Apple yesterday won a court battle against Australian reseller group Buzzle and its liquidator Andrew Wily.
Wily and Buzzle had sued Apple for around $50 million, claiming that it had acted as a "shadow director" and was therefore responsible for debts the company had incurred while it was insolvent.
Buzzle Operations was comprised of seven separate retailers which banded together in 2000 to list the company on the Australian Stock Exchange, hoping to raise $100 million in capital. The group had hoped to achieve efficiencies by the merger. However, the company never made it to float after the business failed.
Apple was a secured creditor for the individual retailers, advancing stock on credit. With debts owing, it had interest in the resellers' plans to merge and had been included in discussions. It had stipulated certain conditions it considered necessary for the merger if it were to continue its stance as an equipment vendor advancing stock on credit. The group had also wanted to lengthen the amount of notice Apple needed to give if it decided to stop providing products.
Because of these conditions, and because Apple had appointed KPMG to look into the group's accounts, Buzzle alleged that Apple had been a relevant party in the organisation and was liable for the debts incurred when Buzzle became insolvent. According to the court, this occurred at the end of 2001, before Wily had been appointed as liquidator.
However, Justice Richard White ruled that this was not the case.
"I do not consider that Apple made or participated in the making of any of the alleged decisions said to affect the whole or a substantial part of the business of Buzzle," he said.
Buzzle had also claimed that certain payments made to Apple were not valid because Apple had been aware of the company's insolvency. The judge did not consider that to be true.
"[Apple] received the payments in good faith and without reasonable grounds for suspecting Buzzle's insolvency," he said.
The company reportedly owed $30 million to creditors at the time of collapse. According to the judgement, the debt owed to Apple as of 18 December 2000 was $24.7 million. Between 1 January 2001 and 30 March 2001 the plaintiffs said that Buzzle incurred debts to Apple of $6,551,208, which remained unpaid.
The case could have ramifications for other companies acting as secured creditors for resellers, providing a precedent which suggests that the creditor is not to be considered as a relevant party acting in the organisation.
Apple declined to comment on the victory. Andrew Wily had yet to return requests for comment at the time of publication.