This week's TGIF considers the recent NSW Supreme
Court decision of Westpac Bank v Raflick Sayah  NSWC
1167, provides comfort to banks and their receivers in that it
validated the actions of a Receiver who had obtained expert advice
on a sale process and had undertaken a thorough
In short, the bank had provided a facility to Green Alliance Pty
Ltd which was supported by a personal guarantee from a director.
The business of Green Alliance had been the provision of services
and supply and installation of household and commercial energy
efficient products (including pink bats and energy efficient
fluorescent lamps). Green Alliance's business was severely
impacted by the Federal government's decision to terminate the
Federal Home Insulation program in February 2010.
Pursuant to its securities, the bank appointed receivers and
managers to Green Alliance and the receivers and managers proceeded
to realise the assets of the company
The bank sought to recover a shortfall arising out of the
facility from a director under a personal guarantee. In
defence, the director raised several cross claims including a claim
that the bank's receivers had breached his duties (including a
breach of section 420A of the Corporations Act) to both Green
Alliance and guarantor in that the receivers had sold the
fluorescent lamps, energy efficient showerheads and pink batts for
less than true market value or at prices not being the best prices
reasonably obtainable, having regard to the circumstances.
The Court rejected all of the claims by the director. In the
course of its decision it confirmed the following.
While accepting there is some debate in the authorities, the
Court felt that the better view is that section 420A does not gives
a guarantor a direct right against a defaulting receiver;
In confirming the receivers had met their general law and
statutory duties, the Court considered the following:
The business of Green Alliance was no longer a going
The fact that the director had, before the receiver's
appointment, sold stock himself through GraysOnline;
The nature of the stock (primarily, small items of lighting
stock in large volumes);
The receivers had sought advice from the National Valuer of
GraysOnline as to the most effective means of sale of the
The receivers had obtained a valuation of the stock;
Based on advice, the receivers determined that an online
auction was the most cost effective means of sale, with a timeline
of two weeks with a further three weeks to allow collection of sold
GraysOnline carried out the online auction and advertised it as
follows: emails to 50 participants in the energy product sector,
advertised the auction on their website, notified 23,840 customers
in the Building Material category; sent an email to 80,599 general
customers and advertised the auction in the Sydney Morning
Representatives of GraysOnline gave evidence that there was
healthy interest in the auction given the number of online visitors
and bids; and
The director gave evidence himself that there was healthy
interest in the auction and that it was well conducted.
The case does not change the law in relation to section 420A and
the duties of receivers. It confirms the importance of a receiver
obtaining advice on the appropriate means of sale of an asset(s),
particularly if they are unusual assets or items of stock, and then
following that advice in the sale process itself.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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A recent NSW decision has implications for liquidators of trustee companies dealing with trust funds and priority debts.
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