Manolete Partners Plc v David Coleman & Ors.

For a preference under Insolvency Act 1986, it is insufficient to show that a transaction conferred a benefit on a creditor, surety or guarantor. The company must have been influenced by a subjective desire to improve that person’s position in the event of insolvent liquidation. The statutory presumptions concerning insolvency and desire may be rebutted on the balance of probabilities. A genuine belief that all creditors will ultimately be paid can rebut the presumption of the required desire, even where the company is presently unable to pay its debts as they fall due. The court must assess the recipient’s position separately where more than one person benefits.

Manolete Partners Plc, as assignee of claims belonging to the liquidator of David Coleman & Company Limited, applied for relief under Insolvency Act 1986, section 239. It challenged three transactions: a payment to David Coleman, the extinguishment of Simon Thacker’s liability through a debit to his capital account, and a payment to Funding Circle Trustee Limited in repayment of loans guaranteed by Coleman and Thacker.

The claim against Funding Circle Trustee Limited had been settled without compromising the claims against the individual respondents. Coleman defended the claims and gave evidence. Thacker was debarred from relying on evidence and did not attend the trial. The central issues were whether the transactions were preferences and, for the July 2019 payments, whether the statutory presumption of the required desire had been rebutted.

The application against David Coleman was dismissed. Judgment for £33,542.20 was entered against Simon Thacker.

1. Under Insolvency Act 1986, section 239, the applicant had to establish the relevant timing and insolvency requirements, that the recipient was a creditor, surety or guarantor, that the transaction placed that person in a better position in an insolvent liquidation, and that the company was influenced by a desire to produce that effect. The judge adopted the approach in Re MC Bacon Ltd [1990] BCLC 324: the required desire is subjective and must be a positive desire to improve the recipient’s position in an insolvent liquidation, rather than merely a desire to confer a benefit.
2. The July payments were made when the company was unable to pay its debts as they fell due and placed Coleman, and Coleman and Thacker as guarantors, in a better position. The statutory presumptions therefore applied. Coleman nevertheless rebutted the presumption of the required desire. On the evidence, he believed that the company’s creditors would ultimately be paid from collected debts and deferred sale consideration, and was not contemplating an insolvent liquidation. The company desired to confer benefits, but did not positively desire to improve the recipients’ positions in an insolvent liquidation.
3. The April 2019 debit benefiting Thacker was within the statutory period, occurred while the company was insolvent, and placed him in a better position on liquidation. Thacker supplied no evidence to rebut the presumptions. The preference claim therefore succeeded against him.
4. It was unnecessary to determine the effect of Coleman’s further £2,000 loan or the National Westminster Bank arrangements for the claims against Coleman. Credit was to be given for any settlement sum paid by Funding Circle Trustee Limited.