Re Intellicomms Pty Ltd (in liq) - [2022] VSC 228

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST

S ECI 2021 03635

IN THE MATTER of INTELLICOMMS PTY LTD (IN LIQUIDATION) (ACN 153 181 367)

BETWEEN:

GLENN JEFFREY FRANKLIN as joint and several liquidator of INTELLICOMMS PTY LTD (IN LIQUIDATION) (ACN 153 181 367) & ORS (according to the attached Schedule)	Plaintiffs
v
TECNOLOGIE FLUENTI PTY LTD (ACN 653 110 582)	Defendant

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JUDGE:	Gardiner AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	23, 24 November, 1 December 2021
DATE OF JUDGMENT:	11 May 2022, revised 2 February 2024
CASE MAY BE CITED AS:	Re Intellicomms Pty Ltd (in liq)
MEDIUM NEUTRAL CITATION:	[2022] VSC 228

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CORPORATIONS – Sale of business immediately prior to company going into creditors’ voluntary winding up – Allegation that sale agreement was a creditor-defeating disposition under s 588FDB of the Corporations Act 2001 (Cth) (the ‘Act’) and a voidable transaction under s 588FE(6B) of the Act – Whether the plaintiff is required to establish actual monetary value of the property the subject of the transaction for the purpose of establishing that the consideration payable was less than the lesser of the market value of the property and the best price that was reasonably obtainable for the property, having regard to the circumstances existing at the time of the transaction – Finding that sale agreement was a creditor defeating disposition under s 588FDB and voidable pursuant to s 588FE(6B) of the Act – Form of relief considered.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr J Evans QC, one of Her Majesty’s counsel, with Ms V Bell	Madgwicks Lawyers
For the Defendant	Mr H N G Austin QC, one of Her Majesty’s counsel, with Mr D F McAloon	Strongman & Crouch

HIS HONOUR:

By originating process filed 4 October 2021, the first and second plaintiffs, Messrs Glenn Jeffrey Franklin and Petr Vrsecky (the ‘Liquidators’) in their capacity as joint and several liquidators of the third plaintiff, Intellicomms Pty Ltd (ACN 153 181 367) (In Liquidation) (‘Intellicomms’), make application under ss 588FB, 588FDA, 588FDB, 588FE and 588FF of the Corporations Act 2001 Cth (the ‘Act’) for relief in relation to a sale agreement dated 8 September 2021 (‘Sale Agreement’) between Intellicomms and the defendant, Tecnologie Fluenti Pty Ltd (‘TF’), involving the sale of certain business assets of Intellicomms to TF (‘assigned assets’).[1]
[1]The originating process also sought relief in the alternative that the Sale Agreement was an uncommercial transaction, or alternatively, an unreasonable director-related transaction. This relief, while not being abandoned by the Liquidators at the hearing of the application, was not pressed.

Until September 2021, Intellicomms, operated a business providing translation services to commercial enterprises under the trading name “ezispeak” in Australia and, through a wholly owned subsidiary, Intellicomms NZ Ltd (‘Intellicomms NZ’), in New Zealand.

On the afternoon of 8 September 2021, Intellicomms sold the assigned assets to TF under the Sale Agreement. A short time afterwards on the same day, a meeting of Intellicomms was convened at short…

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.

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Details

Case: [2022] VSC 228
Decision Date: 2 February 2024

CaseChat Overview and Summary

The case of Re Intellicomms Pty Ltd (in liq) involved a dispute concerning the sale of a business by Intellicomms, a company in liquidation, and the subsequent allegation that the sale was a creditor-defeating disposition and a voidable transaction under the Corporations Act 2001 (Cth). The liquidator of the company, the plaintiff, sought to challenge the sale on the grounds that it was unfair to creditors. The primary court considering this matter was the Federal Court of Australia.

The key legal issues addressed by the court were whether the liquidator was required to establish the actual monetary value of the property for the purpose of proving that the consideration received was less than the market value or the best price reasonably obtainable at the time of the transaction. Additionally, the court had to determine if the sale agreement constituted a creditor-defeating disposition under section 588FDB and whether it was a voidable transaction under section 588FE(6B) of the Act. The interpretation of these statutory provisions was central to the resolution of the case.

The court ruled that the liquidator was not required to establish the actual monetary value of the property but could rely on other evidence to demonstrate that the consideration was inadequate. The court found that the sale agreement indeed constituted a creditor-defeating disposition and was voidable. In reaching this decision, the court emphasised the importance of the timing of the transaction in relation to the company's insolvency and the disparity between the sale price and what could have been achieved under normal market conditions. The court considered the form of relief available, including the possibility of setting aside the transaction.

In conclusion, the court ordered that the sale agreement be set aside, effectively rendering it void and restoring the property to the company's estate. This decision ensures that creditors are not unfairly prejudiced by transactions that occur close to a company's insolvency.

Orders