What is the "ordinary course of business" for the purposes of determining whether transactions are voidable?

In this case1, the High Court considered the application of section 294(2) of the Companies Act 1993 to payments made by a company shortly prior to its liquidation.

The payments at issue where:

• for rent, tyres and parts, to a company with common directors and shareholders; and
  
  
• in part repayment of a loan, to friends of a director of the companies.

The case was brought by the creditors who had been paid, who sought to prove that the payments were in the ordinary course of the company's business and therefore should not be set aside.

The court decided that:

• the payments for rent, tyres and parts should be set aside because the creditor who received the payments was treated in a unique way compared to other creditors, the effect of which was a deliberate preference resulting from the special relationship; and
  
  
• the loan repayment was part of normal banking arrangements for businesses of this type, and should not be set aside.
  

1 Managh v Alpha Buses Limited (Re McKendry Holdings) (High Court, Palmerston North CIV 2003-454-000561, 22 December 2003, M Gendall)

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