On 18 January 2023 the Federal Court of Australia handed down its decision in Copeland as liquidator of Skyworkers Pty Limited (in Liquidation) v Murace [2023] FCA 14. The decision resulted in Liquidator’s insolvent trading claim against Mr Murace being struck out and costs awarded to the defendant, although the liquidator was then allowed to file a further statement of claim.

Background

The plaintiff is Mr Copeland (Liquidator) is the liquidator of the Skyworkers Pty Limited (in liquidation) (Skyworkers). The defendant was Mr Murace who was the sole director of Skyworkers.

The liquidators filed insolvent trading claims against Mr Murace under section 588G of the Corporations Act 2001 (Cth) (Corporations Act).

The Liquidator relied on a presumption of insolvency pursuant to section 588E(4) of the Corporations Act on the basis of Mr Murace’s failure to keep records and in the alternative, actual insolvency pursuant to section 95A of the Corporations Act.

Mr Murace pursued an order striking out the statement of claim, in whole or in part, made by the Liquidators. Mr Murace’s argument to why the claim should be struck out was on the basis that the allegation that Skyworkers failed to keep financial records as required by subsection 286(1) of the Corporations Act was not adequately particularised, the statement of claim did not plead the dates on which debts were alleged to have incurred or how they were incurred pursuant to section 588H and 588GA of the Corporations Act and the Liquidators insolvency claim lacked adequate particulars according to section 95A of the Corporations Act.

Issues

The issues that were to be determined in this case included:

whether it is necessary, pursuant to section 588G (insolvent reading provision) of the Corporations Act, to plead the date on which a debt relied upon is alleged to have been incurred and how the debt was created.
whether the plaintiffs provided proper particulars of the presumed insolvency claim.
whether the plaintiffs provided adequate particulars of the actual insolvency claim.
whether the proceedings be summarily dismissed or whether the statement of claim be struck out; and
what conditions, if any, should be imposed on any grant of leave to file an amended statement of claim.

Court Determination

In respect of whether it was necessary to plead the date on which a debt relied upon is alleged to have been incurred and how the debt was created, Justice Halley applied the findings in Devine v Liu; Devine v Ho (2018) 338 FLR 208, where Justice Parker found that it is essential for a liquidator who is bringing proceedings for insolvent trading to identify the date or dates at which the debt was incurred and how it is alleged the debt arose.

In respect of whether there were proper particulars of the insolvency claim, Justice Halley found that particulars of allegations in a statement of claim should be provided in the pleading itself or in discrete correspondence by way of the provision of further particulars rather than in an affidavit relied upon for an interlocutory application.

In respect of whether adequate particulars of the actual insolvency had been provided in the claim, Justice Halley found that an allegation of actual insolvency under section 95A of the Corporations Act does not usually require further particularisation.

In respect of whether the proceeding should be summarily dismissed or the statement of claim struck out with conditions, Justice Halley found that at least some debts could be pleaded and particularised with sufficient precision to disclose a reasonable cause of action that had reasonable prospects of success. Therefore, he ordered that the statement of claim should be struck out and a costs order should be made for the Liquidator plaintiffs to pay Mr Murace’s costs from the commencement of proceedings, however His Honour granted the Liquidator plaintiffs leave to serve an amended statement of claim.

Take away

Care should be taken when preparing and reviewing a claim for insolvent trading.

If you are unsure whether an insolvent trading claim is adequate or should be struck out, please contact:

Alicia Hill
Principal
T: +61 3 9611 0180 | M: +61 484 313 865
E: ahill@sladen.com.au

Inshani Ward
Senior Associate
T: +61 3 9611 0110 | M: +61 413 557 157
E: iward@sladen.com.au