Gram Engineering Pty Ltd.

In the matter of *Gram Engineering Pty Ltd* [2023] NSWSC 1189, the Supreme Court of New South Wales was asked to determine whether a director of a company, Ms. Bianca Irgang, had breached her statutory duties under the *Corporations Act 2001* (Cth) by failing to prevent the company from incurring debts when it was insolvent or likely to become insolvent. The dispute arose from allegations that Ms. Irgang had allowed Gram Engineering Pty Ltd to continue trading and incur significant debts despite her knowledge of the company's precarious financial position.

The central legal issue before the Court was whether Ms. Irgang had breached section 588G of the *Corporations Act 2001* (Cth), which imposes a duty on directors to prevent a company from incurring debts if there are reasonable grounds to suspect that the company is insolvent or would become insolvent by incurring the debt, and if the director has reasonable grounds to suspect that the company is insolvent or would become insolvent. The Court was required to assess the evidence regarding Ms. Irgang's knowledge of the company's financial state and her actions, or inactions, in the period leading up to the company's eventual insolvency.

Justice Black of the Supreme Court of New South Wales found that Ms. Irgang had indeed breached her statutory duty under section 588G. Her Honour reasoned that Ms. Irgang possessed sufficient knowledge of the company's financial difficulties, including its inability to meet its financial obligations as they fell due, to trigger the application of section 588G. The Court applied the principles established in case law concerning the objective test for reasonable grounds for suspicion and the director's actual knowledge, concluding that Ms. Irgang failed to take reasonable steps to prevent the company from incurring further debts when it was insolvent.

Consequently, the Court made orders against Ms. Irgang, holding her personally liable for the debts incurred by Gram Engineering Pty Ltd during the period of her breach.