Stone (Liquidator), in the matter of RIC Admin Pty Ltd (in liq) v Mandalinic (No 2) [2024] FCA 164

Stone (Liquidator), in the matter of RIC Admin Pty Ltd (in liq) v Mandalinic (No 2) [2024] FCA 164

The company was insolvent from at least 25 August 2017 and incurred PAYGW and GST liabilities it could not meet. The defendant, as sole director, failed to prevent such debts being incurred, contravening s 588G(2), and is liable for the resulting loss. Further, the company made payments of $422,400 to the defendant, which lacked justification and occurred at times when the company was insolvent, constituting unreasonable director-related transactions voidable under s 588FDA.

Parties
First Plaintiff: Richard Stone in his capacity as Liquidator of RIC Admin Pty Ltd (in liquidation); Second Plaintiff: RIC Admin Pty Ltd (in liquidation); Defendant: John Mandalinic
Jurisdiction
Australia
Judgment Date
27 February 2024
Procedural Posture
Corporations—insolvent Trading and Unreasonable Director Related Transactions / Final Judgment After Hearing
Outcome
Plaintiffs' claims upheld; judgment for plaintiffs.
Legal Topics
Insolvent Trading, Director Duties, Unreasonable Director Related Transactions, Corporations—liquidation
Corporations Law Insolvency Insolvent Trading Director Duties Unreasonable Director Related Transactions Corporations—liquidation

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Parties

Richard Stone in his capacity as Liquidator of RIC Admin Pty Ltd (in liquidation)

First Plaintiff

RIC Admin Pty Ltd (in liquidation)

Second Plaintiff

John Mandalinic

Defendant

Procedural Posture

Corporations—insolvent Trading and Unreasonable Director Related Transactions / Final Judgment After Hearing

Legal Issues

  1. 1 Whether the defendant contravened s 588G(2) of the Corporations Act by failing to prevent the company from incurring debts while insolvent
  2. 2 Whether company was insolvent on a cash flow basis from 25 August 2017
  3. 3 Whether payments to the director constituted unreasonable director-related transactions under s 588FDA of the Corporations Act

Ratio Decidendi

The company was insolvent from at least 25 August 2017 and incurred PAYGW and GST liabilities it could not meet. The defendant, as sole director, failed to prevent such debts being incurred, contravening s 588G(2), and is liable for the resulting loss. Further, the company made payments of $422,400 to the defendant, which lacked justification and occurred at times when the company was insolvent, constituting unreasonable director-related transactions voidable under s 588FDA.

Court Disposition

Plaintiffs' claims upheld; judgment for plaintiffs.

Orders

  • Defendant to pay $2,489,187.38 to the first plaintiff as a debt due to the second plaintiff for creditor losses due to insolvent trading.
  • Defendant to pay $422,400.00 to the first plaintiff for unreasonable director-related transaction.