Re Melbournehomes.com Pty Ltd (in liq)

Melbournehomes.com Pty Ltd, a company in liquidation, was the subject of proceedings in the Supreme Court of Victoria. The dispute involved the liquidator's claim against the company's directors under section 588G of the Corporations Act 2001 (Cth), which pertains to insolvent trading. The liquidator sought to hold the directors liable for incurring debts while the company was insolvent. The central issues included determining the point at which the debts for overdue franchise fees were incurred, whether the claim for future franchise fees constituted a debt or an unliquidated claim in damages, and whether the directors had reasonable grounds to suspect insolvency and were therefore aware of it.

The court considered whether the debts for overdue franchise fees were incurred at the time the franchise agreement was entered into or at a later date. It was established that the debts were incurred at the time of the agreement. The court also examined whether the claim for future franchise fees after the termination of the franchise agreement constituted a debt or an unliquidated claim in damages. It was concluded that such a claim was an unliquidated claim in damages. The court further assessed whether the company's failure to keep financial records triggered the presumption of insolvency under section 588E(4)(a). It was determined that this failure did indeed trigger the presumption of insolvency.

The court found that the directors had reasonable grounds to suspect insolvency, as evidenced by the company's failure to keep financial records and its inability to meet its financial obligations. The court held that a reasonable person in the position of the directors would have suspected insolvency. It was also established that the directors were aware of the grounds to suspect insolvency. The court examined the statutory defence available under section 588H(2) and concluded that the directors did not have reasonable grounds to expect solvency. The court found the directors liable under section 588G for incurring debts while the company was insolvent. The liquidator was awarded damages against the directors.