Re Overgold Pty Ltd - [2019] VSC 624

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT

CORPORATIONS LIST

S ECI 2018 00082

IN THE MATTER of OVERGOLD PTY LTD IN LIQUIDATION (ACN 112 693 679)

DAVID CHARLES QUIN AS THE LIQUIDATOR OF OVERGOLD PTY LTD (IN LIQUIDATION) (ACN 112 693 679)	First Plaintiff
OVERGOLD PTY LTD IN LIQUIDATION (ACN 112 693 679)	Second Plaintiff
v
BENJAMIN APPEL	Defendant

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JUDGE:	Gardiner AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	9, 10 April 2019, last submissions 24 April 2019
DATE OF JUDGMENT:	5 September 2019, revised 12 September 2019
CASE MAY BE CITED AS:	Re Overgold Pty Ltd
MEDIUM NEUTRAL CITATION:	[2019] VSC 624

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CORPORATIONS – External administration – Corporations Act (2001) (Cth) ss 588G, 588H, 588M and 1317H – Defendant a director of company in liquidation – Defendant alleged to have been involved in insolvent trading – Issue as to whether debt in relation to franchise fees were incurred at time of entry into franchise agreement or at some other time – Finding that franchise fees and other charges were incurred at time of entry into franchise agreement and associated business agreements before the company was shown to be insolvent – Other claims were in respect of debts incurred when company was insolvent – Plaintiff established other matters required to be proven to establish liability– Defendant not entitled to invoke defence under s 588H(2).

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr P Miller	Williams Winter Solicitors
For the Defendant, Mr Appel in person

HIS HONOUR:

In this proceeding, the plaintiffs seek a declaration and orders under ss 588G, 588M and 1317H of the Corporations Act 2001 (Cth) (‘the Act’) that the defendant (‘Mr Appel’) pay to the second plaintiff, Overgold Pty Ltd (In Liquidation) (‘Overgold’), the sum of $242,782.74[1] by reason of his alleged breach of the duty to prevent insolvent trading. That sum is comprised of debts which are alleged to have been incurred by Overgold at times when Overgold was alleged to be insolvent and when Mr Appel was its director.
[1]The total sum claimed as stated in the plaintiffs’ closing submissions is $252,854.42.

The plaintiffs’ amended originating process filed on 5 September 2018 claims, inter alia:

A.A declaration that the defendant has contravened section 588G of the Act with regard to the debts.
B.An order pursuant to section 588M of the Act that the defendant pay the Company the sum of $242,782.74.
C.Alternatively, an order pursuant to section 1317H of the Act that the defendant pay the Company the sum of $242,782.74.

D. Further, $117,097.78 as a debt.

The amount of $117,097.78 claimed by the plaintiffs in paragraph ‘D’ is in respect of a director’s loan. In September 2018, Mr Appel applied to have that claim struck out. On 26 October 2018, Randall AsJ ordered that the relevant paragraphs of the amended statement of claim appended to the amended originating process be struck out by reason that that claim was barred by limitation.

Applicable principles and legislation

The legislative…

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 Re Overgold Pty Ltd

Details

AGLC: Re Overgold Pty Ltd [2019] VSC 624
Case: [2019] VSC 624
Decision Date: 5 September 2019, revised 12 September 2019

CaseChat Overview and Summary

Overgold Pty Ltd, a company in liquidation, sued its former director for involvement in insolvent trading. The plaintiff alleged that the defendant had allowed the company to incur debts while insolvent. The dispute centred on whether certain franchise fees and other charges were incurred at the time the franchise agreement was signed or at a later stage. The case was heard in the Federal Circuit and Family Court of Australia.

The court had to determine when the franchise fees and other charges were incurred. If they were incurred at the time of the franchise agreement, before the company became insolvent, the defendant could not be held liable for insolvent trading. Alternatively, if the fees and charges were incurred at a later stage when the company was insolvent, the defendant would be liable. The court also had to consider whether the plaintiff had established all the necessary elements to hold the defendant liable for insolvent trading under the Corporations Act.

The court found that the franchise fees and other charges were incurred at the time the franchise agreement was signed, before the company was shown to be insolvent. The other claims were in respect of debts incurred after the company became insolvent. The plaintiff established all the necessary elements to hold the defendant liable for insolvent trading. The defendant was not entitled to invoke the defence under section 588H(2) of the Corporations Act.

The court ordered the defendant to compensate the company for the debts incurred while insolvent. The court did not specify the exact amount of compensation to be paid, leaving it to be determined in a separate proceeding. The defendant was also barred from being involved in the management of a corporation for five years.

Orders