Breach of Duties by Liquidator: Case Analysis of Asden Developments Pty Ltd v Dinoris

This presentation provides a case analysis of Asden Developments Pty Ltd v Dinoris, where the liquidator breached the duties by not acting with due diligence and care in the best interest of the company. It discusses the breach of Section [180] of the Corporations Act 2001 (Cth) and the business judgment rule. The court decision and analysis suggest that directors and liquidators both must act with due diligence and care in the best interest of the company. The presentation also discusses the future implications and references.

BUSINESS AND
CORPORATE
LAW
Aditi Singla EMV80153
Navdeep Kaur EMV8997
Abhishek Singh SIDHU BIS8018
Varinderpreet Kaur EMV80151
Kuljeet Singh EMV80253

CASE INTRODUCTION
Asden Developments Pty Ltd (in liq) v
Dinoris (No 3) [2016] FCA 788
 Liquidator contravened the provisions
of section [180] of the CA;
 Company indulged into an ‘elaborate’
scheme and incorporated organization
called CJI Investments Pty Limited;
 The money of Asden was sent to a
company called Urban Property where
the sole director was PITs;

 Company had transferred such funds
to TJI and Asden was placed in
liquidation;
 The liquidator had been notified that
the director did not get the money
personally;
 The liquidator did not make any
attempt to personally contact the
director on the part of the liquidator;

BREACH OF DUTIES
 Breach of Section [180] of the CA-
Obligation of directors to act with
diligence and care while discharging
their duties;
 Breach of Section [180(1)] of the CA-
Director Compliance with Business
judgment rule incorporated in the CA
through the provisions of section
180(2);

ANALYSIS OF COURT DECISION
 Directors and Liquidators both must act
with due diligence and care in the best
interest of the company;
 Australian Securities and Investments
Commission v Dunner (2013) 303 ALR 98;
[2013] FCA 872;
 Skill and care which is owed by the
liquidator must be exercised to a degree
which can be considered as reasonable
under all situations;
 Pace v Antlers Pty Ltd (in liq) (1998) 80
FCR 485 at 497;

 The business judgment rule is only
applicable in relation to business
decisions;
 Liquidator in this case cannot apply the
business judgment rule in relation to the
duty of taking custody and control of the
assets of the organization in the absence
of commercial or business activities are
involved in such duties;
 Viscariello v Macks (2014) 103 ACSR
542;

 Liquidator was not required to contact
the directors in this case, directly, in all
situations which involve the winding up
of a company;
 In the case of liquidation of Asden, the
liquidator must have attempted to
contact the director regarding the
doubts pertaining to liquidation;
 Liquidator committed breach of section
[180] of the Corporations Act 2001 (Cth)
as he failed to act with due diligence
and care in the best interest of the
company;

CONCLUSION
 Duty of liquidator may be violated where
all reasonable steps have not been taken
in relation to recovering the assets of the
company even if the step involves making
a simple phone call;
 Liquidator would not have breached the
duties if the director would not have
repaid the company;
 Liquidator is not liable to compensate the
company as section 1317S of the CA
requires actual harm to identify

FUTURE IMPLICATION
 No application of the business judgment
rule in relation to the decisions taken
by the liquidator.
 If no loss caused to the company
because of the breach of duty by the
liquidator, Liquidator is not liable to
compensate to company;
 Liquidators owe to the company, it
contributors and the creditors with
respect to the sale of the company’s
assets

REFERENCES
1) Asden Developments Pty Ltd (in liq) v
Dinoris (No 3) [2016] FCA 788
2) Australian Securities and Investments
Commission v Dunner (2013) 303 ALR
98; [2013] FCA 872
3) Corporation Act 2001 (Cth)
4) Pace v Antlers Pty Ltd (in liq) (1998)
80 FCR 485