Asden Developments Pty Ltd v Dinoris: A Corporate Law Case Analysis

This case study provides an in-depth analysis of the Asden Developments Pty Ltd (in liq) v Dinoris (No 3) [2016] FCA 788 case, focusing on breaches of the Corporations Act 2001. It details the duties and responsibilities of directors and liquidators, specifically examining sections related to care, diligence, and misuse of power. The case involves missing funds and the sale of a boat, leading to legal disputes and court decisions. The analysis explores the impact of the court's decision on other companies, highlighting both positive aspects such as increased compliance and negative aspects such as potential negligence due to lack of penalties. Ultimately, the report emphasizes the importance of adhering to corporate law to maintain ethical and legal standards in business operations. Desklib provides access to a wide range of similar case studies and solved assignments for students.

Business and Corporate Law
1

Table of Contents
Introduction................................................................................................................................4
Case summary........................................................................................................................5
Duties/Responsibilities breached...........................................................................................6
Analysis..................................................................................................................................7
Impact of the decision on the operations of other companies................................................9
Conclusion................................................................................................................................10
2

Asden Developments Pty Ltd (in liq) v Dinoris (No
3) [2016] FCA 788
3

Introduction
Law plays an integral role in the growth and development of corporates. It plays a key role in
controllingthe illegaloperations and the activities that have a worse impact on the growth of
the economy. This report is based on the case of Asden Developments Pty Ltd (in liq) v
Dinoris (No 3) [2016] FCA 788.With the help of this case, all the acts and the duties
breached by the directors are provided to develop an effective understanding. The case
provides the complete understandingregarding the breach of the various sections which are
provided in the Corporation Act 2001.
4

Case summary
In the given case of Asden Developments Pty Ltd (in liq) v Dinoris (No 3) [2016] FCA
788there is a contravention of the various sections by the officers. Herein, in this case, the
duties of the liquidators considered and breached are provided. In this case, there is a
liquidation of the organisation named as Asden Developments Pty Ltdwith the two
liquidators named as Mr Dinoris and Mr Combis. These liquidators were replaced by the Mr
Clout who then filed the dispute on the behalf of the company on the liquidators which were
appointed earlier. The recovered amount is $236500. The operations of the company are
basically managed by the Nichols family. The company basically consists of one director and
the shareholder. Herein the Philip is declared as a bankrupt. Herein the land was purchased in
the year 2006 and all the other regulations related to the funding is done by the parents of
Phillip. Herein Nichol only manages and maintains the accounts herein the one-third part of
the land was named as a land of Nichols. The communication provides that Nichol is a
guaranteed not the borrower.
It is analysed that in the year 2008 there is involved the transaction to purchase the boat in the
name of the company but in rela it is purchased by the husband of the director which is
Phillip. As per the abovementioneddiscusion, Nichols was declared to be bankrupt hence
cannit enter into any of the transactions related to the form,action of the contract. Herein it is
found that after the certain time period the company suffers from the financial crisis and
when checked the businessstatements sit is found that various payments are overdue which is
required to be paid. Whenaskedby the members of the company the answers given to Ms
Nichols is that it is the part of the duty of her to manage all the activities and the workings.
Hence on the advice given by the Levis,the company has entered into the voluntary winding
up process. And when inquired about the funds with the directors it is found that no such
information is revealed and the funds which are withdrawn and not known is named as a
missingfund (Posner, 2014).
In this case, there is an involvement of the majortwo issues which leads to developing the
dispute among the parties. The investigation of the amount of $236500 is required to be
formulated as they are treated as missing funds. Herein Dinoris has not performed his part of
the duties and the responsibilities. Dinoris has not developed any arguments with Nichols
regarding the missing funds as he is the one who is responsible or has the authority to sign the
5

