In a previous blog I wrote about the decision in Cooper as Liquidator of Runtong Investment and Development Pty Ltd (In Liquidation) v CEG Direct Securities Pty Ltd [2024] FCA 6,

In that case, a liquidator attacked the granting of a mortgage to secure the borrowings of two associated companies, both guaranteed by its directors, as an “unreasonable director-related transaction.”

There was expert evidence about normal banking practice, provided by a forensic accountant who, notably (at least from my perspective) did not have experience in banking – which was not accepted by the Court.

In CEG Direct Securities Pty Ltd v Cooper as liquidator of Runtong Investment and Development Pty Ltd (in liq) [2025] FCAFC 47, the Full Court allowed the appeal.

Although the Full Court accepted that the granting of the mortgage was “for the benefit of the directors,” it did not accept that the liquidator had satisfied his evidentiary obligation to establish that a reasonable person in the company’s circumstances would not have granted the mortgage.

In relation to the expert evidence, a majority held that the primary judge was was wrong to reject the opinion of the expert as to whether a lender would regard the various associated entities as a “group” notwithstanding that they did not satisfy the Corporations Act definition of “related body corporate,” and was therefore wrong to reject her consequential opinion that cross-collateralisation in such circumstances was common practice amongst commercial lenders. It found that she was “clearly qualified to give opinion evidence on the critical issues on which she opined, ” noting that “the primary judge did not suggest otherwise.”