Judgment
1 HANDLEY JA: This is an appeal as of right by a company in liquidation and its liquidator from the decision of Windeyer J of 28 March 2002 dismissing their summons of 14 December 2001 which had sought a declaration that the transfer of the "O Kosmos" newspaper business to Planet Enterprizes Pty Limited, the respondent to this appeal, was an insolvent transaction within s 588FC of the Corporations Act because it was an uncommercial transaction within s 588FB(1).
2 It was common ground before Windeyer J and this Court that the vendor company was insolvent at the date of the transaction and the sole issue was whether the transaction was uncommercial for the purposes of s 588FB(1). The Judge held that the liquidator had not discharged the onus of proof.
3 When the appeal was opened by Mr Newlinds for the appellant (who had not appeared below) the Court asked whether the appeal lay as of right because it did not appear that it involved an amount of $100,000 or more as required by s 101(2)(r) of the Supreme Court Act. Mr Newlinds endeavoured to demonstrate that the appeal lay as of right and, in the end, the Court heard him fully on all issues in the appeal and called on Mr Thomas for the respondent. I have, nevertheless, reached the firm conclusion that the appeal was incompetent without leave.
4 Windeyer J found that the sale took place during July 2001, at a date not further identified, and rejected the plaintiff's arguments that it occurred in October that year. The Judge's finding cannot be disturbed.
5 It was an informal transaction, not directly evidenced in writing, and its terms had to be proved by the oral evidence of Mr and Mrs Skouloudis, both of whom, of course, were interested parties.
6 The company, which it seems was the trustee of a trading trust, acquired the business of publishing the Greek language newspaper "O Kosmos" under a contract dated 3 December 1998 for the sum of $300,000, subject to adjustments for outgoings and employee entitlements. The amount of these was never established. Possession passed to the purchaser on 3 December 1998 on payment of $100,000, with further payments due on 3 June and 3 December the following year. The purchase price was apportioned between $290,000 for goodwill and $10,000 for plant and equipment.
7 The vendor's accounts annexed to the contract showed sales of $681,076 in the year 30 June 1998 but an operating loss of $11,405. There were no accounts of the purchaser in evidence for the period since 3 December 1998 but there were accounts, including a balance sheet and profit and loss account for the Skouloudis Family Trust, for the year ended 30 June 1999. The profit and loss account showed sales of $385,968, hire income of $735,164 and expenses, resulting in a profit of $25,027. The balance sheet showed net assets of $20 and current liabilities of $1,825,000. The relationship of the trust to the purchase of the newspaper business was not explored.
8 The expenses in the profit and loss account included $151,235 for printing costs but the figure for goodwill in the balance sheet was only $106,000 and there was no reference to any write down from the purchase price for goodwill of $290,000, paid a little over six months before, if this trust had been the beneficial purchaser of the newspaper business. There were also no debts in the balance sheet for the final instalment of the purchase price for the newspaper business of $100,000 due on 3 December 1999.
9 The figure for trade creditors of $12,316.80 does not suggest that the trust was carrying on a newspaper business.
10 The case was conducted on the basis that the company was the trustee of a trading trust and, as at 1 July 2001, had creditors in connection with both the newspaper business and other creditors who were also creditors of the trust. There was no evidence of the extent of these other creditors or the assets available for their payment or the value of any rights of indemnity available to the trustee and the liquidator.
11 The Judge found that the company acting through Mr Skouloudis agreed to sell the newspaper business to a company nominated by Mrs Skouloudis in consideration of the purchaser taking over the liabilities of the newspaper business, together with any accounts accrued due to staff for holiday pay and long service leave, and any such entitlements. These findings were not challenged.
12 Mr Skouloudis gave evidence that the staff entitlements were later assessed by him with the staff at $25,000 to $35,000 and all of the staff had been paid, except one.
13 Mrs Skouloudis nominated the respondent as the company which would purchase the business and it became common ground that it was the purchaser.
14 The direct evidence, such as it was, about the state of the business at the time of the transfer, was that of the liquidator. He said that up until July 2001, printing charges for the newspaper were slightly under $20,000 per month, sales of the newspaper averaged slightly under $15,000 per month and he estimated the advertising revenue at between $2,500 and $4,000 per month. He then said:
"Based on the above information, and from the inquiries and investigations conducted by me, I believe that the business of the 'O Kosmos' newspaper was a valuable asset of the First Defendant".