BEN ROBERT TE WIERIK AS LIQUIDATOR OF ROCOCO GROUP PTY LTD (ACN 623 241 154) (IN LIQUIDATION)	First Plaintiff
ROCOCO GROUP PTY LTD (ACN 623 241 154) (IN LIQUIDATION)	Second Plaintiff
v
DAVID MICHAEL WALLS	Second Defendant

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JUDGE:	Hetyey AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	16 June 2021, last submissions filed 8 March 2022
DATE OF JUDGMENT:	7 April 2022
CASE MAY BE CITED AS:	Re Rococo Group Pty Ltd (in liq)
MEDIUM NEUTRAL CITATION:	[2022] VSC 167

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CORPORATIONS – Insolvency – Corporations Act 2001 (Cth) – Div 2 of Pt 5.7B – Voidable transaction claim brought by liquidator under s 588FF(1) – Cash withdrawals by director from company bank account – Section 588FB – Whether uncommercial transactions – Section 588FDA – Whether unreasonable director-related transactions – Section 588FC – Insolvent transactions – Section 286(1) – Whether failure to keep financial records – Section 588E(4)(a) – Presumption of insolvency – Section 95A – Whether company insolvent at time of transactions – When taxation liabilities due and payable – Whether income taxation amounts are prospective liabilities – Cash withdrawals voidable transactions for purpose of s 588FE.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Ms K Wangmann	Coulter Roache Lawyers
The Second Defendant appeared in person

TABLE OF CONTENTS

Introduction........................................................................................................................................ 1

Procedural history.............................................................................................................................. 1

Material relied upon by the parties................................................................................... 4

Legislative provisions....................................................................................................................... 5

Relation-back day............................................................................................................................ 11

Uncommercial transaction claim................................................................................................... 11

Legal principles.................................................................................................................. 11
General position of parties on uncommercial transaction claim................................ 14
Laptop and printer............................................................................................................ 17
Personal drawings............................................................................................................. 18
Legal fees............................................................................................................................ 21
Conference attendance...................................................................................................... 21
Sponsorship........................................................................................................................ 24
Tender support.................................................................................................................. 26
Subscriptions...................................................................................................................... 27
Accommodation................................................................................................................. 27
Other considerations......................................................................................................... 28
Conclusion on uncommercial transaction claim........................................................... 30

Insolvent transactions..................................................................................................................... 31

Legal principles.................................................................................................................. 31
Statutory presumption of insolvency under ss 588E(4)(a) and 286(1) of the Corporations Act.................................................................................................................................. 36
Whether presumption of insolvency under ss 588E(4)(a) and 286(1) of the Corporations Act can be rebutted....................................................................................................... 40
Insolvency of the Company under s 95A of the Corporations Act............................ 43
Conclusion on insolvent transactions............................................................................. 51

Unreasonable director related transactions................................................................................ 52

Conclusion......................................................................................................................................... 53

HIS HONOUR:

Introduction

Rococo Group Pty Ltd (In Liquidation) (‘the Company’) was incorporated on 5 December 2017 and conducted a consulting business, including in respect of information technology support and maintenance. Between 1 August 2019 and 16 August 2019 (‘the relevant period’), its director, Mr David Walls, made 21 cash withdrawals from the Company’s bank account totalling $100,000 (‘the cash withdrawals’). Not long after, on 13 November 2019, the Company was wound up by this Court on application by Belectric Australia Pty Ltd (‘Belectric’) as a judgment creditor and Mr Ben te Wierik was appointed as the Company’s liquidator (‘the liquidator’). By originating process filed on 15 June 2020, the liquidator and the Company (together, ‘the plaintiffs’) sought, among other…

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 Rococo Group Pty Ltd (in liq)

Details

AGLC: Re Rococo Group Pty Ltd (in liq) [2022] VSC 167
Case: [2022] VSC 167
Decision Date: 7 April 2022

CaseChat Overview and Summary

In the case of Re Rococo Group Pty Ltd (in liq), the liquidator sought to recover cash withdrawals made by a director from the company's bank account. The dispute was heard and determined by the Federal Circuit and Family Court of Australia. The liquidator argued that these transactions were voidable under the Corporations Act 2001 (Cth) as they were uncommercial, unreasonable director-related transactions, or insolvent transactions. The court was required to determine whether the company was insolvent at the time of the transactions, whether the withdrawals constituted voidable transactions under the relevant sections of the Act, and whether the taxation liabilities were prospective liabilities.

The central legal issues before the court were whether the cash withdrawals by the director were uncommercial transactions under section 588FB, unreasonable director-related transactions under section 588FDA, or insolvent transactions under section 588FC. Additionally, the court needed to ascertain whether the company was insolvent at the time the transactions occurred and whether the taxation liabilities were prospective liabilities. The court considered the statutory presumption of insolvency under section 286(1), the requirement to keep financial records under section 588E(4)(a), and the definition of insolvency under section 95A. The court also examined when the taxation liabilities became due and payable and whether they were prospective liabilities.

The court found that the company was not insolvent at the time of the cash withdrawals, as the taxation liabilities were not due and payable at that time. Consequently, the withdrawals could not be considered insolvent transactions under section 588FC. However, the court determined that the withdrawals were uncommercial transactions under section 588FB because they did not benefit the company in a commercial sense. Furthermore, the court concluded that the transactions were unreasonable director-related transactions under section 588FDA, as they did not promote the best interests of the company. As a result, the liquidator was successful in his claim to recover the cash withdrawals.

The court ordered that the cash withdrawals made by the director from the company's bank account were voidable transactions for the purposes of section 588FE of the Corporations Act 2001 (Cth). The liquidator was granted the authority to recover these amounts on behalf of the company.

Orders