Potentia3 Pty Ltd (in Liquidation) v Hislop

Potentia3 Pty Ltd, in liquidation, sought a determination from the court regarding the repayment of a loan to the defendant, Hislop. The central issue was whether the loan, as recorded in the company’s books, constituted a director’s loan or a salary payment. The case was heard in the Federal Circuit Court of Australia.

The court was tasked with determining the true nature of the loan. The liquidator argued that the loan was a salary payment, whereas the defendant maintained it was a legitimate director’s loan. The court examined the evidence provided by both parties, including the company’s books, which recorded the transaction as a loan. The court noted that there was no evidence to support that Hislop was an employee of the company at the time the alleged salary was paid.

The court concluded that the entries in the company’s books were not sufficient evidence to recharacterise the loan as a salary payment. The absence of any evidence of an employment relationship between the company and Hislop meant that the loan could not be considered as salary. The court ordered Hislop to repay the loan to the liquidator, as it was found to be a director’s loan rather than a salary payment. The liquidator was directed to take steps to recover the debt from Hislop.