9. February 2011 08:50
International Greetings UK Ltd, a creditor, sued the directors of the company Oz Wrap under s 588M(2) of the Corporations Act 2001 (Cth) to recover loss or damage occasioned by insolvent trading. Proceedings were commenced by the plaintiff after the s 509(4) lodgment by the liquidator, but prior to deregistration of the company by ASIC. Oz Wrap was deregistered by ASIC before the proceedings came to trial.
The question before the court was whether the plaintiff’s right of recover under s 588M(3) of the Act was precluded by the fact that Oz Wrap was no longer “being wound up”. Section 588M(1)(d) of the Act states that “this section applies where the company is being wound up.” The plaintiff argued that this wording only imposes a condition that the company be “being wound up” when proceedings are commenced: . Stansfield argued that the relevant time is when the order or award is being made by the court: .
It was not open to the court to award the plaintiff any remedy under s 588M(3): ‘The message the words convey is that the creditor “may recover from the director” only where, among other things, the company “is being wound up”, so that the creditor may not “recover from the director” unless at the time of recovery the company “is being wound up,”’ (at ).
Relevant paragraphs of Ford: