ADDSTEAD P/L & ORS (respondents) v LIDDAN PTY LTD AND ORS (appellants) No. SCGRG-95-1880 Judgment No. 6369 Number of pages - 41 Corporations (1997) 70 SASR 21

(1997) 70 SASR 21; [1997] SASC 6727

Supreme Court of South Australia

Built by Barristers,
For Australian Law.

See how it works

Interrogate

Catchwords

1. Corporations
2. › Directors' duties
3. › Fiduciary duties
4. › Duty to act in best interests of company
5. › Insolvent companies
6. › Duty to consider interests of creditors
7. › Diversion of settlement moneys for personal benefit
8. › Whether resignation as director avoids fiduciary obligations
9. › Corporations Law, s 232
1. Equity
2. › Constructive trusts
3. › Knowing receipt
4. › Receipt of property obtained in breach of fiduciary duty
5. › Knowledge of breach
6. › Whether knowledge of terms of deed sufficient to establish knowledge of breach
7. › Whether wilful blindness equivalent to actual knowledge
1. Equity
2. › Constructive trusts
3. › Tracing
4. › Receipt by volunteers
5. › Whether moneys obtained in breach of fiduciary duty traceable into hands of volunteers
6. › Whether knowledge of breach required where recipient is volunteer
1. Practice and Procedure
2. › Summary judgment
3. › Immediate relief
4. › Whether appropriate to dispose of complex factual matters summarily
5. › Whether urgency required
6. › Whether lack of credible defence justifies summary disposal
7. › Supreme Court Rules, R 25.02

Quick Take

A director of an insolvent company who resigns and then participates in a scheme to divert company assets for personal benefit remains subject to fiduciary obligations and cannot sanitise the breach by the resignation. Where settlement moneys are diverted from insolvent companies in breach of directors' duties, recipients who are volunteers (giving no value) hold those moneys on constructive trust traceable in equity, even if knowledge of the specific breach is not established. The terms of a deed may themselves be sufficient to fix a party with knowledge of a gross breach of fiduciary duty where the deed discloses that directors are receiving substantial benefits in consideration for assisting a creditor against their own companies.