Plaintiffs v Defendant

DEBT - Claim in debt by company in liquidation against director in respect of alleged loan - Whether evidence supports existence of loan - s 553C(1) of the Act - Whether director has right of set-off under s 553C(2) - Set-off not available because director on notice of company's insolvency at relevant time.

LIMITATIONS OF ACTIONS - Limitation of Actions Act 1958 (Vic) - s 5 - Potential application of limitation period to claim in debt - Supreme Court (General Civil Procedure) Rules 2015 (Vic) - rr 13.02(1)(b) and 13.07(1) - Defendant required to specifically plead any limitations defence - Matter not pleaded - Failure to do so means defendant cannot later rely on defence and Court should not consider limitation question on its own motion.

1. In this proceeding, Wild K9 Pty Ltd (in liq) ('Wild K9' or 'company') and Mr Jason Glenn Stone in his capacity as its liquidator ('liquidator') (together, 'plaintiffs') bring a claim of insolvent trading against the company's director, Mr Brooke Thompson, pursuant to s 588G of the Corporations Act 2001 (Cth) ('Act') and seek compensation under s 588M and/or s 1317H of the Act in the amount of $132,553[1] ('insolvent trading claim'). The plaintiffs also seek an order that Mr Thompson pay the company the sum of $224,089 by way of a claim in a debt for an unpaid loan ('loan claim') or, alternatively, for monies had and received.

1. Wild K9 was incorporated on 28 September 2015 and Mr Thompson was appointed as its director and secretary. Mr Thompson is also the sole shareholder of the company. Between 18 May 2016 and 31 July 2017, Mr Simon Saint-John was also a director of the company.
2. The company was the corporate trustee of the Orient Hotel Trust ('trust') since its incorporation and operated a pub and restaurant at 95 Queen Street, Warragul Victoria 3820, which variously traded as 'O&H Hotel' and 'O&H Warragul'. It is the liquidator's uncontroverted evidence that the company only ever operated in its capacity as trustee of the company.
3. The company is currently the subject of a creditors' voluntary winding up. The winding up commenced on 2 October 2017 when Messrs Stirling Horne and Jason Stone were appointed as joint and several liquidators of the company by way of special resolution of its sole member (Mr Thompson) pursuant to s 491 of the Act.
4. According to a statutory report prepared by the liquidators, the plaintiffs settled an insolvent trading claim against Mr Saint-John in June 2022.
5. On 27 June 2022, Mr Horne resigned as liquidator of the company. On the same day, orders were made by McEvoy J in the Federal Court of Australia confirming that Mr Stone be entitled to continue as liquidator of Wild K9 and other companies.
6. It is the plaintiffs' evidence that, between 30 June 2016 and 2 October 2017 ('relevant period'), the company incurred debts totalling $132,553 which are still outstanding. The plaintiffs contend the company was insolvent from at least 30 June 2016 onwards. The insolvency of the company is a matter I will address in greater detail.

1. To provide context to the Court's treatment of a number of arguments raised by Mr Thompson in the proceeding, it is necessary to set out the complex procedural history of the matter in some detail.
2. The plaintiffs commenced the proceeding by way of originating process on 17 April 2023. Initially, the plaintiffs sought, among other things, an order directing Mr Thompson to pay the plaintiffs $454,899.20 in respect of the insolvent trading claim together with various declarations concerning alleged voidable transactions in connection with the alleged outstanding loan to Mr Thompson. As a consequence of a number of amendments to the plaintiffs' pleading, the amount of compensation sought in the insolvent trading claim has been reduced and the voidable transaction claims are no longer pursued. The plaintiffs do, however, seek to recover the alleged outstanding loan in the reduced sum of $224,089.00 as a debt or by way of a claim for monies had and received.
3. On 5 May 2023, Connock J made an order referring the matter to an Associate Judge for hearing and determination pursuant to r 77.05 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) ('Rules') and, if required, r 16.1(3) of the Supreme Court (Corporations) Rules 2013 (Vic).
4. On 17 May 2023, the Court administratively adjourned the first directions of the proceeding because the plaintiffs were experiencing difficulty in effecting service of the originating process and supporting affidavit on Mr Thompson.
5. By summons dated 26 May 2023, the plaintiffs applied for an order for substituted service of the documents under r 6.02 of the Rules. On 16 June 2023, the Court made orders for substituted service of the relevant documents on Mr Thompson by email (including via his then lawyers, Willon Legal), text message and post. Service of the relevant documents was deemed to be effected on 7 July 2023.
6. On 19 June 2023, the plaintiffs' lawyers were informed by Willon Legal that they no longer acted for Mr Thompson in the matter. Ahead of a directions hearing on 14 July 2023, Mr Thompson emailed the Court requesting an adjournment on the basis he was unwell. As a consequence, on 14 July 2023, the Court vacated the directions hearing, ordered the plaintiffs to file and serve a statement of claim and re-listed the matter for directions on 4 August 2023 at 10:30am.
7. Mr Thompson did not appear at the directions hearing on 4 August 2023, which was held by audio-visual link on the Zoom platform. However, he notified the Court and the plaintiffs' lawyers by email at 11:22am on the morning of the hearing that he was not well and in hospital. The Court made timetabling orders on 4 August 2023 for the filing of any amended statement of claim by the plaintiffs and requiring Mr Thompson to file and serve a defence and notice of appearance by 29 September 2023. The matter was then listed for further directions on 13 October 2023.
8. On 26 September 2023, Catcher Legal filed a notice of appearance for Mr Thompson. In light of this development, the Court made orders by consent on 26 September 2023 extending the time for Mr Thompson to file his defence to 13 October 2023 and re-listing the directions hearing on 20 October 2023. However, on 12 October 2023, Catcher Legal filed a notice of solicitor ceasing to act.
9. On the morning of the directions hearing on 20 October 2023, Mr Thompson emailed the Court and the plaintiffs' lawyers seeking a further adjournment. He stated he had not been in a position to engage new legal representation since his previous lawyers ceased acting due to a lack of funds. He also said he was in ill health, on medication and that he had 'impairments that limit[ed] [his] ability to defend [himself]'. He maintained he had a defence to the claim and requested the matter be adjourned until his health improved so he could conduct a defence personally, or until his financial situation improved to enable him to retain representation. The Court then informed the parties that the directions hearing would proceed and that Mr Thompson would need to address the matters he had raised in his email in Court. He did not appear at the directions hearing, which was held by audio-visual link on Zoom. Instead, he sent an email to the Court at 11:50am (after the directions hearing had concluded) stating he had just returned from obtaining medication. In the orders made on 20 October 2023 in Mr Thompson's absence, the Court noted Mr Thompson had not complied with the Court's previous orders dated 4 August 2023 and 26 September 2023 for the filing of a defence. The Court then made orders for the filing of any further amended statement of claim and originating process by the plaintiffs and for Mr Thompson to file and serve his defence by 1 December 2023. In the event Mr Thompson sought to vary any of the Court's orders or adjourn the matter further, he was ordered to file and serve an affidavit addressing the following matters by 24 November 2023: any medical condition(s) in respect of which he was receiving treatment; the nature of treatment being undertaken and its duration; any restrictions placed upon him as a result of such condition(s) and/or treatment; the level of risk to his health in attending to the further preparation of the matter for trial; what steps, if any, could be taken to moderate the risk/impact upon him which may be caused by the further preparation of the case for trial; and what steps, if any, he had taken to engage new legal representation. The affidavit was also required to exhibit any recent medical reports substantiating the relevant matters. However, Mr Thompson did not seek to vary the Court's orders or adjourn the matter, or take any steps to indicate he wished to do so.
10. On 10 November 2023, the plaintiffs filed and served an amended originating process and further amended statement of claim. Mr Thompson did not file his defence by 1 December 2023, or at all. Strictly speaking, because Mr Thompson did not file a defence to the plaintiffs' pleading, each of the allegations in the further amended statement of claim is taken to be admitted.[2]
11. At the next return of the matter on 12 December 2023 (again held on Zoom), Mr Thompson did not appear and the Court made orders for the filing of affidavit evidence by the parties, including on the question of the company's solvency. The Court made a self-executing order to the effect that if Mr Thompson did not file his evidence by 3 April 2024, he would not be permitted to file any evidence in opposition to the plaintiffs' claims without leave of the Court ('12 December 2023 self-executing order'). The proceeding was set down for final hearing on 9 May 2024 on an estimated duration of one day in the event it proceeded undefended. The Court made an order providing Mr Thompson an opportunity to file by 26 March 2024 an affidavit seeking to vary the Court's orders or to vacate the trial on the basis of any medical condition or because he was in the process of obtaining new legal representation. The requirements for such an affidavit were the same as those in the corresponding order made on 20 October 2023. The matter was then listed for pre-trial directions on 16 April 2024.
12. Later in the day on 12 December 2023, Mr Thompson sent a number of emails to the Court and the plaintiffs' lawyers indicating he had missed the directions hearing because it conflicted with medical treatment he was receiving. He also referred to a number of medical conditions in respect of which he was receiving treatment and stated that his psychiatrist had advised him not to appear in Court unrepresented. Further, he made a number of assertions refuting aspects of the plaintiffs' claims and raised concerns about a lack of access to Wild K9's banking records. Of its own motion, the Court then made further orders on 13 December 2023 requiring Mr Thompson to file and serve any interlocutory process, supported by affidavit, for the discovery of company documents, in accordance with Order 29 of the Rules. Mr Thompson did not file and serve any such interlocutory process. Nor did he file and serve any affidavit by 26 March 2024, or at all, seeking to vary the Court's existing orders for the filing of his evidence or to vacate the trial on the basis of his medical conditions or because he was in the process of obtaining new legal representation.
13. Mr Thompson did, however, appear at the pre-trial directions hearing on 16 April 2024. At the hearing, the Court provided to Mr Thompson an overview of the operation of ss 588G(1)-(2) (being the insolvent trading provisions) and 588H(2)-(3) of the Act (being certain statutory defences). To ensure Mr Thompson had copies of all the relevant pre-trial orders, the Court circulated the orders made on 12 December 2023 and 13 December 2023 by email to Mr Thompson. The Court made orders for the filing of a court book and for the parties to file any written submissions. Once again, the Court made an order in the same terms as the corresponding orders made on 20 October 2023 and 12 December 2023 and required Mr Thompson to file and serve an affidavit by 30 April 2024 in the event he sought to vary the orders made on 12 December 2023 or vacate the trial. Once again, Mr Thompson did not file any such affidavit by the due date. Further, he did not file and serve his written submissions by the due date of 7 May 2024, or at all.
14. On 6 May 2024, Mr Thompson sent to the Court a number of emails concerning the case, which contained various allegations, made reference to his health status and attached a report from Dr Michael Greenbaum (psychiatrist) dated 25 April 2024. Mr Thompson noted he had privacy and confidentiality concerns over the letter as it made reference to his family members. It does not appear the letter was provided to the plaintiffs. I read Dr Greenbaum's letter and considered it did not adequately address the requirements of the Court's orders made on 16 April 2024 including as regards Mr Thompson's medical condition(s), their treatment and any risk to his health in attending to further preparation of the matter for trial.
15. At the commencement of the trial on 9 May 2024, Mr Thompson made an oral application for an adjournment to enable him to access files held by two of his previous lawyers, so he could defend the matter. The plaintiffs opposed his application, noting that he had been aware of the proceeding since at least July 2023 and had already sought adjournments of multiple directions hearings on similar grounds. Counsel also submitted Mr Thompson had sufficient notice of the trial date.
16. Having heard both parties' submissions, I refused Mr Thompson's adjournment application.[3] I recounted the procedural history of the matter and Mr Thompson's repeated failure to comply with the Court's orders, including in respect of the filing of a formal defence and affidavit evidence. In my view, there was no guarantee that Mr Thompson would be able to obtain the file from his previous solicitors to help him prepare a defence. Even if he was able to obtain the file, Mr Thompson was unable to indicate when he would be in a position to file a defence or outline the steps he would take to do so.[4] I observed that in considering an application for an adjournment, the Court was required to consider the overarching purpose found in s 7(1) of the Civil Procedure Act 2010 (Vic) ('CPA') to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute. I also made reference to the leading case of Aon Risk Services v Australian National University[5] which stands for the proposition that adjournments or amendments to pleadings are not to be considered solely by reference to whether the resulting prejudice to the other party can be compensated for by an order for costs.[6] Courts must also take into account any unfair prejudice that would result from an unnecessary delay in the proceeding, along with the broader inefficiencies that may result from an adjournment, including the impact on other litigants and the Court itself.[7]
17. Having regard to the chronology of the matter, I stated:

