Where a director causes company funds to be paid to a third party in satisfaction of the director's personal obligation, the recipient may be liable under the first limb of Barnes v Addy if they knew the business was the company's, that the payment meant the company could not account for the funds, and that the money was put out of the company's reach — even without clear knowledge of insolvency. Knowledge that an honest and reasonable person would have appreciated a real and not remote risk of prejudice to creditors suffices. A disposition of company funds by agreement between directors and shareholders remains a transaction 'of' the company for Pt 5.7B purposes (per majority, Basten JA and Ipp JA).
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