be both a preference under section 239 of the UK Insolvency Act 1986 and therefore a transaction at an undervalue pursuant to section 238 of the UK Insolvency Act 1986?
Describing it as an interesting question of law on which there was no direct authority, the English High Court in Barber v CI answered in the affirmative. In this commentary, we evaluate that decision and submit that it is difficult to defend. Two main propositions emerge from our analysis: First, a transaction can never properly be reversed or adjusted pursuant to section 238 simply because it is liable to being challenged on some other legal ground (including section 239). And second, a transaction which is intrinsically at an undervalue is always properly susceptible to a successful section 238 challenge even though its constitutive facts also give rise to another cause of action (for example, a common law restitutionary claim arising from a mistaken payment).
Keywords: Preference, Transaction at an Undervalue, Fraudulent Conveyance, Overlap between Sections 238 and 239 of the UK Insolvency Act 1986, Defences, Authorities on US Bankruptcy Code
JEL Classification: K10, K11, K12, K30, K39
Suggested Citation: Suggested Citation