Federal Court of Australia has dismissed the complaint filed by unsecured creditors of wave energy company Oceanlinx to nullify the sale of the company’s intellectual property concluded by the administrators appointed following its demise in 2014.
The joint administrators, Vaughan Strawbridge and Jason Tracy, were cleared of charges of the alleged prejudicial conduct towards the unsecured creditors’ best interests during the sale of the remaining Oceanlinx assets.
Namely, the Administrators conducted a campaign for the sale of Oceanlinx’ intellectual property, after which they received the offers from sources linked to two of the company’s directors – Ali Mohammad Baghaei Nanehkaran, and Tibor Nick Vertes, described in the judgment as the ‘Baghaei Interests’ and the ‘Vertes Interests’ respectively.
The Administrators conducted negotiations with the two interested parties, where the Baghaei Interests submitted an acquisition proposal which included cash payment of $400,000 and the release of claims against the company valued at approximately $1.6 million, but required acceptance of the offer within a number of days, according to TressCox Lawyers, an Australian law firm.
The Vertes Interests submitted an acquisition proposal which included cash payment of $2.46 million and releases assessed at $941,000.
However, the Administrators concluded to complete the sale to Baghei Interests, since the Vertes Interests had not provided sufficient assurances to satisfy the Administrators of its capacity to source funds for the purchase, unlike Baghei Interest which provided proof of funding.
The plaintiffs also sought that new liquidators be appointed to investigate whether claims might be brought by the company against the Administrators for the breaches alleged.
However, the court dismissed the plaintiffs’ application in full, stating that since the Vertes Interests could not satisfy the Administrators (or the Court) that it actually had the financial capacity to complete the sale, the Baghaei proposal remained the only real option for the Administrators, and thus, there was no identifiable prejudice to creditors.
In reaching its conclusion, the Court acknowledged the difficult commercial decision that the Administrators were required to make in this situation and noted that ‘no valid criticism can be levelled at the administrators,’ TressCox Lawyers stated in their summary of the case.
To remind, Oceanlinx went into liquidation late in 2014 following the accident during the transportation of its greenWAVE wave energy device from Port Adelaide to Port MacDonnell where it was supposed to be deployed, leaving the wave energy converter stranded 1.4 km off Carrickalinga, a coastal town in South Australia.