In my view, Mr Thompson has missed the window to file evidence, he has missed the window on two occasions to make applications to adjourn the proceeding and to vacate the trial and he has missed the window to file written submissions. The application that has been made today, in my view, is too little and too late on Mr Thompson's part. It should have been made earlier.[8]

1. I concluded that Mr Thompson as a litigant in person had been provided with a reasonable opportunity to present his case and that the trial would proceed.
2. Although the matter had originally been listed on an undefended basis and Mr Thompson had missed the critical milestones to file material in opposition to the proceeding, I allowed him to make oral submissions to ensure procedural fairness.[9] In doing so, I endeavoured to explain to Mr Thompson the important differences between evidence and submissions.[10] I explained that he was not permitted to introduce any new facts (by virtue of the 12 December 2023 self-executing order) but that he was entitled to make submissions about the existing evidence before the Court. However, during the course of the trial, Mr Thompson tended to go well beyond making submissions and sought to raise new factual matters which were not the subject of evidence before the Court and in respect of which the plaintiffs had no prior notice. I will return to that problem during the course of these reasons.
3. At the conclusion of the trial, I made orders for the plaintiffs to file and serve by 16 May 2024 supplementary submissions concerning whether their debt claim was caught by a limitation period. Mr Thompson was also permitted to file and serve by 30 May 2024 any supplementary submissions in reply on this point. His submissions went well beyond this question. To the extent he has raised new matters in his supplementary submissions not previously addressed at trial, I decline to consider them as it would not be procedurally fair to the plaintiffs nor consistent with the overarching purpose in the CPA.
4. On 30 May 2024, in addition to filing his supplementary submissions, Mr Thompson sent an email to the Court and to the plaintiffs' lawyers which itself enclosed a chain of emails suggesting he had the same day corresponded with Justice Connect 'to prepare [a] defence response'. His email relevantly stated as follows:

I'm not sure of the protocols here but hope this email is not breach [sic] of protocols or Orders. I sending [sic] it as proof of intent to learn more about the orders and protocols and get a defense [sic] in these matters lodged and recognized. I ask for your forbearance on the lack of a defense [sic] by the time set by the court, However [sic] I do not want to be a victim of process because I am unrepresented..

Regards Brooke Thompson

Self represented Litigant

1. The Court responded to the above email by confirming all the material had been received in the matter and the Court had formally reserved its decision. No further correspondence was received from Mr Thompson. Nor did he make any application to re-open the trial.[11]

1. As is apparent from the above procedural history, while Mr Thompson was represented for brief periods throughout the proceeding, he was unrepresented for the majority of the time, including at trial.
2. It is appropriate, at this stage, to explain the Court's obligations to an unrepresented party. In Daher v Bell,[12] Derham AsJ summarised the following governing principles, which I gratefully adopt:

It is the duty of the Court in relation to represented and unrepresented litigants alike to ensure that a hearing or trial is conducted fairly and in accordance with law. Procedural fairness is 'an essential attribute of a court's procedure'. What a judge must do to assist a litigant in person depends on the litigant, the nature of the case, and the litigant's intelligence and understanding of the case. The judge cannot be the advocate of the self-represented litigant, for the role of the judge is fundamentally different to that of an advocate. The judge must maintain the reality and appearance of judicial neutrality at all times and to all parties. The assistance must be proportionate in the circumstances - it must ensure a fair trial and not afford an advantage to the self-represented litigant.

In the decision of the Court of Appeal in Roberts v Harkness [(2018) 57 VR 334 ('Roberts')], which was applied in Doughty-Cowell v Kyriazis [[2018] VSCA 216 [63]-[64]], the Court made it clear that a litigant must have a reasonable opportunity of presenting his case. What amounts to a reasonable opportunity of presenting a case depends on the circumstances of the case, including the nature of the decision to be made, the nature and complexity of the issues in dispute, the nature and complexity of the submissions which the party wishes to advance, the significance to that party of an adverse decision ('what is at stake') and the competing demands on the time and resources of the court or tribunal [Roberts 337-55 (Maxwell P, Beach and Niall JJA)].[13]

1. As the Court of Appeal stated in Roberts v Harkness,[14] to ensure a hearing or trial is conducted fairly, it is necessary to 'assess the capability of the unrepresented person to formulate, and communicate, the case which he/she wishes to present.'[15] The Court of Appeal further explained:

The assessment of capability will typically be based on any written documentation which the litigant has filed and, where there is an oral hearing, on the quality of the litigant's verbal communication with the Court [Cf WZARH (2015) 256 CLR 326, 338 [40]]. Very often, the judicial officer will be able to assess relatively quickly whether, and to what extent, the litigant will need assistance, either from the Court or from a third party, in order for the Court to be able to understand the litigant's case.

A critical fair hearing question for the judicial officer is whether there is, or may be, an arguable legal point underlying the unrepresented litigant's arguments but which he/she has not been able to articulate [See, eg, Neil v Nott [1994] HCA 23; (1994) 121 ALR 148, 150]. In those circumstances, in our view, the duty to afford a fair hearing may require the judicial officer to seek to elicit and elucidate the legal point, through exchanges with the litigant.[16]

1. Equally, as Mazza JA observed in O'Connell v Western Australia,[17] '[b]eing unrepresented is not a free pass to misbehave, flout the legal or procedural rules, ignore the law of evidence or to treat the trial judge and witnesses with disrespect or contempt.'[18]
2. At the pre-trial directions hearing on 16 April 2024 and at the trial itself, Mr Thompson was respectful to the Court and to his opponent. My impression of Mr Thompson was that he is intelligent, articulate and verbally confident, although somewhat disorganised in structuring his submissions by reference to the issues in the case. Where necessary, I re-directed him to the issue at hand and invited him to return to less immediately relevant points at a later stage of the hearing. In some instances, I have sought to summarise his detailed submissions for ease of understanding and to ascertain whether they contain any arguable legal points. Where his submissions constituted new and unsworn evidence not otherwise before the Court, I have declined to allow such evidence in light of the 12 December 2023 self-executing order and having regard to the overarching purpose found in s 7(1) of the CPA.
3. I have otherwise endeavoured to apply the above principles concerning unrepresented litigants in this matter. I consider that Mr Thompson has been afforded a fair hearing and a reasonable opportunity to present his case having regard to the relevant circumstances.

1. In support of their application, the plaintiffs rely on the following material:

(a) the affidavits of: Mr Stone dated 17 April 2023 ('first Stone affidavit'); 21 February 2024 ('second Stone affidavit'); and a further affidavit of Mr Stone also dated 21 February 2024 which exhibits a solvency report dated 16 February 2024 in respect of the company ('solvency report') ('third Stone affidavit');

(b) the affidavit of Mr John Leventis dated 21 February 2024;

(c) a bundle of invoices issued by DBH Electrical Pty Ltd ('DBH Electrical') sent to the Court on 2 May 2024;[19]

(d) a bundle of National Australia Bank ('NAB') bank statements for the company's bank account ending 7301 sent to the Court on 2 May 2024;[20]

(e) an updated schedule of debts incurred by the company after 30 June 2016 and handed up at trial ('updated schedule of debts');[21]

(f) written submissions dated 26 April 2024; and

(g) supplementary submissions dated 16 May 2024.

1. Mr Thompson did not formally file any substantive material in this proceeding, although he provided his supplementary submissions by email dated 30 May 2024. I have, however, also read his emails to the Court dated 6 May 2024 and taken into account his oral submissions made at trial.

1. It is convenient to set out the legislative provisions and legal principles relating to the insolvent trading claim.
2. Section 588G(1) of the Act relevantly provides:

(1) This section applies if:

(a) a person is a director of a company at the time when the company incurs a debt; and

(b) the company is insolvent at that time, or becomes insolvent by incurring that debt, or by incurring at that time debts including that debt; and

(c) at that time, there are reasonable grounds for suspecting that the company is insolvent, or would so become insolvent, as the case may be; and

(d) that time is at or after the commencement of this Act.

