LJ Hooker heir defeats liquidator’s claim over 2020 restructure

A liquidator-led claim against LJ Hooker heir Leslie Janusz Hooker over a controversial 2020 restructuring has been dismissed, with the Federal Court finding no breach of fiduciary or statutory duty despite allegations that the transaction stripped value from an indebted holding company.

The proceedings were brought by Empireal Ltd, now in liquidation and subject to receivership. Empireal alleged that Hooker engineered a restructure of the LJ Hooker Group during a period of financial distress to secure control of the operating business free from mezzanine debt obligations.

Empireal sat at the top of a multi-tiered corporate structure prior to the collapse. Its subsidiaries ultimately controlled the group’s core real estate franchise network, comprising approximately 400 offices across Australia and New Zealand, alongside a separate technology venture.

The group’s debt stack was split between a senior facility of roughly $43 million advanced by ICG Australia Senior Loan Fund to operating entities and a $41 million mezzanine facility provided by Koi Structured Credit Pte Ltd at the holding company level, guaranteed by Empireal and secured over technology assets. This left Empireal structurally subordinated and exposed to creditor claims without direct access to operating cash flow.

In June 2020, Empireal and key subsidiaries were placed into voluntary administration. Creditors later approved deeds of company arrangement that transferred ownership of the core operating business to a new entity ultimately controlled by Hooker. The effect of the restructure was to sever Empireal’s indirect ownership of the operating subsidiaries, leaving it with shares in an entity that no longer held valuable assets.

Empireal alleged that Hooker pursued this outcome for an improper purpose, using the administration process to eliminate the Koi mezzanine debt and acquire the group’s core business for himself. It claimed that the directors lacked a genuine or rational basis to conclude that the companies were insolvent or likely to become insolvent at the time of the administration appointments.

The Court rejected those claims. It held that Empireal failed to establish any breach of duty, including any actionable conflict of interest or improper purpose on Hooker’s part. In particular, the Court found that key steps challenged by the liquidator were not undertaken by Hooker in his capacity as a director of Empireal, and therefore did not engage the duties alleged.

The administration context also proved significant. At the relevant time, Empireal was already in voluntary administration, meaning Hooker’s powers as a director were curtailed, further undermining the foundation of the claims.

Having found no liability, the Court declined to determine issues of causation or quantum. It nevertheless observed that, had the alleged breaches been established, the appropriate remedy could have included an account of profits reflecting the value of the business Hooker ultimately acquired, highlighting the potential exposure in similar cases.

Read the decision here.

• Doran Cook SC and Allan Flick, both of 9 Wentworth Chambers, counsel, and Johnson Winter and Slattery, solicitors, for Leslie Janusz Hooker

• Ross Foreman SC of PG Heley Chambers, Kate Lindeman of Banco Chambers, and W Liu, counsel, and Corrs Chambers Westgarth, solicitors, for Empireal Ltd (in liquidation)