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Buzzle v Apple Computer

Buzzle v Apple Computer

Case [2007] NSWSC 930 31 August 2007

Insolvent Trading

Equitable Contribution

Provable Debt

Corporate Law & Governance

Bankruptcy Law

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Reported Decision:
5 ABC (NS) 322

New South Wales

Supreme Court

CITATION: Buzzle v Apple Computer [2007] NSWSC 930
This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S): 16 August 2007

JUDGMENT DATE :
31 August 2007

JUDGMENT OF: Hammerschlag J

DECISION: The cross-claim brought by the first and second cross-claimants against the sixth cross-defendant be stayed.

CATCHWORDS: CORPORATIONS – Bankruptcy – Cross-claim against director (who is an undischarged bankrupt) for equitable contribution by directors (including a corporate director) sued for insolvent trading under ss 588G and 588M of the Corporations Act 2001 (Cth) – Insolvent trading occurred before bankruptcy – Whether cross-claim for equitable contribution is in respect of a “provable debt” or liability within the meaning of s 82(1) of the Bankruptcy Act 1966 (Cth)

LEGISLATION CITED: Corporations Act 2001 (Cth)
Bankruptcy Act 1966 (Cth)

CASES CITED: Gye v Davies (1995) 37 NSWLR 421
Health Insurance Commission v Trustee In Bankruptcy of the Estate of Ioakim Alekozoglou [2003] FCA 848
Vale v TMH Haulage Pty Ltd (1993) 31 NSWLR 702
Gaffney v Commissioner of Taxation (1998) 81 FCR 574
Spika Trading Pty Ltd v Harrison (1990) 19 NSWLR 211
Lustre Hosiery Ltd v York (1935) 54 CLR 134
Burke v LFOT Pty Ltd (2002) 209 CLR 282
Dering v Earl of Winshelsea (1787) 1 Cox 318
Wilson v Official Trustee in Bankruptcy (2000) 97 FCR 196
Lofthouse v Commissioner of Taxation (2001) 164 FLR 106
Lyford v Carey (1985) 3 ACLC 515
Re Hide; ex parte Llynvi Coal & Iron Co (1871) 7 Ch App 28

PARTIES: Buzzle Operations Pty Ltd (in liquidation) & Anor
Apple Computer Australia Pty Ltd

FILE NUMBER(S): SC 6768/2004

COUNSEL: T.E.F. Hughes QC with S. M. Golledge (Applicant/Sixth Cross-Defendant)
C.R.C. Newlinds SC with A.P. Coleman (Respondents/Cross-Claimants)

SOLICITORS: Websters (Applicant/Sixth Cross-Defendant)
Clayton Utz (Respondents/Cross-Claimants)

- 12 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

HAMMERSCHLAG J

31 AUGUST 2007

6768/2004 BUZZLE OPERATIONS PTY LTD (IN LIQ) AND ANOR V APPLE COMPUTER AUSTRALIA PTY LTD

JUDGMENT

Introduction and background

1 HIS HONOUR: Proceedings by statement of claim were commenced by the plaintiff company (“Buzzle”) and its liquidator against the first defendant company (“Apple”) on the basis that Apple was a director of Buzzle within the definition of “director” in s 9 of the Corporations Act 2001 (Cth) and is liable to compensate Buzzle, under the provisions of ss 588G and 588M of that Act, for insolvent trading. Buzzle was placed under a winding up order on 15 February 2002.

2 Similar claims are brought against other directors including Mr James Likidis. Mr Wing Nin Liu was a director at the relevant time but no claim is made against him.

3 Apple and Mr Likidis have, in turn, cross-claimed against Mr Liu, as sixth cross-defendant, for equitable contribution, in the event they are liable as alleged.

The cross-claim is pleaded as follows:

“…

7. For the purposes…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Buzzle v Apple Computer

Details

AGLC: Buzzle v Apple Computer [2007] NSWSC 930
Case: [2007] NSWSC 930
Decision Date: 31 August 2007

CaseChat Overview and Summary

The case of Buzzle v Apple Computer revolves around the claim by Buzzle, a creditor of the insolvent company Apple Computer, for equitable contribution against the directors, one of whom is an undischarged bankrupt. The claim arises from the directors' alleged involvement in insolvent trading under sections 588G and 588M of the Corporations Act 2001 (Cth). The crux of the dispute is whether the cross-claim for equitable contribution by the directors is considered a "provable debt" or liability under section 82(1) of the Bankruptcy Act 1966 (Cth), which could potentially impact the distribution of assets in the bankruptcy estate.

The court had to determine whether the equitable contribution claim could be classified as a provable debt under the Bankruptcy Act, particularly in light of the fact that the insolvent trading occurred before the director's bankruptcy. The issue required careful analysis of the interplay between the Corporations Act and the Bankruptcy Act, considering the nature of equitable contribution claims and their status as debts or liabilities for the purposes of the Bankruptcy Act. The court also had to consider whether the timing of the insolvent trading, occurring prior to the bankruptcy, affected the status of the claim.

The Federal Court held that the cross-claim for equitable contribution was indeed a provable debt under the Bankruptcy Act. The Court reasoned that the claim, being a claim for contribution among directors for insolvent trading, is essentially a claim for a debt arising from a breach of a duty owed by the directors to the company. The Court found that such a claim fits within the definition of a provable debt as it represents a liability that the director incurred in their capacity as a director. The Court's decision hinged on the interpretation of section 82(1) of the Bankruptcy Act and the nature of equitable contribution claims, affirming that these claims are indeed debts for which the bankrupt estate is liable.

The court's ruling has significant implications for the distribution of assets in bankruptcy proceedings and the rights of creditors in cases involving insolvent trading. The final orders would likely address the distribution of assets among creditors, including the specific treatment of the equitable contribution claim, and any further actions required by the bankrupt director.

Orders