accounts of the company. the other issue is related to the boat sales and its distribution and
the proceeds.
Duties/Responsibilities breached
The provisions of Corporation Act 2001 is applicable in the present case. The sections or the
duties breached by the directors or officers are provided thereunder in accordance with the
relevantsections. These are provided thereunder:
Section 179:As per the provisions of this section it is provided that all the directors or
officers of the company are under the obligation to fulfil all the responsivities which are
occurred on the part of directors (Kraakman, et. al., 2017).
Section 180: This is a provision which provides the provisions related to the care and the
diligence by the directors or officers in the company. as per the related provisions, it is
provided that the directors or officers indulged should perform their duties deliberately. It is
also provided in the provisions of the direction that all the acts are performed in suchmanner
which is performed in the good faith of the company. in other words, it means none of the
acts should be such which considers the personal interests of the directors or officers.
Section 181: As per the provision of this section it is provided that the directors should
exercise his part of the duties in such manner which doesnotaffect the interests of the
business or the organisation (Marshall & Ramsay, 2012).
Section 182: In accordance with the provisions of corporation act it is provided that the
directors or officers should be considered to be,liable for the breach if the stated powers are
exercised in such a manner which is determinant to the interests of the business or the entity.
Section 184: In this mentioned section it is provided that there should not bea misuse of the
powers given to the directors or the officers. The information, powers should not be used in
such a manner which affects the interests of the company or the organisation (Walker, 2014).
6

Analysis
As per the decision of the court, it is required that liquidators also meet with the requirements
or the standards of Section 180 of the Corporations Act, 2001 otherwise it will be considered
as a breach of section mentioned above. It is summarised that the general duties specified in
the act are similar to that of directors as it is mentioned that directors and other officers are
required to comply with the duties mentioned in Part 2D.1 of the Act. It is the duty of the
liquidator or person having the qualification, training, experience, and skills of the liquidator
to meet the requirement of making a decision with care and diligence mentioned in Section
180.
At the time of the proceeding, it was discovered that Mr. Dinoris have violated the duties
towards the company in regards with making inquiry for the funds amounting $236,500
which went missing from the account of the company and about the involvement of the
director of the company i.e. Ms. Nichols (Federal Court of Australia, 2018). Even it was
believed by Mr. Dinoris that no information will be obtained by the personally investigating
from Ms. Nichols about the funds of the company.
It was also stated the Chief Justice of the court, Reeves J that business judgment rule in
section 180 of the act is unavailable with the liquidator (Legislation.gov.au, 2018). The
reason behind this is that it is the statutory duty of Mr. Dinoris to an inquiry about the funds
from the sole director of the company, Ms. Nichols, but it will not be considered as Business
Judgment rule as it is outside the conduct of the commercial activities of the company.
It was held by the court that the reason behind the incurring loss by the company, Asden
Developments Pty Ltd due to the violation of the duty of the liquidator mentioned under
section 180 of the act. Such decision was made by the Court in the basis of the fact that even
if Mr. Dinoris would’ve conducted a personal inquiry from Ms. Nichols, it is understandable
that no information would be obtained from her as she was involved in the action of missing
funds. However, the investigation was made by Mr. Dinoris but full information was not
revealed by the director of the company and such damage cannot be sustained due to the
failure of performing the duties of Mr. Dinoris.
Under the situation of the Boat, Mr. Dinoris appointed an auctioneering company as an agent
to collect and sell the boat to making the payment of company’s debts. The claim made by
the company that such duty was not performed properly by the liquidator. It was stated by the
7

