Directors who suffer personal liability for insolvent trading under s 588M of the Corporations Act cannot attribute that loss to a third party's misleading conduct where the causal basis for the liability (insolvency and reasonable grounds for suspecting insolvency) is entirely distinct from and unconnected to the alleged misleading conduct. The mere fact that debts were incurred in reliance on a misrepresentation is insufficient to establish causation where the loss arises from the directors' own failure to prevent insolvent trading. A pleading that focuses on the incurring of debts while overlooking the insolvency element fails to establish the necessary causal nexus.
The full text is available to signed-in members.