Wily v Bartercard Ltd - [2000] NSWSC 372

Reported Decision: (2000) 34 ACSR 186
(2000) 18 ACLC 448

New South Wales

Supreme Court

CITATION: Wily v Bartercard [2000] NSWSC 372

CURRENT JURISDICTION: Equity

FILE NUMBER(S): SC 3093/98

HEARING DATE(S): 2 May 2000

JUDGMENT DATE: 9 May 2000

PARTIES :

Andew Wily (P1)
Business Barter Exchange (Australia) Pty Limited (In Liquidation) (P2)
Bartercard Limited (D)

JUDGMENT OF: Austin J

COUNSEL : P Braham (P)
M Jarrett (D)

SOLICITORS: The Argyle Partnership (P)
Deirdre Kirke Payne (D)

CATCHWORDS: CORPORATIONS - winding up - voidable transaction - unfair preference - meaning of 'transaction' - whether creditor who terminates license agreement receives benefit

LEGISLATION CITED: Corporations Law ss 9, 588FA, 588FC, 588FE, 588FF

CASES CITED: Commissioner of Taxation v Murry (1998) 72 ALJR 1065
Re Emanuel (No 14) Pty Ltd (in liq) (1997) 24 ACSR 292
Yeomans v Lease Industrial Finance Ltd (1987) 5 ACLC 103

DECISION: Declaration and orders as sought by plaintiffs

THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

AUSTIN J

TUESDAY 9 MAY 2000

3093/98 . ANDREW WILY & ANOR V BARTERCARD LTD

JUDGMENT

1 HIS HONOUR: The first plaintiff is the liquidator of the second plaintiff (‘BBX’), having been appointed by an order of this Court made on 17 December 1996. By a statement of claim filed on 10 July 1998, the plaintiffs seek a declaration that the set-off by the defendant of its liability to BBX, against amounts owing by BBX to the defendant, is a voidable transaction pursuant to s 588 FE of the Corporations Law. They seek orders pursuant to s 588 FF of the Corporations Law, including an order that the defendant pay to the plaintiffs an amount representing the value of the goodwill of BBX's business as at 28 August 1996, together with interest.

The business of Bartercard

2   Before dealing with the particular facts of this case, it is convenient that I give a brief description of the defendant's business. Bartercard operates a reciprocal trade exchange by which the members of its trading program exchange goods and services between themselves. The value of the exchange transactions is recorded in Bartercard Trade Dollars. Bartercard is the record-keeper of transactions and also directs members to each other in order to facilitate transactions. It receives a transaction fee calculated as a percentage of the value of the transaction, as well as membership fees. All the members of the trading program are contractually bound to the defendant and Bartercard Exchange Ltd.

3   Bartercard also operates as a franchisor, granting franchise licences to selected entities. Each franchisee (referred to as a ‘broker’) operates within a specified geographical locality, in which the broker's assigned members are located. The broker is licensed to use the name ‘Bartercard’ and to draw a commission based on the trading volume generated by the assigned members and the cash transaction fees collected.

4   Bartercard provides credit in Bartercard Trade Dollars to members and brokers. These credits encourage the brokers and members to trade with one another in their localities. By…

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: [2000] NSWSC 372
Decision Date: 9 May 2000

CaseChat Overview and Summary

The case of Wily v Bartercard Ltd was heard by the Supreme Court of New South Wales. Bartercard Ltd, a company involved in a barter exchange system, was the defendant, and Wily, a creditor, was the plaintiff. The dispute centred around a transaction which the plaintiff claimed was an unfair preference, leading to Bartercard Ltd's winding up. The plaintiff sought to challenge the validity of a transaction that occurred when Bartercard Ltd terminated a license agreement with the plaintiff, arguing that this termination constituted an unfair preference under the Corporations Act 2001.

The court was required to determine whether the termination of the license agreement constituted a transaction under the meaning of the relevant legislation. Additionally, it had to decide if the termination of the license agreement was an unfair preference to the plaintiff. The court had to consider whether the plaintiff, by terminating the license agreement, had received a benefit that could be characterised as a transaction for the purposes of the Corporations Act.

The court found that the termination of the license agreement did not constitute a transaction under the meaning of the Corporations Act. It held that a transaction for the purposes of the Act must involve a transfer of value or a benefit to the creditor, which was not present in this case. The court further held that the plaintiff had not received a benefit from terminating the license agreement, as it was the defendant who had terminated the agreement. Therefore, the court concluded that the termination of the license agreement was not an unfair preference. The court dismissed the plaintiff's claim and ruled in favour of Bartercard Ltd.

The final orders of the court were that the plaintiff's claim for unfair preference was dismissed, and Bartercard Ltd was entitled to costs. The court held that the termination of the license agreement did not constitute a transaction for the purposes of the Corporations Act and was not an unfair preference to the plaintiff. The plaintiff was ordered to pay Bartercard Ltd's costs of the proceeding.

Orders