1. The inquiry in s 588G(1) is not one concerning the particular director whose conduct is under consideration.[22] Instead, facts and matters must be shown to exist which would enable a director of reasonable competence and diligence to suspect insolvency.[23]
2. Section 588G(2) of the Act says:

By failing to prevent the company from incurring the debt, the person contravenes this section if:

(a) the person is aware at that time that there are such grounds for so suspecting; or

(b) a reasonable person in a like position in a company in the company's circumstances would be so aware.

1. Once the threshold requirements of s 588G(1) of the Act are established, the question of contravention of the provision then arises under s 588G(2).[24] The essence of a contravention of s 588G(2) is the failure to prevent a company from incurring a debt at a time it was insolvent.[25]
2. While the test found in s 588G(1)(c) is an objective one and is not concerned with the particular director or directors who is/are the subject of the proceeding,[26] the test under s 588G(2) of whether there are grounds to suspect insolvency can be either subjective (as regards the individual defendant director(s)) or objective (by reference to a reasonable person in a like position to the relevant director(s)). It follows that a liquidator is not required to establish that an individual director was actually aware there were grounds for suspecting insolvency at the time the company incurred a debt.[27]
3. In summary, a person may be liable for contravening s 588G(2) in the following circumstances:

(a) he/she was a director at the time the company incurred the relevant debt;

(b) the company was insolvent at the time the debt was incurred or became insolvent as a result of the debt being incurred;

(c) there were reasonable grounds for suspecting that the company was insolvent or would become insolvent as a result of the debt being incurred; and either

(d) the person was aware at the time the company incurred a debt that there were grounds for suspecting that the company was insolvent or would become insolvent as a result of the debt being incurred; or

(e) a reasonable person in a like position in a company in similar circumstances would be aware of the company's insolvency.

1. The onus of establishing a contravention of s 588G rests with the plaintiffs.[28] According to s 1332 of the Act, in a proceeding other than a proceeding for an offence, it is sufficient if the Court is satisfied there has been a contravention on the balance of probabilities.
2. Where there is material before the Court that is capable of proving actual insolvency and where such material was available to the director at the time the debt was incurred, the Court will more readily find that a reasonable person in the position of the director would have concluded that the company was unable to pay its debts as they fell due.[29] That said, the Court must ultimately make its own findings on the basis of the facts and circumstances that existed at the time without the benefit of hindsight.[30]
3. A common statutory defence to insolvent trading can be found in s 588H(2) of the Act which provides:

Expectations and belief about company's solvency

(2) It is a defence if it is proved that, at the key time [the time a debt was incurred],[31] the person had reasonable grounds to expect, and did expect, that the company was solvent at the time and would remain solvent despite all its debt incurred, and dispositions of its property made, at that time.

1. The defence requires an actual expectation that the company was, and would continue to be, solvent and that the grounds for expecting its solvency are reasonable.[32] An expectation involves a higher degree of satisfaction or certainty than mere hope, possibility or suspicion.[33]
2. Section 588H(3) of the Act provides:

(3) Without limiting the generality of subsection (2), it is a defence if it is proved that, at the key time [the time a debt was incurred], the person:

(a) had reasonable grounds to believe, and did believe:

(i) that a competent and reliable person (the other person) was responsible for providing to the first-mentioned person adequate information about whether the company was solvent; and

(ii) that the other person was fulfilling that responsibility; and

(b) expected, on the basis of information, provided to the first-mentioned person by the other person, that the company was solvent at that time and would remain solvent despite all its debts incurred, and dispositions of its property made, at that time.

1. It is also a defence under s 588H(4) of the Act if:

...the person was a director of the company at the key time [the time a debt is incurred] ... [and] it is proved that, because of illness or for some other good reason, he or she did not take part at that time in the management of the company.

1. Section 588M of the Act enables a liquidator to recover compensation from a director who has engaged in insolvent trading in contravention of s 588G(2). The section relevantly provides:

(1) This section applies where:

(a) a person (in this section called the director) has contravened subsection 588G(2) or (3) in relation to the incurring of a debt by a company; and

(b) the person (in this section called the creditor) to whom the debt is owed has suffered loss or damage in relation to the debt because of the company's insolvency; and

(c) the debt was wholly or partly unsecured when the loss or damage was suffered; and

(d) the company is being wound up;

(2) The company's liquidator may recover from the director, as a debt due to the company, an amount equal to the amount of the loss or damage.

Overview of debts comprising insolvent trading claim

1. The plaintiffs allege that during the period 30 June 2016 to 2 October 2017, the company incurred debts in the total sum of $132,553 at a time when it was insolvent. The relevant debts are set out in the updated schedule of debts which was produced at trial. As a result of a number of concessions and adjustments by the plaintiffs, the updated schedule reduces the total quantum of debts from $430,421 as claimed in the further amended statement of claim.
2. The following is a simplified version of the updated schedule:

Bakers Delight Warragul Coles ('Bakers Delight')

Superior Food Group Pty Ltd t/as Superior Food Services

Warragul Regional Newspaper Pty Ltd ('Warragul Regional Newspaper')

1. I will collectively refer to the creditors and debts set out above as the 'relevant creditors' and the 'relevant debts', respectively.
2. At trial, I invited Mr Thompson to make any submissions concerning the relevant debts, specifically when they were incurred and whether they remained outstanding. Instead, Mr Thompson said he was not willing to acknowledge any of the debts and did not take responsibility for them because they 'were run up with[out] [his] permission'.[34] I will consider that submission in the context of any statutory defences. In addition, Mr Thompson made some specific submissions concerning a number of the relevant debts which I will address below.

1. The plaintiffs allege Wild K9 incurred taxation debts to the Deputy Commissioner of Taxation in the amount of $61,841 from 7 September 2016 to 2 October 2017 and during the period in which it was insolvent.
2. It is clear that taxation liabilities are considered debts for the purpose of s 588G of the Act.[35] Even if there has not been a formal determination or assessment, a debt may arise where the taxpayer has performed transactions to generate a tax liability and where the tax in question is capable of calculation.[36] Further, taxation liabilities are incurred on the date on which they arose by operation of the relevant taxation legislation.[37] Specifically, a taxation liability is incurred by a company at the end of the relevant tax period (annually for income tax liabilities and quarterly for running balance account deficit debts) because that is when the amount of tax to be paid can be calculated.[38] Alternatively, taxation debts are incurred when the company was required to remit payment.[39]
3. On 18 October 2017, the Deputy Commissioner of Taxation lodged a formal proof of debt in the liquidation of the company for the amount of $61,841.08. The proof of debt comprises a running balance account debt of $5,494.92 as at 2 October 2017, together with superannuation guarantee charges ('SGC') and related general interest charges ('GIC') for the period from 1 October 2015 to 2 October 2017, in the sum of $56,346.16.
4. On its face, some of the amount claimed by the Deputy Commissioner in the proof of debt in respect of SGC and associated GIC falls outside the relevant period (30 June 2016 to 2 October 2017) and the time the company was said to be insolvent (from 30 June 2016). However, a running account ledger obtained from the Australian Taxation Office ('ATO') demonstrates the SGC and GIC were in fact incurred from 29 September 2016. The same running account ledger also shows that the $56,346.16 debt claimed by the Deputy Commissioner was owing on the effective date of 18 October 2017, which is after the company went into liquidation. As at 19 September 2017, the running account balance for SGC and related GIC was for the slightly lesser sum of $56,184.36. I will treat the amount of $56,184.36 as a debt incurred by the company between 29 September 2016 and 19 September 2017, which is within the relevant period and at a time the company is said to have been insolvent.
5. An additional running account ledger obtained from the ATO appears to suggest the $5,494.92 claimed in the Deputy Commissioner's proof of debt comprises penalties and GIC on the company's running balance account following a failure to lodge documents on time on 9 August 2016. However, it also appears that the $5,494.92 amount claimed by the Deputy Commissioner was current as at 18 October 2017 (after the company's liquidation). The amount of penalties and GIC owing as at 23 September 2017 was $5,483.11, which was also within the relevant period and at a time the company is alleged to have been insolvent.
6. On my reconciliation of the figures contained in the Deputy Commissioner's proof of debt and running account ledgers, the total liability incurred by the company to the Deputy Commissioner during the relevant period (30 June 2016 to 2 October 2017) was in fact $61,667.47 (and not $61,841 as stated above).
7. I note that Mr Thompson submitted the total liability owing to the Deputy Commissioner was overstated because of a bookkeeping error involving the duplication of payroll liabilities and/or an accounting error by the ATO in not allocating instalments to the correct taxpayer.[40] However, there is no evidence to substantiate these contentions and I do not intend to take them any further.
8. I also note that in the Form 507 Report as to Affairs ('RATA') in respect of Wild K9 and dated 2 October 2017, Mr Thompson listed the ATO as an unsecured creditor in the amount of $60,000. The RATA was verified and signed by Mr Thompson with an accompanying declaration confirming the particulars of the RATA to be true.
9. In one of his emails to the Court dated 6 May 2024, Mr Thompson made reference to and attached a director penalty notice he had received from the ATO dated 24 April 2024. Assuming the tax liabilities claimed in the notice concern the same tax liabilities discussed above, the fact that Mr Thompson is being asked to pay those liabilities by the ATO is not presently relevant to the insolvent trading claim. There is no evidence he has actually paid the amounts sought by the ATO in the director penalty notice such that it might be said the Deputy Commissioner has not suffered any loss and damage as a creditor for the purpose of s 588M of the Act.

