CORPORATIONS - Insolvent trading - whether company unable to pay its debts as and when they fell due - Reasonable expectation - Reliance upon information provided.
Income Tax Assessment Act 1936 (Cth), ss 222ALA, 22AF(5)
Quick Take
1A written agreement under s 222ALA ITAA that refers to the totality of group tax arrears by a specified dollar amount sufficiently 'specifies' the liabilities for the purposes of that section, even without allocating payments to particular monthly liabilities; such an agreement defers the due date of the arrears and affects the solvency assessment under s 95A.
2The defences under s 588FGB(3) and (4) require both objective reasonableness and subjective belief that the company was solvent at the payment time; a director's expectation that future funds would enable the company to trade out of its difficulties does not satisfy either element where the company was demonstrably unable to pay debts as they fell due.
3The solvency test under s 95A is ultimately a question of fact not to be constrained by rigid legal criteria; while the nature of an industry (such as mineral exploration) and the capacity to call on related entities for funds are relevant factors, they do not exempt a company from the solvency provisions where the company chronically cannot pay its debts as they fall due.
Case Details
Citation[2002] NSWSC 644
CourtNSWSC
JurisdictionNew South Wales
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