Apple has won an eight-year court battle with liquidators for defunct reseller group, Buzzle, in the NSW Supreme Court.
Court proceedings were initiated after the reseller group was liquidated and then placed into receivership. Buzzle liquidator, Andrew Wily, alleged Apple breached the Corporations Act by selling stock to the organisation while allegedly knowing it was insolvent. He claimed the IT vendor was acting as a ‘shadow director’ and was responsible for Buzzle’s debts while it was insolvent.
The administrators were seeking to recoup $50 million from the vendor, plus damages, interest and legal costs. But in his ruling on March 30, Justice Richard White, concluded Apple and its finance director, James Likidis, were not ‘shadow directors’ of Buzzle, and the company was therefore not liable.
In one example, Buzzle alleged Apple instructed its directors to arrange for Buzzle employees to prepare financial reports, prepare a plan for collection of accounts receivable, and employ resources for debt collection. Another example alleged Apple’s Likidis gave instructions to Buzzle and its directors to only sell Apple products and no other third-party hardware, software or accessories.
“There had been little contact between Mr Likidis and Buzzle prior to December 2000. After Buzzle defaulted in its debts to Apple on December 1, 2000 Apple moved to protect its position by putting increasing pressure on Buzzle to provide it with financial information about Buzzle’s trading position and to cause Buzzle to collect the debts owed to it,” Justice White said in his judgment. “This is far removed from Apple being a shadow director.”
Justice White did note Apple was aware Buzzle was having trouble with its accounting system, which created problems when reconciling cash banked against debtors. This made it difficult for the group to identify collecting debts. It was expected to be a temporary ‘teething’ issue.
“I do not accept that by December 31, 2000, Buzzle’s directors were accustomed to act on the instructions or wishes of Apple or Likidis,” Justice White said. “Looking at the picture in broad terms, the resellers had merged their business in a way contrary to that advised by Likidis.”
Buzzle was formed in 2000 by a consortium of Apple resellers: Choice Connections, Design Wyse, GM Computer, Mac's Place, Manning Computers, Status Graph and Next Byte. One month after it was announced, Next Byte split from the merged group.
During its short time, the group had more than 30 outlets around Australia and Apple had projected the group would represent one-third of its business locally.