A Federal Court decision has thrown out liquidators’ claims against former financiers of a video review platform, dismissing accusations that company executives had inflated the firm’s earnings. The dispute involved Big Review TV Ltd (BRTV), a subsidiary of ASX-listed BIG UN Ltd (BIG), which folded in 2018 after disclosing revenue figures later revealed as inflated.
The liquidators sought $27.2 million in compensation or, alternatively, up to $72.7 million through an account of profits or knowing receipt from First Class Capital and one of its directors. Their case rested on the claim that BRTV’s leadership had approved deals that treated debt as revenue, a practice they said artificially propped up BIG’s share price for personal benefit. The liquidators cited violations of sections 181 and 182 of the Corporations Act 2001 and breaches of fiduciary duty.
The court rejected the allegation of improper purpose. It held that the executives had relied on accounting guidance supporting the revenue treatment and had not sought to mislead investors about BRTV’s financial health. The court said that the liquidators’ case involved a ‘false dichotomy’ between revenue recognition and BRTV’s commercial interests. The court acknowledged that as a startup, BRTV had secured funding during a period when its revenue appeared robust, a factor that justified the accounting approach.
The court rejected the claim that the main financing agreement was uncommercial. The court found that the cashflow analysis by the liquidators’ expert ignored the growth in value of BRTV’s video library and the potential future revenue of the business. The court said that there was no proper basis to second-guess the officers’ business decisions. A separate challenge to a share subscription agreement similarly failed.
Although it said that it did not need to decide the point, the court found that the financiers neither knew nor considered that the agreements were contrary to BRTV’s interests. The ruling further found no demonstrated loss. The bulk of the compensation claim-$25.5 million in financing and cancellation fees-was classified as a “cost-free loan,” since BRTV later sold its intellectual property, including its video collection, for $42 million during administration. The liquidators had not established how the financing had contributed to that sale.
