Cooper as Liquidator of Runtong Investment and Development Pty Ltd (In Liq) v Ceg Direct Securities Pty Ltd

The case of Cooper as Liquidator of Runtong Investment and Development Pty Ltd (In Liq) v Ceg Direct Securities Pty Ltd involved a dispute over whether a mortgage executed by Runtong, an insolvent company, over land it owned in favour of CEG, a securities company, was an unreasonable director-related transaction under the Corporations Act 2001 (Cth). The plaintiff, Cooper, as liquidator of Runtong, argued that the transaction was an unreasonable director-related transaction that conferred a benefit on the directors of Runtong, Datong, and Futong who were also common directors of those companies. The court had to decide whether the transaction met the criteria of an unreasonable director-related transaction under s 588FDA(1) of the Act, whether the transaction was voidable under s 588FE(6A), and if so, whether the plaintiff was entitled to an order for the defendant to pay a sum that fairly represented the benefit received by the defendant.

The court found that the transaction was an unreasonable director-related transaction as it met the requirements of s 588FDA(1) of the Act. The court held that the transaction was voidable under s 588FE(6A) of the Act. The court found that the directors of Runtong, Datong, and Futong were related entities within the meaning of the Corporations Act, and that the transaction conferred a benefit on them by reducing their contingent liability under the personal guarantees they had given to CEG. The court rejected the argument that the transaction was a reasonable business decision and that there was no quantum of benefit to the directors. The court also found that a reasonable person in Runtong's circumstances would not have entered into the transaction.

The court made an order that CEG Direct Securities Pty Ltd pay Runtong Investment and Development Pty Ltd (in liq) the sum of ONE MILLION, NINE HUNDRED AND EIGHTY THREE THOUSAND, ONE HUNDRED DOLLARS AND FORTY CENTS ($1,983,100.40) as a fair representation of the benefit received by CEG from the transaction. The court reserved the question of interest and costs to be heard at a later date. The court also made a declaration that the transaction was an unreasonable director-related transaction within the meaning of s 588FDA(1) of the Act, as it recorded the Court’s disapproval of Runtong entering into the Transaction and acted as a deterrent to others.