Weaver v Harburn

(2014) 103 ACSR 416; [2014] WASCA 227

Western Australia Court of Appeal

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Interrogate

Catchwords

1. Corporations
2. › Directors' duties
3. › Unreasonable director-related transactions
4. › Payment by company to close associate of director
5. › Whether reasonable person in company's circumstances would have entered into transaction
6. › Relevance of company's financial health
7. › Corporations Act 2001 (Cth), ss 588FDA, 588FE(6A), 588FF
1. Corporations
2. › Directors' duties
3. › Good faith and proper purpose
4. › Improper use of position
5. › Director causing company to make gift to spouse
6. › Whether breach of ss 181 and 182
7. › Corporations Act 2001 (Cth), ss 181, 182
1. Corporations
2. › Voidable transactions
3. › Scope of relief under s 588FF
4. › Whether directing mind of company is 'party' to transaction
5. › Defence under s 588FG(1)(a)
6. › Whether non-party who received no benefit may be subject to order
7. › Corporations Act 2001 (Cth), ss 588FF, 588FG
1. Corporations
2. › Voidable transactions
3. › Unreasonable director-related transactions
4. › Scope of recovery under s 588FF(4)
5. › Whether recovery limited to amount of creditors' debts
6. › Whether benefit of creditors includes costs of winding up
7. › Corporations Act 2001 (Cth), s 588FF(4)

Quick Take

A payment by a company to a close associate of a director that constitutes in substance a gift with no benefit to the company is prima facie an unreasonable director-related transaction under s 588FDA regardless of the company's financial health. The financial condition of the company is not an element of an unreasonable director-related transaction but may be a relevant circumstance under s 588FDA(1)(c)(iv), and its relevance and weight depend on the facts. A natural person who is the directing mind of a company does not become a 'party' to a transaction merely because they caused the company to enter into it; the parties are identified by s 588FDA(1)(a) and (b). Recovery under s 588FF(4) is not capped at the total debts owed to creditors because 'benefit of creditors' includes the costs of proper investigation and administration of the winding up.