CI Ltd v Sonatacus Ltd (Joint Liquidators of)

CI Ltd v Sonatacus Ltd (Joint Liquidators of)

The payment of £50,000 by Sonatacus Ltd to CI Ltd constituted a preference under sections 239 to 241 of the Insolvency Act 1986, as it discharged the Company’s debt to Mr Susca, thereby preferring him. CI Ltd failed to establish that it received the payment in good faith, given its knowledge of the Company’s financial difficulties and the circumstances of the transaction. The transaction was not a transaction at an undervalue as the consideration was equal, but the payment was voidable as a preference and must be repaid.

Parties
Appellant: CI Ltd; Respondent: The Joint Liquidators of Sonatacus Ltd
Jurisdiction
England and Wales
Judgment Date
25 January 2007
Procedural Posture
Civil Appeal / Second Appeal From Chancery Division, Manchester County Court
Outcome
Appeal dismissed
Legal Topics
Transaction at Undervalue, Preference, Good Faith, Liquidation
Insolvency Law Company Law Transaction at Undervalue Preference Good Faith Liquidation

Case Brief

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Parties

CI Ltd

Appellant

The Joint Liquidators of Sonatacus Ltd

Respondent

Procedural Posture

Civil Appeal / Second Appeal From Chancery Division, Manchester County Court

Legal Issues

  1. 1 Whether the payment of £50,000 by Sonatacus Ltd to CI Ltd constituted a transaction at an undervalue under section 238 of the Insolvency Act 1986
  2. 2 Whether the payment constituted a preference under section 239 of the Insolvency Act 1986
  3. 3 Whether CI Ltd received the payment in good faith within the meaning of section 241(2) of the Insolvency Act 1986

Ratio Decidendi

The payment of £50,000 by Sonatacus Ltd to CI Ltd constituted a preference under sections 239 to 241 of the Insolvency Act 1986, as it discharged the Company’s debt to Mr Susca, thereby preferring him. CI Ltd failed to establish that it received the payment in good faith, given its knowledge of the Company’s financial difficulties and the circumstances of the transaction. The transaction was not a transaction at an undervalue as the consideration was equal, but the payment was voidable as a preference and must be repaid.

Court Disposition

Appeal dismissed

Orders

  • Declaration that the payment of £50,000 by Sonatacus Ltd to CI Ltd constituted a preference under sections 239 to 241 of the Insolvency Act 1986
  • Order for payment by CI Ltd to the joint liquidators of £50,000 plus interest