1. I have considered the remaining debts the subject of the insolvent trading claim as set out in the updated schedule and their underlying documentation. The fact of the incurring of these debts is substantiated by tax invoices issued by the relevant creditor, a formal or informal proof of debt lodged in the liquidation by the creditor, or the inclusion of the debt in the RATA signed by Mr Thompson or in an aged payables summary extracted from Wild K9's Xero accounting software and attached to the RATA (or a combination of those document types). With some minor qualifications, and having regard to a number of specific submissions made by Mr Thompson, I am satisfied that each of these remaining debts were incurred during the relevant period and at the time the liquidator says the company was insolvent.
2. On 12 October 2017, Bakers Delight lodged an informal proof of debt in the sum of $896.80 for bread and bread products over a three to four month period. At trial, the plaintiffs submitted the relevant debt was incurred immediately prior to the winding up of the company - i.e. between May and August 2017. However, Mr Thompson argued the company did not incur this debt as Bakers Delight products were not used on the O&H Hotel's menu. Instead, he submitted the debt was run up by the wife of an employee and falsely characterised as a debt of the company.[41] There is no evidence to support this allegation. Further, the allegation is contradicted by the company's aged payables summary which records the precise amount claimed in the proof of debt as owing by the company. As already noted, the aged payables summary was attached to the RATA signed and verified by Mr Thompson. I am satisfied the debt claimed by Bakers Delight was incurred by the company during the relevant period.
3. Be Clean Professional Cleaning Services issued a tax invoice dated 31 July 2017 in the sum of $4,560 for cleaning services undertaken at the O&H Hotel between April and July 2017. Mr Thompson expressed some doubt as to the genuineness of this debt and said he had no recollection of the creditor's staff attending the OH&S Hotel to clean,[42] although he later stated he met one of the cleaners who attended after the business had closed. None of this is in evidence and I do not accept Mr Thompson's submission. The debt is also corroborated in the company's aged payables summary and attached to the RATA, which underscores its genuineness.
4. DBH Electrical lodged an informal proof of debt on 26 October 2017 in the sum of $5,312.03 for various electrical works performed between 22 September 2016 and 1 July 2017. There are a series of tax invoices which comprise this debt, each of which is addressed to 'O & H Bar & Bistro' at its business address.[43] The debt is included in the aged payables summary annexed to the RATA signed by Mr Thompson. Despite this, Mr Thompson says that Wild K9's landlord, Langford Intelligence Pty Ltd ('Langford Intelligence') (a related company of which Mr Thompson was apparently a former director), was actually responsible for the debt because it related to repairs on the goods and chattels of the building.[44] He also asserted some of the electrical work was in fact carried out at another hotel and the creditor was requested to re-issue the invoices to that business. When I asked Mr Thompson why he included the DBH Electrical debt in the RATA if he believed a different entity owed the amount, Mr Thompson said he 'wasn't sure what to do with the debt'.[45] There is no evidence to support his contentions. Instead, the weight of the evidence confirms the DBH Electrical debt was incurred by Wild K9 during the relevant period.
5. In the case of P.V. Meats, while the liquidator has only located invoices totalling $3,125.20, the company's aged payables summary records an amount of $4,792 owing to that creditor. Mr Thompson did not specifically dispute the quantification of this debt and I accept that it was incurred in the relevant period.
6. Lastly, Warragul Regional Newspaper lodged a proof of debt in the liquidation of the company in the amount of $2,569 in respect of newspaper advertising for the period between 27 September 2016 and 19 October 2017. At least some of that advertising occurred after the liquidation and cannot form part of the insolvent trading claim. Over the course of approximately 13 months of advertising, the company had an average monthly spend of $197.61. Accordingly, I will exclude one month's worth of average advertising from the total debt claimed by the creditor, resulting in an adjusted debt of $2,371.38.
7. As a result of the above analysis, the revised total quantum of debts claimable by the plaintiffs for the relevant period is $132,181.43.
8. Having determined that each of the debts relied on by the plaintiffs were, with minor qualification, incurred in the relevant period and prior to the company's liquidation on 2 October 2017, it is then necessary to consider whether the debts were incurred at a time when the company was insolvent.

1. The plaintiffs are required to prove the company was insolvent at the time the debts were incurred or that it became insolvent as a result of incurring the debts.

1. The test for solvency found in s 95A(1) of the Act is whether a company can pay its debts as and when they become due and payable. Section 95A(2), in turn, provides that a company which is not solvent, is insolvent.
2. In Crema Pty Ltd v Land Mark Property Developments Pty Ltd,[46] Dodds-Streeton J (as her Honour then was) cited with approval the decision of Weinberg J (as his Honour then was) in Ace Contractors & Staff v Westgarth Development Pty Ltd[47] and confirmed that s 95A of the Act enshrines the cash flow test of insolvency which, in contrast to a balance sheet test, focuses on liquidity and the viability of the business. Her Honour elaborated further, stating:

While an excess of assets over liabilities will satisfy a balance sheet test, if the assets are not readily realisable so as to permit the payment of all debts as they fall due, the company will not be solvent. Conversely, it may be able to pay its debts as they fall due, despite a deficiency of assets.[48]

1. Although s 95A adopts a cash flow test of insolvency as opposed to a balance sheet test, a deficiency of assets over liabilities in a company's balance sheet may nevertheless be used as a non-conclusive indicator of insolvency.[49]
2. In determining solvency, commercial realities will be relevant in assessing what resources are available to a company to source the income necessary to meet its liabilities.[50] Further, the weight of authority supports the view that contingent and prospective liabilities can also be taken into account when determining solvency under s 95A, including for the purpose of voidable transaction claims under Division 2 of Part 5.7B of the legislation.[51]
3. In Australian Securities and Investments Commission v Plymin ('Plymin'),[52] Mandie J set out a number of factors which may be indicative of insolvency. The indicia of insolvency most relevant for present purposes are: continuing losses; liquidity ratios below 1; overdue Commonwealth and/or State taxes; creditors unpaid outside trading terms; special arrangements with selected creditors; a lack of access to alternative finance; and solicitors' letters, summonses, judgments or warrants issued against the company (which I will take to include, by analogy, warning letters and penalty notices from the ATO). The factors referred to in Plymin have been described as representing common sense indicators of insolvency.[53] As Mansfield J observed in Lewis, Re Damilock Pty Ltd (in liq) v VI SA Australia Pty Ltd,[54] one or more of these indicia may have particular significance in a matter, but the absence of one or more of them does not, of itself, establish solvency.
4. Ultimately, the question of whether a company is able to pay its debts as and when they fall due is a question of fact[55] to be ascertained from a consideration of the company's financial position taken as a whole.[56]

1. According to the liquidator's solvency report, the O&H Hotel business operated by the company was significantly impacted by a high turnover of hotel management staff and ongoing trading losses. As a consequence, the company was unable to generate significant cashflow to continue its business resulting in it ceasing to trade and the appointment of liquidators on 2 October 2017. It is the liquidator's opinion that the company was insolvent from at least 30 June 2016 and unable to pay its debts as an when they became due and payable.
2. I pause here to note that while the liquidator places reliance upon both externally prepared financial statements for the trust, and internal management accounts for the company (sourced from its Xero accounting software), I consider both sets of financial records to be relevant to the assessment of the company's solvency. As already noted, there is unchallenged evidence that the company did not carry out any activities other than in its capacity as trustee of the trust. Importantly, there is no evidence the company held any assets in its own right or that the liabilities of the company were incurred other than in its capacity as trustee. Accordingly, there is no need to distinguish between liabilities of the company and liabilities of the trust.
3. Externally prepared financial statements for the trust show a net loss of -$174,048.02 in the financial year ending 30 June 2016. The greatest expenditure was for wages in the sum of $353,078 compared to a gross profit of $385,971. While Mr Thompson suggested at trial that the initial draft of the company's profit and loss statement prepared by the company's bookkeeper was erroneous because it showed payroll liabilities as exceeding the company's turnover, he also suggested that issue had been corrected after he discussed it with the bookkeeper in November 2015.[57] Further, he did not appear to contest the final version of the externally prepared financial statement for the 2016 financial year which showed a net loss of -$174,048.[58]
4. The trust also reported a net asset deficiency of -$173,748.02 for the 2016 financial year. Internal management accounts for the company extracted from its Xero accounting software show a net loss of -$143,098 for the same financial year and a net asset deficiency of -$326,999 as at 31 July 2016.
5. The company's financial position became progressively worse. According to the Xero management accounts, the company also incurred trading losses of -$1,066,683 in the financial year ending 30 June 2017 and experienced a net asset deficiency of - $1,284,966 as at 31 July 2017. In the period from 1 July 2017 to the date of the appointment of the liquidators on 2 October 2017, the company had trading losses of - $135,488. A management account balance sheet dated 31 October 2017 shows there was a deficiency of assets over liabilities in the sum of -$633,980 on 30 September 2017, immediately prior to the company's winding up.
6. Mr Thompson observed that while the externally prepared balance sheet for the 2016 financial year records as a current asset, '[p]rovision for 'stolen funds' in the amount of $14,255', the company's management account balance sheet for the 2017 financial year ought to have made similar provision, but does not. Given the quantum of the 'stolen funds', I do not regard this potential variance to be material to the question of the company's solvency during the relevant period. Mr Thompson also suggested the figure for stock in hand in the 2017 balance sheet was significantly undervalued ($110,000 compared to $171,000 in the externally prepared balance sheet for the 2016 financial year).[59] In addition, he made a general submission that anything extracted from the company's Xero management accounts was 'rubbish, because it was inputted by Simon Saint-John.'[60] This was not a point fully developed by Mr Thompson. Regardless, the allegation is unsubstantiated by any evidence and is at odds with the fact that Mr Thompson himself relied on the Xero management accounts in preparing the RATA, which he signed.
7. The liquidator deposes that Wild K9 had a deficiency in working capital since at least 30 June 2016 which persisted in later periods. The liquidator's solvency report also states that Wild K9 had a working capital ratio (the ratio of current assets over current liabilities) of less than 1 from at least 30 June 2016, which is indicative of the company's poor liquidity. In particular, the company had a working capital ratio of: 0.71 as at 30 June 2016; 0.18 as at 30 June 2017; and 0.16 as at 2 October 2017.[61]
8. The company also had overdue Commonwealth tax debts throughout the relevant period. As already noted, a running account ledger obtained from the ATO demonstrates the company incurred liabilities for SGC and GIC from 29 September 2016 in the amount of $6,610.45. This debt continued to accrue throughout the relevant period to an amount of $56,184.36 as at 19 September 2017, just prior to the company going into liquidation. From 9 August 2016, the company also owed penalties and GIC in the sum of $1,080 on its running balance account following a failure to lodge documents on time. As at 23 September 2017, the amount owing for these charges was $5,483.11.
9. The company's non-compliance with its taxation obligations resulted in the ATO taking action against it. On 15 March 2017, as a result of the company's non-responsiveness and lack of compliance, the ATO wrote to the company advising it was commencing an audit in respect of the company's superannuation guarantee obligations. On 1 May 2017, the ATO and the company entered a payment arrangement in respect of its outstanding SGC debt. The ATO also granted the company a payment arrangement for outstanding business activity statements ('BAS') on 2 May 2017. However, the company failed to adhere to these payment arrangements. As a result of its non-compliance, the ATO issued a further notice of audit on 12 September 2017. The ATO then foreshadowed potential debt collection action in a letter to the company dated 18 September 2017.
10. Additionally, the company failed to lodge monthly BAS from January 2016 to October 2017 and quarterly BAS for the quarters ending December 2015 to December 2017. It also neglected to file its income tax return for the financial year ending 30 June 2017. Accordingly, the debt owed by Wild K9 to the Deputy Commissioner may be substantially higher than the amount currently claimed.
11. In addition to the payment arrangements with the ATO described above, the liquidator has located correspondence from a further creditor, Australian Liquor Marketers ('ALM'), which refers to the company having entered into a payment plan. There is also correspondence from ALM for payment of invoices that had been overdue for more than two months. Moreover, invoices issued by DBH Electrical were owing from late September 2016 and remained unpaid.
12. The company also had overdue utility charges from 30 June 2016. Origin issued notices in relation to overdue charges for electricity and threatened to disconnect supply from as early as 15 July 2016. The company then entered into a payment arrangement with Origin on 18 August 2017, but went into default on 25 August 2017. Further, the company had an overdue account with Telstra, resulting in the issuing of a suspension notice on 22 September 2017.
13. The company's aged payables report extracted from its Xero accounting software (current as at the end of September 2017), which was attached to the RATA and signed by Mr Thompson, confirms the extent to which creditors were unpaid outside trading terms. There were $95,154 worth of creditor debts older than three months, out of a total of $123,768 in recorded debts. This represents approximately 77% of the company's total indebtedness recorded in the aged payables report.
14. A review of the company's 'business everyday' bank account with the NAB (account number ending 7301) ('NAB 7301 account') indicates it was repeatedly overdrawn from late February 2016. On 3 August 2016, the company entered into an agreement by which NAB would extend an overdraft facility to the company to a limit of $50,000. However, the company defaulted under the terms of this overdraft facility in October 2016 when it failed to maintain the facility within the agreed limit. On 17 January 2017, NAB extended the company's overdraft facility limit to $200,000 following the execution of a deed of guarantee and indemnity. On 28 February 2017, the company subsequently defaulted on the overdraft facility. Between 20 April 2016 and 29 September 2017, the balance of the company's bank account with NAB decreased from $11,505.13 to - $202,528.94. It is the liquidator's evidence that aside from the NAB overdraft facility, from 30 June 2016, the company did not have access to alternative sources of finance to pay its current and overdue liabilities.

