Have You Been Put on Notice? Void Dispositions under the Corporations Act

I love scoring a deal. Be it two for one, end of financial year sale, or even 50% off, I think I am a smart shopper. But some deals just seem too good to be true. Proper investigation is essential to make sure you’re buying the real deal. To me, it’s no different than doing the relevant searches on a property you propose to purchase.

In the case Conlan v Pratt ([2013] FCA 19), Michael Pratt thought he has scored a great deal. He was introduced by a mutual friend to a Mr Topping who mentioned that he was in the transport business. Mr Topping had a truck for sale. Mr Pratt had purchased numerous second hand trucks in his lifetime (many of them unseen) and was given advice as to the kilometres travelled by the truck during some 11,000 engine hours.

The friend told Mr Pratt he held a Power of Attorney for Mr & Mrs Topping as the couple were fighting an action of a liquidator for their company (PB Enterprises) and that they needed some money to fund the legal action against the liquidator. The friend confirmed that the truck was owned by Mr Topper and his wife; had no encumbrances; and was registered in the name of the business for tax purposes.

Mr Pratt thought nothing more about the registration. He knew that people owned property personally, but registered it in the name of their business. Mr Pratt did some further research on the truck and offered $66,000.00 including GST. The friend accepted the offer on Mr Topping’s behalf. At no time was Mr Pratt told that the truck was not company property, nor did he pay anything less than fair market value. The thought never occurred that he was about to enter into a deal where he was about to throw away thousands of dollars.

The liquidator of PB Enterprises then commenced an action for the You can apply for Medicaid using the New Mexico Health cheap health insurance for families Exchange. return of the truck under Section 468(1) of the Corporations Act 2001 (Cth). Mr Pratt was shocked and claimed that he acted honestly, reasonably and cautiously. Section 468(1) details that:

There are four effective parts in section 468(1):

• Disposition of company property;
• The disposition occurred after the commencement of the company’s winding up by the Court;
• The disposition is not an exempt disposition;
• The Court has not exercised its discretion under the section to validate the disposition.

The Liquidator argued that there was no reason for the court to validate the purchase. That is because Mr Pratt knew or ought to have known that the Truck was the property of PB Enterprises. It then followed that Mr Pratt would have no claim against PB Enterprises in respect of the $66,000.00 paid to the friend that was never passed on to the company.

The Court took the view that the liquidator was authorised by the court to wind up the company and collect monies for the creditors. Mr Pratt had an agreement for the purchase of the truck without the consent of the court. This transaction was deemed void and the negotiations had thrown up enough anomalies to cause Mr Pratt to conduct his own enquiries rather than simply taking his friend’s assertions at face value.

As Mr Pratt had been put on notice that there was a liquidator, he should have consulted a solicitor to ensure that the purchase was legal. In many cases, solicitors are able to provide just that bit of comfort that ensures that you won’t be out of pocket or sleep deprived because a deal’s gone bad.

If you’re about to do a deal and you think you’ve been put on notice, contact us and we’ll ensure that all the necessary procedures are followed in order for the transaction to go ahead smoothly & you can sleep easily knowing everything is taken care of.