[2025] EWHC 2294 (Ch)

The s.239 claim

The Applicant’s case on the s.239 claim relates to that part of the Payments totalling £89,158.68 (the alleged preference payments). The Applicant contends that

The Respondent is an individual connected with the Company. The alleged preference payments were made within 2 years of the Company entering into administration on 3 January 2020;

The Respondent was a creditor of the Company at the time of each of the alleged preference payments;

The making of the alleged preference payments (and each of them) by the Company had the effect of putting the Respondent into a position which, in the event of the Company going into administration or insolvent liquidation, was a better position than if the alleged preference payments (and each of them) had not been made;

The alleged preference payments (and each of them) were made at a time when the Company was insolvent, as evidenced by the CVA proposal;

The Company and the Respondent were influenced in deciding to make the alleged preference payments and each of them by a desire to put the Respondent into a better position in the Company’s administration or insolvent liquidation than would have been the case had the payments not been made. The desire to prefer is presumed pursuant to section 239(6) IA as the Respondent is connected with the Company by virtue of being a director.

In light of my findings in respect of the s 238 claim, I shall treat the preference claim as extending to the full £101,000 of payments made over the relevant period.

In my judgment the preference claim fails. On the evidence which I have heard and read, the Applicant has failed to establish that the Company did anything or suffered anything to be done which had the effect of putting the Respondent into a position which, in the event of the Company going into insolvent liquidation, would be better than the position he would have been in if that thing had not been done: s239(4)(b). That is to say: no ‘preference in fact’ has been made out on the evidence. Whilst the Respondent received repayments of his director’s loan over the period April to December 2019, that was in place of his salary. He was not better off as a result of the salary/loan swap arrangement. In fact, he was slightly worse off. His net monthly salary came to approximately £10,377 per month. He took £10 in salary in March 2019 and then came off the payroll completely. The loan repayments he received in place of salary, calculated with reference to the period March 2019 to December 2019, averaged out at approximately £10,100 per month.

Even if the salary/loan swap arrangement had satisfied the ‘preference in fact’ requirements of s239(4)(b), in my judgment the preference claim would still fail. On the evidence which I have heard and read, the presumption of a desire to prefer is plainly rebutted.

On the evidence which I have heard and read, I am satisfied that in making the Payments, the Company, acting by its directing mind the Respondent, was not influenced by a desire to put the Respondent into a position which, in the event of the Company going into insolvent liquidation, would be better than the position he would have been in if that thing had not been done. In putting the salary/loan swap arrangement in place and thereafter effecting the Payments pursuant to such arrangement, the Company acting by the Respondent simply wished to save the Company the PAYE and NIC that would otherwise have been payable on the Respondent’s salary. I so find.

For the sake of completeness, I confirm that I reject Mr Arumugam’s argument that a desire to prefer was positively evidenced by Mr Botting at paragraph 17 of his second witness statement. By that paragraph Mr Botting was simply addressing a ’consequence’ of the salary/loan swap arrangement and paragraph 17 must in any event be read together with paragraph 18.