KMS Imports (Aust) Pty Ltd (In Liq) v Wang, in the matter of KMS Imports (Aust) Pty Ltd (In Liq) [2016] FCA 1571

KMS Imports (Aust) Pty Ltd (In Liq) v Wang, in the matter of KMS Imports (Aust) Pty Ltd (In Liq) [2016] FCA 1571

The Court found Mr Li was a director at the relevant time as no evidence substantiated a valid resignation. The company was presumed insolvent due to failure to keep and produce financial records and for continually failing to pay tax obligations. A reasonable director would have suspected the company was insolvent. Mr Li's lack of participation or subjective unawareness was no defence. Therefore, Mr Li is liable under s 588M for the amount of the debt incurred while trading insolvent.

Jurisdiction
Australia
Judgment Date
22 December 2016
Procedural Posture
Corporations Trading While Insolvent Civil Claim / Final Judgment After Hearing, Orders as to Compensation, Interest and Costs
Outcome
Judgment for plaintiff against second defendant for compensation, interest and costs.
Legal Topics
['insolvent Trading' "director's Duties" 'company Liquidation' 'statutory Presumptions of Insolvency']
['corporations Law' 'insolvency'] ['insolvent Trading' "director's Duties" 'company Liquidation' 'statutory Presumptions of Insolvency']

Case Brief

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Procedural Posture

Corporations Trading While Insolvent Civil Claim / Final Judgment After Hearing, Orders as to Compensation, Interest and Costs

Legal Issues

  1. 1 ['Whether the second defendant was a director when the relevant debt was incurred' 'Whether the company traded while insolvent in breach of s 588G(2) of the Corporations Act 2001 (Cth)' 'Whether a reasonable person would have suspected the company was insolvent when incurring the debt to the ATO' 'Whether the presumption of insolvency for failure to keep financial records applies']

Ratio Decidendi

The Court found Mr Li was a director at the relevant time as no evidence substantiated a valid resignation. The company was presumed insolvent due to failure to keep and produce financial records and for continually failing to pay tax obligations. A reasonable director would have suspected the company was insolvent. Mr Li's lack of participation or subjective unawareness was no defence. Therefore, Mr Li is liable under s 588M for the amount of the debt incurred while trading insolvent.

Court Disposition

Judgment for plaintiff against second defendant for compensation, interest and costs.

Orders

  • ['The second defendant (Mr Li) pay the plaintiff $74,159.37 pursuant to s 588M of the Corporations Act 2001 (Cth).' 'The second defendant pay interest pursuant to s 51A of the Federal Court Act 1976.' "The second defendant pay the plaintiff's costs, to be taxed in default of agreement."]