Valassis v Official Trustee in Bankruptcy Re McCabe

The case of *Valassis v Official Trustee in Bankruptcy Re McCabe* concerned a dispute between the Official Trustee in Bankruptcy and Valassis, a creditor of Mr. McCabe. The core of the disagreement revolved around the validity of a transfer of property from Mr. McCabe to his wife, which the Official Trustee sought to set aside as a fraudulent preference. The matter came before the High Court of Australia.

The High Court was required to determine whether the transfer of property from Mr. McCabe to his wife constituted a fraudulent preference within the meaning of section 122 of the *Bankruptcy Act 1966* (Cth). This involved considering whether the transfer was made at a time when Mr. McCabe was unable to pay his debts as they became due from his own moneys, and whether the effect of the transfer was to place his wife in a position that would not have been her position had the transfer not been made, and that position was a better position than that of other creditors.

Gaudron and McHugh JJ held that the transfer was not a fraudulent preference. Their Honours reasoned that for a transaction to be a fraudulent preference, the debtor must have a dominant intention to prefer the creditor. In this instance, the evidence did not establish that Mr. McCabe's dominant intention in transferring the property to his wife was to prefer her over his other creditors. The court emphasised that the mere fact that a transaction has the effect of preferring a creditor is not sufficient; the intention to prefer must be present.

Consequently, the appeal was dismissed, and the transfer of property was upheld.