1. Having regard to the evidence on Wild K9's solvency in its totality, I am satisfied on the balance of probabilities, that the company was both cash flow and balance sheet insolvent from at least 30 June 2016. Externally prepared financial statements and internal management accounts for the 2016 financial year demonstrate the company's financial performance was impaired on various metrics, including: a net loss; a net deficiency of assets over liabilities; and a working capital ratio of less than 1 which suggested it was unable to access liquid assets to meet its current liabilities. The company's financial situation significantly deteriorated in the 2017 financial year with the company experiencing insurmountable losses and a significant deficit of assets over liabilities.
2. Other indicia of insolvency are also apparent throughout the relevant period. From late September 2016, the company began to incur ever-increasing tax liabilities to the Deputy Commissioner (in respect of SGC, penalties and GIC) which it was apparently unable to reduce. Minimal payments to the ATO were made and the company defaulted on its payment arrangements. The true extent of the company's liabilities to the ATO may be considerably higher than as currently calculated owing to its failure to lodge: monthly BAS from January 2016 to October 2017; quarterly BAS for the quarters ending December 2015 to December 2017; and an income tax return for the 2017 financial year. Whilst some of these additional taxation liabilities may not have fallen due during the relevant period pending the company's lodgement and the ATO's assessment, they are at the very least prospective liabilities[62] and weigh against the company's solvency as a matter of commercial reality.[63] Further, aside from the company's NAB overdraft facility (which was itself the subject of default), there is no evidence the company had any access to alternative sources of finance to meet its liabilities.
3. For the above reasons, I reject Mr Thompson's submission at trial that none of the relevant debts the subject of the insolvent trading claim were incurred by Wild K9 without the capacity to pay them.[64]
4. It follows that there is a solid evidentiary foundation for concluding Wild K9 was insolvent from at least 30 June 2016, and throughout the relevant period, at the time each of the relevant debts were incurred.

1. Having regard to the insolvency evidence previously set out, I accept for the purpose of s 588G of the Act the plaintiffs' contention that at all times during the relevant period:

(a) there were reasonable grounds for suspecting the company was insolvent or would become insolvent; and

(b) Mr Thompson was aware (or a reasonable person in his position as director of Wild K9 would have been aware) there were reasonable grounds for suspecting the company was insolvent or would become insolvent.

1. In particular, there were reasonable grounds for suspecting insolvency under s 588G(1)(c) of the Act because:

(a) from late September 2016, Wild K9 incurred ever-increasing taxation liabilities which it did not, or could not, meaningfully reduce. Further, the company was seemingly unable to comply with payment arrangements entered into with the ATO in May 2017;

(b) throughout the relevant period, the company received various demands for payment of overdue invoices by a number of its creditors; and

(c) the company's financial statements and internal accounts throughout the 2016 and 2017 financial years record increasing and insurmountable losses and a consistent deficiency of assets over liabilities.

1. At trial, Mr Thompson argued that a reasonable person looking at the externally prepared balance sheet for the 2016 financial year would in fact conclude the company was solvent for two reasons: first, the company had significant stock on hand (with a value of $171,000); and second, a purported loan to Mr Thompson on the balance sheet for the sum of $396,000 was effectively cancelled out by a liability to NAB (described as 'Loan - NAB **4193' in the 2016 financial year balance sheet in the sum of $399,990, but shown in the amount of $400,000 in the company's bank statements) ('NAB loan').[65] In essence, Mr Thompson contented that he paid out the NAB loan on behalf of the company and is therefore entitled to be subrogated to the rights of NAB.[66] He also submitted that all debts claimed by NAB should be withdrawn from the statement of claim.
2. The first point to observe is that the plaintiffs do not rely on any debt claimed by NAB as part of the insolvent trading claim. Because NAB was a secured creditor, any debt owed to that creditor could not be the subject of an order for compensation under s 588M of the Act unless, and to the extent, NAB surrendered its security or suffered a shortfall in realising its security (neither of which appears to have occurred here). The second point is that even though the externally prepared balance sheet for the 2016 financial year shows stock on hand worth $171,000 (which presumably represents alcohol, food and other consumables), had the company liquidated that stock at that point in time, it would still have a deficit of assets over liabilities and no stock with which to conduct its business and generate cash flow. The third point is that Mr Thompson's allegations about the payment of the NAB loan have not found their way into any affidavit of evidence or a defence. I will return to Mr Thompson's allegations about the NAB loan later in these reasons when I consider the plaintiffs' loan claim.
3. Having regard to s 588G(2) of the Act, and for the same reasons set out above, I consider that a reasonable person in the position of a director of the company would have been aware there were reasonable grounds for suspecting the company was insolvent. In my view, such a suspicion would undoubtedly have gone beyond mere wondering about whether the company was insolvent.
4. I also accept the plaintiffs' contention that Mr Thompson himself was aware there were reasonable grounds for suspecting the company was insolvent or would become insolvent at the time the relevant debts were incurred because Mr Thompson was closely involved in monitoring the financial affairs of the company. In this regard, the available evidence suggests Mr Thompson:

(a) had ongoing correspondence with the company's external accountant in relation to its financial affairs, including its Xero management accounts. Tax invoices from the accountant dated 31 October 2016 and 30 December 2016 suggest the accountant had various calls and email exchanges with Mr Thompson regarding the company's bookkeeping, cash flow and profit and loss statements, payroll, superannuation and wage rates;

(b) made the decision to wind up the company and appoint liquidators in his capacity as the sole member of the company; and

(c) was able to provide in the RATA information about the company's financial position, which he verified to be true. In preparing the RATA, Mr Thompson extracted aged payables from the company's Xero account. The aged payables revealed $95,154 worth of creditor debts older than three months. I reject Mr Thompson's assertion at trial that he did not have access to the Xero account (and the aged payables report) at earlier times throughout the relevant period.[67] There is no evidence to substantiate this claim and it is contradicted by the evidence I have referred to. Similarly, I do not accept the statement by Mr Thompson in one of his emails to the Court of 6 May 2024 that, prior to Mr Saint-John's resignation as a director of the company on 10 July 2017, Mr Saint-John removed the company's records, hard drives and computers from the O&H Hotel premises. There is simply no evidence before the Court to support that allegation.

1. Despite the above matters, Mr Thompson failed to prevent the company from incurring the relevant debts in circumstances where it did not have the capacity to pay those debts.
2. Mr Thompson sought to give the following evidence during the course of his oral submissions about the company's financial circumstances:

[On or around 31 January 2016,] I rang Simon and, ah, ah, said, 'You've - I've said, 'The hotel - we've had six weeks of trading. I think, ah, this - I think the figures that we were supplied at the time of purchase were overstated', um, the company has just made a - created a 70,000 odd dollar loss from what I can see in that six week period, um, and that, ah, I - I said, um, 'Given the medical emergency of my daughter, that I can't run this hotel, ah, and my suggestion is to close the hotel'.

...around about 12 February, ah, 2016, um, I - Simon went down and had a look at the operations of the hotel, um, and ah, basically, um, said to me - he came back, this is in front of my partner, Helen, at the time, ah, the meeting occurred at ... my residence at the time and he said basically, 'I'm going to do you guys a favour. I can see you're stuck with this health crisis, um, and I'll take over the running of this hotel'...

Basically from that date [presumably, 12 February 2016] onwards, I said to Simon, 'I will put some money into the bank account to make it so there's - you know, the payroll can be paid and you've basically got 30 days to come up with a plan that says there's profitability, ah, in continuing to run this hotel, ah, or shut the hotel down'.[68]

1. At another point in the trial, the following exchange with Mr Thompson occurred:

HIS HONOUR: So we'll just go back to the insolvent trading claim, Mr Thompson. The allegation is that from 30 June 2016, the company was insolvent in the sense it couldn't pay its debts as and when they fell due. So what do you specifically say about that allegation?

MR THOMPSON: Okay, well, when I handed the hotel over to Simon, ah, I put about $15,000 of cash into the account, which you've ordered that credit balance.

HIS HONOUR: And you say you handed the hotel over to Simon when he became the director?

MR THOMPSON: No, prior to that.

HIS HONOUR: Prior to.

