Liquidator’s win over secured lender overturned

Three appeals court judges have reversed a decision which found that the grant of a mortgage to a lender by a company which was subsequently placed in liquidation was an unreasonable director-related transaction.

The decision, delivered on Wednesday in CEG Direct Securities Pty Ltd v Cooper as liquidator of Runtong Investment and Development Pty Ltd (in liq) [2025] FCAFC 47, means Oracle Insolvency Services principal Nick Cooper, his litigation funder and their legal advisors will need to decide whether to challenge the new ruling, which also reverses orders made in regards to interest and costs.

Cooper commenced the proceedings in 2019 after being appointed administrator and then liquidator of Runtong Investment and Development Pty Ltd (Runtong) in 2018.

Runtong had been incorporated in 2012 to purchase a development site on the western edge of Adelaide’s CBD from Adelaide council.

Runtong shared directors with two related entities, Australian Datong Investment & Development Pty Ltd (Datong) and Futong Investment and Development Pty Ltd (Futong).

Datong and Futong had already entered into secured loan arrangements with Vincent Ventrice’s short to medium term lender CEG Direct Securities Pty Ltd (CDS) in respect of property developments and the agreements were varied at intervals. In 2014 Runtong granted CDS a mortgage over the property at 114-122 Waymouth Street, Adelaide in 2014.

After being appointed liquidator and attracting a litigation funder Cooper commenced proceedings under s 588FF of the Act on the basis that the grant of the mortgage by Runtong to CEG was an “unreasonable director-related transaction” within the meaning of s 588FDA of the Act and thus a “voidable transaction” under ss 588FE(1)(b) and (6A) of the Act”.

Cooper as Liquidator of Runtong Investment and Development Pty Ltd (In Liq) v CEG Direct Securities Pty Ltd [2024] FCA 6 (12 January 2024) details the findings made in Cooper’s favour by primary judge Patrick O’Sullivan.

But Federal Court judges Elizabeth Cheeseman, Tim McEvoy and Scott Goodman were persuaded by CDS’s counsel Farid Assaf and Alex Lazarevich that O’Sullivan erred in concluding that s 588FDA(1)(c) of the Corporations Act had been satisfied.

“As the requirements of s 588FDA(1) are cumulative, it follows that the Runtong Mortgage is not properly characterised as an unreasonable director-related transaction within the meaning of s 588FDA of the Act and is not a voidable transaction on that basis.”

More than $2.5 million is sitting in a controlled monies account that’s been generating a tidy return whilst awaiting the outcome of this appeal and Cooper and his backers will now have to calculate whether it’s worth fighting for.