[23] As correctly submitted by the applicants, in order to establish an entitlement to the relief sought, the statement of claim must plead the following:
- (a) that the respondent was a director of W2R when it incurred the relevant debts;
- (b) that W2R was insolvent at the time it incurred the relevant debts;
- (c) that at the time the relevant debts were incurred, there were reasonable grounds for suspecting that W2R was insolvent; and
- (d) that the respondent failed, in breach of s 588G(2), to prevent W2R from incurring the relevant debts, in circumstances where the respondent was aware that W2R was insolvent or that there were grounds for so suspecting.[10]
[24] The material facts pleaded in the statement of claim satisfy each of these four requirements, entitling the applicants to the relief sought. The debts of W2R for which the respondent is sought to be made liable are debts that were incurred between 1 December 2018 and 18 June 2019. Paragraph 3 of the statement of claim pleads that the respondent was the sole director of W2R from 7 February 2011 and remained the sole director through to at least the date of the filing of the statement of claim, 20 November 2019. Paragraph 12 expressly pleads that the respondent was a director of W2R when it incurred the debts between 1 December 2018 and 18 June 2019.
[25] As to the second requirement, namely that W2R was insolvent, s 95A(1) of the Corporations Act states that a person is solvent if, and only if, the person is able to pay all the person's debts, as and when they become due and payable. Section 95A(2) provides that a person who is not solvent is insolvent. Paragraph 6 of the statement of claim pleads that from at least 1 December 2018 until 18 June 2019, W2R was insolvent (within the meaning of s 95A of the Corporations Act) in that it was unable to pay its debts as and when they fell due during that period. Paragraph 7 pleads the reasons that W2R was insolvent during the relevant period. Ten specific reasons are identified and include the fact that W2R recorded net continuing losses from at least August 2018; its working capital was insufficient to meet all of its current liabilities from at least December 2018; it had outstanding Commonwealth and State taxes due and payable; the Commissioner of Taxation had issued a statutory garnishee notice on the company's ANZ bank account for unpaid taxation liabilities; and the company had entered into special instalment arrangements with some creditors, including the Commissioner of Taxation, which it did not comply with. Paragraph 12(b) expressly pleads that at the time W2R incurred the relevant debts, it was insolvent.
[26] As to the third requirement that there were reasonable grounds for suspecting that W2R was insolvent, the material facts pleaded in paragraphs 6 to 12(c) of the statement of claim establish a sufficient basis for there being reasonable grounds for suspecting that W2R was insolvent. As the sole director, the respondent was in a position to know or ought to have known the facts pleaded in paragraphs 6 and 7 of the statement of claim.
[27] As to the fourth requirement, paragraph 13 of the statement of claim pleads that in breach of s 588G of the Corporations Act, the respondent failed to prevent W2R from incurring each of the relevant debts when it was insolvent. The debts incurred by W2R for the period 1 December 2018 to 18 June 2019 are pleaded in paragraphs 8 to 10 of the statement of claim. The relevant debts consist of $198,490.04 described as "Tax Debts" which remain unpaid to the Commonwealth of Australia and payable to the Commissioner of Taxation. A further amount of $107,518.13 described in the pleading as "Priority Creditor Debts" are debts incurred to priority creditors that fell due and payable and which remain unpaid. The third category of debts is "Trade Creditor Debts" in the amount of $6,801,101.32. Paragraph 10 of the statement of claim provides particulars of the trade creditor's name, the amounts of the debt due and owing by W2R and the dates during which the said debts were incurred. Paragraph 11 pleads that all of the Tax Debts, Priority Creditor Debts and the Trade Creditor Debts incurred by W2R were wholly unsecured.
[28] Paragraph 14 of the statement of claim pleads that as at the date of filing the claim, there are not sufficient funds available in the liquidation of W2R to be able to pay any dividend to the unsecured creditors. In the result, the unsecured creditors of W2R have suffered loss and damage in the sum of $7,107,109.49. This amount was demanded by the first applicants from the respondent by letter dated 10 October 2019. No part of this amount has been paid by the respondent.
[29] Based on the deemed admissions of the material facts pleaded in the statement of claim, I am satisfied that the respondent has failed to prevent the relevant debts being incurred by W2R in contravention of s 588G(2) of the Corporations Act in the sum of $7,107,109.49. It is appropriate to make a declaration in those terms, together with an order pursuant to s 588M that the respondent pay the applicants the amount of the loss by way of compensation in the sum of $7,107,109.49.
[30] The applicants seek interest on that amount pursuant to s 58 of the Civil Proceedings Act 2011 (Qld). The applicants have calculated the amount of interest pursuant to Practice Direction No 7 of 2013 to the date of the filing of the application, which is 27 March 2020. Paragraph 19 of the statement of claim seeks interest from 24 September 2019 (being the date of the winding up of W2R when the cause of action arose) until the date of judgment, at the rate of four per cent above the Reserve Bank of Australia cash rate. I have calculated interest to the date of judgment on this basis.