L.A. TECHNOLOGIES PTY LTD (ACN 092 001 495) (IN LIQUIDATION) and DENNIS ANTHONY TURNER (AS LIQUIDATOR OF L.A. TECHNOLOGIES PTY LTD (ACN 092 001 495) (IN LIQUIDATION)) v LAM KIEN VU

PROCEDURAL HISTORY 7 As I have said, the Plaintiffs commenced these proceedings on 5 May 2009. Service of both the originating process and the affidavit in support of that initial application were personally served on the Defendant on 6 May 2009. 8 The matter first came before the Court on 19 May 2009. The Defendant did not appear. At that time, the Court made Orders that the process proceed by way of pleadings, the Plaintiffs file and serve a statement of claim substantially in the form then provided to the Court, the Defendant file and serve an appearance on or before 9 June 2009 and, in the event of default by the Defendant in filing and serving an appearance, any application by the Plaintiffs pursuant to O 35A r 3(2)(c) of the Federal Court Rules 1979 (Cth)for judgment be made by 23 June 2009. Also, the Court Ordered the Defendant to file and serve a defence on or before 23 June 2009, and importantly, directed that the Plaintiffs serve a copy of the Orders made on 19 May 2009 on the Defendant on or before 22 May 2009. 9 Consistent with those Orders, the Plaintiffs filed and served a statement of claim and a sealed copy of the Orders of 19 May 2009 on the Defendant on 20 May 2009. The Defendant did not file an appearance and did not take any other step in the proceedings. Contrary to the Orders made on 19 May 2009, the Plaintiffs did not file an application for judgment in default pursuant to O 35A r 3(2)(c) by 23 June 2009. Instead, that application was filed on 9 July 2009 by way of an interlocutory process, supported by affidavit, seeking the relief set out in para [3] above together with interest on those sums and costs. On 15 July 2009, the interlocutory process and additional supporting affidavit were served personally on the Defendant.

APPLICABLE RULES, PRINCIPLES AND ANALYSIS 10 For present purposes, it is necessary to have regard to the nature of the Plaintiffs' application, the rules which govern that application, and finally, the facts and matters said to support the making of the orders. 11 The rules governing judgment on default are found in O 35A rr 2(2) and 3(2) of the Federal Court Rules 1979 (Cth). So far as is presently relevant, those rules provide that: 2(2) For this Order, a respondent is in default if the respondent has not satisfied the applicant's claim and: (a) the time for the respondent to enter an appearance has expired and the respondent has failed to enter an appearance; or (b) the time for the respondent to file a defence has expired and the respondent has failed to file a defence; or (c) the respondent fails to attend a directions hearing; or (d) the respondent fails to comply with an order of the Court in the proceeding; or ... 3(2) If a respondent is in default, the Court may: ... (c) if the proceeding was commenced by an application supported by a statement of claim or the Court has ordered that the proceeding continue on pleadings - give judgment against the respondent for the relief that: (i) the applicant appears entitled to on the statement of claim; and (ii) the Court is satisfied it has power to grant; or (d) give judgment or make any other order against the respondent; or (e) make an order specified in paragraph (b), (c) or (d) to take effect if the respondent does not take a step ordered by the Court in the proceeding in the time limited in the order. 12 Subrule 5 goes on to provide that: (5) The Court may make an order of the kind mentioned in subrule (1), (2) or (4), or such other order, or may give such directions, and specify such consequences for non-compliance with the order, as the Court thinks just. 13 The requirement in O 35A r 3(2) that the applicant (in this case the Plaintiffs) appear to be entitled to the relief on the claim does not require proof by way of evidence of the claim. It requires an assessment of the claims pleaded to ascertain whether or not there is a cognisable claim for relief (i.e. a claim is stated and the Court has jurisdiction to grant the relief sought): see e.g. Arthur v Vaupotic Investments Pty Ltd [2005] FCA 433; Chanel Limited v Kim [2008] FCA 477 and Nokia Corporation v Yu (No 2) [2008] FCA 1088 at [8]. 14 Notwithstanding that O 35A r 3(2) does not require the Plaintiffs to file and serve proof by way of evidence in order for judgment on default to be granted, I should note that in this case it is apparent, both on the face of the claims and from the affidavit material filed and served on the Defendant, that there is evidence that would justify and warrant the default judgment now sought. 15 That brings me to the application of O 35A. As I have stated earlier, the Defendant has not filed a defence or any affidavit material in support of the contention that he should not be held accountable under either s 588FF or s 588M of the Act. As a result, the Defendant is in default for the purposes of O 35A. 16 I then move to consider the allegations in the claim. In my view, the allegations have been made out and it is appropriate for there to be relief of the kind - although not completely of the kind - sought in the Plaintiffs' claim. That conclusion requires some explanation.

