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Uncommercial transaction

The Old Kiama Wharf Company Pty Ltd (in liquidation) v Betohuwisa Investments Pty Limited & Anor [2011] NSWSC 823. Pembroke J.

[34] Although the most common instance of an uncommercial transaction will be one which occurs at an undervalue: Demondrille Nominees PL v Shirlaw (1997) 25 ACSR 535 at 548, a sale at an undervalue is not the only circumstance that will lead to the conclusion that a transaction is uncommercial.

Any situation in which a reasonable person in the company's circumstances would not have entered into the transaction, even if it were for full value, justifies the conclusion that it is uncommercial: Lewis as liq of Doran Constructions PL (in liq) & Anor v Doran & Ors (2005) 219 ALR 555 at 584-585 (Giles JA).

[35] The question posed by Section 588FB is whether a reasonable person in the company's circumstances would not have entered into the transaction. This is an objective inquiry that requires consideration of the factors listed in subsection (1), although every one of those factors will not always be applicable to the transaction in question: Tosich Construction v Tosich (1997) 78 FCR 363 at 367.

[36] One of the factors, either alone or in conjunction with other factors, which might indicate that a transaction is uncommercial is that it was not conducted at arms length and that the controlling minds of the corporate entities involved are identical or related: McDonald v Hanselmann (1998) 144 FLR 463 at 470; see also Welcome Homes Real Estate PL & Ors v Ziade Investments PL & Anor [2007] NSWCA 167 at [52] - [57]. Another circumstance is where the purpose of the transaction is to defeat creditors: Re Solfire Pty Ltd (in liq) (1997) 25 ACSR 160 at 165.

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