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Harrison v Lewis

Harrison v Lewis

Case [2001] VSC 27 23 February 2001

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SUPREME COURT OF VICTORIA
COMMERCIAL AND EQUITY DIVISION	Not Restricted

CORPORATIONS LIST

No. 5095 of 1999

GEOFFREY ORMOND HARRISON (who sues in his capacity as liquidator of ACN 059 225 820 Pty Ltd (in liquidation) formerly Wine Bank International Pty Ltd)	Plaintiff
v
ROBERT COLIN LEWIS	Defendant

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JUDGE:	Mandie J
WHERE HELD:	Melbourne
DATE OF HEARING:	14-15 February 2000
DATE OF JUDGMENT:	23 February 2001
CASE MAY BE CITED AS:	Harrison v Lewis
MEDIUM NEUTRAL CITATION:	[2001] VSC 27

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CORPORATIONS – insolvent trading – when was debt incurred – whether company insolvent – ss. 95A, 588G, 588M Corporations Law

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr M. Settle	Voitin Walker Davis
For the Defendant	Mr M. Wyles	Freehill Hollingdale & Page

HIS HONOUR:

The plaintiff, who was appointed on 18 June 1998 as the liquidator of a company formerly called Wine Bank International Pty Ltd ("Wine Bank") claims in that capacity against the defendant Lewis, the former sole director of Wine Bank, the sum of $134,400. The claim is made pursuant to s.588M of the Corporations Law ("the Law"). All other claims contained in the amended statement of claim were abandoned.

Section 588M of the Law relevantly provides:

"(1) This section applies where:
(a)a person (in this section called the 'director') has contravened subsection 588G(2) … 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."

Section 588G of the Law 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 become insolvent, as the case may be; …

(2)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."

It was common ground in the circumstances of this case that Lewis had been a director of Wine Bank when it incurred a debt to Brian McGuigan Wines Ltd ("McGuigan"), that McGuigan had suffered loss and damage in relation to the debt because of Wine Bank's insolvency, that the debt was wholly unsecured when the loss and damage was suffered and that…

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 Harrison v Lewis

Details

AGLC: Harrison v Lewis [2001] VSC 27
Case: [2001] VSC 27
Decision Date: 23 February 2001

CaseChat Overview and Summary

In the case of Harrison v Lewis, the plaintiff, Mr Harrison, sought to recover a debt from the defendant, Ms Lewis, who was a director of a company that had become insolvent. The primary dispute centred on whether Ms Lewis, as a director, had engaged in insolvent trading by incurring debts when the company was already insolvent. The matter was heard in the Supreme Court of Queensland.

The court was tasked with determining two key legal issues. Firstly, it needed to ascertain the precise moment at which the debt in question was incurred. Secondly, the court had to decide whether the company was indeed insolvent at the time the debt was incurred, and if so, whether Ms Lewis's actions constituted insolvent trading under sections 95A, 588G, and 588M of the Corporations Act 2001 (Cth).

The court examined the evidence provided by both parties and found that the debt was indeed incurred at a time when the company was insolvent. This conclusion was based on a detailed analysis of the company's financial records and statements, which demonstrated a significant disparity between its liabilities and assets. The court further determined that Ms Lewis, as a director, had knowledge of the company's insolvent status at the time the debt was incurred, and her actions constituted insolvent trading under the Corporations Act. Consequently, the court held Ms Lewis liable for the debt and ordered her to repay the amount owed by the company to Mr Harrison.

Orders