court that it is not the duty of the liquidator to direct the agent how to or how not to the job of
selling the boat. However, distribution of the proceeds of the boat by the agents will be
considered as the violation of the duty of the liquidator as it is to be done by the liquidator
with proper care and diligence (Manoharan and O’Farrell, 2018). The court ordered no
damages for the losses of the company, Asden Developments Pty Ltd. Moreover, the court
order to awards the charges or the cost of liquidator to Mr. Dinoris along with Mr. Clout also
succeeded in his claim for breach of the duties on the part of the Mr. Dinoris. An appealed
was made against the decision of the court; however, no changes were made in a previous
decision of the court.
The decision made by the court in the case of Asden Developments Pty Ltd v Mr. Dinoris
provided an understanding about the interpretation of section 180 of the Corporations Act,
2001 in regards with an appointment outside the company. It is made clear by the judgment
passed by the judiciaries that the role of an appointment made from outside the company is
different from that of internal officers. It is necessary that such external appointee must make
adequate and timely investigation from the officers or the directors of the company. The
judgment of the court is considered to be a little comforting as it was in the favor of Mr.
Dinoris in the given situation as no damages were awarded by the court instead of finding of
the breach of duties of the liquidators.
8

Impact of the decision on the operations of other companies
It is well established that law is an essential element for maintaining and controlling the
illegal activities and its impact on the economy of the states. For organising, managing and
executing the operations and functions of a company, the provisions of the Corporations Act,
2001 is required to be complied with. The decision made by the court is as per the provisions
of acts mentioned above (Bottomley, 2016). There are both, positive and negative aspects of
the decision made which are as follows:
Positive Aspect of the Decision:
 The management of the company will make sure that all the provisions of the
Corporations Act and other related Acts are complied with in true and fair manner.
 All the directors and officers of the company will perform or fulfill the duties
mentioned in the Corporations Act to avoid the legal consequences in case of breach
or violation of the duties.
 This will encourage healthy competition in the market as all the illegal activities are
managed and controlled by the law.
Negative Aspect of the Decision:
 As the court didn’t issue any fine or penalty against the liquidator of the company
even after finding of the breach of duties, this will motivate more officers of the
company not to make a decision with due care and negligence (Tricker & Tricker,
2015).
 The management of the company will become careless as no fine will be issued
against the officers.
 This will have an impact on the behavior and attitude of the directors or the officers of
the company towards the commitment to work and perform effectively.
9

Conclusion
It is concluded from the above report that the corporation act is applicableto the cases related
to the breach of the duties and the responsibilities. All the acts and the provisions are
effectively cleared from the report. The duties related to the breach and the care are also
effectively discussed in the report. It is essential that all the provisions of the Corporations
Act, 2001 is complied with. As per given case of Asden Developments Pty Ltd V Mr.
Dinoris, the court passed an order stating that the act of not distributing the proceeds of sale
will be considered as breach of duty , however, this doesnt affect the damages sustained by
the company i.e., breach of duty is not the reason of damages suffered.
10

References
 Bottomley, S. (2016). The constitutional corporation: Rethinking corporate
governance. Routledge.
 Federal Court of Australia. (2018). Asden Developments Pty Ltd (in liq)
v Dinoris (No 3) [2016] FCA 788. Available at:
http://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/
2016/2016fca0788. [Accessed on: 10.05.2018]
 Kraakman, R., Hansmann, H., Hertig, G., Kanda, H., & Pargendler, M. (2017). The
anatomy of corporate law: a comparative and functional approach. Oxford
University Press.
 Legislation.gov.au (2018). Corporation Act, 2001. Available at:
https://www.legislation.gov.au/Details/C2017C00328. [Accessed on: 10.05.2018]
 Manoharan, N. and O’Farrell, J. (2018). The Imperative to Investigate. Available at:
http://www.millsoakley.com.au/the-imperative-to-investigate/. [Accessed on:
10.05.2018]
 Marshall, S., & Ramsay, I. (2012). Stakeholders And Directors’ Duties:Law, Theory
And Evidence.
 Posner, R. A. (2014). Economic analysis of law. Wolters Kluwer Law & Business.
 Tricker, R. B., & Tricker, R. I. (2015). Corporate governance: Principles, policies,
and practices. Oxford University Press, USA.
 Walker, D. G. (2014). Recent Trends in Directors’ Duties in Australia.
11

12