Mr Farrell said on one side, the ruling gave creditors receiving payments from insolvent businesses for goods and services more certainty that they can keep their payments.
On the other side, he said the ruling meant creditors were more likely to be treated unequally because some will get their money out prior to liquidation and some won't and there was now less opportunity to address that situation.
"In reality unsecured creditors are now less likely to get payout in a liquidation."
Mr Farrell said the decision also left more scope for company directors to choose which creditors get paid and which creditors don't prior to liquidation and he believed the current law didn't do enough to discourage directors from treating creditors unequally or to discourage creditors from seeking to obtain a preference.
"In Australia there are measures against directors who play this game and we will now need something like that in New Zealand."
Specialist Trade Contractors Federation president Graham Burke said the ruling would come as a relief to thousands of businesses.
"This affected every business providing goods and services on account. The building trade was particularly aware of the issue because there are more insolvencies in the construction sector than in other sectors."
He said the previous decision left businesses in a state of limbo - having been paid for a contract they had completed but with a risk that money could be clawed back for up to two years.
"That uncertainty made it difficult for small businesses to invest and grow."
He said it was a very important decision for the contracting market and would allow contractors to make decision about investing in their business.
Rotorua Chamber of Commerce chief executive Darrin Walsh said the issue of clawing back payments had always been contentious.
On the face of it he believed it was fair, however he said it did open the door to directors making payments to creditors to whom they may have closer personal ties.
