Merrag Pty Ltd (in liq) v Khoury

Merrag Pty Ltd, in liquidation, sought against Khoury regarding an alleged unfair preference, uncommercial transaction, and unreasonable director-related transaction. The dispute arose from the sale of a property to Khoury, a director of the company, under suspicious circumstances. The case was heard in the Federal Court of Australia. The central legal issues revolved around whether a written contract for the sale of the property to Khoury was a sham, whether there was an oral contract that offset the purchase price against Khoury's loan to the company, and if the company was insolvent at the time of the alleged oral contract and the transfer of the property to Khoury. Furthermore, the court had to determine if the contract or the subsequent transfer constituted an unfair preference, an uncommercial transaction, or an unreasonable director-related transaction.

The Federal Court considered the nature of the transactions between the company and Khoury, including the written contract and the alleged oral agreement. The court examined whether the written contract was genuine or if it was a facade to disguise the true nature of the transactions. Additionally, the court assessed whether the oral contract, which supposedly offset the purchase price by Khoury's loan to the company, was valid and if it was made while the company was insolvent. The court also scrutinized the timing of the insolvency and the transfer of the property to determine if these events indicated an unfair preference or an unreasonable director-related transaction.

The court concluded that the written contract was not a sham but was part of a series of transactions designed to benefit Khoury. The court found that an oral contract was indeed made, which was contingent upon the release of Khoury's loan to the company. The court determined that the company was insolvent at the time of the alleged oral contract and the transfer of the property to Khoury. The court ruled that the oral contract and the subsequent transfer constituted an unfair preference because the company was insolvent at the time and the transactions favoured Khoury. The court further held that these transactions were unreasonable director-related transactions under the Corporations Act 2001.

The court ordered that the transaction be set aside and that Khoury repay the amount received from the sale of the property to the liquidator of Merrag Pty Ltd. The orders aimed to restore the company's assets and ensure equitable treatment of creditors in the insolvency proceedings.