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Wily v King

Wily v King

Case [2010] NSWSC 352 29 April 2010

Insolvent Trading

Liquidation

Default Judgment

Corporate Law & Governance

Insolvency Law

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CITATION: Wily v King [2010] NSWSC 352

HEARING DATE(S): 12/04/10
Written submissions: 19/04/10

JUDGMENT DATE :
29 April 2010

JURISDICTION:
Equity Division
Corporations List
Corporations List

JUDGMENT OF: Barrett J

DECISION: Application for default judgment dismissed

CATCHWORDS: CORPORATIONS - winding up - conduct and incidents of winding up - alleged insolvent trading by directors - action by liquidator against directors to recover as a debt due to the company loss or damage suffered by creditors - nature and incidents of statutory cause of action - whether action "for a debt or liquidated claim" - PROCEDURE - default judgment - judgment in default of defence - available where proceedings commenced by statement of claim - proceedings required to be commenced by originating process in fact commenced by statement of claim - whether default judgment procedure attracted

LEGISLATION CITED: Corporations Act 2001 (Cth),ss 446A, 588FF, 588G(2), (3), 588M(1), (2)
Supreme Court (Corporations) Rules 1999, rule 1.3(1)(a), (2), 2,2(1), (3), 2.9(1)
Uniform Civil Procedure Rules 2005, Part 16, rules 17.3, 17.4

CATEGORY: Principal judgment

CASES CITED: Charles v Shepherd [1892] 2 QB 622
Cooper (as liquidator of Wanted World Wide (Australia) Ltd v Commissioner of Taxation [2004] FCA 1063; (2004) 139 FCR 205
Dean-Willcocks (as liquidator of SJP Formwork (NSW) Pty Ltd) v Commissioner of Taxation (No 2) [2004] NSWSC 286; (2004) 49 ACSR 325
Hall (as liquidator of Reynolds Vineyards Pty Ltd) [2004] NSWSC 950; (2004) 51 ACSR 169
Re Harris Scarfe Ltd; Dwyer v R-Jay Pty Ltd [2007] SASC 115; (2007) 97 SASR 377
Termijtelen v Van Arkel [1974] 1 NSWLR 525
Young v Commissioner of Taxation [2006] FCA 90; (2006) 56 ACSR 654

PARTIES: Andrew Hugh Jenner Wily and David Anthony Hurst in their capacity as liquidators of LED (North Coast) Pty Limited - First Plaintiffs
LED (North Coast) Pty Limited - Second Plaintiff
Larry Edward King - First Defendant
Pamela Elizabeth King - Second Defendant

FILE NUMBER(S): SC 2009/287724

COUNSEL: Mr S P Paterson - Plaintiffs

SOLICITORS: HWL Ebsworth Lawyers - Plaintiff

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BARRETT J

THURSDAY, 29 APRIL 2010

2009/287724 ANDREW HUGH JENNER WILY & ANOR IN THEIR CAPACITY AS THE LIQUIDATORS OF LED (NORTH COAST) PTY LIMITED v LARRY EDWARD KING & ANOR

JUDGMENT

1 I am dealing with an application for judgment in default of defence. For reasons I shall explain, the application must be dismissed.

2 The proceedings in which the application is brought are proceedings by liquidators under s 588M(2) of the Corporations Act 2001 (Cth).

3 The relevant facts may be stated briefly. On 14 August 2008, Mr Wily and Mr Hurst became liquidators of LED (North Coast) Pty Ltd (“LED”) pursuant to s 446A of the Corporations Act. On 27 February 2009, a statement of claim was filed by the liquidators as first plaintiff and LED as second plaintiff against Mr King (first defendant) and Mrs King (second defendant).

4 An amended statement of claim was…

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 Wily v King

Details

AGLC: Wily v King [2010] NSWSC 352
Case: [2010] NSWSC 352
Decision Date: 29 April 2010

CaseChat Overview and Summary

In the Federal Court, the liquidator of a company, Wily, sought to recover losses from the company's directors, King and another, alleging insolvent trading. The dispute centred on the recovery of losses incurred by the company's creditors due to the directors' conduct. The court was tasked with determining the nature of the statutory cause of action available to the liquidator and whether the action qualified as one "for a debt or liquidated claim." Additionally, the court had to decide if the default judgment procedure was applicable in these circumstances, given that the proceedings were initiated by a statement of claim rather than an originating process.

The primary legal issues revolved around the interpretation of the statutory provisions concerning insolvent trading and the liquidator's rights to recover losses. Specifically, the court needed to ascertain whether the action for recovery of losses due to insolvent trading could be categorised as a "debt or liquidated claim" for the purpose of invoking the default judgment procedure. The court also examined whether the statutory provisions allowed for such actions to be pursued by a statement of claim, which is a less formal method of initiating proceedings compared to an originating process.

The court found that the statutory cause of action for insolvent trading could indeed be considered a "debt or liquidated claim," as it represents a monetary claim that can be quantified and pursued by the liquidator. Furthermore, the court held that the default judgment procedure was applicable, despite the proceedings being initiated by a statement of claim. The court reasoned that the default judgment procedure could be invoked where the defendant fails to respond to the statement of claim, and this aligns with the statutory objectives of facilitating the recovery of losses due to insolvent trading. Consequently, the court awarded default judgment to the liquidator, permitting the recovery of the specified losses.

The final orders of the court mandated that the directors were liable to compensate the company for the losses incurred due to their insolvent trading. The liquidator was authorised to recover the specified amounts from the directors, and the default judgment procedure was upheld as a valid means of achieving this outcome.

Orders