Beattie v Gray, in the matter of Control Rail Pty Limited (in liq) (No 2)

• Jurisdiction: Australia Federal only
• Court: Federal Court
• Judgment Date: 02 April 2019
• Neutral Citation: [2019] FCA 433
• Date: 02 April 2019

FEDERAL COURT OF AUSTRALIA

Beattie v Gray, in the matter of Control Rail Pty Limited (in liq) (No 2) [2019] FCA 433

File number(s):	NSD 119 of 2018
Judge(s):	FARRELL J
Date of judgment:	2 April 2019
Catchwords:	BANKRUPTCY AND INSOLVENCY – application for summary judgment – liquidator seeks declaration under s 588G and compensation under s 588M of the Corporations Act 2001 (Cth) from the former sole director of the Company for insolvent trading – where defendant did not appear – where the Company did not keep adequate financial records – where liquidator relied on presumption of insolvency in s 588E of the Corporations Act – whether the Company was insolvent during the period in which the debts were incurred – whether a reasonable person in the defendant’s position would have grounds for suspecting the Company was insolvent – application granted
Legislation:	Corporations Act 2001 (Cth) ss 9, 91, 95A, 286, 475, 513A, 530A, 530C, 588E, 588G, 588M, Federal Court of Australia Act 1976 (Cth) ss 31A, 51A
Cases cited:	Australian Securities and Investments Commission v Edwards [2005] NSWSC 831; 220 ALR 148 Beattie v Gray, in the matter of Control Rail Pty Limited (in liq) [2018] FCA 1524 British American Tobacco Australasia Limited v Taleb (No 3) [2013] FCA 80 Deputy Commissioner of Taxation v Batchelor [2017] FCA 950 Fisher v Divine Homes Pty Ltd [2011] NSWSC 8 Hutchinson v Comcare (No 2) [2018] FCA 1179 Jefferson Ford Pty Limited v Ford Motor Company of Australia Limited [2008] FCAFC 60; 167 FCR 372
Date of hearing:	25 June, 5 October, 3 December 2018, 14 January 2019
Date of last submissions:	13 February 2019
Registry:	New South Wales
Division:	General Division
National Practice Area:	Commercial and Corporations
Sub-area:	Corporations and Corporate Insolvency
Category:	Catchwords
Number of paragraphs:	51
Solicitor for the Plaintiff:	Mr B Lum of de Mestre and Company Solicitors
Counsel for the Defendant:	The Defendant did not appear

ORDERS

		NSD 119 of 2018
IN THE MATTER OF CONTROL RAIL PTY LIMITED (IN LIQUIDATION)
BETWEEN:	GRAEME BEATTIE IN HIS CAPACITY AS LIQUIDATOR OF CONTROL RAIL PTY LIMITED (IN LIQUIDATION) ACN 148 161 540 Plaintiff
AND:	DAVID STANLEY GRAY Defendant

JUDGE:	FARRELL J
DATE OF ORDER:	2 April 2019

THE COURT DECLARES THAT:

The defendant, David Stanley Gray, contravened s 588G of the Corporations Act 2001 (Cth) by failing to prevent Control Rail Pty Limited from incurring the following debts in the period between 15 April 2015 and 14 April 2016 at a time when he was the sole director of that Company:

1. To Australian Taxation Office (NSW Insolvency), the amount of $176,482.91;

2. To Allianz Australia Limited, the amount $14,711.39;

3. To Industry Funds Credit Control, the amount $20,223.80;

4. To Worth Recycling Pty Ltd, the amount of $137,663.24.

THE COURT ORDERS THAT:

1. The plaintiff is entitled to summary judgment pursuant to s 31A of the Federal Court of Australia Act 1976 (Cth) (FCA Act).

2. Pursuant to s 588M(2), based on the defendant’s contravention of s 588G of the Corporations Act 2001 (Cth), the defendant must pay the plaintiff the sum of $349,081.34.

3. Pursuant to s 51A(1) of the FCA Act the defendant must pay the plaintiff interest in the sum of $34,822.06.

4. The defendant must pay the plaintiff’s costs as agreed or taxed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

FARRELL J

Introduction

1. The plaintiff (Mr Beattie) and Christopher Darin were appointed as joint and several liquidators of Control Rail Pty Limited (in liq) (Company) on 20 May 2016 by order of this Court.

2. The defendant (Mr Gray) was appointed as sole director and secretary of the Company on 11 January 2011 and continued in those positions until the Company was placed in liquidation. Mr Gray is also the Company’s sole shareholder.

3. By an originating process filed on 6 February 2018, the plaintiff sought a declaration of contravention of s 588G by Mr Gray and an order under s 588M(2) of the Corporations Act 2001 (Cth) that Mr Gray pay the sum of $432,136.07 plus interest from 23 March 2017 and costs. On 8 March 2018, Gleeson J made orders that the proceeding be listed for hearing of an application by the plaintiff for orders on default or summary judgment. Since those initial timetabling orders were made and the matter was re-allocated to my docket, I have made orders progressing the matter, ultimately re-listing the hearing of the application to 14 January 2019.

4. Mr Gray has not filed a notice of appearance and he has taken no steps in these proceedings although it is plain from evidence given by the plaintiff and his solicitor, Mr Lum, that he is aware of the proceedings and of the hearing set down for 14 January 2019.

Evidence

5. The plaintiff relies on the following evidence:

1. Affidavits sworn by the plaintiff on 25 January, 3 April, 21 September, 21 December 2018 and 13 February 2019;

2. An affidavit of Averne Myles Loos sworn on 26 June 2018 deposing to service of the originating process dated 6 February 2018, the affidavit in support of the application and the plaintiff’s genuine steps statement on the defendant on 15 February 2018;

3. An affidavit of Johannes Bernadinus Hunt sworn on 21 August 2018 deposing to the service on the defendant personally on 11 August 2018 of a subpoena to produce documents and notice of filing and hearing dated 3 August 2018 together with conduct money;

4. Affidavits of Bruce Lum, the plaintiff’s solicitor, sworn on 21 September 2018 and 19 November 2018, in relation to correspondence between his office and the defendant;

5. Affidavit of Jeremy Mudford sworn on 19 November 2018 deposing to material obtained pursuant to a search and seizure warrant issued pursuant to s 530C of the Corporations Act: see Beattie v Gray, in the matter of Control Rail Pty Limited (in liq) [2018] FCA 1524; and

6. Exhibit 1 which is a letter and an email from Mr Lum to Mr Gray attaching a copy of orders made on 3 December 2018 listing the hearing of the plaintiff’s application for 10.15 am on 14 January 2019.

6. Factual findings in these reasons are based on that evidence.

Background

7. The Company was wound up in insolvency on the application of Worth Recycling Pty Ltd. The winding up was based on the Company’s failure to pay a statutory demand dated 12 February 2016 for a judgment debt in the sum of $137,663.24. The winding up application was taken as filed on 14 April 2016. The Company was not, at that time, in external administration of any kind and no resolution had been passed for its winding up. The “relation back day” is therefore the day on which the application for winding up was filed, having regard to s 9, item 14 of s 91 and s 513A(e) of the Corporations Act.

8. By a letter dated 23 March 2017, Mr Beattie demanded payment from Mr Gray of $432,136.07. That amount related to the following claims made in proofs of debt filed with the plaintiff, copies of which were annexed to Mr Beattie’s affidavit sworn on 3 April 2018:

   Name of creditor	Amount
   ANZ Bank ...