Insolvency Law Update: When the Phoenix does not rise!



[co-author: Ryan Lennon]*

In the recent decision of Re Intellicomms Pty Ltd (in liq) [2022] VSC 228, the Victorian Supreme Court considered whether the sale of business assets immediately prior to Intellicomms Pty Ltd entering a Creditor’s Voluntary Winding Up was a Creditor-defeating disposition for the purposes of section 588FDB of the Corporations Act 2001 (Act).


Intellicomms provided translation services in Australia and New Zealand. On 8 September 2021 Intellicomms entered into a sale agreement with Tecnologie Fluenti Pty Ltd (Tecnologie) under which Tecnologie bought Intellicomms’ business assets but did not become liable to pay any of Intellicomms’ creditors.

On 8 September 2021 (shortly after signing the business sale agreement) Intellicomms’ sole Director convened a Shareholders’ Meeting at which it was resolved to place Intellicomms into Creditor’s Voluntary Liquidation.

Intellicomms Sole Director failed to inform other Shareholders and a Creditor, Callscan Australia Pty Ltd (Callscan) of the sale agreement that she had entered into on Intellicomms’ behalf minutes before the meeting.

Tecnologie’s sole Director and Shareholder is Intellicomms’ sole Director’s sister.

Creditor-defeating disposition

Intellicomms is the first reported decision dealing with section 588FDB of the Act.

The Court considered what the Plaintiff needed to prove to establish that the business sale was a Creditor Defeating Disposition.

The Act says that a disposition of property will be a Creditor-defeating disposition if:

  • the consideration paid to the company was less than the lower of the:
    • market value of the property; or
    • best price reasonably available for the property; and
  • the disposition prevents, hinders or significantly delays the property becoming available for the benefit of the company’s Creditors.

Tecnologie argued that the Liquidator, as Plaintiff, needed to provide evidence that allowed the Court to establish an: “actual monetary value” of the market price and the best price reasonably available.

The Court did not agree with that argument and found that the Liquidator was only required to establish on the balance of probabilities that the consideration payable by Tecnologie to Intellicomms was less than the market price or the best reasonably available price, which ever was lower.

Callscan gave evidence that it was prepared to buy Intellicomms’ business assets for a greater amount than what Tecnologie agreed to pay under the sale agreement.

Further, Intellicomms obtained four separate independent valuations of its business assets in 2021 one on:

  1. 3 February 2021;
  2. 26 July 2021;
  3. 20 August 2021; and
  4. 8 September 2021.

Each valuation showed a decreasing valuation for Intellicomms. Tecnologie argued that the 20 August and 8 September 2021 valuations prove that it was paying market value for Intellicomms’ business assets.

No explanation was given about why numerous valuations were obtained in such a short time. However, it was shown that Intellicomms provided material for each subsequent valuation that showed a worsening financial position for Intellicomms.

The Court found that those valuations were not an accurate measure of Intellicomms market value because they did not value all of the assets that Tecnologie purchased.

Phoenix Transaction

A Phoenix transaction occurs when a company carries on the business of a company that has been liquidated in circumstances where the “new company” pays little to no consideration for the business assets of the “old company”.

The Court in Intellicomms held:

“As I have observed earlier in these reasons, I consider that the Sale Agreement has all the features of what has become known as a phoenix transaction; indeed, it is a brazen and audacious example.”

What does the decision mean?

Intellicomms provides guidance on what evidence a Liquidator will need to present when seeking Orders declaring a disposition a Creditor-defeating disposition and, therefore, voidable under section 588FE(6B) of the Act.


*Special Counsel, Recovery and Restructuring, Perth

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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