MR THOMPSON: He dawdled on the direction and I gave instructions to Colin Petrie, who was also the ASIC agent who was also the accountant, ah, to put him on as a director, and I actually said to Simon, I said, 'Do not enter into any more credit agreements without my knowledge and until you're a director of the company'... Now, you need to demonstrate to me that the company is solvent and you need to report that to the company accountant, which was Colin Petrie.

... so I handed him in mid-February a company that had made losses with a creditors - I put enough money into the account to pay out any unpaid creditor, ah and to not operate the company for more than 30 days unless he had a feeling; a business plan that would make the company profitable.[69]

1. Because of the 12 December 2023 self-executing order, Mr Thompson was not permitted to file any such evidence in opposition to the plaintiffs' claims without leave of the Court. No such leave has been sought or given. In light of my decision to refuse Mr Thompson's application to adjourn the trial on the basis he had been afforded a reasonable opportunity to present his case, I do not consider that he should be able to rely on this new evidence now. But even if I am wrong in refusing to admit this new (and unsworn) evidence, I note it would only serve to reinforce my conclusion that Mr Thompson was closely involved in monitoring the financial affairs of the company in early 2016 and was aware there were reasonable grounds for suspecting the company was insolvent at the time the relevant debts were incurred.

1. I turn now to the question of whether Mr Thompson has any defences to the insolvent trading claim. While Mr Thompson did not file any formal defence, he sought to invoke various statutory defences to the claim by way of his emails to the Court dated 6 May 2024 and his oral submissions made during the course of the trial. He bears the onus of proof in respect of those defences, the elements of which must be established on the balance of probabilities.[70]

1. On the basis of those oral submissions and 6 May 2024 emails, I do not understand Mr Thompson to rely on the statutory defence contained in s 588H(2) of the Act. However, even if I am wrong about that, I do not consider that such a defence could be made out on the evidence. To establish that defence, Mr Thompson needs to prove that at the time when each of the relevant debts were incurred, he had reasonable grounds to expect, and did expect, the company was solvent and would remain solvent even if it incurred that debt. In light of the findings I have already made about the existence of reasonable grounds for suspecting the company was insolvent, I do not accept Mr Thompson had an expectation of the company's solvency which was reasonably based.

1. It is clear that Mr Thompson does seek to invoke the statutory defence available under s 588H(3) of the Act. The defence requires proof of the following three elements:

(a) a director had reasonable grounds to believe, and did believe, that a competent and reliable person (the other person) was responsible for providing to the director adequate information about whether the company was solvent;

(b) the director had reasonable grounds to believe, and did believe, that the other person was fulfilling that responsibility; and

(c) the director expected, on the basis of information provided to him or her by the other person, the company was solvent at the time a debt was incurred and would remain solvent despite all its debts incurred at that time.

1. Unfortunately, Mr Thompson did not adduce any evidence to engage the specific elements of the statutory defence under s 588H(3).
2. However, in one of his 6 May 2024 emails to the Court, Mr Thompson said that his reliance on Mr Saint-John as co-director was 'total and the claimed insolvent trading occurred under [Mr Saint-John's] management of the hotel'.[71] Mr Thompson says that '[a]ny claim [he] was running the hotel on a day to day basis ie payroll, stock ordering, instructing staff, counting and banking the cash etc between 1/2/2016 and 10/7/2017 [the period in which Mr Saint-John was said to have run the O&H Hotel] is simply false'.[72] I have already referred to a number of statements made by Mr Thompson concerning the circumstances in which he said he handed over the operation of the O&H Hotel to Mr Saint-John following the illness of Mr Thompson's daughter. He also asserted at trial that Mr Saint-John had supplied him with sales forecasts and stock level reports which were 'indicative of a company that would be profitable within the next 12 months'.[73] In addition, Mr Thompson claimed the relevant debts 'were run up with[out] [his] permission between 15 February 2016 until 10 July 2017'.[74] He further stated at trial that:

... I wasn't on the spot. I wasn't counting the money. I was being supplied false information.[75]

1. I will not allow Mr Thompson's statements at trial concerning Mr Saint-John's operation of the O&H Hotel to now stand as his evidence on that matter. However, even if those statements were admitted as evidence, they would not show that Mr Thompson had reasonable grounds for belief in Mr Saint-John's competence and reliability in providing adequate financial information about the company's solvency. Mr Thompson's statements are also undermined by other statements made by him at trial. In particular, Mr Thompson said the O&H Hotel business operated in a 'climate of fear' and that Mr Saint-John was associated with 'some really dangerous people...who repeatedly threatened [Mr Thompson's] life'.[76] He also informed the Court he had known from at least as early as late 2015 that Mr Saint-John had previously run a real estate agency that 'had gone broke'[77] and that 'every time [he] ask[ed] questions ... of [Mr] Saint-John he would produce another balance sheet ... or another profit and loss statement, or another cash flow forecast that didn't seem ... to be follow-ons from each other'.[78] Even if these statements were also admitted into evidence (to be clear, they are not), they would tend to undermine any finding that Mr Thompson had reasonable grounds to believe, and did believe, that Mr Saint-John was a competent and reliable person who was responsible for providing to Mr Thompson adequate information about whether the company was solvent and that Mr Saint-John was fulfilling that responsibility.
2. Regardless, a director who has failed in their duty to prevent a company from trading whilst insolvent cannot say they simply relied on another director or senior employee to discharge the duty for them.[79] That is because it is a fundamental feature of the Act that directors are expected to participate in the management of a company.[80] Further, a total abdication of the duties of a director in reliance on the conduct of someone else would be inconsistent with the duties imposed on directors by the Act and the applicable case law.[81]
3. I do not consider Mr Thompson is able to invoke the defence found in s 588H(3) of the Act.

1. As previously stated, s 588H(4) of the Act essentially provides that if a person was a director of the company at the time when a debt was incurred, it is a defence if it is proved that because of illness or for some other good reason he or she did not take part at that time in the management of the company. I understand Mr Thompson seeks to rely on this defence on the basis of submissions made by him at trial. Mr Thompson stated that, on or around 31 January 2016, he and his then partner took their daughter to the doctor to receive urgent medical attention.[82] He said his daughter was subsequently admitted to a specialist medical facility for six months. I have already set out Mr Thompson's statements about the alleged arrangement by which Mr Saint-John temporarily took over the operations of the hotel from 1 February 2016 to 10 July 2017.[83] Mr Thompson also sought to introduce oral evidence that from 31 January 2016 to 10 July 2017, he was not responsible for the operations of the O&H Hotel[84] and that the relevant debts were incurred 'with[out] [his] permission'.[85]
2. For the following reasons, Mr Thompson cannot succeed in a defence under s 588H(4) of the Act. First, the submissions and statements he made at trial in support of such a defence do not count as evidence and the time for Mr Thompson to put forward evidence has well and truly passed. Secondly, whether caring for an unwell family member might constitute 'some other good reason' for a director to not take part in the management of a company will ultimately turn on the facts. Here, there is a distinct absence of evidence going to the underlying health conditions of Mr Thompson's daughter, how they manifested at specific points in time throughout the relevant period and how precisely they prevented Mr Thompson from taking part in the management of the company, including to what extent and for what duration. Thirdly, the phrase 'some other good reason' will be read down so it does not conflict with the obligation of directors generally to participate in the management of a company.[86] In the absence of critical evidence to support the defence, I will read the phrase down in this case. Fourthly, the defence under s 588H(4) cannot be engaged if the director actually took part in the management of the company.[87] In concluding that Mr Thompson was aware there were reasonable grounds for suspecting the company was insolvent or would become insolvent at the time the relevant debts were incurred, I set out evidence which suggests Mr Thompson was in fact closely involved in monitoring the financial affairs of the company. Fifthly, even assuming Mr Thompson had total reliance on Mr Saint-John (as a senior employee and then director) to run the affairs of the company during the period from 31 January 2016 to 10 July 2017 (while Mr Thompson's daughter was receiving medical treatment), this would not separately constitute 'some other good reason' so as to engage the defence under s 588H(4).[88] Lastly, if circumstances meant Mr Thompson could not actively participate in the affairs of the company for a significant period of time owing to his daughter's health crisis, the appropriate course would have been for him to resign as a director and to hand over control of the operations of the company to Mr Saint-John upon his appointment as director.

1. As each of the elements of s 588G of the Act have been established by the plaintiffs and no statutory defences have been made out, Mr Thompson has contravened the insolvent trading provision by failing to prevent the company from incurring the relevant debts. Accordingly, he is liable to compensate the company in accordance with s 588M of the Act.[89] The plaintiffs are entitled to judgment against Mr Thompson in the sum of $132,181.43, which is a debt pursuant to s 588M(2) of the Act and an amount equal to the loss or damage suffered by the relevant creditors. Interest will also be awarded on this amount pursuant to statute.

1. I turn now to the loan claim brought by the plaintiffs against Mr Thompson.
2. On 5 February 2016, the bank records for the company's NAB 7301 account show a transfer of $396,000 to a NAB account ending 3009, which the plaintiffs say is Mr Thompson's personal bank account. The transfer is recorded in the trust's externally prepared balance sheet of 30 June 2016 as an asset of the company with the descriptor: 'Loan Brooke Thompson 3' for an amount of $396,000.
3. The plaintiffs submit that the quantum of the loan claim should be reduced by certain offsets representing payments made by Mr Thompson to the company. There are two loan amounts in favour of Mr Thompson recorded in the trust's balance sheet for the 2016 financial year in the amounts of $8,000 and $33,359, respectively. Reconciliations of the loan amount were also undertaken by the liquidator following meetings between Mr Thompson and Mr Leventis, an employee of the liquidator's firm, on 22 August 2019 and 27 August 2019. A full reconciliation of the balance of the loan claim is found in schedule B of the plaintiffs' outline of submissions dated 26 April 2024. According to the evidence of Mr Leventis and the content of his 4 September 2019 file note of the meetings, following the reconciliation exercise, Mr Thompson acknowledged his liability to pay the resulting loan balance of $224,089. The plaintiffs submit Mr Thompson owes the company this sum.
4. However, at the trial Mr Thompson denied liability for the loan claim by linking it to the NAB loan. As best I understand it, his position appears to be as follows:[90]

(a) the borrower of the NAB loan was intended to be Langford Intelligence (a related entity of Wild K9), but Wild K9 was recorded as a borrower due to a clerical error at the bank;

(b) because the company did not have a bank account at the relevant time, the funds from the NAB loan were remitted to a 'treasury' NAB account called 'Brooke Thompson Corporate Profile' and ending in the numbers 3009 ('NAB 3009 account');

(c) the NAB 3009 account was not actually controlled by Mr Thompson and the transaction occurred 'over [his objection] and without [his] knowledge';

(d) at the same time, the paperwork for the NAB loan mandated that it was to first go to Wild K9 and then to the NAB 3009 account to settle a payment to a joint NAB account ending in the numbers 1868;

(e) the funds were then used to facilitate the acquisition of units in the 95 Queen Street Warragul unit trust via Langford Intelligence;

(f) Mr Thompson paid out the NAB loan on or around 15 November 2021 on behalf of the company pursuant to a personal guarantee he had given and is entitled to be subrogated to the rights of NAB; and

(g) the plaintiffs are conveniently ignoring that Mr Thompson has paid out the NAB loan and are instead demanding Mr Thompson effectively pay this money twice by seeking judgment on the loan claim.

