Chan & Ors v First Strategic Development Corporation Limited (in liq) & Anor

[2015] QCA 28

Queensland Court of Appeal

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Interrogate

Catchwords

1. Corporations
2. › Insolvent trading
3. › Director liability under s 588M(2)
4. › Solvency test under s 95A
5. › Whether company able to pay debts as and when they fall due
6. › Financial support from director or related entity
7. › Degree of commitment to continuation of financial support
8. › Conditional willingness to fund
9. › Corporations Act 2001 (Cth), ss 95A, 588E(4), 588M(2)
1. Corporations
2. › Insolvent trading
3. › Defences
4. › Reasonable grounds to expect solvency under s 588H(2)
5. › Whether directors entitled to rely on ability and willingness of co-director to fund company
6. › Corporations Act 2001 (Cth), s 588H(2)
1. Corporations
2. › Insolvent trading
3. › Defences
4. › Non-participation in management under s 588H(4)
5. › Whether director excluded from management of company
6. › Onus of proof on director
7. › Corporations Act 2001 (Cth), s 588H(4)
1. Appeal and New Trial
2. › Appeal — Loss of advantage of trial judge
3. › Interference with findings of fact
4. › Where inferences of fact involved
5. › Whether findings open on the evidence

Quick Take

Where a company's solvency depends on informal financial support from a director or related entity, cogent evidence is required of such a degree of commitment to continue the support that it can be said the company was able to pay its debts as and when they fell due. Conditional willingness to fund, dependent on contingencies such as the execution of a third-party agreement, may be insufficient. The assessment is factual and does not require a precise probability formula. Directors who are aware of the conditional nature of funding may have reasonable grounds for suspecting insolvency.