In the matter of ZH International Pty Ltd (in liquidation) [2022] NSWSC 2

In the matter of ZH International Pty Ltd (in liquidation) [2022] NSWSC 2

The transfers of company properties by ZH International Pty Ltd to the directors/shareholders in 2014 were voidable transactions under the Corporations Act 2001 (Cth) as unreasonable director-related transactions, uncommercial transactions, and (in part) unfair preferences, being effected at a time when the company was insolvent, at an undervalue, and primarily to defeat the claims of creditors. Family Court orders did not bind the company nor allocate proprietary interests in its assets, so orders for recovery could be made. The directors breached their statutory and fiduciary duties in causing company property to be transferred to themselves at a detriment to the company and its creditors.

Jurisdiction
Australia
Judgment Date
02 February 2022
Procedural Posture
Principal Judgment / Final Judgment With Orders
Outcome
Defendants ordered to transfer four properties (and four specific units) to company; further orders for parties to quantify and account for benefits conferred; costs reserved.
Legal Topics
['voidable Transactions' 'unreasonable Director Related Transactions' 'uncommercial Transactions' 'unfair Preference' 'director Duties' 'asset Stripping' 'family Law Property Orders' 'constructive Trust']
['corporations Law' 'equity' 'insolvency' 'family Law'] ['voidable Transactions' 'unreasonable Director Related Transactions' 'uncommercial Transactions' 'unfair Preference' 'director Duties' 'asset Stripping' 'family Law Property Orders' 'constructive Trust']

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Procedural Posture

Principal Judgment / Final Judgment With Orders

Legal Issues

  1. 1 ['Whether transfer of company-owned properties to directors/shareholders pursuant to Family Court consent orders constituted voidable transactions under Part 5.7B Corporations Act 2001 (Cth)' 'Whether such transactions were unreasonable director-related transactions, uncommercial transactions, or unfair preferences' 'Whether Family Court orders precluded relief under Corporations Act' 'Whether directors breached statutory and fiduciary duties to the company']

Ratio Decidendi

The transfers of company properties by ZH International Pty Ltd to the directors/shareholders in 2014 were voidable transactions under the Corporations Act 2001 (Cth) as unreasonable director-related transactions, uncommercial transactions, and (in part) unfair preferences, being effected at a time when the company was insolvent, at an undervalue, and primarily to defeat the claims of creditors. Family Court orders did not bind the company nor allocate proprietary interests in its assets, so orders for recovery could be made. The directors breached their statutory and fiduciary duties in causing company property to be transferred to themselves at a detriment to the company and its creditors.

Court Disposition

Defendants ordered to transfer four properties (and four specific units) to company; further orders for parties to quantify and account for benefits conferred; costs reserved.

Orders

  • ['Within 30 days, first defendant to execute and deliver transfer of 268 Cabramatta Road to company.' 'Within 30 days, first defendant to execute and deliver transfers of Units 1, 10, 14, 20 of 87 Hughes Street to company (subject to existing mortgages).' 'Within 30 days, second defendant to execute and deliver...