Asden Developments Pty Ltd (in Liq) V Dinoris (No 3) [2016] FCA 788: Case Analysis

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

In every corporation, there are some individual bodies who act on behalf of the company and they are known as officers of the company. But such officers need not be a director or employee of the company every time. From every officer of the corporation it is expected that they shall perform their duties under the provided umbrella of law. Many of times, such officers commit acts which are outside of the boundaries of expectation of law provided under Corporations Act, 2001 (Cth). Although these acts can be done without any mala fide intentions, but still proceedings can be initiate against such deeds of an officer of Corporation. It is not necessary that such deeds of an officer lead an adverse impact to corporation, yet these officers shall responsible to breach their duties provided under section 180,181, and 182 of Corporations Act, 2001. This report address one of the lead case of Australia titled “Asden Develpoments Pty Ltd(in liq) v Dinos (No. 3) [2016] FCA 788”, and brief the facts, proceedings and decision given by the court in regard to this case.

The presented case, brought an argument in between Asden Developments Pty Ltd, corporation which was under the process of liquidation (herein after referred as “Asden”) and Mr. Dinoris, it is one of the liquidator. In this case, question of argument was an act of Mr. Dinoris along with his co-appointee Mr. Combis (herein after jointly referred as “Mr. Dinoris”), which has come into light when company has changed it is present liquidator and appointed another person on this designation, named Mr. Clout.

The lead issue of the case was the fact that there were some funds of the corporation which has transferred from corporation’s account but to whom they have been paid was not traceable. Mr. Dinoris, being liquidator of the company did not ask about such funds to sole director of the company who was Ms. Nichols. In addition to this, there was also a boat registered in the name of the asden, who has sold but Mr. Dinoris did not supervise such sale and he also had no idea about the disposal of sale value of boat (Maddocks, 2016).

As per the requirement of Section 180 and 181 of Corporations Act, 2001, it is expected from an officer, that these persons shall charge their duties in the best effective manner and in well faith of the corporation (Maisto, 2009). But in the cited case, Mr. Dinoris resulted failed to do so, thus Asden commenced a case against Mr. Dinoris.

Facts

Mr. Dinoris has appointed as liquidator of the company on   22 December, 2010. Before a week ago his appointment some funds worth $236,500 has transferred from asden’s bank account. Later on, these funds declared as missing funds as nobody could track that to where the same have transferred. Here, being the officer cum liquidator of asden it was the duty and statutory liability of Mr. Dinoris that he must ask to Ms. Nichols, that to which account such missing funds have transferred, as apart from being director and sole shareholder of corporation, she was also the signatory of account from where those funds have debited, but Mr. Dinoris did not ask any questions to Ms. Nichols.    

Asden put one more allegation on Mr. Dinoris, as there was a sale of boat to a third party, but Mr. Dinoris did not properly take care of this sale. Inclusive this, he also had no information about distribution of amount, which asden has received in consideration of aforementioned sale. Although Mr. Dinoris has appointed a sale agent to look after to this sale, yet it was his duty to at least maintain a record of said transaction.

Sections 180 of Corporations Act 2001 define that an officer of the corporation must perform his/her duties with required amount of responsibility and attentiveness. Roles of an officer can vary according to position but the essential requirement of his post is his/her best judgment (Legalvision, 2015).

Section 181 of Corporation Act, 2001 communicates the requested form of intention of officers of corporation. This section ascertain that an officer of a corporation must always work in it is excellent belief. This section made responsible corporation’s directors and officers to play their role in the corporation for a convenient purpose. This section confirms the aspect that is needs to be follow by an officer of a corporation while taking any decision or conducting any business action (Lo, 2015)

All the officers and director of the corporation must follow their duties for the favor of corporation, for it is finest interest and for a meaningful cause (Federal Register of Legislation, 2018).

Section 182 of Corporations Act, 2001 also defines the duties and obligation of director, employee and an officer of the corporation. This section demands that aforesaid persons must not improperly use their designation in the corporation and must not take unfair advantage of their position (Austlii, 2018).

Duties Breached

In the case in case Fodare Pty Ltd v Shearn (2011) NSWSC 479, it was held that a director as well as every officer of the corporation must follow their duties provided under section 180 alike a responsible person. While performing their duties, such officers must be aware of with every possible result of their deeds and actions.

In the assigned case, being the liquidator, it was expected from Mr. Dinoris under section 180 of Corporations Act, 2001 that he shall look after to every financial transaction of the asden. Whereas, in asden some valuable funds were missed and Mr. Dinoris does not kept any records of the same. He also did not ask any question to Ms. Nichols about clearance of such funds. It is assume on the part of Mr. Dinoris that even on asking about those funds to Ms. Nichols, she must not been able to answer, but this cannot be an appropriate ground to take plea. So here, Mr. Dinoris become failed to perform his duties as required from him according to Corporations Act, 2001.