1. I find Mr Thompson's arguments to be unpersuasive. His submissions are unsupported by evidence and do not themselves constitute evidence. His submissions are also at odds with the available evidence concerning the loan claim and the NAB loan. For example, contrary to his assertions, the company did have a bank account at the time (the NAB 7301 account) and it received the NAB loan (in the sum of $400,000) into that account on 5 February 2016. On the same day, $396,000 left the NAB 7301 account and was transferred to the NAB 3009 account. In other words, despite Mr Thompson's assertion, the funds did pass through the company's account and did not directly go to the NAB 3009 account. Further, Mr Thomspon's claim that he did not control the NAB 3009 account conflicts with the purported record of his conversations with Mr Leventis on 22 and 27 August 2019 where he allegedly described the NAB 3009 account as his personal bank account and not the company's bank account.
2. More importantly, the $396,000 payment to Mr Thompson is recorded in the trust's externally prepared 2016 financial year balance sheet. Under s 1305(1) of the Act, a book kept by a company under a requirement of the Act is prima facie evidence of any matter stated or recorded in the book. A 'book' is defined in s 9 of the Act to include financial reports or financial records, however compiled, recorded or stored. Further, pursuant to s 286 of the Act, a company must keep written financial records that correctly record and explain its transactions and financial position and performance, and which would enable true and fair financial statements to be prepared and audited. It follows that the 2016 financial year balance sheet is a 'book' kept by Wild K9 under a requirement of the Act and is therefore prima facie evidence of a loan by the company to Mr Thompson in the amount of $396,000. I accept there is sufficient evidence to support the existence of the loan by the company to Mr Thompson.
3. At the trial, counsel for the plaintiffs informed the Court that NAB is no longer a creditor of the company. Whilst that may well be the case, I accept counsel's further submission that there is simply no evidence before the Court that Mr Thompson made any payment to NAB on behalf of the company in discharge of the NAB loan.
4. I also consider that even if Mr Thompson had discharged the NAB loan and was subrogated to the rights of NAB, any subrogated claim likely arose after the company went into liquidation. That is because, according to the liquidators' report to creditors dated 19 December 2017, NAB had advised the liquidators on 20 October 2017 it was a secured creditor in the sum of $605,507. Further, Mr Thompson asserted at trial that he paid out the NAB loan on or around 15 November 2021. The timing of any payment by Mr Thompson of the NAB loan is significant because of the operation of s 553C of the Act.
5. Section 553C of the Act states:

(1) Subject to subsection (2), where there have been mutual credits, mutual debts or other mutual dealings between an insolvent company that is being wound up and a person who wants to have a debt or claim admitted against the company:

(a) an account is to be taken of what is due from the one party to the other in respect of those mutual dealings; and

(b) the sum due from the one party is to be set off against any sum due from the other party; and

(c) only the balance of the account is admissible to proof against the company, or is payable to the company, as the case may be.

(2) A person is not entitled under this section to claim the benefit of a set - off if, at the time of giving credit to the company, or at the time of receiving credit from the company, the person had notice of the fact that the company was insolvent.

1. Assuming Mr Thompson paid the NAB loan after the commencement of the company's liquidation, pursuant to s 553C(2) of the Act, Mr Thompson would not be able to claim the benefit of a set-off against the loan claim under s 553C(1) because he would have clearly had notice of the company's insolvency by the time of any payment.
2. However, given the loan claim relates to a transaction made more than six years prior to the commencement of the proceeding, the question arises as to whether the Court should consider the application of a limitation period to the loan claim.[91] At the conclusion of the trial I required the parties to file and serve short supplementary submissions on the question.
3. The plaintiffs submit the Court should not consider any potential limitation period applicable to the loan claim for the following reasons:

(a) any limitation period imposed by the Limitation of Actions Act 1958 (Vic) ('LAA') generally bars a plaintiffs' remedy but does not actually extinguish the plaintiffs' rights.[92] For this reason, a defendant must specifically plead the running of the limitation period by way of defence[93] or the issue will not arise.[94] A failure to do so is fatal to a defendant's ability to later invoke the statute of limitations;[95]

(b) rule 13.07(1) of the Rules states:

A party shall, in any pleading subsequent to a statement of claim, plead specifically any fact or matter which -

(a) the party alleges makes any claim or defence of the opposite party not maintainable; or

(b) if not pleaded specifically, might take the opposite party by surprise; or

(c) raises questions of fact not arising out of the preceding pleading.

Further, r 13.02(1)(b) of the Rules requires that, where a defence arises by or under any Act, the pleading must identify the specific provision relied on;

(c) Mr Thompson has not pleaded a limitations defence in accordance with rr 13.02(1)(b) and 13.07(1), let alone filed any defence in the proceeding. Accordingly, he cannot now rely on any defence under the LAA;

(d) despite Mr Thompson having the burden of proving a limitation defence,[96] he has not led evidence or made any submissions to discharge that burden;

(e) the Court should not consider the limitation provision on its own motion;[97] and

(f) any consideration of a potential limitation period in relation to the loan claim at this stage of the proceeding would be unfairly prejudicial to the plaintiffs. Had Mr Thompson pleaded a limitation defence when he was required to do so, the plaintiffs would have had an opportunity to consider their case in reply including the effect of any acknowledgment and/or part-payment of the loan by Mr Thompson (see s 24(3) of the LAA).

1. I accept the plaintiffs' comprehensive submissions on this issue. Although Mr Thompson in his supplementary submissions dated 30 May 2024 suggests 'the defence of "limitations"... [was] discussed and reported' with the liquidator's officers 'during the administration more than once', there is no evidence of this. Regardless, it does not change the fact that Mr Thompson has not formally pleaded the issue by way of a defence.
2. It follows that the company is entitled to recover from Mr Thompson the sum of $224,089, together with statutory interest, on account of his indebtedness to the company.
3. In the alternative to the loan claim, the plaintiffs claim Mr Thompson is liable to pay the sum of $224,089 for monies had and received. In oral submissions, counsel for the plaintiffs suggested there had been a total failure of consideration which was the relevant 'unjust factor' to support this restitutionary claim. However, as the plaintiffs have succeeded on the loan claim, it is not necessary to consider this alternative claim any further.

1. In light of the above findings, the plaintiffs are entitled to judgment against Mr Thompson for contravention of s 588G of the Act in the sum of $132,181.43, which is a debt pursuant to s 588M, together with statutory interest. The plaintiffs are also entitled to recover from Mr Thompson the sum of $224,089, as an outstanding loan, together with statutory interest. I will ask the parties to address the Court on the formulation of orders to give effect to these reasons, including on the question of costs.

1. At the time of the delivery of these reasons, Mr Thompson made an oral application to stay or defer delivery of these reasons for up to 60 days so he could make a formal application to re-open the case. That application was refused. Mr Thompson then made an oral application to re-open the case supported by short submissions and an email sent to the Court earlier in the day. That application was also refused. My reasons for refusing Mr Thompson's oral applications were given ex tempore and are recorded in the transcript of the hearing.

JASON GLENN STONE in his capacity as Liquidator of WILD K9 PTY LTD (ACN 608 471 503)

[1] Initially, the claim was for $454,899.20, however, as a result of a number of concessions by the liquidator, the quantum of the claim underwent a number of revisions throughout the proceeding, including a reduction on the day of the trial from $161,014.47 to $132,553. The final reconciliation of debts the subject of the insolvent trading claim are set out in an updated schedule A of debts which was tendered at trial and marked as exhibit 'MFI-1A'.

[2] Yang v Finder Earth Pty Ltd [2019] VSCA 22 at [24] (Maxwell P, Tate and Emerton JJA).

[3] Re Wild K9 Pty Ltd (Supreme Court of Victoria, S ECI 2023 01592, Hetyey AsJ, ruling on 9 May 2024) ('ruling on adjournment application').

[5] (2009) 239 CLR 175; [2009] HCA 27.

[6] Ibid 9 (French CJ); 53 (Gummow, Hayne, Crennan, Kiefel and Bell JJ).

[8] Ruling on adjournment application 25.

[9] Re Wild K9 Pty Ltd (in liq) (Supreme Court of Victoria, S ECI 2023 01592, Hetyey AsJ, 9 May 2024) ('transcript of proceedings' or 'transcript') 27.

[11] Although now see the postscript to these reasons.

[12] [2020] VSC 346.

[13] Ibid [8]-[9] (emphasis added). This summary was approved by the Court of Appeal in Daher v Bell [2021] VSCA 192, [13] (Kryou, Kaye and Kennedy JJA). See also Brazel v State of Victoria [2024] VSCA 327 at [89] (Kaye JA); Biddle v Miele Australia Pty Ltd [2025] VSC 146 (O'Meara J) at [67]-[79].

[14] [2018] VSCA 215; (2018) 57 VR 334.

[15] Ibid 356 (Maxwell P, Beach and Niall JJA).

[17] [2012] WASCA 96.

[18] Ibid [109] (Mazza JA, with Martin CJ and Buss JA agreeing). See also Samuel Tessa v The King [2024] VSCA 204 [176] (Boyce, Orr and T Forrest JJA).

[19] Tendered at trial and marked 'MFI-3'.

[20] Tendered at trial and marked 'MFI-4'.

[21] The updated schedule was subsequently marked 'MFI-1A'.

[22] Smith v Bone [2015] FCA 319; (2015) 104 ACSR 528, 581; [2015] FCA 319 (Gleeson J); Australian Securities and Investments Commission v Plymin [2003] VSC 123; (2003) 175 FLR 124, 224-225; [2003] VSC 123 (Mandie J) ('Plymin'); Quin v Vlahos [2021] VSCA 205 [216] (Kyrous, Kennedy and Walker JJA) ('Quin v Vlahos').

