Smith v Starke, in the matter of Action Paintball Games Pty Ltd (in liq) (No 2) [2015] FCA 1119

Smith v Starke, in the matter of Action Paintball Games Pty Ltd (in liq) (No 2) [2015] FCA 1119

The payments were made under an arrangement by which the defendants took on Perpetual loan obligations primarily to secure Lot 22 for Action Paintball's long-term benefit, and in the earlier years a reasonable person in the company's circumstances could have made the payments having regard to the company's financial position, the shareholders' interests, and the aim of preserving Lot 22. By 31 December 2010, however, Action Paintball's financial position, outstanding superannuation guarantee liabilities and tax debts, declining revenue, and lack of realistic progress in making Lot 22 suitable for use meant that a reasonable person in the company's circumstances would have ceased making...

Jurisdiction
Australia
Judgment Date
22 October 2015
Procedural Posture
Liquidator's Application to Recover Payments as Unreasonable Director Related Transactions Under S 588 FF of the Corporations Act 2001 (cth) / Reasons for Judgment After Hearing; Parties Directed to File Proposed Minutes of Order
Outcome
Some impugned payments were found to be unreasonable director-related transactions: payments made from 1 January 2011 to 25 May 2012, subject to a deduction for the proportion referable to loan proceeds used for the company's benefit. The parties were directed to prepare proposed orders and costs were reserved for...
Legal Topics
['unreasonable Director Related Transactions' 'voidable Transactions' 'liquidator Recovery Orders' "payments to Directors' Creditor" 'benefits and Detriment to Company']
['corporations' 'insolvency'] ['unreasonable Director Related Transactions' 'voidable Transactions' 'liquidator Recovery Orders' "payments to Directors' Creditor" 'benefits and Detriment to Company']

Case Brief

Summary, issues, holding and outcome

More case intelligence is available

Unlock the full research layer for this judgment.

Full judgment text Downloadable case file Legal principles 1 Authorities cited 2 Party arguments 2 Amounts and remedies 1
Sign in to unlock

Procedural Posture

Liquidator's Application to Recover Payments as Unreasonable Director Related Transactions Under S 588 FF of the Corporations Act 2001 (cth) / Reasons for Judgment After Hearing; Parties Directed to File Proposed Minutes of Order

Legal Issues

  1. 1 ['Whether each disputed payment was a payment made by the company to a person on behalf of, or for the benefit of, a director or close associate within s 588FDA(1).' "Whether it may be expected that a reasonable person in Action Paintball's circumstances would not have made each disputed payment, having regard to s 588FDA(1)(c)." 'If any payments were unreasonable director-related transactions, what orders should be made under s 588FF.']

Ratio Decidendi

The payments were made under an arrangement by which the defendants took on Perpetual loan obligations primarily to secure Lot 22 for Action Paintball's long-term benefit, and in the earlier years a reasonable person in the company's circumstances could have made the payments having regard to the company's financial position, the shareholders' interests, and the aim of preserving Lot 22. By 31 December 2010, however, Action Paintball's financial position, outstanding superannuation guarantee liabilities and tax debts, declining revenue, and lack of realistic progress in making Lot 22 suitable for use meant that a reasonable person in the company's circumstances would have ceased making...

Court Disposition

Some impugned payments were found to be unreasonable director-related transactions: payments made from 1 January 2011 to 25 May 2012, subject to a deduction for the proportion referable to loan proceeds used for the company's benefit. The parties were directed to prepare proposed orders and costs were reserved for...

Orders

  • ['Within 14 days of the date of this judgment, the parties file and serve a joint proposed minute of order giving effect to these reasons.' 'The matter be listed for directions at 9.30 am on 12 November 2015.' 'The parties have liberty to apply.']