Directors of companies are authorised to do a range of things in respect of the company’s affairs including issuing proceedings except where the director is bankrupt.  There are various provisions in the Corporations Act 2001 (Cth) (the Corporations Act) and the Bankruptcy Act 1966 (Cth) (the Bankruptcy Act) which are relevant to the conduct of a director who is a bankrupt at the time certain transactions are undertaken.  These considerations are particularly relevant if a company issues legal proceedings, or continues with those proceedings, and it is acting on the instructions of a director who is a bankrupt.  There may be significant ramifications including offences which may be committed by a person who conducts such action and pursues legal proceedings when they do not have the authority to do so.

In the recent Supreme Court decision of Donojon 1325 Pty Ltd (formerly ACN 119 219 840 Pty Ltd) v Donojon Pty Ltd ATF Donojon Unit Trust and VCAT [2026] VSC 58 (20 February 2026), the Court determined several issues regarding the entitlement of Donojon 1325 Pty Ltd (Donojon 1325), as the applicant, to issue an application for leave to appeal against orders made by VCAT on 23 June 2025 – those VCAT orders entitled Donojon Pty Ltd (Donojon), as the first respondent in the appeal application, to recover possession of its premises from Donojon 1325.

The relevant facts of the case include the following:

• One of the key issues in this case was that Donojon sought orders for the proceeding to be dismissed on the basis that it was an abuse of process under rule 23.01 of the Supreme Court (General Civil Procedure) Rules 2025 (the Rules) – it was an abuse of process because Donojon 1325 had no validly appointed director with the requisite authority to cause the proceeding to be issued. At the first return of the summons, Associate Justice Goulden, was satisfied that the proceeding was an abuse of process as a result of Donojon 1325 having no validly appointed director;
• However, Counsel for Donojon sought to adduce further evidence to verify the validity of a director having been appointed before the issue of the proceedings or alternatively, to take steps to regularise the director’s appointment by the members of Donojon 1325 in order to cure the defect in the commencement of the proceeding;
• By orders made on 2 October 2025, Associate Justice Goulden made self-executing orders which would mean the proceeding would be dismissed unless further evidence was filed establishing either:

(a) a validly appointed director of Donojon 1325 who could cause it to commence the proceeding on 18 July 2025; or

(b) a director had since been validly appointed who ratified the commencement of the proceeding and its continuation on behalf of Donojon 1325.

• Donojon 1325 filed various affidavits as required by the Court’s orders as well as further evidence and further submissions following a short adjournment, at the request of Donojon 1325’s barrister, who had recently been engaged prior to the hearing on 9 December 2025, and had identified gaps in the evidence filed on behalf of Donojon 1325.
• Despite the bankruptcy of Bruno Strangio, the sole director of Donojon 1325, having occurred in 2008 by sequestration order made against him and the extraordinary length of the bankruptcy, there was no evidence that he had been discharged from bankruptcy. As a bankrupt, Mr Strangio was automatically disqualified from managing a corporation under section 206B(3) of the Corporations Act.  The restrictions imposed upon him as a bankrupt had significant impact on the transactions which he engaged in as a purported director and shareholder of Donojon 1325.

Accordingly, there were several critical outcomes of this case:

• Associate Justice Goulden was perplexed that Donojon 1325 had changed its name after the first hearing of the summons (which was to possibly suggest a legitimate association with Donojon) and which was noted as a bizarre step but which was not relevant to the application.
• The effect of the relevant provisions of the Corporations Act upon Mr Strangio was that:

(a) he became disqualified from managing any corporation upon his bankruptcy and remains disqualified for the period of his bankruptcy;

(b) he ceased being a director of any corporation to which he had been validly appointed prior to his bankruptcy upon the making of the sequestration order;

(c) he could not be appointed as a director of any corporation during the period of his bankruptcy unless permission was granted by ASIC or a Court; and

(d) he could not engage in the conduct proscribed by s 206A following his disqualification without committing a criminal offence.

• There was various evidence presented about Mr Strangio’s appointment as director of Donojon 1325 by four separate Form 484 documents lodged with ASIC on 17 June 2013 but there was no evidence before the Court as to how Mr Strangio was appointed as a director from 28 February 2013 – given that he was a bankrupt since 2008, he was disqualified from acting as a director of Donojon 1325 and could not have been validly appointed as a director. There were also issues as to whether Mr Strangio was validly appointed as a director of other related entities, known as Civilink and Ilford Vic, and whether acts undertaken by Mr Strangio were invalid including execution of share transfer forms.
• The Court undertook an examination of the relevant authorities which had considered section 201M(1) of the Corporations Act – this provision states that an act done by a director is effective even if the director’s appointment, or the continuation of the director’s appointment, is invalid because the company or the director did not comply with the company’s constitution or any provision of the Corporations Act.
• The analysis of the case law is thorough and well considered and enabled Associate Justice Goulden to determine that:

“…the invalidity in the appointment arises by operation of a provision of the Corporations Act, being s 201B(2), which provides that a person who is disqualified may only be appointed as a director if they have permission from ASIC or leave of the Court. Mr Strangio has never had such permission or leave. Having become disqualified by reason of his bankruptcy, Mr Strangio could not, therefore, be appointed as director. There was a substantive prohibition on his appointment as director, even if he purported, unlawfully, to continue to act as such. Accordingly, this is not a case where there has been a slip in the appointment, but rather, one where there is no appointment at all. In those circumstances, s 201M(1) does not operate to validate any acts Mr Strangio purported to perform acting as director.”

• Donojon 1325 asserted that Justin Vida had been appointed as director and was authorised to deal with the proceeding (and that his related entity, Nationhire, was a shareholder of Donojon 1325). The evidence put before the Court regarding Mr Vida’s appointment as a director demonstrated an elaborate process (somewhat convoluted of sorts) regarding transfer of shares to various entities, a declaration of trust and executed share transfer forms to support Mr Vida’s appointment as director of Donojon 1325.  However, the first transaction which occurred on 28 February 2013 in the chain of the title to the shares held in Donojon 1325 failed – Donojon 1325 had been “paralysed” since the appointment of the bankruptcy trustee as there was no validly appointed directors of Donojon 1325 nor were there any validly appointed directors of its shareholder, Ilford Vic.  At no stage was the evidence, on behalf of Donojon 1325, capable of proving that Mr Vida was validly appointed as a director of Donojon 1325.
• The purported shareholder of Donojon 1325, being Ilford Vic, had also been deregistered and its shares vested in the Commonwealth and Mr Vida’s company, known as Nationhire, had never received a transfer of shares by Ilford Vic. Therefore, Nationhire could not have passed a member’s resolution on 3 October 2025 to appoint Mr Vida as a director of Donojon 1325.
• Importantly, Associate Justice Goulden indicated that the evidence, put forward by Mr Strangio in support of the application, raises a serious question as to the commission of offences by him under the Corporations Act and the Bankruptcy Act and those matters were referred to the regulator for investigation.
• Accordingly, the proceeding was dismissed and the stay on the VCAT orders was dissolved.

FCW Lawyers often act for directors and bankrupts in a range of litigious matters and where a director or their related entities are involved in legal proceedings (or they wish to initiate new proceedings). There are a range of circumstances where further enquiries must be undertaken when dealing with legal proceedings – it is important to confirm whether the relevant director has the requisite authority to act and provide instructions for the issue of proceedings, including applications for leave to appeal.