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Fraudulent Preference

RPG Receivables Purchase Group Inc. v. American Pacific Corporation 2025 Ont CA

Trustee in bankruptcy moved to set aside, under s. 95(1)(a) and (2) of the Bankruptcy and Insolvency Act (BIA). The bankrupt had paid $400,000 to one of its major suppliers approximately one month before it assigned itself into bankruptcy. The bankrupt was insolvent when it made the payment. The bankrupt stated that it made the payment so that it could get more supply from that creditor that it would use to produce product to satisfy its major customer. The court held that paying past indebtedness to enable the continuation of the business is inconsistent with a preference only if the plan to continue in the business had a reasonable basis and, in this case, it did not. The payment was set aside.

Written by Jonathan Speigel, the founding partner of Speigel Nichols Fox LLP, leads the litigation and construction practices.