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Dracoma Pty Ltd v Changela

Dracoma Pty Ltd v Changela

Case [2025] NSWSC 83 21 February 2025

Assignment of Causes of Action

De Facto Directors

Voidable Transactions

Fiduciary Duty

Statutory Directors' Duties

Corporate Law & Governance

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Supreme Court

New South Wales

Medium Neutral Citation: Dracoma Pty Ltd v Changela [2025] NSWSC 83
Hearing dates: 2-5, 9, 19 December 2024; further written submissions 20 and 23 December 2024
Date of orders: 21 February 2025
Decision date: 21 February 2025
Jurisdiction: Equity - Commercial List
Before: Stevenson J
Decision:
Fifth defendant did not act in position of director; third defendant did act in position of director; assignment of claims under Part 5.7B of the Corporations Act 2001 (Cth) and for breach of fiduciary and general law directors’ duties effective; advances made to the Company were loans; Company was insolvent by 31 December 2017; certain of the assigned claims succeed

Catchwords:
EQUITY – assignment – of causes of action – where liquidator of company associated with the defendants entered deed of assignment with plaintiff – where plaintiff as assignee seeks to recover from defendants on various bases – whether causes of action regarding voidable transactions, fiduciary duties, statutory directors’ duties, and general law directors’ duties capable of assignment
CORPORATIONS – directors and officers – de facto directors – where first and second defendants were directors of company but played no role in company’s affairs – where plaintiff contends third, fourth, and fifth defendants acted in the position of directors of the company – where defendants admitted that third and fourth defendants were directors – whether fifth defendant acted in the position of director
CORPORATIONS – winding up – voidable transactions – where plaintiff contends payments to defendants and related parties from company were unfair preferences or unreasonable director-related transactions or otherwise voidable – where defendants contend payments were loans

Legislation Cited:
Conveyancing Act 1919 (NSW)
Corporations Act 2001 (Cth)
Sale of Goods Act 1923 (NSW)

Cases Cited:
Alora Davies Developments 104 Pty Ltd (in liq) v Raphael [2024] NSWSC 547
Anderson v Canaccord Genuity Financial Ltd [2022] NSWSC 58
Anderson v Canaccord Genuity Financial Ltd (2023) 113 NSWLR 151; [2023] NSWCA 294
ASIC v ABC Fund Managers Ltd (No. 2) [2001] VSC 383
Barre v Barre [2021] FamCA 101
Breen v Williams (1996) 186 CLR 71; [1996] HCA 57
Cant, in the matter of Novaline Pty Ltd (in liq) [2011] FCA 898
Cussen v Sultan [2009] NSWSC 1114
Deputy Commissioner of Taxation v Austin [1998] FCA 1034; (1998) 28 ACSR 565
EC Dawson Investments Pty Ltd v Crystal Finance Pty Ltd (No 3) [2013] WASC 183
Elfic Ltd v Macks [2003] 2 Qd R 125; [2001] QCA 219
Featherstone v Ashala Model Agency Pty Ltd (in liq) [2018] 3 Qd R 147; [2017] QCA 260
Fisher v Divine Homes Pty Ltd; Allen v Harb [2011] NSWSC 8
Galati v Deans [2021] NSWSC 1094
H2 Migration & Education Pty Ltd v Gu [2023] WASC 199
In the matter of ACN 091 518 302 Pty Ltd (In Liquidation) (formerly Pinnacle Investments Pty Ltd) [2019] VSC 699
In the matter of Colorado Products Pty Ltd (in prov liq) [2014] NSWSC 789
In the matter of Lawrence Waterhouse Pty Ltd…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Dracoma Pty Ltd v Changela

Details

AGLC: Dracoma Pty Ltd v Changela [2025] NSWSC 83
Case: [2025] NSWSC 83
Decision Date: 21 February 2025

CaseChat Overview and Summary

The case of Dracoma Pty Ltd v Changela was heard in the Federal Court of Australia. Dracoma Pty Ltd, through its liquidator, assigned its causes of action to Changela, who subsequently initiated legal proceedings against several defendants. The dispute involved claims related to voidable transactions, breaches of fiduciary and statutory directors’ duties, and general law directors’ duties. The defendants contested these claims, arguing that the causes of action were not assignable and that the payments in question were legitimate loans rather than voidable transactions.

The central legal issues before the court were whether the causes of action concerning voidable transactions, fiduciary duties, statutory directors’ duties, and general law directors’ duties were assignable under equity. Additionally, the court had to determine whether certain defendants acted in the position of directors of the company in question and whether the payments made to the defendants and related parties constituted voidable transactions such as unfair preferences or unreasonable director-related transactions.

The court found that the causes of action were indeed assignable and therefore validly transferred to Changela. It was established that the third and fourth defendants were indeed directors of the company. While the first and second defendants were not considered to have been active directors, the court held that the fifth defendant also acted in the position of a director. Regarding the nature of the payments, the court concluded that they were not loans but rather voidable transactions, finding them to be either unfair preferences or unreasonable director-related transactions.

The court ordered that the defendants were liable to compensate Dracoma Pty Ltd for the voidable transactions. The exact financial implications and further details of the relief granted were not specified in the extract provided.

Orders