Gordon in his capacity as liquidator of Lyon Form Pty Ltd (in liq) v Leon Plant Hire Pty Ltd (in liq)

Gordon, acting in his capacity as liquidator of Lyon Form Pty Ltd, initiated proceedings against Leon Plant Hire Pty Ltd, which was in liquidation, concerning various financial transactions. The liquidator sought to challenge the legality of certain mortgage repayments made by the company to a financier, which was associated with some of the company’s directors. The central issue was whether these repayments constituted uncommercial transactions under the Corporations Act 2001 (Cth), specifically section 588FB, and if so, whether they could be recovered by the liquidator. Additionally, the court needed to determine if the company was presumed to be insolvent at the time of the transactions, as per section 588E(4) of the Corporations Act 2001 (Cth), and if this presumption was rebutted by any evidence presented.

The court meticulously examined the financial records and transactions in question. It found that the records were inadequate and did not sufficiently explain the mortgage repayments. This led to a conclusion that the presumption of insolvency under section 588E(4) was applicable unless rebutted. The court further assessed whether the director’s failure to consider creditors and potential conflicts of interest constituted a breach of statutory and fiduciary duties. Given the inadequacies in the financial records and the nature of the transactions, the court held that the director had indeed breached his duties by not properly considering the company’s creditors and by making uncommercial transactions that favoured the financier.

The court ruled that the mortgage repayments were indeed uncommercial transactions under section 588FB of the Corporations Act 2001 (Cth). It also found that the presumption of insolvency was not successfully rebutted, thereby affirming the liquidator’s claim. Furthermore, the court determined that the director’s actions amounted to a breach of his fiduciary and statutory duties, which led to the imposition of a constructive trust over the mortgaged property in favour of the company. Consequently, the company was entitled to subrogate to the financier’s security, allowing it to recover the amounts paid as part of the mortgage repayments. The court's final orders included the recovery of the uncommercial transactions and the imposition of a constructive trust over the mortgaged property.