In Crispino v Kiparoglou [2026] VSC 80, the liquidators of Sky High Panels Pty Ltd (in liq) (SHP) alleged SHP either made loans to Smash Corp and its director despite having no loan agreement, or entered into unreasonable director-related transactions with Smash Corp.
Justice Cosgrave of the Supreme Court of Victoria found in favour of SHP’s liquidators that a loan agreement was entered into. Or alternatively that a portion of the total loan amount was an unreasonable director-related transaction.
This ruling illustrates that loan agreement need not be in an executed contract. Rather, loan agreements may be inferred from company books and records, in conjunction with evidence as to the intent of the parties.
Background
Crispino and Albarran were the liquidators of SHP.
The liquidators commenced proceedings against Smash Corp Collision Repair Centre Pty Ltd (Smash Corp) and its sole director Clem Kiparoglou (Clem).
The proceedings were for:
recovery of a debt of $496,587.38; from a loan made from SHP to Clem. The sole pieces of evidence for the loan were a Xero entry in the account of SHP titled ‘Loan – Clem’, and a corresponding bank statement; or
recovery of unreasonable director-related transactions or voidable transactions under the Corporations Act 2001 (Cth) (Corporations Act) being:
2.1. $217,940.63 paid from SHP to Clem during the relation-back period (21 September 2019 – 7 December 2023). Clem argued these payments were not loans. Rather, the payments were consideration paid by Christopher, and not SHP, for his purchase of the SHP business.
2.2. $227,800.84 paid from SHP to Smash Corp for a loan made from SHP to Smash Corp. Alternatively, the Liquidators claimed $227,800.84 paid from SHP to Smash Corp during the relation-back period, on the basis that the payments were unreasonable director-related transactions. The sole pieces of evidence of the loan were a Xero entry in SHP’s account titled ‘Loan – A1 Preferred Smash Repairs’ (the trading name of Smash Corp at the time), and a corresponding bank statement. Smash Corp argued these payments were for the supply of goods, work and labour provided by Smash Corp to SHP.
Issues
The issues for determination included:
Were the payments to Clem loans or alternatively were the payments made to Clem during the relation-back period void for being unreasonable director-related transactions?
Were payments to Smash Corp loans, or alternatively, were the payments made to Smash Corp during the relation back period void for being unreasonable director related transactions?
Court Findings
The Court determined the Liquidators succeeded in their claims against Clem, and against Smash Corp.
The unreasonable director-related transactions were deemed to run concurrently with the loan amounts, and thus Clem and Smash Corp were ordered to pay SHP $496,587.38 and $227,800.84 respectively.
Were the payments to Clem loans?
Justice Cosgrave explained that a loan need not be documented in a formal agreement. The existence of a contractual obligation to repay is a question of fact, requiring consideration of all the circumstances, including the nature of the parties’ relationship.
As there was no loan agreement between the parties, his Honour was required to consider what a reasonable person would conclude the terms of the agreement were, based on what the parties said and did, understood in light of what they knew.
His Honour referred to the precedent of GJB Building Pty Ltd v AI&PB Property Pty Ltd [2023] VSC 782; a loan may be evidenced by book entries. However, the mere fact a book entry titled ‘Clem – Loan’ was, in and of itself, insufficient to establish the existence of a loan. Consideration of all evidence that bore on the parties’ intentions was required.
His Honour rejected Clem’s argument that the payments received by him were consideration paid by Christopher in exchange for all shares in SHP. ASIC records showed Clem was not a shareholder of SHP at the time of the alleged share sales, and at least $248,484.02 was paid before the alleged share sale.
Justice Cosgrave considered section 1305 of the Corporations Act – the use of the word ‘loan’ in the Xero entry suggested the account was to be treated as a running balance of indebtedness between Clem and SHP.
Clem carried the evidential burden to prove that these monies were not loans. Clem failed to put on any evidence and Justice Cosgrave inferred from Clem’s failure to put on evidence that the payments recorded were loans, as there was no evidence provided to the contrary.
Accordingly, Justice Cosgrave determined that SHP lent $496,587.38 to Clem.
Were the payments made to Clem during the relation-back period void for being unreasonable director-related transactions?
Despite a finding that SHP did in fact lend Clem $496,587.38, Justice Cosgrave also considered the alternative argument of the Liquidators and SHP.
Justice Cosgrave determined that $178,014.38 of the payments made to Clem were void, as they were unreasonable director-related transactions.
His Honour considered section 588FE(6A) of the Corporations Act; if a company is being wound up, a transaction of the company is voidable if it is an unreasonable director-related transaction of the company.
Under section 588FE of the Corporations Act, the court can make an order directing a person to pay to the company an amount equal to some or all of the money that the company has paid under the transaction. However, this is qualified by section 588FF(4) of the Corporations Act: in relation to unreasonable director transactions, a court may only make orders under section 588FF(1) for the purpose of recovering for the benefit of the company’s creditors the difference between the total value of the transaction and the value that may be expected that a reasonable person in the company’s circumstances would have provided.
During the relation-back period, SHP (via Christopher) paid Clem a nett amount of $178,014.38.
The key issue was whether a reasonable person in the company’s circumstances would have entered the transaction.
Justice Cosgrave assessed there was no benefit to SHP on the facts. To the contrary, the commercial detriment to SHP was clear: the payments to Clem made it more difficult for SHP to pay its creditors. The benefit to Clem in receiving such payments when he provided no plausible justification was equally clear. Justice Cosgrave determined that a reasonable person in SHP’s position would not have made the payments to Clem during the relation-back period.
Justice Cosgrave concluded the net payments to Clem totalling $178,014.38 were unreasonable director-related transactions, voidable by virtue of s 588FE(6A) of the Corporations Act.
Were the payments to Smash Corp loans, and were the payments made to Smash Corp during the relation-back period void for being unreasonable director-related transactions?
Justice Cosgrave determined the $227,800.84 payment by SHP to Smash Corp was, in fact, a loan.
While Smash Corp alleged the payments made to it by SHP were for the supply of goods, work and labour, no further detail about the alleged services was provided. As there was no evidence provided by Smash Corp to the contrary, his Honour determined the nett payments of $227,800.84 by SHP to Smash Corp were also properly characterised as loans.
Justice Cosgrave made a further order in the alternative, that if his first assessment was incorrect, then the payments made to Smash Corp during the relation-back period were void for being unreasonable director-related transactions.
This required consideration of whether the transactions legally or financially advantaged the director of Smash Corp, Clem, pursuant to section 588FDA(1)(b)(iv) of the Corporations Act.
As Clem was sole director and shareholder of Smash Corp, Justice Cosgrave determined the payments would have benefitted him, at least indirectly.
His Honour further determined a reasonable person in SHP’s circumstances would not have made the payment to Smash Corp. No evidence to the contrary was adduced, and the payments to Smash Corp caused significant detriment to SHP in circumstances where it was insolvent and heavily in debt.
The Court found that the payments were voidable as they were unreasonable director-related transactions pursuant to section 588FE(6A) of the Corporations Act.
Key Takeaways
Loan agreements can be inferred from company books and records, subject to an objective assessment of the intent of the parties and other surrounding circumstances.
In considering the reasonable person test under s 588FDA(1)(c) of the Corporations Act to make out an unreasonable director related transaction, the Courts will consider not only the severity of the debt owing, but also any failure to produce evidence to the contrary.
Please contact Alicia Hill or Amy Green if you wish to discuss this article further.
This article was prepared with the assistance of Chris Downes, Paralegal.
