A theoretical conundrum: double voidable claims, same monies, same creditor but separate liquidators

If a related party (Co B) pays a text debt on behalf of Co A, and both companies enter into liquidation, which liquidator has priority in pursuing the ATO?

The Co A liquidator may pursue the ATO for a third party unfair preference claim, per s588FA of the Corporations Act (assuming the requirements are met).

Co B liquidator may pursue the ATO for an uncommercial transaction, given Co B received no or insufficient benefit in making the payment. Per s588FB of the Corps Act.

There is no priority, and in a theoretical sense, it is possible that the ATO will pay twice for the one payment. If the claims are made years apart, it is practically possible that the double claim is missed.

Although s588FF(1) or (2) of the Corps Act can be used by the court to prevent the injustice to the ATO, rarely do these cases actually go to judgment.

This can also happen to trade creditors and any other unsecured creditor out there, not just the ATO.

… this would be an interesting research project for someone to tackle!

#insolvency #tax #svvoidables

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