As Mr. Dinoris was designated an officer asden, he must deliver his services in a proper way and must have questioned to Ms. Nichols, regardless the fact the reply of the same was available with her or not.

In addition to aforementioned, Mr. Dinoris has also not suitably reviewed the sale transaction of boat, which was asden’s property. As Mr. Dinoris was working as a liquidator of asden, according to Section 180 of Corporations Act, 2001, it was his charge to review and control every transaction of asden similar to an answerable officer (Mills Oakley, 2016).

It was held in the case Macks V Viscariello, (2017) SASCFC 172 It is assume that if an individual is acting alike an officer of a corporation, he/she must be aware with his/her role in the organization, and also must follow delegated responsibilities with due care.

In the considered case, asden has applied to court to initiate a proceeding against Mr. Dinoris, as he did not perform his duties in an appropriate and responsible manner in the course of his job. Court, while making judgment, stated that Mr. Dinoris has breached his duties under section 180 of Corporations Act, 2001. Although, it was held that due to the negligence of Mr. Dinoris towards his obligation, asden has not suffered from any loss. So no penalties shall levy upon Mr. Dinoris. It was also held by the court that even if Mr. Dinoris would ask some questions to Ms. Nichols, she would not be able to clarify anything related to missing funds.

Reason why duties have breached?

Further, in the matter of sale transaction of boat, Court has stated that Mr. Dinoris has appointed a sale agent to handle this transaction; he was no more obliged to administer afore mentioned deal (Jade, 2018)

This case does not involve director of a corporation. This case enlightens the fact that an officer, whether director or liquidator of a company is equally liable for the purpose of section 180 of Corporations Act, 2001. Before this case, it was a misconception among corporations and their other officers that only directors of corporations will hold liable to perform their duties according to section 180, 181 and 182 of Corporation Act, 2001. But now, they have a proper understanding about the scope and impacts of said sections.

Admitting the fact that court had not levied any penalty upon Mr. Dinoris, this fact cannot be ignored that if due to his negligence, if any loss could accrued to asden, court must have given decision in his against. Corporations and their officers in Australia now these days become more aware about their duties and responsibilities. They are playing their role in more attentive way. When any matters come to highlight, court’s decision plays a very impressive role as it bring a effect that what can happen when a person not meet out with the requirements asked by law. This case brought the same effect to officers of corporations in the said country. Now, they have a well versed interpretation of Corporations Act, 2001 and duties described in this act. They understand what exactly law expects from them.

Conclusion

In the reviewed case, an officer of a corporation did not behaved with required level of responsibilities. Being the officer of a corporation, it was expected that he shall perform his duties in an accurate manner. Mr. Dinoris did not ask any questions to Ms. Nichols about missing funds in the asden. In addition to this, he neither has supervised sale transaction of boat nor did he have any account of the distribution of sale value; whereas it was the duty of Mr. Dinoris to do so.  As per Sections 180 to 182 of Corporation Act, 2001, there are some basic duties of every officer of the corporation, which such officers should deliver to corporation.

Further, court has declared Mr. Dinoris liable to breach his duties as per the requirement of law but did not levy any penalties as there was no monetary loss happened to asden due to the negligence of Mr. Dinoris.

Although, no penalties have levied to Mr. Dinoris, he must follow all his responsibilities carefully in order to avoid proceedings.

References

Austlii. (2018) Commonwealth Numbered Acts [online] available from: https://www5.austlii.edu.au/au/legis/cth/num_act/ca2001172/s182.html[accessed on 14/05/18]

Corporations Act, 2001 (Cth)

Federal Register of Legislation. (2018) Corporations Act, 2001 [online] available from: https://www.legislation.gov.au/Details/C2013C00003[accessed on 14/05/18]

Fodare Pty Ltd v Shearn (2011) NSWSC 479

Jade. (2018) Asden Developments Pty Ltd (in liq) v Dinoris (No 3) [2016] FCA 788. [online] available from: https://jade.io/article/483696[accessed on 14/05/18]

Lo., S.H.C. (2015) In search of Corporate Accountability. U.K.: Cambridge Scholars, p.206

Macks V Viscariello, (2017) SASCFC 172

Maddocks. (2016) You should’ve called! Liquidator breaches duties by not picking up the phone. [online] available from: https://www.maddocks.com.au/you-shouldve-called-liquidator-breaches-duties-picking-phone/[accessed on 14/05/18]

Maisto, G. (2009) Residence of Companies under Tax Treaties and EC Law. Netherland:IBFD

Mills Oakley.(2016) The Imperative to Investigate. [online] available from: https://www.millsoakley.com.au/the-imperative-to-investigate/[accessed on 14/05/18]