In April 2026, the Full Federal Court of Australia handed down a significant decision that every director, creditor, and insolvency practitioner in Australia should understand. In Yang v Wong [2026] FCAFC 39, the Court confirmed that when an insolvent company pays money to an intermediate entity — rather than directly to a director or their associate — the “unreasonable director-related transaction” provisions of the Corporations Act may not capture the ultimate beneficiary. The case has important implications for how voidable transaction claims are structured, who can be pursued, and the critical importance of proper pleading in insolvency litigation.
What Happened: The Facts of Yang v Wong
Axis North Pty Ltd (Axis North) entered external administration and was subsequently placed into liquidation. During the liquidation, it emerged that Axis North had made payments to a related company — Company B. Company B then used those funds to repay a loan it owed to Ms Wong, who was a relative of a director of Axis North.
The liquidator of Axis North assigned its right to pursue a voidable transaction claim to Ms Yang, who commenced proceedings against Ms Wong to recover approximately $2.8 million. The argument was that the money ultimately ended up in Ms Wong’s hands, so the transactions should be treated as an “unreasonable director-related transaction” directed at Ms Wong as a close associate of a director.
At first instance (Yang v Wong, in the matter of Axis North Pty Ltd (R&M Appt.) (in Liq) (No 2) [2025] FCA 693), the Federal Court found that the payment was made to Company B, not to Ms Wong. Ms Yang appealed to the Full Federal Court.
What the Court Found
1. The Payment Was “To” Company B — Not Ms Wong
Section 588FDA(1) of the Corporations Act 2001 (Cth) provides that a transaction is an “unreasonable director-related transaction” if it involves a payment, disposition of property, or issue of securities to a director or a close associate of a director, and a reasonable person in the company’s position would not have entered into the transaction.
The Full Federal Court confirmed that the word “to” in s 588FDA means the direct recipient of the payment. When Axis North paid Company B, the payment was “to” Company B — a separate legal entity. The fact that Company B later repaid a loan to Ms Wong did not transform the original payment into one made “to” Ms Wong.
The relevant question is who received the payment directly from the insolvent company — not who ultimately benefited from the money through subsequent transactions. The correct respondent in a s 588FDA claim is the direct recipient, not the ultimate beneficiary downstream.
2. New Arguments Cannot Be Raised for the First Time on Appeal
Ms Yang also attempted to raise new legal arguments on appeal that had not been pleaded or argued at first instance. The Full Federal Court refused to allow this. The Court held that introducing new grounds of appeal would be prejudicial to Ms Wong, who had no opportunity to establish a defence to those arguments at trial — including making different decisions about evidence.
This is a fundamental principle: you cannot use an appeal as a second chance to run a better case. What is not properly pleaded below cannot be argued above.
What This Means for Directors, Creditors and Business Owners
For Directors and Their Associates
If you are a director of a company that has been placed into liquidation, or a person associated with such a director, this decision provides important clarity:
- Structure matters. Where payments from a company flow to an intermediate entity before reaching you, the liquidator’s primary target under s 588FDA is that intermediate entity — not you directly. However, the intermediate company itself may separately face claims.
- This is not a shield for deliberate structuring. Other provisions of the Corporations Act — including insolvent trading (s 588G), uncommercial transactions (s 588FB), and unfair preferences (s 588FA) — remain available to liquidators. ASIC actively pursues directors who engage in phoenixing or asset stripping.
- Get advice early. If your company is in financial difficulty, early advice from an experienced insolvency lawyer can help you understand your obligations and protect your position.
For Liquidators and Creditors Pursuing Voidable Transaction Claims
- Identify the correct defendant. The direct recipient of each payment from the insolvent company is the relevant party under s 588FDA. If money moved through multiple entities, each step in the chain needs to be independently assessed.
- Plead your case properly at first instance. The Full Court’s refusal to allow new arguments on appeal is a reminder that insolvency litigation requires careful, thorough pleading from the outset.
- Consider all available causes of action. If s 588FDA does not capture the ultimate beneficiary, other provisions — s 588FB uncommercial transactions, s 588FA unfair preferences, equitable claims — may fill the gap.
For Business Owners Generally
Related party transactions — loans between companies, payments to relatives of directors, asset transfers within corporate groups — are a common feature of SME business structures. When a company in the group faces financial difficulty, these transactions attract immediate scrutiny from liquidators.
Maintain proper records of all transactions with related parties, ensure transactions are conducted at arm’s length and properly documented, and seek legal advice before restructuring or moving assets within a corporate group — especially where the financial health of any entity is uncertain.
Key Lessons and Action Points
- Know who the “direct recipient” is. Under s 588FDA, it is the entity that directly received the payment from the insolvent company. Subsequent transactions are separate events giving rise to separate claims.
- If you’re a creditor or liquidator, trace every step. Each payment in a chain from the insolvent company to the ultimate recipient needs to be separately analysed.
- Plead everything at first instance. If you have alternative legal bases for a voidable transaction claim, plead them all at trial.
- If you’re a director with related party transactions, get an audit. Any payments to related companies, associates, or family members over the preceding four years will be examined in a liquidation.
- The safe harbour still matters. Directors of financially distressed companies should consider the safe harbour provisions under s 588GA of the Corporations Act, which can protect directors from insolvent trading claims where genuine restructuring steps are taken early.
How Boss Lawyers Can Help
We regularly act for directors, creditors, and shareholders caught up in insolvency proceedings — whether defending voidable transaction claims, pursuing recovery actions, or advising on director duties and personal liability when a company enters financial difficulty.
If you are a director of a company that is insolvent or near insolvency, a creditor owed money by a company in administration or liquidation, or a related party who has received a demand from a liquidator, we can provide clear, strategic advice on your position and options across the full spectrum of insolvency and restructuring law, director disputes, and debt recovery.
For strategic commercial legal advice, call Mark Harley on 1300 267 711 or contact Boss Lawyers online.
Frequently Asked Questions
What is an “unreasonable director-related transaction” under the Corporations Act?
Under s 588FDA of the Corporations Act 2001 (Cth), a transaction is an “unreasonable director-related transaction” if it involves a payment or benefit to a director or a close associate of the director, and a reasonable person in the company’s circumstances would not have entered into the transaction. Liquidators can apply to have such transactions declared voidable and recover the payment. Unlike unfair preference claims, s 588FDA does not require the company to have been insolvent at the time of the transaction.
Can a liquidator pursue a director’s family members for money paid to them before the company collapsed?
It depends on how the money reached them. If the insolvent company paid a director’s relative directly, that payment may be a voidable transaction under s 588FDA. However, as confirmed in Yang v Wong [2026] FCAFC 39, if the money flowed through an intermediate company before reaching the relative, the s 588FDA claim is against the intermediate company — not the relative personally. Liquidators may also have other claims available, including unfair preference claims (s 588FA) and uncommercial transaction claims (s 588FB).
What should a director do if a liquidator contacts them about a voidable transaction?
Take it seriously and seek independent legal advice immediately. Liquidators have broad powers to investigate transactions and pursue recovery actions going back four years or more. Do not respond to a liquidator’s demands without first understanding your obligations and defences. Boss Lawyers acts for directors in exactly these situations — call 1300 267 711.
This is general information only and is not legal advice. You should obtain professional advice specific to your circumstances.
Author: Mark Harley, Principal Solicitor, Boss Lawyers Pty Ltd. Mark has over 17 years’ experience in commercial litigation and insolvency law. He acts for directors, creditors, shareholders and business owners in complex disputes across Queensland and Australia.
