Maurice & Barry (No 2)

Maurice & Barry Pty Ltd (in liq) (the applicant) sought orders against Barry and Maurice (the respondents) in the Supreme Court of Victoria. The dispute concerned the respondents' alleged breaches of their duties as directors of the applicant company, which had been placed into liquidation. Specifically, the applicant alleged that the respondents had engaged in conduct that amounted to insolvent trading and had failed to exercise due care and diligence in their roles.

The central legal issues before the Court were whether the respondents had breached their statutory duties under the *Corporations Act 2001* (Cth) by continuing to incur debts when they were aware, or ought to have been aware, that the company was insolvent or would become insolvent. The Court was also required to determine whether the respondents had failed to exercise their powers and discharge their duties with the degree of care and diligence required of a reasonable director in their position.

In his judgment, Carew J applied the principles established in *ASIC v Plymin* and *ASIC v Adler* regarding the standard of care and diligence expected of directors. His Honour found that the respondents had failed to take reasonable steps to ascertain the company's financial position and had continued to incur debts without a reasonable basis for believing the company would be able to pay them. The evidence demonstrated a lack of proper financial oversight and a failure to obtain adequate professional advice, leading to the conclusion that the respondents had breached their statutory duties.