Treloar Constructions Pty Ltd v McMillan

The appeal in *Treloar Constructions Pty Ltd v McMillan* concerned a dispute over payment terms in a construction and project management services contract, and a claim for compensation against a director for insolvent trading under the *Corporations Act 2001* (Cth). The primary legal issues before the Court of Appeal of New South Wales were whether the word "paid" in the contract's payment clause meant that the contractor was not entitled to render invoices until it had actually paid its own suppliers and contractors, and whether the company was insolvent at the time the debts were incurred, thereby entitling the plaintiff to recover compensation from the director under sections 588M and 588G of the *Corporations Act*. Further issues included the evidentiary onus on the director to contradict expert evidence of insolvency, and whether the non-payment of invoices constituted "loss or damage" for the purposes of section 588M.

The Court of Appeal found that the word "paid" in the contract did not prevent the contractor from rendering invoices before it had discharged its own payment obligations to suppliers and contractors. The court also determined that the company was indeed insolvent at the relevant times, applying principles that consider factors such as the availability of informal overdraft facilities and the relevance of unpaid tax debts, while noting that a non-binding offer of funding was not a reliable indicator of solvency. The court held that the respondent director bore an evidentiary onus to contradict the expert evidence of insolvency, and that the non-payment of invoices was sufficient to establish the requisite "loss or damage" under section 588M.

Consequently, the Court of Appeal allowed the appeal, set aside the orders of the District Court, and directed the entry of judgment for the plaintiff in the sum of $418,991.77, plus interest, with costs ordered against the defendant. The respondent was also ordered to pay the appellant's costs of the appeal.