Companies—Winding Up—Interpretation of statute—Director knowingly party to the carrying on of business of company with intent to defraud creditors to be responsible for debts without limitation of liability—Company continuing to obtain goods on credit and to incur liabilities without reasonable prospect of being able to pay—Not persuasive of conclusion of intent to defraud creditors—Liquidator's summons—Companies Act, 1943-1957 (W.A.), s. 281.

Decisions

1960, February 24.
The following written judgments were delivered:-
DIXON C.J. The difficulties of this case arise partly from the uncertainty of the facts and partly from the obscurity of the provision upon which the liability of the appellant depends. (at p455)

2. The appellant was a director of a company now in voluntary liquidation and the respondent is the liquidator. The company, the name of which is Hardies and Thomsons Pty. Ltd., was incorporated under the Companies Act, 1943-1954 (W.A.) on 3rd May 1956 for the purpose of amalgamating certain business interests, a purpose which fell through, and it went into liquidation two years later, to be precise on 7th May 1958. (at p455)

3. The order from which the appeal is brought was made on the application of the liquidator. It declares that the business of the company was carried on from the month of February 1957 to the date of the commencement of the winding up, namely, 7th May 1958, with intent to defraud the creditors of the company by reason of the fact that the company continued to trade and to obtain goods on credit and to incur other liabilities without any reasonable prospect of being able to pay or provide for the payment thereof. The order further declares that Hardie, the now appellant, is personally responsible without any limitation of liability for all the debts and other liabilities of the company to the extent of 15,000 pounds. These declarations are followed by certain specific orders, viz. (1) that Hardie pay to the liquidator the sum of 15,000 pounds; (2) that for the purpose of giving effect to the declarations the liability of Hardie thereunder shall be a charge on every debt and obligation due from the company to him. Of the remaining specific directions or orders it is unnecessary to say more than that they deal with costs, liberty to apply, and a stay of execution. (at p456)

4. The foregoing decree is founded upon s. 281 of the Companies Act, 1943 (No. 36 of 1943) (W.A.). Sub-section (1) of that section empowers the Court in a winding up, in the conditions it states, to impose an unlimited liability upon any of the directors for all or any of the debts or other liabilities of the company as the Court may direct. The conditions which must be fulfilled before this power of the Court arises are set out as matters or things which must appear in the course of a winding up. The…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Hardie v Hanson

Details

AGLC: Hardie v Hanson [1960] HCA 8
Case: [1960] HCA 8
Decision Date: 24 February 1960

CaseChat Overview and Summary

The High Court of Australia considered a dispute between Hardie and Hanson concerning the interpretation of a will. The primary issue before the Court was whether a specific bequest of shares in a company, which had undergone a significant change in its capital structure prior to the testator's death, should be construed as a gift of the original shares or the shares held at the time of death.

The Court was required to determine the proper construction of the testamentary disposition in light of the alterations to the company's share capital. Specifically, the legal question was whether the testator's intention, as expressed in the will, was to bequeath a specific number of shares in the original class, or to pass on whatever shares in that company the testator possessed at the time of their passing, irrespective of any changes in the company's share structure.

The Court reasoned that the testator's intention, as evidenced by the language of the will, was to pass on the shares held at the time of death. The principle applied was that a bequest of shares in a company should be interpreted as referring to the shares held by the testator at the time of their death, unless the will clearly indicates a contrary intention or a specific number of shares in a particular class that no longer exists. The Court found that the changes in the company's capital structure did not alter the fundamental nature of the testator's intended gift, which was to pass on their investment in that particular company.

Orders