APPLICATION UNDER S 588FF OF THE ACT 17 In relation to s 588FF of the Act, I would grant relief and Order that pursuant to s 588FF of the Act, the Defendant pay to the Company the sum of $33,000, together with interest in the sum of $3,651.69. 18 However, contrary to the Orders sought by the Plaintiffs, I would not direct that the payment be made forthwith. Instead, I will direct that payment be made by the Defendant to the Company within 45 days of service of the sealed copy of these Orders on the Defendant.

APPLICATION UNDER S 588M(2) OF THE ACT 19 Mr Bowers-Taylor properly conceded that this application is more complicated than the application under s 588FF. 20 Consistent with the relevant provisions of the Act, a number of facts and matters need to be pleaded for these to be a cognisable claim for relief. First, the defendant must be a person who is a director of the company at the time when the company incurs a debt. Next, at the relevant time, there must be reasonable grounds for suspecting that the company was insolvent or would so become insolvent. The "relevant time" is the time it is alleged that the company became insolvent as a result of the debt being incurred or at the time the debt was incurred, or at the time that certain debts, including the debt in issue, were incurred. Mr Bowers-Taylor contended that, for relevant purposes, the relevant time was 1 July 2007. That, however, is not the end of the inquiry. Subsection (2) of 588G goes on to provide that a person, namely a person in the position of the Defendant, contravenes the section if he or she fails to prevent the company from incurring the debt in issue, if at the time that debt was incurred there were grounds for so suspecting or a reasonable person in a like position in a company in the Company's circumstances would be so aware that it would constitute insolvent trading. 21 In my view, the statement of claim pleads, and the affidavit material in support of the application provides evidence of, each of these matters. If, as in this case, those facts and matters are satisfied, then the liquidator may recover from the director as a debt due to the company an amount equal to the loss and damage suffered by the company. I have set out earlier the debts which are the subject of the application by the Plaintiffs (see [5] above) and which are said to give rise to an order under s 588M(2). 22 For the sake of completeness, I note the following facts and matters: 1. The Defendant was, at all material times, a director of the Company and was a director of the Company when each of the debts listed in paragraph [5] above was incurred. 2. The Company had not complied with its obligation to remit taxes regularly and the Company's superannuation guarantee charge liability was, at the relevant time (1 July 2007), in excess of $40,000. 3. Unpaid group tax, payroll tax, GST, workers' compensation premiums, together with the unpaid superannuation guarantee contributions totalled $144,862.70 and covered a period, which extended back to 1 July 2007. 4. The Company's bank statements disclosed a balance of $13,435.66, which did not rise above $38,000, with an average closing balance over the 15 month period of just $4,081.83. 5. The Company otherwise had little in the way of net realisable assets, other than motor vehicles, plant and equipment, valued somewhere between $13,000 and $20,000. 6. The Liquidators' report to creditors dated 9 October 2008 set out, by way of summary, the director's report as to affairs ("RATA") which had been provided to the Liquidator by the Defendant on 8 August 2008. The RATA disclosed total assets of $13,000 and provided no quantification of liabilities. (In other words, the Defendant's own view was that there were little, if any, assets realisable to pay the Company's debts at that time). 23 In those circumstances, the next question which arises is whether or not any of the debts claimed by the Plaintiffs should be excluded from an order under s 588M(2). In relation to the alleged employee debt, I was informed by Mr Bowers-Taylor that because it had not been formally proved and may be the subject of withdrawal, the liquidator did not seek an order in respect of that alleged debt. In those circumstances, it is inappropriate for the Court to grant relief in respect of that debt. In relation to the balance of the debts (see [5] above), I am satisfied that it is appropriate that there be relief in the modified form I have outlined earlier, namely that pursuant to s 588M(2) the Defendant is to pay to the Company the sum of $163,228.17, together with interest in the sum of $18,062.43. 24 Again, contrary to the orders sought by the Plaintiffs payment will not be ordered to be made forthwith but within 45 days of service of a sealed copy of these Orders upon the Defendant. In accordance with the usual order as to costs, costs should follow the event. The Defendant should be Ordered to pay the Plaintiffs' costs of the interlocutory process, filed on 9 July 2009 and of the proceeding, to be taxed in default of agreement. 25 Before making final orders, I should say something about interest. Attached to submissions filed by the Plaintiffs was a schedule of the calculation of interest. They were amended. I have adopted the amended calculations and, consistent with the decision in Powell v Fryer (2001) 159 FLR 433 at [115], I would Order the Defendant to pay interest in the terms that I have. I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gordon.

Associate: Dated: 21 July 2009 Solicitor appearing for the Plaintiffs: Mr J Bowers-Taylor

Solicitor for the Plaintiffs: JBT Lawyers