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Sancho Bakery Pty Ltd (in Liquidation) v Durolek

Sancho Bakery Pty Ltd (in Liquidation) v Durolek

Case [2024] WASC 81 22 March 2024

Breaches of directors duties

Accessorial liability

Restitution

Voidable transactions

Insolvent transaction

Good faith defence

Corporate Law & Governance

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JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION:   SANCHO BAKERY PTY LTD (IN LIQUIDATION) -v- DUROLEK [2024] WASC 81
CORAM:   TOTTLE J
HEARD:   9 - 11 OCTOBER 2023
DELIVERED          :   22 MARCH 2024
FILE NO/S:   CIV 1873 of 2022
BETWEEN:   SANCHO BAKERY PTY LTD (IN LIQUIDATION)
First Plaintiff
TRAVIS KUKURA AND NEIL RAYMOND CRIBB AS JOINT AND SEVERAL LIQUIDATORS OF SANCHO BAKERY PTY LTD (IN LIQUIDATION)
Second Plaintiff
BUITENDAG HOLDINGS PTY LTD as trustee for BUITENDAG FAMILY TRUST
Third Plaintiff
AND
BELINDA DUROLEK
First Defendant
FRANCK DUROLEK
Second Defendant

Catchwords:

Corporations - Breaches of directors duties - Accessorial liability - Whether first defendant directly or indirectly concerned in breaches of duty by second defendant - Whether first defendant was an intentional participant in the breaches with knowledge of the essential elements of the contravening conduct - Intention and knowledge not established

Equity - Knowing assistance in dishonest and fraudulent breach of duty - No pleading of dishonest and fraudulent design - Knowledge of dishonest and fraudulent design not established

Contract - Where no express agreement - Whether existence of loan contact capable of being inferred from circumstances - Whether loan contract can be inferred from payment of funds by company controlled by second defendant into account in the joint names of defendants - No contract inferred

Restitution - Claim for money had and received - Whether second defendant received a benefit - No benefit received

Corporations - Voidable transactions - Whether first defendant a party to a transaction - Whether transaction an uncommercial transaction - Whether transaction an insolvent transaction - Whether transaction an insolvent transaction for the purpose of defeating creditors - Whether good faith defence open - Voidable transaction established - Good faith defence established - Nature of the power conferred by s 588FF

Legislation:

Acts Interpretation Act 1901 (Cth)
Corporations Act 2001 (Cth)

Result:

Action dismissed

Category: B

Representation:

Counsel:

First Plaintiff	:	K A Dundo
Second Plaintiff	:	K A Dundo
Third Plaintiff	:	K A Dundo
First Defendant	:	L A Warnick SC
Second Defendant	:	No appearance

Solicitors:

First Plaintiff	:	KD Legal (Perth)
Second Plaintiff	:	KD Legal (Perth)
Third Plaintiff	:	KD Legal (Perth)
First Defendant	:	Havilah Legal
Second Defendant	:	No appearance

Case(s) referred to in decision(s):

Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd [2018] HCA 43; (2018) 265 CLR 1
ASIC v ActiveSuper Pty Ltd (2015) 105 ACSR 116; [2015] FCA 342
Australian Securities and Investments Commission v Adler [2002] NSWSC 171; (2002) 168 FLR 253
Bryant, in the matter of Gunns Limited (in liq) (receivers and managers appointed) v Edenborn Pty Ltd [2020] FCA 715
Cashflow Finance Pty Ltd (in liq) v Westpac Banking Corp [1999] NSWSC 671
Cook's Constructions Pty Ltd v Brown [2004] NSWCA 105; (2004) 49 ACSR 62
Crowe-Maxwell v Frost [2016] NSWCA 46; (2016) 91 NSWLR 414
Cussen v Commissioner of Taxation [2003] NSWSC 841
Cussen v Commissioner of…

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 Sancho Bakery Pty Ltd (in Liquidation) v Durolek

Details

AGLC: Sancho Bakery Pty Ltd (in Liquidation) v Durolek [2024] WASC 81
Case: [2024] WASC 81
Decision Date: 22 MARCH 2024

CaseChat Overview and Summary

The case of Sancho Bakery Pty Ltd (in Liquidation) v Durolek involved a legal dispute between the liquidator of Sancho Bakery Pty Ltd and the Durolek family, concerning breaches of directors' duties, accessory liability, and voidable transactions under the Corporations Act. The dispute was heard by the Federal Court of Australia. The central issues before the court were whether the first defendant, Mr Durolek, was directly or indirectly involved in the breaches of duty by the second defendant, Mrs Durolek, and if there was a contract between the parties. The court also had to determine if the second defendant received a benefit and whether the transaction was voidable.

The court examined the evidence to determine if Mr Durolek was an accessory to the breaches of duty by Mrs Durolek. It held that the intention and knowledge required for accessory liability were not established. The court also ruled that there was no evidence to support that Mr Durolek was a knowing assistant in any dishonest and fraudulent breach of duty by Mrs Durolek. Furthermore, the court found that there was no express agreement or inferred contract between the parties based on the payment of funds into a joint account. Consequently, the court concluded that the second defendant did not receive a benefit, and no contract was established.

In its reasoning, the court found that while the second defendant had breached her duties as a director, the first defendant was not an accessory to those breaches. The court determined that the transaction between the parties was voidable as an insolvent transaction for the purpose of defeating creditors. However, the court also held that the good faith defence was established, and the nature of the power conferred by section 588FF of the Corporations Act was clarified. The final orders of the court reflected these findings, with the transaction being voidable, but the good faith defence being upheld.

Orders