Scott v Williams & Ors No. Scciv-98-1663 - [2002] SASC 424

SCOTT V WILLIAMS & ORS
[2002] SASC 424
Civil

LANDER J.
Introduction
The plaintiff is the liquidator of South Australian Ships Pty Ltd (the Company) having been appointed by order of this Court on 8 June 1999. The Company went into liquidation on 21 March 1997 and the first third party (Mr Sims) was appointed liquidator on that day.
The first third party and the plaintiff were, at the times of Mr Sims’ appointment as liquidator, and at the time of his retirement and Mr Scott’s appointment, partners in the firm of Sims Lockwood together with the other third parties.
The third parties practise as a firm of chartered accountants which specialises in insolvency work. The plaintiff is, as I have said, a member of that firm.
The plaintiff has brought this action pursuant to s 588M of the Corporations Law, 1996 (Cth) (the Law) against the defendants who were the directors of the Company at the time that the Company went into liquidation.
Section 588M(2) allows a company’s liquidator to recover from a director “... as a debt due to the company, an amount equal to the amount of the loss or damage” suffered by the company in circumstances where the company has traded whilst insolvent.
The fourth defendant, Mr Hercus, (the defendant) is one of five directors who was sued.
The Other Defendants
A settlement has been reached with the other directors. Dr Donald Williams was the chairman of directors. He died on 7 August 2001. The liquidator has reached an agreement with his executrix, Mrs Naomi Williams, the terms of which have been recorded in a Deed executed on 9 January 2002.[1] She has agreed to pay $300,000 by way of ‘Interim Settlement Sum’ “ ... in partial settlement of the Proceeding and (subject to certain matters) additional monies to settle the Liquidator’s claim against the Estate in the Proceeding and will enter into further negotiations with the Liquidator on the terms set out in this Deed to pay up to a further maximum amount of $400,000.00.”
[1] P1 [The exhibits in this case were identified by reference to the party who tendered them, P (Plaintiff) D (Defendant) TP (Third Parties).
P5 contained 17 Lever Arch Files
TP 12 contained 4 Lever Arch Files
The documents in these exhibits have separate internal numbers
The terms of the Deed of Settlement provided that she was to pay the Interim Settlement Sum before 10 January 2002.
It is provided in clause 8 of the Deed of Settlement:
“8 If the Liquidator:
8.1Settles with Phillip Christian Hercus (“Hercus”) (who is also a defendant in the Proceeding) for any amount at any time; or
8.2Obtains a judgment against Hercus for any amount and after the determination of any appeal or appeals arsing from any such judgment.
the parties agree that after any of the events in clause 8.1 or 8.2 first occurring they will promptly and no later than 14 days after conduct further negotiations with a view to the…

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 Scott v Williams & Ors No. Scciv-98-1663

Details

AGLC: Scott v Williams & Ors No. Scciv-98-1663 [2002] SASC 424
Case: [2002] SASC 424
Decision Date: 20 December 2002

CaseChat Overview and Summary

Scott v Williams and others involved a legal dispute over the insolvency of South Australian Ships Pty Ltd (SAS), with the liquidator of SAS, Scott, suing the directors of SAS, including Hercus, for contraventions of section 588G of the Corporations Law 1996 (Cth). The case centred around whether the directors of SAS, including Hercus, contravened the law by allowing the company to trade while insolvent, and if so, whether Hercus could be held liable for the losses incurred by the company. The court found that Hercus, despite his awareness of his duties as a director, failed to properly inform himself about the financial condition of SAS, particularly during the period from 25 September 1996 to 14 January 1997. The court concluded that there were reasonable grounds for suspecting that SAS was insolvent during this period, and that a reasonable person in Hercus' position would have also suspected the company's insolvency. The court dismissed Hercus' claims for indemnity and contribution against the third parties, Sims Lockwood, and ordered Hercus to pay $500,000 to the liquidator as damages for the contravention of section 588G. The decision highlighted the importance of directors diligently discharging their duties, particularly in ensuring a company does not trade while insolvent.

Orders