Re Central Management (NSW) Pty Ltd (in liq)

In the matter of Central Management (NSW) Pty Ltd, a company in liquidation, the liquidator sought to hold the Second Defendant, Mr. Smith, personally liable for breaches of directors' duties in connection with payments made by the company to its detriment. The case was heard by the Federal Court of Australia. The central dispute was whether Mr. Smith, who had ceased to be a recorded director of the company, had nonetheless acted as a de facto director and whether he breached his duties by causing or failing to prevent the company from making detrimental payments. Additionally, the court needed to determine whether the payments could be recovered as loans from the payee.

The court examined whether Mr. Smith's conduct constituted a breach of his duties as a director. It was necessary to establish whether Mr. Smith, despite no longer being a recorded director, acted in a manner consistent with a de facto director. The court also had to assess whether Mr. Smith's actions or inactions led to the company making payments that were detrimental to its financial position. Furthermore, the court had to decide whether the payments made could be characterised as loans recoverable from the payee.

The court found that Mr. Smith had acted as a de facto director, despite no longer being recorded as such. It was determined that his conduct and influence over the company's financial decisions constituted a breach of his directors' duties. The court held that the payments made by the company to its detriment were a result of Mr. Smith's actions or inactions. Consequently, the court ruled that the payments could be recovered as loans from the payee. The court's decision was grounded in the established principles of de facto directorship and the duties owed by directors to the company.

The final orders of the court included holding Mr. Smith personally liable for the detrimental payments made by the company and allowing the liquidator to recover those payments as loans from the payee. The court's ruling underscored the importance of holding de facto directors accountable for their actions, regardless of their formal status as a director.