McLeod v Alokaily - [2020] QSC 308

SUPREME COURT OF QUEENSLAND

CITATION:

McLeod & Anor v Alokaily [2020] QSC 308

PARTIES:

JONATHAN PAUL McLEOD AND BILL KARAGEOZIS AS LIQUIDATORS OF ALI ALI CONTRACTING PTY LTD (IN LIQUIDATION) ACN 620 279 183

(Applicants)

v

ESKANDER ALOKAILY

(Respondent)

FILE NO/S:

BS No 11613 of 2019

DIVISION:

Trial Division

PROCEEDING:

Trial

DELIVERED ON:

8 October 2020

DELIVERED AT:

Brisbane

HEARING DATE:

28 September 2020

JUDGE:

Bowskill J

ORDERS:

1.   The court orders that the respondent pay to the company, Ali Ali Contracting Pty Ltd, the sum of $358,683.44, in satisfaction of the director’s loan.

2. The court declares that the following transactions are voidable transactions under s 588FE(6A) of the Corporations Act 2001, because they are unreasonable director-related transactions of the company, Ali Ali Contracting Pty Ltd, within the meaning of s 588FDA(1) of the Corporations Act 2001:

(a)     the transfer of amounts totalling $168,000 from the company’s bank account to the Maha Contracting Pty Ltd bank account;

(b)     the transfer of amounts totalling $163,238 from the company’s bank account to the respondent’s credit card account;

(c)     the transfer of amounts totalling $80,100 from the company’s bank account to the respondent’s personal bank account; and

(d)     the withdrawal of $20,800 cash from the company’s bank account.

3.   The court directs that the applicants file an affidavit setting out the liquidators’ costs, including in relation to this proceeding, within a time frame to be determined.

4. Further submissions in relation to the orders to be made under s 588FF(1)(a) of the Corporations Act 2001, in relation to the transactions declared to be voidable transactions, will be heard on a date to be determined.

CATCHWORDS:

CORPORATIONS – WINDING UP – CONDUCT AND INCIDENTS OF WINDING UP – EFFECT OF WINDING UP ON OTHER TRANSACTIONS – PREFERENCES AND VOIDABLE TRANSACTIONS – UNREASONABLE DIRECTOR-RELATED TRANSACTIONS – where the respondent is the sole director and shareholder of a company in liquidation – where the company has no assets or other funds to satisfy its creditors – where, prior to the appointment of the liquidators, the company made payments to the director’s personal bank account, credit card account and another bank account controlled by the director, with no records kept to substantiate the purpose of the payments being for the benefit of the company’s business – whether the payments are unreasonable director-related transactions within the meaning of s 588FDA(1) of the Corporations Act 2001 (Cth) – whether the court should make an order directing the director to pay an amount equal to some or all of the money the company paid under the transactions

CORPORATIONS – WINDING UP – CONDUCT AND INCIDENTS OF WINDING UP – COLLECTING THE ASSETS – where the financial records of the company record a director’s loan, which remains outstanding – whether an order should be made requiring the director to repay the amount of the loan

Corporations Act 2001 (Cth) ss 588FB, 588FDA, 588FF, 588FE

COUNSEL:
L Henry (sol) for the applicants

The respondent appeared on his own behalf

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 McLeod v Alokaily

Details

AGLC: McLeod v Alokaily [2020] QSC 308
Case: [2020] QSC 308
Decision Date: 8 October 2020

CaseChat Overview and Summary

McLeod v Alokaily was a case before the court regarding the winding up of Ali Ali Contracting Pty Ltd, with the primary dispute centering around transactions made by the company's sole director and shareholder, Mr Alokaily, prior to the appointment of liquidators. The company was in liquidation and had no assets or funds to satisfy its creditors. The liquidators sought to challenge several transactions made by Mr Alokaily, including payments to his personal bank account, credit card account, and another bank account he controlled, arguing these were unreasonable director-related transactions.

The legal issues before the court were whether the payments made by the company to Mr Alokaily constituted unreasonable director-related transactions under section 588FDA(1) of the Corporations Act 2001, and if so, whether the court should make an order directing Mr Alokaily to repay the amounts. Additionally, the court had to consider whether an order should be made requiring Mr Alokaily to repay a director’s loan recorded in the company’s financial records.

