Featherstone v Ashala Model Agency Pty Ltd (in liq)

Featherstone, the appellant, brought an appeal against the decision of the primary judge to dismiss his claim against Ashala Model Agency Pty Ltd (in liquidation), the first respondent. The case revolves around a dispute concerning the purchase of a residential apartment using almost the entirety of the first respondent's accounts. The appellant claimed that the money used for the purchase was due to him as payment for rent under a lease agreement of the premises. The liquidator sought to avoid the transaction as an uncommercial transaction under s 588FB of the Corporations Act 2001 (Cth) rather than an unfair preference under s 588FA. The court had to determine whether the two categories of unfair preference and uncommercial transaction were mutually exclusive, whether the appellant’s purpose in making the transaction was relevant to whether it was an uncommercial transaction, and whether the transaction was a voidable transaction within s 588FE(5) because it was entered for the purpose of defeating, delaying, or interfering with the rights of other creditors.

The court considered whether there was sufficient evidence to infer that the company’s purpose in making the transaction was to defeat the rights of other creditors. The appellant argued that the claim should have been stayed by operation of s 58(3) of the Bankruptcy Act 1966 (Cth), as the property was held by the bankrupt on trust for another person. The appellant further argued that the respondents did not comply with rule 72 of the UCPR because no leave was sought to continue the proceedings after he became a bankrupt. The court dismissed the appeal and ordered that the appellant pay the respondents’ costs of the appeal. The primary judge's reasoning was upheld, finding that the liquidator had not challenged the lease agreement or that the debt to the appellant existed. The court found that the appellant's purpose in making the transaction was not relevant to whether it was an uncommercial transaction and that there was no sufficient evidence to infer that the company's purpose was to defeat the rights of other creditors.