(i) when did Mr Tyson know, or ought he to have known, that the bankruptcy in question was a possibility?
- It is common ground that Mr Tyson's bankruptcy occurred as a result of personal guarantees he had provided to Holmwood. Accordingly, it was clear that once Mr Tyson became aware of the financial difficulties facing Holmwood, he should have been aware of the possibility of his own financial difficulties, in light of the personal guarantees he had given the company and in light of the loan his wife had given to the company of $1 300 000, which had been secured over the couple's family home.
- Mr Tyson's evidence is that he only realised that the company might have to go into liquidation in September or October 2012, when he became aware of his tradesmen not being paid or being paid sporadically.
- As a director of a company, however, Mr Tyson has a duty of care and diligence in accordance with section 180 of the Corporations Act 2001. This includes being informed of the actual financial affairs of their company, including its solvency. It is a duty that is not diminished by delegating responsibility, and directors are unable to hide behind ignorance of the company's affairs, where that ignorance is of their own making. Statewide Tobacco Services Ltd v Morley (1990) 2 ACSR 405.
- If Mr Tyson had showed the due diligence required of him as a director of the company, he would have ensured that he was aware of the company's financial records. Had he checked the financial records he would have discovered, as the liquidator later did, that the company was already in financial difficulties in November 2011. Had he checked the records, Mr Tyson would have found that the company's liquidity rates were below 1 for the financial years ending 30 June 2011, 30 June 2012, and for the period 1 July 2012 to 13 November 2012. He would also have discovered the high balance of monies owed to creditors in excess of ninety days. Similarly, he would have been aware of the company's overdue Commonwealth and State taxes to an amount of $217 354.11.
- His explanation to the Tribunal that he simply 'did not have access to the database or the MYOB package or the bank accounts' is not sufficient.
- Furthermore, Mr Tyson's acknowledgement in the Report by Director or Officer as to the Affairs of Holmwood Builders Pty Ltd dated 3 December 2012 that he had failed to take steps to ensure that the books and records were properly kept and to satisfy himself that the balance sheets and profit and loss accounts were correct is further proof that he had not shown the due diligence required of a director of a company.
- Mr Tyson has stated that he now believes that there were two sets of financial records being kept for the company. As no evidence of this has been placed before me, I can give only limited weight to Mr Tyson's assertion in this regard.
- Because of his failure to show due diligence as a director, Mr Tyson remained unaware of the financial difficulties of the company as a time when he should have been aware of them.
- On this basis, I find that had Mr Tyson performed his duties with due diligence as required by a director, he would have been aware of the financial difficulties faced by the company, and the consequential possibility of his own bankruptcy, well before October 2012.