To settle their ongoing family dispute, Charles Beattie agreed to take ownership of father Anthony’s fruit and vegetable concentrates business Directus valued at $935,000. In return, Charles gave up all claims as beneficiary of family trusts and the estates of his father Anthony and Anthony’s deceased wife. It did not prove to be an amicable settlement. A subsequent dispute over the level of Directus’ debts saw the two in court.
The High Court ruled that the agreed deal required son Charles to clear a USD 227,300 Directus business debt, putting a severe dent into his cashflow at a time when Charles said he was short of cash.
The High Court was told father and son signed a sale agreement in 2020 described as full and final settlement of their business and personal disputes. Son Charles was gifted ownership of the Directus business and its south-east Asian customer base. In return, he promised not to claim any rights as a beneficiary of his father’s family trusts or as a potential beneficiary of his father’s estate on death.
The Directus deal involved transfer of all business assets and liabilities to a Hong Kong company controlled by son Charles. His father retained his shareholding in Directus South East Asia Ltd, which was left as an asset-less shell. Charles was later to dispute his liability to pay a Directus debt of some USD227,300 owed to US company Directus USA Inc. His father Anthony owned Directus USA.
Associate judge Taylor ruled son Charles was personally liable to pay this debt. The 2020 sale specifically included sale of Directus’ business debts as well as assets. The contract gave Charles twenty working days to challenge the value of any debts Directus owed; it was too late to dispute the amount of a debt 18 months later, Judge Taylor said. Transfer of all business assets and liabilities was part of a wrap-up deal intended to end a family dispute in what was a full and final settlement.
Charles could not belatedly reopen the deal claiming he did not expect to pay cash over and above giving up his disputed family claims.
The court was told Directus South East Asia, still owned by father Anthony, had paid Directus USA the amount claimed. As a matter of law, liability on a debt cannot be assigned without creditor agreement. Primary liability for the debt still lay with Directus South East Asia, owned by father Anthony. It was Directus South East Asia under father Anthony’s control which sued son Charles to recover the amount paid. In the 2020 sale agreement, Charles agreed to indemnify Directus South East Asia for any debts left unpaid.
Directus South East Asia Ltd v. CNG International Ltd & Beattie – High Court (16.05.23)
23.071