[23] Re Overgold Pty Ltd [2019] VSC 624 [30] (Gardiner AsJ) ('Re Overgold'), citing the authors in Farid Assaf, Brett Shields and Hilary Kincaid, Voidable Transactions in Company Insolvency (LexisNexis Butterworths, 2015) [10.46] ('Voidable Transactions in Company Insolvency').

[24] Voidable Transactions in Company Insolvency [10.49].

[26] Ibid [10.46], citing Powell v Fryer [2001] SASC 59; (2001) 159 FLR 433, 446 (Olsson J, with Duggan and Williams JJ agreeing) ('Powell v Fryer'); Kenna & Brown Pty Ltd (in liq) v Kenna [1999] NSWSC 533; (1999) 32 ACSR 430, 444 (Bergin J); Re McLellan; The Stake Man Pty Ltd v Carroll [2009] FCA 1415; (2009) 76 ACSR 67, 96-97 (Goldberg J). See also Quin v Vlahos [216].

[27] Elliott v Australian Securities and Investments Commission [2004] VSCA 54; (2004) 10 VR 369, 402 (Warren CJ, Charles JA and O'Bryan AJA).

[28] Playspace Playground Pty Ltd v Osborne [2009] FCA 1486 [43] (Reeves J). See also Commonwealth Bank v Friedrich (1991) 5 ACSR 115, 124 (Tadgell J); Voidable Transactions in Company Insolvency [10.56].

[29] Stoland Pty Ltd v Thurn (1997) 29 ACSR 280, 287 (Lehane J) ('Stoland v Thurn'); Quin v Vlahos [216].

[30] Stoland v Thurn 287; Powell v Fryer 446; Quin v Vlahos [216].

[31] See the meaning of 'key time' at s 588H(1)(a) of the Corporations Act 2001 (Cth) ('Act').

[32] Tourprint International Pty Ltd (in liq) v Bott [1999] NSWSC 581; (1999) 32 ACSR 201, 215 (Austin J).

[35] See Commissioner of State Taxation (WA) v Pollock (1993) 12 ACSR 217, 229-30 (Ipp J, with Pidgeon and Wallwork JJ agreeing) ('Pollock'); Sutherland v Liquor Administration Board (1997) 24 ACSR 176, 179; Sands & McDougall Wholesale Pty Ltd (In liq) v Commissioner of Taxation (Cth) [1998] VSCA 76; (1999) 1 VR 489, 504 (Charles JA, with Brooking and Kenny JJA agreeing) ('Sands & McDougall Wholesale v Commissioner of Taxation (Cth)'); Powell v Fryer 443; Walsh Engineering Services Pty Ltd (in liq) v Walsh Group (Aust) Pty Ltd [2021] VSC 206 [38] (Hetyey AsJ).

[36] Pollock 224 (Ipp J); Re Overgold [12]-[16] (Gardiner AsJ); Yeo v Sklenovski [2020] FCA 1540 [28] (Anderson J) ('Yeo v Sklenovski').

[37] See Powell v Fryer 443-444 (Olsson J, with Duggan and Williams JJ agreeing); Sands & McDougall Wholesale v Commissioner of Taxation (Cth) 504-505 (Charles JA, with Brooking and Kenny JJA agreeing); Rambaldi v Rice Bar Restaurant Pty Ltd [2018] VSC 218 [32]-[33] (Gardiner AsJ); Re Melbournehomes.com Pty Ltd (in liq) [2020] VSC 854; (2020) 356 FLR 390, 403 (Hetyey AsJ) ('Re Melbournehomes.com').

[46] [2006] VSC 338; (2006) 58 ACSR 631, 651-652 ('Crema v Land Mark Property').

[47] [1999] FCA 728.

[49] Quick v Stoland Pty Ltd [1998] FCA 1200; (1998) 87 FCR 371, 380 (Emmett J); Quin v Vlahos [45].

[50] See Southern Cross Interiors Pty Ltd v Deputy Commissioner of Taxation [2001] NSWSC 621; (2001) 188 ALR 114, 124 (Palmer J); Australian Beverage Distributors v The Redrock Co [2008] NSWSC 3 [146]-[156] (Austin J); Queensland Phosphate Pty Ltd v Korda [No 2] [2019] VSCA 215 [99]-[100] (Kyrou, McLeish, Niall JJ) ('Queensland Phosphate').

[51] Edwards v Attorney General [2004] NSWCA 272; (2004) 60 NSWLR 667, 679 (Spigelman CJ) ('Edwards v Attorney General'); New Cap Reinsurance Corporation Ltd (in liq) v A E Grant (2008) ACSR 176, 194 (White J); Fitzgerald v CBL Insurance Ltd [2014] VSC 493 [100] (Sloss J); Re Legend International Holdings Inc (in liq) [2018] VSC 789 [142] (Randall AsJ); Re Rococo Group Pty Ltd (in liq) [2022] VSC 167 [85] (Hetyey AsJ) ('Re Rococo'). See also Expo International Pty Ltd (in liq) v Chant [1979] 2 NSWLR 820, 838-839 (Needham J). A contingent debt exists where a debtor has a legal obligation to pay a sum of money in the future that is contingent on certain events occurring (that may or may not occur) (see Michael Murray and Jason Harris, Keay's Insolvency: Personal and Corporate Law and Practice (Thomson Reuters, 11th ed, 2022) [1.75]; Community Development Pty Ltd v Engwirda Construction Co [1969] HCA 47; (1969) 120 CLR 455, 459 (Kitto J, with Barwick CJ and Windeyer J agreeing); Re Melbournehomes.com, 413), whereas a prospective debt is not immediately payable but will become due on a future date which is presently determined or will be determined by reference to future events (Voidable Transactions in Company Insolvency [2.20], citing Edwards v Attorney General 679; Stonegate Securities Ltd v Gregory [1980] Ch 576; [1980] 1 All ER 241, 244; Re Simionato Holdings Pty Ltd; Commissioner of Taxation v Simionato Holdings Pty Ltd [1997] FCA 125; (1997) 15 ACLC 477 (Mansfield J)).

[53] See decision of Perram J in Morris v Danoz Directions Pty Ltd (in Liq) (No 2) [2010] FCA 836 [13].

[54] [2008] FCA 1801; (2008) 68 ACSR 493, 492.

[55] Lewis v Doran [2004] NSWSC 608; (2004) 208 ALR 385, 408-409 (Palmer J), approved by the New South Wales Court of Appeal in Lewis (as liq of Doran Constructions Pty Ltd (in liq)) v Doran [2005] NSWCA 243; (2005) 219 ALR 555, 579. See also Stone v Melrose Cranes & Rigging Pty Ltd (in liq) (No 2) [2018] FCA 530 [146] (Marcovic J).

[61] For the latter time periods, the liquidator made an adjustment to the company's management accounts by treating an overdraft debt facility owed to the National Australia Bank as a current liability, rather than a non-current liability on the basis it was due and payable at the relevant dates.

[63] See Yeo v Sklenovski [35], [37]; Ashala Model Agency Pty Ltd (in liq) v Featherstone [2016] QSC 121; [2017] 2 Qd R 1 [81], [91] (undisturbed on appeal in Featherstone v Ashala Model Agency Pty Ltd (in liq) [2017] QCA 260 [21] (Sofronoff P), [114] (Morrison JA), [200] (McMurdo JA)).

[66] Ibid 11, 98-102, 112-113; 6 May 2024 email to the Court from Mr Thompson.

[70] Metropolitan Fire Systems Pty Ltd v Miller (1997) 23 ACSR 699 (Einfield J).

[71] 6 May 2024 email to the Court from Mr Thompson.

[79] See Metal Manufacturers Ltd v Lewis (1988) 13 NSWLR 315, 318-319 (Kirby P in his Honour's dissenting judgment).

[80] Deputy Commissioner of Taxation v Clark [2003] NSWCA 91; (2003) 57 NSWLR 113, 141 (Spigelman CJ, with Handley and Hodgson JA agreeing) ('DCOT v Clark').

[87] Williams (as liquidator of Scholz Motor Group Pty Ltd (in liq) v Scholz [2008] QCA 94 [36] (Keane JA, as his Honour then was, with Muir JA and Mackenzie AJA agreeing); Quin v Vlahos [263].

[89] Although the plaintiffs also sought an order for compensation payable to the company under s 1317H of the Act in respect of a breach of s 588G(2) (which is a civil penalty provision), this alternative relief did not appear to be pressed at trial. Further because s 588M provides a specific remedy for the contravention of s 588G(2) of the Act, it does not appear that an order under s 1317H is also necessary.

[90] Transcript 4-7, 11, 98-102, 112-113; 6 May 2024 email to the Court from Mr Thompson.

[91] See s 5 of the Limitation of Actions Act 1958 (Vic) concerning the limitation period for the bringing of an action founded on simple contract (such as a debt claim).

[92] Peter Handford, Limitation of Actions - The Laws of Australia (Thomas Reuters, 4th ed, 2017) [5.10.2530] ('Limitation of Actions - The Laws of Australia'); LexisNexis, Halsbury's Laws of Australia (online at 13 May 2024) 255 Limitations of Actions, 'The Effect of the Expiry of a Limitation Period' [255-265].

[93] Citing Pullen v Gutteridge, Haskins & Davey Pty Ltd [1993] VicRp 4; [1993] 1 VR 27, 76 (Brooking, Tadgell and Hayne JJ) ('Pullen'); Baker v Culvenor [2019] VSC 224 [34] (Ginnane J); Cigna Insurance Asia Pacific Ltd v Packer [2000] WASCA 415; (2000) 23 WAR 159, 171 (Malcolm CJ, with Kennedy J agreeing); Gill v Ethicon Sarl (No 5) [2019] FCA 1905 [4601] (Katzmann J); Hamling v Australia Meat Holdings Pty Ltd [2005] QCA 415; [2006] 2 Qd R 235 [38] (Jerrard and Keane JJA and Douglas J); Price v Spoor [2021] HCA 20; (2021) 270 CLR 450, 482 (Steward J) ('Price v Spoor').

[97] Citing James v Australia & New Zealand Banking Group Ltd [1986] FCA 41; (1986) 64 ALR 347, 396 (Toohey J); citing Limitation of Actions - The Laws of Australia [5.10.2530].