The court found that the transactions in question were indeed unreasonable director-related transactions under the relevant section of the Corporations Act. The payments made by the company to Mr Alokaily’s personal accounts were not substantiated as being for the benefit of the company’s business, and the lack of records to support these transactions supported the liquidators' claim. The court also noted the outstanding director’s loan and directed Mr Alokaily to repay it. Consequently, the court ordered Mr Alokaily to pay the company $358,683.44 to satisfy the director’s loan and declared several transactions voidable. The court further directed the liquidators to file an affidavit detailing their costs and scheduled further submissions regarding the orders to be made under section 588FF(1)(a) of the Corporations Act 2001.

Orders

Orders of the court

1. The court orders that the respondent pay to the company, Ali Ali Contracting Pty Ltd, the sum of $358,683.44, in satisfaction of the director’s loan.

2. The court declares that the following transactions are voidable transactions under s 588FE(6A) of the Corporations Act 2001, because they are unreasonable director-related transactions of the company, Ali Ali Contracting Pty Ltd, within the meaning of s 588FDA(1) of the Corporations Act 2001:

(a) the transfer of amounts totalling $168,000 from the company’s bank account to the Maha Contracting Pty Ltd bank account;

(b) the transfer of amounts totalling $163,238 from the company’s bank account to the respondent’s credit card account;

(c) the transfer of amounts totalling $80,100 from the company’s bank account to the respondent’s personal bank account; and

(d) the withdrawal of $20,800 cash from the company’s bank account.

3. The court directs that the applicants file an affidavit setting out the liquidators’ costs, including in relation to this proceeding, within a time frame to be determined.

4. Further submissions in relation to the orders to be made under s 588FF(1)(a) of the Corporations Act 2001, in relation to the transactions declared to be voidable transactions, will be heard on a date to be determined.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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CITATION:	McLeod & Anor v Alokaily [2020] QSC 308
PARTIES:	JONATHAN PAUL McLEOD AND BILL KARAGEOZIS AS LIQUIDATORS OF ALI ALI CONTRACTING PTY LTD (IN LIQUIDATION) ACN 620 279 183 (Applicants) v ESKANDER ALOKAILY (Respondent)
FILE NO/S:	BS No 11613 of 2019
DIVISION:	Trial Division
PROCEEDING:	Trial
DELIVERED ON:	8 October 2020
DELIVERED AT:	Brisbane
HEARING DATE:	28 September 2020
JUDGE:	Bowskill J
ORDERS:	1. The court orders that the respondent pay to the company, Ali Ali Contracting Pty Ltd, the sum of $358,683.44, in satisfaction of the director’s loan. 2. The court declares that the following transactions are voidable transactions under s 588FE(6A) of the *Corporations Act* 2001, because they are unreasonable director-related transactions of the company, Ali Ali Contracting Pty Ltd, within the meaning of s 588FDA(1) of the *Corporations Act* 2001: (a) the transfer of amounts totalling $168,000 from the company’s bank account to the Maha Contracting Pty Ltd bank account; (b) the transfer of amounts totalling $163,238 from the company’s bank account to the respondent’s credit card account; (c) the transfer of amounts totalling $80,100 from the company’s bank account to the respondent’s personal bank account; and (d) the withdrawal of $20,800 cash from the company’s bank account. 3. The court directs that the applicants file an affidavit setting out the liquidators’ costs, including in relation to this proceeding, within a time frame to be determined. 4. Further submissions in relation to the orders to be made under s 588FF(1)(a) of the *Corporations Act* 2001, in relation to the transactions declared to be voidable transactions, will be heard on a date to be determined.
CATCHWORDS:	CORPORATIONS – WINDING UP – CONDUCT AND INCIDENTS OF WINDING UP – EFFECT OF WINDING UP ON OTHER TRANSACTIONS – PREFERENCES AND VOIDABLE TRANSACTIONS – UNREASONABLE DIRECTOR-RELATED TRANSACTIONS – where the respondent is the sole director and shareholder of a company in liquidation – where the company has no assets or other funds to satisfy its creditors – where, prior to the appointment of the liquidators, the company made payments to the director’s personal bank account, credit card account and another bank account controlled by the director, with no records kept to substantiate the purpose of the payments being for the benefit of the company’s business – whether the payments are unreasonable director-related transactions within the meaning of s 588FDA(1) of the Corporations Act 2001 (Cth) – whether the court should make an order directing the director to pay an amount equal to some or all of the money the company paid under the transactions CORPORATIONS – WINDING UP – CONDUCT AND INCIDENTS OF WINDING UP – COLLECTING THE ASSETS – where the financial records of the company record a director’s loan, which remains outstanding – whether an order should be made requiring the director to repay the amount of the loan Corporations Act 2001 (Cth) ss 588FB, 588FDA, 588FF, 588FE
COUNSEL:	L Henry (sol) for the applicants The respondent appeared on his own behalf