Cooper as Liquidator of Runtong Investment and Development Pty Ltd (In Liq) v CEG Direct Securities Pty Ltd [2024] FCA 6

FEDERAL COURT OF AUSTRALIA

Cooper as Liquidator of Runtong Investment and Development Pty Ltd (In Liq) v CEG Direct Securities Pty Ltd [2024] FCA 6 File number(s): SAD 119 of 2019

Judgment of: O'SULLIVAN J

Date of judgment: 12 January 2024

Catchwords: CORPORATIONS LAW – where now insolvent plaintiff company executed a mortgage over land in favour of the defendant to secure borrowings from the defendant by two other companies – where all three companies share two common directors – where each of the three companies also had other directors – where the two common directors had given personal guarantees guaranteeing the repayment of borrowings by the other two companies – whether by the grant of the mortgage the two common directors obtained a benefit by reducing their contingent liability under the terms of the personal guarantees – whether the transaction was an unreasonable director-related transaction within the meaning of s 588FDA of the Corporations Act 2001 (Cth) – whether the granting of the mortgage was made to a person on behalf of, or for the benefit of, a director – whether a reasonable person in the company's circumstances would not have entered into the transaction – held transaction an unreasonable director-related transaction – whether the defendant should pay the plaintiff an amount that fairly represents some or all of the benefits that the defendant has received because of the transaction – assessment of benefit under s 588FF(4) of the Act – orders made

Legislation: Corporations Act 2001 (Cth), ss 9, 588FE, 588FF(1) & (4), 588FDA, 588FDA(1) Federal Court of Australia Act 1976, s 21

Cases cited: Ainsworth v Criminal Justice Commission [1992] HCA 10; (1992) 175 CLR 564 Australian Competition and Consumer Commission v Oscar Wylee Pty Ltd [2020] FCA 1340 Aviation 3030 Pty Ltd (in liq) v Lao, in the matter of Aviation 3030 Pty Ltd (in liq) [2022] FCA 458 Crowe-Maxwell v Frost [2016] NSWCA 46; 91 NSWLR 414 D Pty Ltd (in liq) v Calas (Trustee), in the matter of D Pty Ltd (in liq) [2016) FCA 1409 Golden Heritage Golf Pty Ltd (in liq) (recvrs and mngrs apptd) v Sun [2016] VSC 167; 113 ACSR 550 Great Investments v Warner [2016] FCAFC 85; (2016) 243 FCR 516 Parker Trading as on Grid off Grid Solar v Switchee Pty Ltd Trading as Australian Solar Quotes [2018] FCA 479 Pearce v Gulmohar Pty Ltd [2017] FCA 660 Re IW4U Pty Ltd (in liq) [2021] NSWSC 40; 150 ACSR 146 Slaven v Menegazzo [2009] ACTSC 94 Smith v Starke (No 2) [2015] FCA 1119; 109 ACSR 145 Vasudevan v Becon Constructions (Australia) Pty Ltd [2014] VSCA; (2014) 41 VR 445 Weaver v Harburn [2014] WASCA 227; 103 ACSR 416 Heydon JD, Leeming MJ, Turner PG, Meagher, Gummow and Lehane's Equity: Doctrines & Remedies (5th ed, Butterworths, 2014)