(1)Subject as follows in this and the next two sections, where an individual is made bankrupt and he has at a relevant time (defined in section 341) given a preference to any person, the trustee of the bankrupt’s estate may apply to the court for an order under this section.
(2)The court shall, on such an application, make such order as it thinks fit for restoring the position to what it would have been if that individual had not given that preference.
(3)For the purposes of this and the next two sections, an individual gives a preference to a person if—
(a)that person is one of the individual’s creditors or a surety or guarantor for any of his debts or other liabilities, and
(b)the individual does anything or suffers anything to be done which (in either case) has the effect of putting that person into a position which, in the event of the individual’s bankruptcy, will be better than the position he would have been in if that thing had not been done.
(4)The court shall not make an order under this section in respect of a preference given to any person unless the individual who gave the preference was influenced in deciding to give it by a desire to produce in relation to that person the effect mentioned in subsection (3)(b) above.
(5)An individual who has given a preference to a person who, at the time the preference was given, was an associate of his (otherwise than by reason only of being his employee) is presumed, unless the contrary is shown, to have been influenced in deciding to give it by such a desire as is mentioned in subsection (4).
(6)The fact that something has been done in pursuance of the order of a court does not, without more, prevent the doing or suffering of that thing from constituting the giving of a preference.
Cases considering section 340 26
[2001] EWCA Civ 387 · 15 March 2001Interprets
Considers whether a spouse in whose favour a property adjustment order may be made can be a creditor for the purposes of the preference provisions. The question was left unresolved and treated as an important point of principle (unpaginated judgment, passage beginning "The other two points").
[2025] EWHC 1790 (Ch) · 18 July 2025Defines
Applies the preference regime to the deed, which improved the respondent’s position as a creditor or surety in the event of bankruptcy. (see paras [66], [69])
Applies the provision permitting the trustees to seek an order in respect of the preference. (see paras [66], [69])
Applies the restoration remedy by ordering that the deed should not have effect. (see paras [66], [69])
Applies the preference definition to the deed’s effect of improving the respondent’s position in the bankruptcy. (see paras [66], [69])
Applies the creditor, surety or guarantor requirement because the transfer was potentially in satisfaction of a liability owed to Mrs Harrow. (see para [69])
Applies the better-position criterion because the deed improved Mrs Harrow’s position in the event of bankruptcy. (see paras [66], [69])
Applies the desire requirement to the deed; the court found the statutory elements amply made out. (see paras [66], [69])
Applies the associate presumption because Mrs Harrow was an associate of Mr Russell and the presumption was not rebutted. (see paras [66], [69])
[2020] EWHC 1200 (Ch) · 22 May 2020Interprets
Interprets section 340 as imposing requirements for a preference while conferring a wide discretion over the restorative order. Relief is normally granted, but no order may be made in an exceptional case where restoration would be unjust. (see paras [6]-[13]; [21]-[26]; [101]-[105])
Applies the statutory preference framework to a payment made within the relevant period to an associate creditor. (see paras [6]-[7])
Interprets the restorative power as discretionary despite the word “shall”. The court may make no order or a lesser order where justice requires, although refusal is confined to out-of-the-norm cases. (see paras [10]-[13]; [21]-[26])
Confirms that trustees may rely on the statutory presumption without first interviewing or questioning the bankrupt, although such inquiries are good practice. (see para [72])
Applies the presumption that an associate payment was influenced by a desire to produce a preference. The recipient failed to rebut it on the evidence. (see paras [6](g); [62]-[74])
6 more judgments, and what each says about section 340, are in the
case-law panel in the full Act.